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"fact_ifrs-full_DisclosureOfNotesAndOtherExplanatoryInformationExplanatory_E2_CY": {
"value": "\n1. ABOUT OUR FINANCIAL STATEMENTS
ORGANISATIONAL RESTRUCTURE
On 3 January 2023, Australia and New Zealand Banking Group Limited (ANZBGL) established by a scheme of arrangement, a non-operating holding
company, ANZ Group Holdings Limited (ANZGHL), as the new listed parent holding company of the ANZ Group and implemented a restructure to
separate ANZ\u2019s banking and certain non-banking businesses into the ANZ Bank Group and ANZ Non-Bank Group (the Restructure). The ANZ Bank
Group comprises the majority of the businesses and subsidiaries that were held in ANZBGL prior to the Restructure. The ANZ Non-Bank Group
comprises banking-adjacent businesses developed or acquired by the ANZ Group to focus on bringing new technology and banking-adjacent
services to the ANZ Group\u2019s customers, and a separate service company.
On Restructure, each ANZ shareholder received one ANZGHL ordinary share for each ANZ ordinary share that they held prior to the implementation of
the Restructure. The Restructure is accounted for as a reverse acquisition in the ANZGHL consolidated financial statements as at 30 September 2023,
with ANZBGL identified as the acquirer in accordance with AASB 3
Business Combinations
.
As a result of the Restructure, the ANZBGL consolidated results for the 2023 financial year end consist of:
\u2022 the results of the former ANZ Group for the period 1 October 2022 to 2 January 2023;
\u2022 the result of ANZBGL and its subsidiaries (Group) for the period 3 January to 30 September 2023.
Refer to Accounting Policies Applicable to the Restructure section below for further details.
GENERAL INFORMATION
These are the financial statements for ANZBGL (the Company) and its controlled entities (together, the Group or Consolidated Entity) for the year
ended 30 September 2023. The Company is a public company incorporated and domiciled in Australia with debt listed on securities exchanges. The
Company is a subsidiary of ANZGHL and is regulated by APRA as an ADI. The address of the Company\u2019s registered office and its principal place of
business is ANZ Centre, 833 Collins Street, Docklands, Victoria, Australia 3008. The Group provides banking and financial services to individuals and
business customers and operates in and across 29 markets.
On 10 November 2023, the Directors resolved to authorise the issue of these financial statements. Information in the financial statements is included
only to the extent we consider it material and relevant to the understanding of the financial statements. A disclosure is considered material and
relevant if, for example:
\u2022 the amount is significant in size (quantitative factor);
\u2022 the information is significant by nature (qualitative factor);
\u2022 the user cannot understand the Group\u2019s results without the specific disclosure (qualitative factor);
\u2022 the information is critical to a user\u2019s understanding of the impact of significant changes in the Group\u2019s business during the period - for example,
business acquisitions or disposals (qualitative factor);
\u2022 the information relates to an aspect of the Group\u2019s operations that is important to its future performance (qualitative factor); and
\u2022 the information is required under legislative requirements of the
Corporations Act 2001
, the
Banking Act 1959 (Cth)
or by the Group\u2019s principal
regulators, including the Australian Securities and Investments Commission (ASIC) and the Australian Prudential Regulation Authority (APRA).
This section of the financial statements:
\u2022 outlines the basis upon which the Group\u2019s financial statements have been prepared; and
\u2022 discusses any new accounting standards or regulations that directly impact the financial statements.
BASIS OF PREPARATION
This financial report is a general purpose (Tier 1) financial report prepared by a \u2018for profit\u2019 entity, in accordance with Australian Accounting Standards
(AASs) and other authoritative pronouncements of the Australian Accounting Standards Board (AASB), the
Corporations Act 2001
, and
International
Financial Reporting Standards
(IFRS) and interpretations published by the International Accounting Standards Board (IASB).
We present the financial statements of the Group in Australian dollars, which is the Company\u2019s functional and presentation currency. We have
rounded values to the nearest million dollars ($m), unless otherwise stated, as allowed under the
ASIC Corporations (Rounding in Financial/Directors
Report) Instrument 2016/191
. We measure the financial statements of each entity in the Group using the currency of the primary economic
environment in which that entity operates (the functional currency).
BASIS OF MEASUREMENT AND PRESENTATION
We have prepared the financial information in accordance with the historical cost basis - except the following assets and liabilities which we have
stated at their fair value:
\u2022 derivative financial instruments and in the case of fair value hedging, a fair value adjustment made to the underlying hedged item;
\u2022 financial instruments held for trading;
\u2022 financial assets and financial liabilities designated at fair value through profit or loss (FVTPL);
\u2022 financial assets at fair value through other comprehensive income (FVOCI); and
\u2022 assets and liabilities classified as held for sale (except those required to be at carrying value).
In accordance with AASB 119
Employee Benefits
we have measured defined benefit obligations using the Projected Unit Credit Method.
There were no discontinued operations in the current period. For the purpose of comparative information, discontinued operations in the prior period
are separately presented from the results of the continuing operations as a single line item \u2018Profit/(Loss) after tax from discontinued operations\u2019 in the
Income Statement.
BASIS OF CONSOLIDATION
The consolidated financial statements of the Group comprise the financial statements of the Company and all its subsidiaries. An entity, including a
structured entity, is considered a subsidiary of the Group when we determine that the Company has control over the entity. Control exists when the
Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its
power over the entity. We assess power by examining existing rights that give the Company the current ability to direct the relevant activities of the
entity. We have eliminated, on consolidation, the effect of all transactions between entities in the Group.
FOREIGN CURRENCY TRANSLATION
TRANSACTIONS AND BALANCES
Foreign currency transactions are translated into the relevant functional currency at the exchange rate prevailing at the date of the transaction. At the
reporting date, monetary assets and liabilities denominated in foreign currencies are translated into the functional currency at the relevant spot rate.
Any foreign currency translation gains or losses that arise are included in profit or loss in the period they arise.
We measure translation differences on non-monetary items classified as FVTPL and report them as part of the fair value gain or loss on these items. For
non-monetary items classified as investment securities measured at FVOCI, translation differences are included in other comprehensive income.
FINANCIAL STATEMENTS OF FOREIGN OPERATIONS THAT HAVE A FUNCTIONAL CURRENCY THAT IS NOT AUSTRALIAN DOLLARS
The financial statements of our foreign operations are translated into Australian dollars for consolidation into the Group financial statements using the
following method:
| Foreign currency item | Exchange rate used |
| Assets and liabilities | The reporting date rate |
| Equity | The initial investment date rate |
| Income and expenses | The average rate for the period \u2013 but for a significant transaction if we believe the average rate is not |
| reasonable, then we use the rate at the date of the transaction |
Exchange differences arising from the translation of financial statements of foreign operations are recognised in the foreign currency translation
reserve in equity. When we dispose of a foreign operation, the cumulative exchange differences are transferred to profit or loss.
FIDUCIARY ACTIVITIES
The Group provides fiduciary services to third parties including custody, nominee and trustee services. This involves the Group holding assets on
behalf of third parties and making decisions regarding the purchase and sale of financial instruments. If ANZ is not the beneficial owner or does not
control the assets, then we do not recognise these transactions in these financial statements, except when required by accounting standards or
another legislative requirement.
ACCOUNTING POLICIES APPLICABLE TO THE RESTRUCTURE
The implementation of the non-operating holding company involved the transfer of assets and entities between companies within the wider
ANZGHL Group. This had implications for the ANZBGL consolidated financial statements due to the transfers extending outside of the Group. From an
accounting perspective, since the transfers were between wholly owned entities, these are considered common control transactions. As there is no
specific accounting standard for such transfers, the Group is required to make an accounting policy choice.
The Group\u2019s accounting policy for the transfer of the assets and entities between companies under common control is to apply book value
accounting. Under this approach, any differences between book value and the transfer price are recorded in equity. The accounting policy choice did
not have a material impact on profit and loss or equity when the assets were transferred as part of the Restructure. Refer to Note 31 Related Party
Disclosures for details of the transfer.
KEY JUDGEMENTS AND ESTIMATES
In the process of applying the Group\u2019s accounting policies, management has made a number of judgements and applied estimates and
assumptions about past and future events. Further information on the key judgements and estimates that we consider material to the
financial statements are contained within each relevant note to the financial statements.
The global economy is facing challenges associated with high inflation and interest rates, labour market constraints, and continuing
geopolitical tensions which contribute to an elevated level of estimation uncertainty involved in the preparation of these financial
statements.
The Group has made various accounting estimates in this Financial Report based on forecasts of economic conditions which reflect
expectations and assumptions at 30 September 2023 about future events considered reasonable in the circumstances. Thus there is a
considerable degree of judgement involved in preparing these estimates. Actual economic conditions are likely to be different from those
forecast since anticipated events frequently do not occur as expected, and the effect of these differences may significantly impact
accounting estimates included in these financial statements. The significant accounting estimates impacted by these forecasts and
associated uncertainties are predominantly related to expected credit losses and recoverable amounts of non-financial assets.
The impact of these uncertainties on each of these accounting estimates is discussed in the relevant notes in this Financial Report. Readers
should consider these disclosures in light of the inherent uncertainties described above.
INTEREST RATE BENCHMARK REFORM
Interbank offered rates (IBORs) reform is the global transition away from IBORs and their replacement by risk-free rates (RFRs). IBOR reforms have had a
wide-ranging impact for the Group and our customers given the fundamental differences between IBORs and RFRs. Accordingly, the Group
established an enterprise-wide Benchmark Transition Program to manage the operational, market, legal, conduct and financial reporting risks
associated with IBOR transition.
As at 30 September 2023 the Group\u2019s Program is largely complete, and included the implementation of the required processes, technology and
product capabilities that ensured the transitions were successfully undertaken. In line with regulatory announcements made in early 2021, IBOR rates
including Pound Sterling (GBP), Euro (EUR), Swiss Franc (CHF) and Japanese Yen (JPY), and the 1-week and 2-month US Dollar (USD) London Interbank
Offered Rate (LIBOR) rate settings ceased on 31 December 2021 and were replaced by alternative RFRs. The Group\u2019s exposure to IBOR reform was
primarily concentrated in other USD LIBOR settings which ceased on 30 June 2023. No material changes were made to the Group\u2019s risk management
strategy because of IBOR reform and the use of IBOR rates in new products was phased out in accordance with industry and supervisory guidance. The
transition activities had an immaterial impact to the Group\u2019s profit and loss.
To support any legacy contracts referencing these benchmarks across the industry, the 1-month, 3-month and 6-month USD settings will continue to
be published using an alternative \u2018synthetic\u2019 methodology. The Group continues to manage a small number of loan and derivative contracts whose
transition is being managed with customers, and a small number of debt issuances with investors. These remaining contracts will either mature or
transition ahead of the synthetic USD LIBOR cessation date of 30 September 2024. The Group has an immaterial exposure to other announced
benchmark cessation events expected to occur between 2024 and 2026.
ACCOUNTING STANDARDS ADOPTED IN THE PERIOD
Accounting policies have been consistently applied, unless otherwise noted.
AASB 2023-2
AMENDMENTS TO AUSTRALIAN ACCOUNTING STANDARDS \u2013 INTERNATIONAL TAX REFORM \u2013 PILLAR TWO MODEL RULES
In May 2023, the Federal Government announced it will implement key aspects of Pillar Two of the OECD/G20 Two-Pillar Solution to address the tax
challenges arising from digitalisation of the economy. This measure is not yet law. Other jurisdictions in which ANZ operates are also considering
implementation of the regime. The ANZ Group is expected to be within the scope of associated legislation. In anticipation of legislation being
enacted, the AASB issued AASB 2023-2
Amendments to Australian Accounting Standards \u2013 International Tax Reform \u2013 Pillar Two Model Rules
in June
2023. The Group has applied the mandatory exemption included in para. 4A of this standard and will apply the whole amending standard from 1
October 2023. This amending standard stipulates a mandatory temporary exemption from recognising deferred tax assets and liabilities related to
Pillar Two income taxes. The Group is monitoring progress of associated legislation and has not yet determined the expected impact on its financial
statements.
ACCOUNTING STANDARDS NOT EARLY ADOPTED
A number of new standards, amendments to standards and interpretations have been published but are not mandatory for the financial statements
for the year ended 30 September 2023 and have not been applied by the Group in preparing these financial statements. Further details of these are
set out below.
GENERAL HEDGE ACCOUNTING
AASB 9
Financial Instruments
(AASB 9) introduced new hedge accounting requirements which more closely align accounting with risk management
activities undertaken when hedging both financial and non-financial risks. AASB 9 provided the Group with an accounting policy choice to continue
to apply the AASB 139
Financial Instruments: Recognition and Measurement
(AASB 139) hedge accounting requirements until the International
Accounting Standards Board\u2019s ongoing project on Dynamic Risk Management (macro hedge accounting) is completed. The Group continues to apply
the hedge accounting requirements of AASB 139.
AASB 17
INSURANCE CONTRACTS
(AASB 17)
The final version of AASB 17 was issued in July 2017 and is not effective for the Group until 1 October 2023. It will replace AASB 4
Insurance Contracts
,
AASB 1023
General Insurance Contracts
and AASB 1038
Life Insurance Contracts
. AASB 17 establishes principles for the recognition, measurement,
presentation and disclosure of insurance contracts.
The measurement, presentation and disclosure requirements under AASB 17 are significantly different from current accounting standards. Although
the overall profit recognised in respect of insurance contracts will not change, it is expected that the timing of profit recognition will change.
AASB 17 will not have a material impact on the Group.
DEFERRED TAX RELATED TO ASSETS AND LIABILITIES ARISING FROM A SINGLE TRANSACTION
AASB 2021-5
Amendments to Australian Accounting Standards \u2013 Deferred Tax related to Assets and Liabilities arising from a Single Transaction
amends AASB 112
Income Taxes.
It
clarifies that entities are required to recognise deferred tax on transactions for which there is both an asset and a
liability and that give rise to equal taxable and deductible temporary differences which may apply to leases and decommissioning or restoration
obligations. This amendment is effective for the Group from 1 October 2023 and will not have a material impact on the Group.
LEASE LIABILITY IN A SALE AND LEASEBACK
AASB 2022-5
Amendments to Australian Accounting Standards \u2013 Lease Liability in a Sale and Leaseback
amends AASB 16
Leases
and specifies the
accounting for variable lease payments by seller-lessees in sale and leaseback transactions. The amendment is effective from 1 October 2024 and will
not have a material impact on the Group.
2.
NET INTEREST INCOME
| Consolidated | | The Company | |
| 2023 | 2022 | 2023 | 2022 |
| $m | $m | $m | $m |
| Net interest income | | | | |
| Interest income by type of financial asset | | | | |
| Financial assets at amortised cost | 44,303 | 21,737 | 35,000 | 16,289 |
| Investment securities at FVOCI | 2,615 | 1,107 | 2,235 | 834 |
| Trading assets | 1,654 | 700 | 1,413 | 547 |
| Financial assets at FVTPL | 1,355 | 65 | 1,449 | 177 |
| External interest income | 49,927 | 23,609 | 40,097 | 17,847 |
| Controlled entities' income | - | - | 1,047 | 561 |
| Interest income | 49,927 | 23,609 | 41,144 | 18,408 |
| Interest expense by type of financial liability | | | | |
| Financial liabilities at amortised cost | (31,334) | (8,019) | (26,016) | (6,170) |
| Securities sold short | (451) | (214) | (392) | (191) |
| Financial liabilities designated at FVTPL | (1,214) | (162) | (1,104) | (151) |
| External interest expense | (32,999) | (8,395) | (27,512) | (6,512) |
| Controlled entities expense | - | - | (1,161) | (581) |
| Interest expense | (32,999) | (8,395) | (28,673) | (7,093) |
| Major bank levy | (353) | (340) | (353) | (340) |
| Net interest income | 16,575 | 14,874 | 12,118 | 10,975 |
RECOGNITION AND MEASUREMENT
NET INTEREST INCOME
Interest Income and Expense
We recognise interest income and expense in net interest income for all financial instruments, including those classified as held for trading,
assets measured at FVOCI, and assets and liabilities designated at FVTPL. We use the effective interest rate method to calculate the
amortised cost of assets held at amortised cost and to recognise interest income on financial assets measured at amortised cost and FVOCI.
The effective interest rate is the rate that discounts the stream of estimated future cash receipts or payments over the expected life of the
financial instrument or, when appropriate, a shorter period, to the net carrying amount of the financial asset or liability. For assets subject to
prepayment, we determine their expected life on the basis of historical behaviour of the particular asset portfolio taking into account
contractual obligations and prepayment experience.
We recognise fees and costs, which form an integral part of the financial instrument (for example loan origination fees and costs), using the
effective interest rate method. These are presented as part of interest income or expense depending on whether the underlying financial
instrument is a financial asset or financial liability.
Major Bank Levy
The Major Bank Levy Act 2017
(levy or major bank levy) applies a rate of 0.06% to certain liabilities of ANZBGL. The levy represents a finance
cost and it is presented as interest expense in the Income Statement.
3.
NON-INTEREST INCOME
| Consolidated | | The Company | |
| | 2023 | 2022 | 2023 | 2022 |
| | $m | $m | $m | $m |
| Non-interest income | | | | |
| Fee and commission income | | | | |
| Lending fees1 | 397 | 374 | 362 | 340 |
| Non-lending fees | 2,275 | 2,394 | 1,533 | 1,744 |
| Commissions | 85 | 103 | 55 | 74 |
| Funds management income | 246 | 261 | 22 | 27 |
| External fee and commission income | 3,003 | 3,132 | 1,972 | 2,185 |
| Controlled entities' income | - | - | 187 | 244 |
| Fee and commission income | 3,003 | 3,132 | 2,159 | 2,429 |
| Fee and commission expense | (1,057) | (1,160) | (553) | (695) |
| Net fee and commission income | 1,946 | 1,972 | 1,606 | 1,734 |
| Other income | | | | |
| Net foreign exchange earnings and other financial instruments income2 | 1,535 | 1,993 | 1,272 | 1,296 |
| Gain on completion of ANZ Worldline partnership | - | 307 | - | 307 |
| Impairment of interest in controlled entities | - | - | - | (180) |
| Release of foreign currency translation reserve | 43 | (65) | - | - |
| Loss on disposal of financial planning and advice business | - | (62) | - | (22) |
| Loss on disposal of data centres in Australia | (43) | - | (32) | - |
| Dividends received from controlled entities | - | - | 2,562 | 3,181 |
| Other | 96 | 90 | (7) | 108 |
| Other income | 1,631 | 2,263 | 3,795 | 4,690 |
| Other operating income | 3,577 | 4,235 | 5,401 | 6,424 |
| Net income from insurance business | 89 | 140 | - | - |
| Share of associates' profit/(loss) | 225 | 177 | (18) | (12) |
| Non-interest income | 3,891 | 4,552 | 5,383 | 6,412 |
1. Lending fees exclude fees treated as part of the effective yield calculation in Interest income.
2. 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, ineffective
portions of cash flow hedges, and fair value movements in financial assets and liabilities designated at FVTPL.
RECOGNITION AND MEASUREMENT
OTHER OPERATING INCOME
Fee and Commission Revenue
We recognise fee and commission revenue arising from contracts with customers (a) over time when the performance obligation is
satisfied across more than one reporting period, or (b) at a point in time when the performance obligation is satisfied immediately or is
satisfied within one reporting period.
\u2022 lending fees exclude fees treated as part of the effective yield calculation of interest income. Lending fees include certain guarantee and
commitment fees where the loan or guarantee is not likely to be drawn upon, and other fees charged for providing customers a distinct
good or service that are recognised separately from the underlying lending product.
\u2022 non-lending fees include fees associated with deposit and credit card accounts, interchange fees and fees charged for specific customer
transactions such as international transaction fees. Where the Group provides multiple goods or services to a customer under the same
contract, the Group allocates the transaction price of the contract to distinct performance obligations based on the relative stand-alone
selling price of each performance obligation. Revenue is recognised as each performance obligation is satisfied.
\u2022 commissions represent fees from third parties where we act as an agent by arranging a third party (such as an insurance provider) to
provide goods and services to a customer. In such cases, we are not primarily responsible for providing the underlying good or service
to the customer. If the Group collects funds on behalf of a third party when acting as an agent, we only recognise the net commission
retained as revenue. When the commission is variable based on factors outside our control (such as a trail commission), revenue is only
recognised if it is highly probable that a significant reversal of the variable amount will not be required in future periods.
\u2022 funds management income represents fees earned from customers for providing asset management services. Revenue is recognised
over the period in which the asset management services are delivered. Performance fees associated with funds management activities
are only recognised when it becomes highly probable the performance hurdle will be achieved.
Net Foreign Exchange Earnings and Other Financial Instruments Income
We recognise the following as net foreign exchange earnings and other financial instruments income:
\u2022 exchange rate differences arising on the settlement of monetary items and translation differences on monetary items translated at rates
different to those at which they were initially recognised or included in a previous financial report;
\u2022 fair value movements (excluding realised and accrued interest) on derivatives not designated as accounting hedges that we use to
manage interest rate and foreign exchange risk on funding instruments;
\u2022 the ineffective portions of fair value hedges, cash flow hedges and net investment hedges;
\u2022 immediately upon sale or repayment of a hedged item, the unamortised fair value adjustments to items designated as fair value hedges
and amounts accumulated in equity related to designated cash flow hedges;
\u2022 fair value movements on financial assets and financial liabilities designated at FVTPL or held for trading;
\u2022 amounts released from the FVOCI reserve when a debt instrument classified as FVOCI is sold; and
\u2022 the gain or loss on derecognition of financial assets or liabilities measured at amortised cost.
Gain or Loss on Disposal of Non-Financial Assets
The gain or loss on the disposal of assets is the difference between the carrying value of the asset and the proceeds of disposal net of costs.
This is recognised in Other income in the year in which control of the asset transfers to the buyer.
When a non-financial asset or group of assets is classified as held for sale, it is measured at the lower of its carrying amount immediately
prior to reclassification and fair value less costs to sell, with any remeasurement recognised in Other operating income to align with the
classification of gain or loss on sale that would have applied if the sale had completed during the year.
RECOGNITION AND MEASUREMENT
NET INCOME FROM INSURANCE BUSINESS
We recognise
:
\u2022 premiums received (net of reinsurance premiums paid) based on an assessment of the likely pattern in which risk will emerge over the
term of the policies written. This assessment is undertaken periodically and updated in accordance with the latest pattern of risk
emergence; and
\u2022 claims incurred net of reinsurance, on an accruals basis once the liability to the policy owner has been established under the terms of
the contract and through actuarial assumptions of future claims.
SHARE OF ASSOCIATES\u2019 PROFIT/(LOSS)
The equity method is applied to accounting for associates. Under the equity method, our share of the after tax results of associates is
included in the Income Statement and the Statement of Comprehensive Income.
4. OPERATING EXPENSES
| | Consolidated | | The Company | |
| | 2023 | 2022 | 2023 | 2022 |
| | $m | $m | $m | $m |
| Personnel | | | | |
| Salaries and related costs | 5,157 | 4,754 | 3,791 | 3,494 |
| Superannuation costs | 396 | 375 | 335 | 317 |
| Other | 183 | 167 | 154 | 127 |
| Personnel | 5,736 | 5,296 | 4,280 | 3,938 |
| Premises | | | | |
| Rent | 71 | 88 | 50 | 67 |
| Depreciation | 437 | 419 | 338 | 344 |
| Other | 176 | 214 | 123 | 168 |
| Premises | 684 | 721 | 511 | 579 |
| Technology | | | | |
| Depreciation and amortisation | 501 | 578 | 455 | 521 |
| Subscription licences and outsourced services | 1,007 | 899 | 695 | 648 |
| Other | 178 | 144 | 144 | 162 |
| Technology | 1,686 | 1,621 | 1,294 | 1,331 |
| Restructuring | 169 | 101 | 146 | 78 |
| Other | | | | |
| Advertising and public relations | 176 | 165 | 133 | 128 |
| Professional fees | 857 | 935 | 795 | 864 |
| Freight, stationery, postage and communication | 175 | 172 | 128 | 128 |
| Other | 604 | 568 | 1,201 | 1,077 |
| Other | 1,812 | 1,840 | 2,257 | 2,197 |
| Operating expenses | 10,087 | 9,579 | 8,488 | 8,123 |
RECOGNITION AND MEASUREMENT
OPERATING EXPENSES
Operating expenses are recognised as services are provided to the Group, over the period in which an asset is consumed, or once a liability
is created.
SALARIES AND RELATED COSTS - ANNUAL LEAVE, LONG SERVICE LEAVE AND OTHER EMPLOYEE BENEFITS
Wages and salaries, annual leave and other employee entitlements expected to be paid or settled within twelve months of employees
rendering service are measured at their nominal amounts using remuneration rates that the Group expects to pay when the liabilities are
settled.
We accrue employee entitlements relating to long service leave using an actuarial calculation. It includes assumptions regarding staff
departures, leave utilisation and future salary increases. The result is then discounted using market yields at the reporting date. The market
yields are determined from a blended rate of high quality corporate bonds with terms to maturity that closely match the estimated future
cash outflows.
If we expect to pay short term cash bonuses, then a liability is recognised when the Group has a present legal or constructive obligation to
pay this amount (as a result of past service provided by the employee) and the obligation can be reliably measured.
Personnel expenses also include share-based payments which may be cash or equity settled. We calculate the fair value of equity settled
remuneration at grant date, which is then amortised over the vesting period, with a corresponding increase in share capital or the share
option reserve as applicable. When we estimate the fair value, we take into account market vesting conditions, such as share price
performance conditions. We take non-market vesting conditions, such as service conditions, into account by adjusting the number of
equity instruments included in the expense.
After the grant of an equity-based award, the amount we recognise as an expense is reversed when non-market vesting conditions are not
met, for example an employee fails to satisfy the minimum service period specified in the award due to resignation, termination or notice
of dismissal for serious misconduct. However, we do not reverse the expense if the award does not vest due to the failure to meet a
market-based performance condition.
Further information on share-based payment schemes operated by the Group during the current and prior year is included in Note 30
Employee Share and Option Plans.
5. INCOME TAX
INCOME TAX EXPENSE
Reconciliation of the prima facie income tax expense on pre-tax profit with the income tax expense recognised in profit or loss:
| | Consolidated | | The Company | |
| | 2023 | 2022 | 2023 | 2022 |
| $m | $m | $m | $m |
| Profit before income tax from continuing operations | 10,134 | 10,079 | 8,938 | 9,529 |
| Prima facie income tax expense at 30% | 3,040 | 3,024 | 2,681 | 2,859 |
| Tax effect of permanent differences: | | | | |
| Net (gain)/loss from divestments/closures | - | (83) | - | (113) |
| Share of associates' (profit)/loss | (68) | (53) | 5 | 4 |
| Interest on convertible instruments | 92 | 49 | 92 | 49 |
| Overseas tax rate differential | (163) | (128) | (95) | (70) |
| Provision for foreign tax on dividend repatriation | 41 | 155 | 35 | 150 |
| Rebatable and non-assessable dividends | - | - | (769) | (954) |
| Impairment of interest in controlled entities | - | - | - | 54 |
| Other | (2) | 4 | 23 | (21) |
| Subtotal | 2,940 | 2,968 | 1,972 | 1,958 |
| Income tax (over)/under provided in previous years | 1 | (28) | (8) | (25) |
| Income tax expense | 2,941 | 2,940 | 1,964 | 1,933 |
| Current tax expense | 2,887 | 2,694 | 2,012 | 1,725 |
| Adjustments recognised in the current year in relation to the current tax of | | | | |
| prior years | 1 | (28) | (8) | (25) |
| Deferred tax expense/(income) relating to the origination and reversal of | | | | |
| temporary differences | 53 | 274 | (40) | 233 |
| Income tax expense | 2,941 | 2,940 | 1,964 | 1,933 |
| Australia | 1,640 | 1,844 | 1,568 | 1,755 |
| Overseas | 1,301 | 1,096 | 396 | 178 |
| Effective tax rate | 29.0% | 29.2% | 22.0% | 20.3% |
DEFERRED TAX ASSETS AND LIABILITIES
| | Consolidated | | The Company | |
| | 2023 | 2022 | 2023 | 2022 |
| $m | $m | $m | $m |
| Deferred tax assets balances comprise temporary differences | | | | |
| attributable to: | | | | |
| Amounts recognised in the Income Statement: | | | | |
| Collectively assessed allowances for expected credit losses | 1,128 | 1,065 | 897 | 880 |
| Individually assessed allowances for expected credit losses | 102 | 148 | 79 | 119 |
| Provision for employee entitlements | 294 | 252 | 243 | 206 |
| Other provisions | 263 | 314 | 209 | 240 |
| Software | 917 | 867 | 781 | 708 |
| Other | 290 | 285 | 238 | 218 |
| Total | 2,994 | 2,931 | 2,447 | 2,371 |
| Amounts recognised directly in Other Comprehensive Income: | | - | | |
| Cash flow hedge reserve | 818 | 882 | 789 | 891 |
| Other reserves | 29 | 20 | 27 | 16 |
| Total | 847 | 902 | 816 | 907 |
| Total deferred tax assets (before set-off) | 3,841 | 3,833 | 3,263 | 3,278 |
| Set-off of deferred tax balances pursuant to set-off provisions | (455) | (449) | (275) | (286) |
| Net deferred tax assets | 3,386 | 3,384 | 2,988 | 2,992 |
| | 2023 | 2022 | 2023 | 2022 |
| $m | $m | $m | $m |
| Deferred tax liabilities balances comprise temporary differences | | | | |
| attributable to: | | | | |
| Amounts recognised in the Income Statement: | | | | |
| Finance leases | 95 | 79 | 6 | (15) |
| Other | 303 | 300 | 212 | 232 |
| Total | 398 | 379 | 218 | 217 |
| Amounts recognised directly in Other Comprehensive Income: | | | | |
| Foreign currency translation reserve | 36 | 36 | 36 | 36 |
| Cash flow hedge reserve | 17 | 8 | 7 | 8 |
| FVOCI reserve | 17 | 57 | 19 | 31 |
| Defined benefit obligations | 47 | 52 | 42 | 48 |
| Total | 117 | 153 | 104 | 123 |
| Total deferred tax liabilities (before set-off) | 515 | 532 | 322 | 340 |
| Set-off of deferred tax balances pursuant to set-off provisions | (455) | (449) | (275) | (286) |
| Net deferred tax liabilities | 60 | 83 | 47 | 54 |
TAX CONSOLIDATION
The Company and all its wholly owned Australian resident entities are part of a tax-consolidated group under Australian taxation law. Following the
Restructure on 3 January 2023, ANZGHL is the head entity in the tax-consolidated group. We recognise each of the following in the separate financial
statements of members of the tax consolidated group on a \u2018group allocation\u2019 basis: tax expense/income, and deferred tax liabilities/assets that arise
from temporary differences for members of the tax-consolidated group.
Under a tax funding arrangement between the entities in the tax-consolidated group, amounts are recognised as payable to or receivable by each
member of the tax-consolidated group in relation to the tax contribution amounts payable or receivable between members of the tax-consolidated
group and the head entity ANZGHL.
Members of the tax-consolidated group have also entered into a tax sharing agreement that provides for the allocation of income tax liabilities
between the entities were the head entity to default on its income tax payment obligations.
UNRECOGNISED DEFERRED TAX ASSETS AND LIABILITIES
Unrecognised deferred tax assets related to unused realised tax losses (on revenue account) total $1 million (2022: $1 million) for the Group and nil
(2022: nil) for the Company.
Unrecognised deferred tax liabilities related to additional potential foreign tax costs (assuming all retained earnings in offshore branches and
subsidiaries are repatriated) total $286 million (2022: $250 million) for the Group and $30 million (2022: $18 million) for the Company.
RECOGNITION AND MEASUREMENT
INCOME TAX EXPENSE
Income tax expense comprises both current and deferred taxes and is based on the accounting profit adjusted for differences in the
accounting and tax treatments of income and expenses (that is, taxable income). We recognise tax expense in profit or loss except when
the tax relates to items recognised directly in equity and other comprehensive income, in which case we recognise the tax directly in
equity or other comprehensive income respectively.
CURRENT TAX EXPENSE
Current tax is the tax we expect to pay on taxable income for the year, based on tax rates (and tax laws) which are enacted at the reporting
date. We recognise current tax as a liability (or asset) to the extent that it is unpaid (or refundable).
DEFERRED TAX ASSETS AND LIABILITIES
We account for deferred tax using the balance sheet method. Deferred tax arises because the accounting income is not always the same as
the taxable income. This creates temporary differences, which usually reverse over time. Until they reverse, we recognise a deferred tax
asset, or liability, on the balance sheet. We measure deferred taxes at the tax rates that we expect will apply to the period(s) when the asset
is realised, or the liability settled, based on tax rates (and tax laws) that have been enacted or substantially enacted at the reporting date.
We offset current and
deferred tax assets and liabilities only to the extent that:
\u2022 they relate to income taxes imposed by the same taxation authority;
\u2022 there is a legal right and intention to settle on a net basis; and
\u2022
it is allowed under the tax law
of the relevant jurisdiction.
KEY JUDGEMENTS AND ESTIMATES
Judgement is required in determining provisions held in respect of uncertain tax positions. The Group estimates its tax liabilities based on
its understanding of the relevant law in each of the countries in which it operates and seeks independent advice where appropriate.
6. DIVIDENDS
ORDINARY SHARE DIVIDENDS
Dividends determined by the Board of the Company are recognised with a corresponding reduction of retained earnings on the dividend payment
date. Accordingly, the final dividend announced for the current financial year is paid in the following financial year. Following the Restructure on 3
January 2023, ANZGHL is the head entity in the tax-consolidated group, and the franking and imputation credits have been transferred by the
Company to ANZGHL.
| | | | |
| | Amount | Total dividend |
| Dividends | | | |
| % of total | per share | $m |
| Financial Year 2022 | | | |
| 2021 final dividend paid1,2 | | 72 cents | 2,030 |
| 2022 interim dividend paid1,2 | | 72 cents | 2,012 |
| Bonus option plan adjustment | | | (77) |
| Dividends paid during the year ended 30 September 2022 | | | |
| | | | |
| | | 3,965 |
| Cash | 90.2% | | 3,577 |
| Dividend reinvestment plan3 | 9.8% | | 388 |
| Dividends paid during the year ended 30 September 2022 | | | |
| | | | |
| | | 3,965 |
| Financial Year 2023 | | | |
| 2022 final dividend paid1,2 | | 74 cents | 2,213 |
| 2023 special dividend paid to ANZ BH Pty Ltd | | 33 cents | 1,000 |
| 2023 interim dividend paid to ANZ BH Pty Ltd | | 79 cents | 2,387 |
| Dividends paid during the year ended 30 September 2023 | | | 5,600 |
| Cash | 96.3% | | 5,394 |
| Dividend reinvestment plan | 3.7% | | 206 |
| Dividends paid during the year ended 30 September 2023 | | | 5,600 |
| | | Total |
| | | dividend |
| | | Amount | |
| Dividends announced and to be paid after year-end | Payment date | per share | $m |
| 2023 final dividend | 22 December 2023 | 94 cents | 2,825 |
1. Carries New Zealand imputation credits of NZD 9 cents for the 2022 final dividend and 2022 interim dividend, and NZD 8 cents for the 2021 final dividend.
2. Fully franked for Australian tax purposes (30% tax rate).
3. Includes on-market share purchases for the DRP of $204 million.
DIVIDEND REINVESTMENT PLAN AND BONUS OPTION PLAN
ANZBGL\u2019s Dividend Reinvestment Plan (DRP) and Bonus Option Plan (BOP) ceased to operate following implementation of the Restructure on 3
January 2023.
RESTRICTIONS ON THE PAYMENT OF DIVIDENDS
APRA\u2019s written approval is required before paying dividends on the ordinary shares of the Company if:
\u2022 the aggregate dividends exceed the Company\u2019s after tax earnings (in calculating those after tax earnings, we take into account any payments we
made on senior capital instruments) in the financial year to which they relate; or
\u2022 ANZ\u2019s Common Equity Tier 1 capital ratio falls within capital range buffers specified by APRA.
If the Company fails to pay a dividend or distribution on its ANZ Capital Notes or ANZ Capital Securities on the scheduled payment date, it may
(subject to a number of exceptions) be restricted from resolving to pay or paying any dividend on the Company\u2019s ordinary shares.
7. SEGMENT REPORTING
DESCRIPTION OF SEGMENTS
The Group\u2019s six operating segments are presented on a basis that is consistent with the information provided internally to the Chief Executive Officer,
who is the chief operating decision maker. This reflects the way the Group\u2019s businesses are managed, rather than the legal structure of the Group.
We measure the performance of operating segments on a cash profit basis. To calculate cash profit, we exclude items from profit after tax attributable
to shareholders. For 2023 and 2022, the adjustments relate to impacts of economic hedges and revenue and expense hedges which represent timing
differences that will reverse through earnings in the future. Transactions between divisions across segments within ANZ are conducted on an arm\u2019s-
length basis and disclosed as part of the income and expenses of these segments.
The presentation of divisional results has been impacted by the following structural changes during the period. Prior period comparatives have been
restated:
\u2022 Non-banking businesses - transfer of non-banking businesses held in the Australia Commercial and Institutional divisions to the Group Centre
division which were then disposed as part of the Restructure.
\u2022 Corporate customer re-segmentation - certain business and property finance customers were transferred from the New Zealand division to the
Institutional division.
\u2022 Cost reallocations - certain costs were reallocated across the Australia Retail, Australia Commercial, Institutional and Group Centre divisions.
The reportable segments are divisions engaged in providing either different products or services or similar products and services in different
geographical areas. They are as follows:
Australia Retail
The Australia Retail division provides a full range of banking services to Australian consumers. This includes Home Loans, Deposits, Credit Cards and
Personal Loans. Products and services are provided via the branch network, home loan specialists, contact centres, a variety of self-service channels
(digital and internet banking, website, ATMs and phone banking) and third-party brokers. It also includes the costs related to the development and
operation of the ANZ Plus proposition for retail customers.
Australia Commercial
The Australia Commercial division provides a full range of banking products and financial services, including asset financing, across the following
customer segments: SME Banking (small business owners and medium commercial customers), and Specialist Business (large commercial customers,
and high net worth individuals and family groups).
Institutional
The Institutional division services global institutional and corporate customers, and governments across Australia, New Zealand and International
(including Papua New Guinea (PNG)) via the following business units:
\u2022 Transaction Banking provides customers with working capital and liquidity solutions including documentary trade, supply chain financing,
commodity financing as well as cash management solutions, deposits, payments and clearing.
\u2022 Corporate Finance provides customers with loan products, loan syndication, specialised loan structuring and execution, project and export
finance, debt structuring and acquisition finance and corporate advisory services.
\u2022 Markets provides customers with risk management services in foreign exchange, interest rates, credit, commodities, and debt capital markets in
addition to managing the Group's interest rate exposure and liquidity position.
New Zealand
The New Zealand division comprises the following business units:
\u2022 Personal provides a full range of banking and wealth management services to consumer and private banking customers. We deliver our services
via our internet and app-based digital solutions and a network of branches, mortgage specialists, relationship managers and contact centres.
\u2022 Business and Agri (previously Business) provides a full range of banking services through our digital, branch and contact centre channels, and
traditional relationship banking and sophisticated financial solutions through dedicated managers. These cover privately owned small, medium
and large enterprises, the agricultural business segment, government and government-related entities.
Pacific
The Pacific division provides products and services to retail and commercial customers (including multi-nationals) and to governments located in the
Pacific region, excluding PNG which forms part of the Institutional division.
Group Centre
Group Centre division provides support to the operating divisions, including technology, property, risk management, financial management, treasury,
strategy, marketing, human resources, corporate affairs, and shareholder functions. It also includes minority investments in Asia.
OPERATING SEGMENTS
| | Australia | | | | | | |
| Retail | | | | | | |
| | Australia | | | | | |
| | Commercial | Institutional | | | | |
| | | | New | | | |
| | | | Zealand | Pacific | | |
| | | | | | Group | |
| | | | | | Centre | |
| | | | | | | Group |
| | | | | | | Total |
| Year ended 30 September 2023 | $m | $m | $m | $m | $m | $m | $m |
| Net interest income | 5,716 | 3,224 | 4,040 | 3,149 | 123 | 323 | 16,575 |
| Net fee and commission income | 546 | 322 | 685 | 398 | 19 | (24) | 1,946 |
| Net income from insurance business | 89 | - | - | - | - | - | 89 |
| Other income1,2 | 16 | 43 | 2,009 | 11 | 66 | (80) | 2,065 |
| Share of associates\u2019 profit/(loss) | - | - | - | - | - | 225 | 225 |
| Other operating income | 651 | 365 | 2,694 | 409 | 85 | 121 | 4,325 |
| Operating income1,2 | 6,367 | 3,589 | 6,734 | 3,558 | 208 | 444 | 20,900 |
| Operating expenses | (3,542) | (1,423) | (2,708) | (1,291) | (145) | (978) | (10,087) |
| Cash profit before credit impairment and income tax | 2,825 | 2,166 | 4,026 | 2,267 | 63 | (534) | 10,813 |
| Credit impairment (charge)/release | (135) | (107) | 80 | (112) | 28 | 1 | (245) |
| Cash profit before income tax | 2,690 | 2,059 | 4,106 | 2,155 | 91 | (533) | 10,568 |
| Income tax expense and non-controlling interests1,2 | (816) | (619) | (1,143) | (603) | (20) | 105 | (3,096) |
| Cash profit/(loss) from continuing operations | 1,874 | 1,440 | 2,963 | 1,552 | 71 | (428) | 7,472 |
| Cash profit/(loss) from discontinued operations | | | | | | | - |
| Cash profit/(loss) | | | | | | | 7,472 |
| Economic hedges1 | | | | | | | (217) |
| Revenue and expense hedges2 | | | | | | | (90) |
| Profit after tax attributable to shareholders | | | | | | | 7,165 |
| Includes non-cash items: | | | | | | | |
| Share of associates\u2019 profit/(loss) | - | - | - | - | - | 225 | 225 |
| Depreciation and amortisation | (77) | (5) | (164) | (105) | (10) | (580) | (941) |
| Equity-settled share based payment expenses | (6) | (2) | (73) | (4) | - | (20) | (105) |
| Credit impairment (charge)/release | (135) | (107) | 80 | (112) | 28 | 1 | (245) |
| | Australia | | | | | | |
| Retail | | | | | | |
| | Australia | | | | | |
| | Commercial | Institutional | | | | |
| | | | New | | | |
| | | | Zealand | Pacific | | |
| | | | | | Group | |
| | | | | | Centre | |
| | | | | | | Group |
| | | | | | | Total |
| Financial position | $m | $m | $m | $m | $m | $m | $m |
| Goodwill | 100 | - | 1,261 | 1,617 | - | - | 2,978 |
| Investments in associates | - | - | - | - | - | 2,321 | 2,321 |
| Total external assets | 315,184 | 61,916 | 538,827 | 125,178 | 3,391 | 61,545 | 1,106,041 |
| Total external liabilities | 168,866 | 119,341 | 452,779 | 122,924 | 3,862 | 169,155 | 1,036,927 |
1. The cash profit adjustment for economic hedges applies to the Institutional, New Zealand and Group Centre divisions with $305 million loss recognised in Other operating income and $88 million benefit
recognised in Income tax expense.
2. The cash profit adjustment for revenue and expense hedges applies to the Group Centre division with $129 million loss recognised in Other operating income and $39 million benefit recognised in Income
tax expense.
| Australia | | | | | | |
| Retail | | | | | | |
| | Australia | | | | | |
| | Commercial | Institutional | | | | |
| | | | New | | | |
| | | | Zealand | Pacific | | |
| | | | | | Group | |
| | | | | | Centre | |
| | | | | | | Group |
| | | | | | | Total |
| Year ended 30 September 2022 | $m | $m | $m | $m | $m | $m | $m |
| Net interest income | 5,527 | 2,568 | 3,697 | 2,871 | 96 | 115 | 14,874 |
| Net fee and commission income | 477 | 404 | 648 | 428 | 26 | (11) | 1,972 |
| Net income from insurance business | 140 | - | - | - | - | - | 140 |
| Other income1,2 | 5 | 258 | 1,003 | 32 | 42 | 44 | 1,384 |
| Share of associates\u2019 profit/(loss) | - | - | - | - | - | 177 | 177 |
| Other operating income | 622 | 662 | 1,651 | 460 | 68 | 210 | 3,673 |
| Operating income1,2 | 6,149 | 3,230 | 5,348 | 3,331 | 164 | 325 | 18,547 |
| Operating expenses | (3,397) | (1,301) | (2,566) | (1,273) | (153) | (889) | (9,579) |
| Cash profit before credit impairment and income tax | 2,752 | 1,929 | 2,782 | 2,058 | 11 | (564) | 8,968 |
| Credit impairment (charge)/release | 129 | 133 | 27 | (45) | 6 | (18) | 232 |
| Cash profit before income tax | 2,881 | 2,062 | 2,809 | 2,013 | 17 | (582) | 9,200 |
| Income tax expense and non-controlling interests1,2 | (872) | (511) | (872) | (564) | (8) | 142 | (2,685) |
| Cash profit/(loss) from continuing operations | 2,009 | 1,551 | 1,937 | 1,449 | 9 | (440) | 6,515 |
| Cash profit/(loss) from discontinued operations | | | | | | | (19) |
| Cash profit/(loss) | | | | | | | 6,496 |
| Economic hedges1 | | | | | | | 569 |
| Revenue and expense hedges2 | | | | | | | 54 |
| Profit after tax attributable to shareholders | | | | | | | 7,119 |
| Includes non-cash items: | | | | | | | |
| Share of associates\u2019 profit/(loss) | - | - | - | - | - | 177 | 177 |
| Depreciation and amortisation | (87) | (12) | (158) | (116) | (10) | (626) | (1,009) |
| Equity-settled share based payment expenses | (5) | (1) | (72) | (4) | (1) | (19) | (102) |
| Credit impairment (charge)/release | 129 | 133 | 27 | (45) | 6 | (18) | 232 |
| Australia | | | | | | |
| Retail | | | | | | |
| | Australia | | | | | |
| | Commercial | Institutional | | | | |
| | | | New | | | |
| | | | Zealand | Pacific | | |
| | | | | | Group | |
| | | | | | Centre | |
| | | | | | | Group |
| | | | | | | Total |
| Financial position | $m | $m | $m | $m | $m | $m | $m |
| Goodwill | 178 | - | 1,198 | 1,530 | - | - | 2,906 |
| Investments in associates | - | - | - | - | - | 2,181 | 2,181 |
| Total external assets | 292,876 | 59,983 | 544,066 | 116,218 | 3,707 | 68,879 | 1,085,729 |
| Total external liabilities | 153,494 | 118,355 | 473,114 | 115,263 | 4,065 | 155,037 | 1,019,328 |
1. The cash profit adjustment for economic hedges applies to the Institutional, New Zealand and Group Centre divisions with $802 million gain recognised in Other operating income and $233 million
expense recognised in Income tax expense.
2. The cash profit adjustment for economic hedges applies to the Group Centre division with $77 million gain recognised in Other operating income and $23 million expense recognised in Income tax
expense.
SEGMENT INCOME BY PRODUCTS AND SERVICES
The primary sources of our external income across all divisions are Interest income and Other operating income, which includes net fee and
commission income, net foreign exchange earnings and other financial instruments income. The Australia Retail, Australia Commercial, New Zealand,
and Pacific divisions derive income from products and services in retail and commercial banking. The Institutional division derives its income from
institutional products and market services. No single customer amounts to greater than 10% of the Group\u2019s income.
GEOGRAPHICAL INFORMATION
The reportable segments operate across three geographical regions as follows:
\u2022 Australia Retail division - Australia
\u2022 Australia Commercial division - Australia
\u2022 Institutional division - all three geographical regions
\u2022 New Zealand division - New Zealand
\u2022 Pacific division \u2013 Rest of World
\u2022 Group Centre division - all three geographical regions
Discontinued operations results are included in the Australia geography. The Rest of World geography includes Asia, Pacific, Europe and the Americas.
The following table sets out total operating income earned including discontinued operations and assets to be recovered in more than one year
based on the geographical regions in which the Group operates.
| | Australia | | New Zealand | | Rest of World | | | |
| | | | | | | Total | |
| | 2023 | 2022 | 2023 | 2022 | 2023 | 2022 | 2023 | 2022 |
| | $m | $m | $m | $m | $m | $m | $m | $m |
| Total operating income1 | 12,677 | 12,462 | 4,463 | 4,501 | 3,326 | 2,547 | 20,466 | 19,510 |
| Assets to be recovered in more than one year2 | 407,221 | 384,724 | 119,278 | 109,191 | 28,877 | 32,350 | 555,376 | 526,265 |
1. Includes Operating income earned from discontinued operations of nil (2022: $84 million).
2. Represents Net loans and advances based on the contractual maturity.
FINANCIAL ASSETS
Outlined below is a description of how we classify and measure financial assets as they apply to the note disclosures that follow.
CLASSIFICATION AND MEASUREMENT
Financial assets - general
There are three measurement classifications for financial assets under AASB 9: amortised cost, FVTPL and FVOCI. Financial assets are
classified into these measurement classifications on the basis of two criteria:
\u2022 the business model within which the financial asset is managed; and
\u2022 the contractual cash flow characteristics of the financial asset (specifically whether the contractual cash flows represent solely payments
of principal and interest).
The resultant financial asset classifications are as follows:
\u2022 Amortised cost: Financial assets with contractual cash flows that comprise solely payments of principal and interest and which are held
in a business model whose objective is to collect their cash flows;
\u2022 FVOCI: Financial assets with contractual cash flows that comprise solely payments of principal and interest and which are held in a
business model whose objective is to collect their cash flows or to sell the assets; and
\u2022 FVTPL: Any other financial assets not falling into the categories above are measured at FVTPL.
Fair value option for financial assets
A financial asset may be irrevocably designated on initial recognition:
\u2022 at FVTPL when the designation eliminates or significantly reduces an accounting mismatch that would otherwise arise; or
\u2022 at FVOCI for investments in equity securities, where that instrument is neither held for trading nor contingent consideration recognised
by an acquirer in a business combination.
8. CASH AND CASH EQUIVALENTS
Cash and cash equivalents comprise cash on hand and other balances, as outlined below, that are convertible into cash with an insignificant risk of
changes in value and with remaining maturities of three months or less, including reverse repurchase agreements.
| | Consolidated | | The Company | |
| | 2023 | 2022 | 2023 | 2022 |
| | $m | $m | $m | $m |
| Coins, notes and cash at bank | 1,070 | 1,147 | 667 | 787 |
| Securities purchased under agreements to resell in less than 3 months | | | | |
| 1 | | | | |
| | 31,711 | 15,996 | 31,120 | 14,372 |
| Balances with central banks | 105,689 | 127,790 | 94,389 | 118,928 |
| Settlement balances owed to ANZ within 3 months | 29,684 | 23,199 | 28,232 | 21,396 |
| Cash and cash equivalents | 168,154 | 168,132 | 154,408 | 155,483 |
1.
During 2023, the Group commenced the management of repurchase agreements and reverse repurchase agreements on a fair value basis within the trading book in its Markets business. This resulted in the
associated repurchase and reverse repurchase agreements being recognised and measured at FVTPL.
9. TRADING ASSETS
| Consolidated | | The Company | |
| | 2023 | 2022 | 2023 | 2022 |
| | $m | $m | $m | $m |
| Government debt securities and notes | 28,074 | 27,291 | 23,144 | 21,881 |
| Corporate and financial institution securities | 3,885 | 3,941 | 2,914 | 2,700 |
| Commodities | 4,881 | 3,860 | 4,471 | 3,348 |
| Other securities | 164 | 145 | 164 | 144 |
| Total | 37,004 | 35,237 | 30,693 | 28,073 |
RECOGNITION AND MEASUREMENT
Trading assets are financial instruments or other assets we either:
\u2022 acquire principally for the purpose of selling in the short-term; or
\u2022 hold as part of a portfolio we manage for short-term profit making.
Trading assets include commodity inventories measured at fair value less cost to sell in accordance with the broker trader exemption under
AASB 102
Inventories
.
We recognise purchases and sales of trading assets on trade date:
\u2022 initially, we measure them at fair value; and
\u2022 subsequently, we measure them in the balance sheet at their fair value with any change in fair value recognised in profit or loss.
Assets disclosed as Trading assets are subject to the general classification and measurement policy for Financial Assets outlined at the
commencement of the Group\u2019s financial assets disclosures on page 101.
KEY JUDGEMENTS AND ESTIMATES
Judgement is required when applying the valuation techniques used to determine the fair value of trading assets not valued using quoted
market prices. Refer to Note 18 Fair Value of Financial Assets and Financial Liabilities for further details.
2022
2023
27,291
145
3,941
3,860
Other securities
Commodities
Government debt
securities and notes
Corporate and financial
institution securities
28,074
164
3,885
4,881
10. DERIVATIVE FINANCIAL INSTRUMENTS
| Consolidated | | | | |
| | | | | |
| Assets | | | |
| 2023 | | | |
| | Liabilities | | |
| | 2023 | | |
| | | Assets | |
| | | 2022 | |
| | | | Liabilities |
| | | | 2022 |
| Fair Value | $m | $m | $m | $m |
| Derivative financial instruments - held for trading | 60,059 | (57,210) | 89,716 | (84,793) |
| Derivative financial instruments - designated in hedging relationships | 347 | (272) | 458 | (356) |
| Derivative financial instruments | 60,406 | (57,482) | 90,174 | (85,149) |
| The Company | | | | |
| | | | | |
| Assets | | | |
| 2023 | | | |
| | Liabilities | | |
| | 2023 | | |
| | | Assets | |
| | | 2022 | |
| | | | Liabilities |
| | | | 2022 |
| Fair Value | $m | $m | $m | $m |
| Derivative financial instruments - held for trading | 59,649 | (57,256) | 87,650 | (84,200) |
| Derivative financial instruments - designated in hedging relationships | 340 | (255) | 406 | (300) |
| Derivative financial instruments | 59,989 | (57,511) | 88,056 | (84,500) |
FEATURES
Derivative financial instruments are contracts:
\u2022 whose value is derived from an underlying price index (or other variable) defined in the contract - sometimes the value is derived from more than
one variable;
\u2022 that require little or no initial net investment; and
\u2022 that are settled at a future date.
Movements in the price of the underlying variables, which cause the value of the contract to fluctuate, are reflected in the fair value of the derivative.
PURPOSE
The Group\u2019s derivative financial instruments have been categorised as following:
| Trading | Derivatives held in order to: |
| \u2022 meet customer needs for managing their own risks. |
| \u2022 manage risks in the Group that are not in a designated hedge accounting relationship (some elements of balance |
| sheet management). |
| \u2022 undertake market making and positioning activities to generate profits from short-term fluctuations in prices |
| or margins. |
| Designated in Hedging | |
| Relationships | |
| Derivatives designated into hedge accounting relationships in order to minimise profit or loss volatility by matching |
| movements in underlying positions relating to: |
| \u2022 hedges of the Group\u2019s exposures to interest rate risk and currency risk. |
| \u2022 hedges of other exposures relating to non-trading positions. |
TYPES
The Group offers or uses four different types of derivative financial instruments:
| Forwards | A contract documenting the rate of interest, or the currency exchange rate, to be paid or received on a notional |
| principal amount at a future date. |
| Futures | An exchange traded contract in which the parties agree to buy or sell an asset in the future for a price agreed on the |
| transaction date, with a net settlement in cash paid on the future date without physical delivery of the asset. |
| Swaps | A contract in which two parties exchange one series of cash flows for another. |
| Options | A contract in which the buyer of the contract has the right - but not the obligation - to buy (known as a \u2018call option\u2019) |
| or to sell (known as a \u2018put option\u2019) an asset or instrument at a set price on a future date. The seller has the |
| corresponding obligation to fulfil the transaction to sell or buy the asset or instrument if the buyer exercises |
| the option. |
RISKS MANAGED
The Group offers and uses the instruments described above to manage fluctuations in the following market factors:
| Foreign Exchange | Currencies at current or determined rates of exchange. |
| Interest Rate | Fixed or variable interest rates applying to money lent, deposited or borrowed. |
| Commodity | Soft commodities (that is, agricultural products such as wheat, coffee, cocoa and sugar) and hard commodities (that |
| is, mined products such as gold, oil and gas). | |
| Credit | Risk of default by customers or third parties. |
The Group uses a number of central clearing counterparties and exchanges to settle derivative transactions. Different arrangements for posting of
collateral exist with these exchanges:
\u2022 some transactions are subject to clearing arrangements which result in separate recognition of collateral assets and liabilities, with the carrying
values of the associated derivative assets and liabilities held at their fair value.
\u2022 other transactions, are legally settled by the payment or receipt of collateral which reduces the carrying values of the related derivative instruments
by the amount paid or received.
DERIVATIVE FINANCIAL INSTRUMENTS \u2013 HELD FOR TRADING
The majority of the Group\u2019s derivative financial instruments are held for trading. The fair value of derivative financial instruments held for trading is:
| Consolidated | Assets | Liabilities | Assets | Liabilities |
| | 2023 | 2023 | 2022 | 2022 |
| Fair Value | $m | $m | $m | $m |
| Interest rate contracts | | | | |
| Forward rate agreements | - | - | - | (1) |
| Futures contracts | 294 | (37) | 336 | (123) |
| Swap agreements | 10,815 | (15,194) | 10,421 | (15,031) |
| Options | 1,805 | (2,023) | 1,698 | (1,954) |
| Total | 12,914 | (17,254) | 12,455 | (17,109) |
| Foreign exchange contracts | | | | |
| Spot and forward contracts | 21,399 | (19,580) | 42,221 | (37,426) |
| Swap agreements | 23,230 | (18,172) | 32,169 | (27,548) |
| Options | 690 | (1,120) | 926 | (1,343) |
| Total | 45,319 | (38,872) | 75,316 | (66,317) |
| Commodity and other contracts | 1,812 | (1,067) | 1,927 | (1,353) |
| Credit default swaps | 14 | (17) | 18 | (14) |
| Derivative financial instruments - held for trading1 | 60,059 | (57,210) | 89,716 | (84,793) |
1. Includes derivatives held for balance sheet management which are not designated into accounting hedge relationships.
The majority of the Company\u2019s derivative financial instruments are held for trading. The fair value of derivative financial instruments held for trading is:
| The Company | Assets | Liabilities | Assets | Liabilities |
| | 2023 | 2023 | 2022 | 2022 |
| Fair Value | $m | $m | $m | $m |
| Interest rate contracts | | | | |
| Forward rate agreements | 2 | (1) | 2 | (7) |
| Futures contracts | 259 | (30) | 240 | (116) |
| Swap agreements | 11,324 | (15,178) | 10,778 | (15,098) |
| Options | 1,807 | (2,016) | 1,684 | (1,947) |
| Total | 13,392 | (17,225) | 12,704 | (17,168) |
| Foreign exchange contracts | | | | |
| Spot and forward contracts | 19,229 | (17,595) | 36,576 | (33,376) |
| Swap agreements | 24,493 | (20,216) | 35,526 | (30,949) |
| Options | 684 | (1,110) | 895 | (1,331) |
| Total | 44,406 | (38,921) | 72,997 | (65,656) |
| Commodity and other contracts | 1,823 | (1,078) | 1,923 | (1,352) |
| Credit default swaps | 28 | (32) | 26 | (24) |
| Derivative financial instruments - held for trading1 | 59,649 | (57,256) | 87,650 | (84,200) |
1. Includes derivatives held for balance sheet management which are not designated into accounting hedge relationships.
DERIVATIVE FINANCIAL INSTRUMENTS \u2013 DESIGNATED IN HEDGING RELATIONSHIPS
As set out in Note 1, under the accounting policy choice provided by AASB 9, the Group has continued to apply the hedge accounting requirements
of AASB 139.
There are three types of hedge accounting relationships the Group utilises:
| | Fair value hedge | Cash flow hedge | Net investment hedge |
| Objective of this | | | |
| hedging | | | |
| arrangement | | | |
| To hedge our exposure to changes to | | |
| the fair value of a recognised asset or | | |
| liability or unrecognised firm | | |
| commitment caused by interest rate | | |
| or foreign currency movements. | | |
| | To hedge our exposure to variability in | |
| | cash flows of a recognised asset or | |
| | liability, a firm commitment or a highly | |
| | probable forecast transaction caused | |
| | by interest rate, foreign currency and | |
| | other price movements. | |
| | | To hedge our exposure to exchange |
| | | rate differences arising from the |
| | | translation of our foreign operations |
| | | from their functional currency to |
| | | Australian dollars. |
| Recognition of | | | |
| effective hedge | | | |
| portion | | | |
| | | | |
| | | | |
| The following are recognised in profit | | |
| or loss at the same time: | | |
| \u2022 all changes in the fair value of the | | |
| underlying item relating to the | | |
| hedged risk; and | | |
| \u2022 the change in the fair value of the | | |
| derivatives. | | |
| | We recognise the effective portion of | |
| | changes in the fair value of derivatives | |
| | designated as a cash flow hedge in | |
| | the cash flow hedge reserve. | |
| | | We recognise the effective portion of |
| | | changes in the fair value of the |
| | | hedging instrument in the foreign |
| | | currency translation reserve (FCTR). |
| Recognition of | | | |
| ineffective hedge | | | |
| portion | | | |
| Recognised immediately in Other operating income. | | |
| If a hedging | | | |
| instrument expires, | | | |
| or is sold, terminated, | | | |
| or exercised; or no | | | |
| longer qualifies for | | | |
| hedge accounting | | | |
| | When we recognise the hedged item | |
| | in profit or loss, we recognise the | |
| | related unamortised fair value | |
| | adjustment in profit or loss. This may | |
| | occur over time if the hedged item is | |
| | amortised to profit or loss as part of | |
| | the effective yield over the period | |
| | to maturity. | |
| | | Only when we recognise the hedged |
| | | item in profit or loss is the amount |
| | | previously deferred in the cash flow |
| | | hedge reserve transferred to profit |
| | | or loss. |
| | | The amount we defer in the foreign |
| | | currency translation reserve remains in |
| | | equity and is transferred to profit or |
| | | loss only when we dispose of, or |
| | | partially dispose of, the foreign |
| | | operation. |
| Hedged item sold or | | | |
| repaid | | | |
| We recognise the unamortised fair | | |
| value adjustment immediately in | | |
| profit or loss. | | |
| | Amounts accumulated in equity are | |
| | transferred immediately to profit | |
| | or loss. | |
| | | The gain or loss, or applicable |
| | | proportion, we have recognised in |
| | | equity is transferred to profit or loss on |
| | | disposal or partial disposal of a foreign |
| | | operation. |
The fair value of derivative financial instruments designated in hedging relationships is:
| | | 2023 | | | 2022 | |
| Consolidated | | | | | | |
| Nominal | | | | | |
| amount | Assets | Liabilities | | | |
| | | | Nominal | | |
| | | | | amount | Assets | Liabilities |
| | $m | $m | $m | $m | $m | $m |
| Fair value hedges | | | | | | |
| Foreign exchange spot and forward contracts | 607 | 5 | - | 604 | - | (37) |
| Interest rate swap agreements | 126,881 | 32 | (195) | 106,366 | 79 | (168) |
| Interest rate futures contracts | 11,778 | 243 | (9) | 17,361 | 264 | (3) |
| Cash flow hedges | | | | | | |
| Interest rate swap agreements | 122,704 | 17 | (48) | 125,063 | 33 | (53) |
| Foreign exchange swap agreements | 683 | 50 | (19) | 656 | 48 | (44) |
| Foreign exchange spot and forward contracts | - | - | - | 161 | - | (4) |
| Net investment hedges | | | | | | |
| Foreign exchange spot and forward contracts | 47 | - | (1) | 940 | 34 | (47) |
| Derivative financial instruments - designated in | | | | | | |
| hedging relationships | 262,700 | 347 | (272) | 251,151 | 458 | (356) |
| | | 2023 | | | 2022 | |
| The Company | | | | | | |
| Nominal | | | | | |
| amount | Assets | Liabilities | | | |
| | | | Nominal | | |
| | | | amount | Assets | Liabilities |
| | $m | $m | $m | $m | $m | $m |
| Fair value hedges | | | | | | |
| Foreign exchange spot and forward contracts | 607 | 5 | - | 604 | - | (37) |
| Interest rate swap agreements | 101,587 | 32 | (184) | 80,185 | 65 | (163) |
| Interest rate futures contracts | 11,778 | 243 | (9) | 17,361 | 264 | (3) |
| Cash flow hedges | | | | | | |
| Interest rate swap agreements | 89,173 | 10 | (42) | 94,928 | 28 | (49) |
| Foreign exchange swap agreements | 683 | 50 | (19) | 656 | 48 | (44) |
| Foreign exchange spot and forward contracts | - | - | - | 161 | - | (4) |
| Net investment hedges | | | | | | |
| Foreign exchange spot and forward contracts | 47 | - | (1) | 146 | 1 | - |
| Derivative financial instruments - designated in | | | | | | |
| hedging relationships | 203,875 | 340 | (255) | 194,041 | 406 | (300) |
The maturity profile of the nominal amounts of our hedging instruments held is:
| Consolidated | | | | | | | |
| | Average | | | | | |
| | Rate | | | | | |
| | | Less than 3 | | | | |
| | | months | | | | |
| | | $m | | | | |
| | | | 3 to 12 | | | |
| | | | months | | | |
| | | | $m | | | |
| | | | | 1 to 5 | | |
| | | | | years | | |
| | | | | $m | | |
| | | | | | After | |
| | | | | | 5 years | |
| | | | | | $m | |
| | | | | | | Total |
| Nominal Amount | | | | | | | $m |
| As at 30 September 2023 | | | | | | | |
| Fair value hedges | | | | | | | |
| Interest rate | Interest Rate | 2.38% | 2,314 | 10,533 | 79,350 | 46,462 | 138,659 |
| Foreign exchange | HKD/AUD FX Rate | 5.02 | 607 | - | - | - | 607 |
| Cash flow hedges | | | | | | | |
| Interest rate | Interest Rate | 2.27% | 7,573 | 37,630 | 76,359 | 1,142 | 122,704 |
| Foreign exchange1 | AUD/USD FX Rate | 0.74 | - | - | - | 683 | 683 |
| USD/EUR FX Rate | 0.91 | | | | | |
| Net investment hedges | | | | | | | |
| Foreign exchange | NZD/AUD FX Rate | 1.09 | - | 47 | - | - | 47 |
| | | | | | | | |
| As at 30 September 2022 | | | | | | | |
| Fair value hedges | | | | | | | |
| Interest rate | Interest Rate | 1.65% | 10,931 | 17,322 | 65,259 | 30,215 | 123,727 |
| Foreign exchange | HKD/AUD FX Rate | 5.43 | 604 | - | - | - | 604 |
| Cash flow hedges | | | | | | | |
| Interest rate | Interest Rate | 1.59% | 3,317 | 32,145 | 88,461 | 1,140 | 125,063 |
| Foreign exchange1 | AUD/USD FX Rate | 0.74 | 40 | 121 | - | 656 | 817 |
| USD/EUR FX Rate | 0.91 | | | | | |
| Net investment hedges | | | | | | | |
| Foreign exchange | TWD/AUD FX Rate | 20.68 | 794 | 146 | - | - | 940 |
| THB/AUD FX Rate | 25.05 | | | | | |
1. Hedges of foreign exchange risk cover multiple currency pairs. The table reflects the larger currency pairs only.
T | | | | | | | |
| he Company | | | | | | | |
| | Average | | | | | |
| | Rate | | | | | |
| | | Less than 3 | | | | |
| | | months | | | | |
| | | $m | | | | |
| | | | 3 to 12 | | | |
| | | | months | | | |
| | | | $m | | | |
| | | | | 1 to 5 | | |
| | | | | years | | |
| | | | | $m | | |
| | | | | | After | |
| | | | | | 5 years | |
| | | | | | $m | |
| | | | | | | Total |
| Nominal Amount | | | | | | | $m |
| As at 30 September 2023 | | | | | | | |
| Fair value hedges | | | | | | | |
| Interest rate | Interest Rate | 2.49% | 1,910 | 8,025 | 61,644 | 41,786 | 113,365 |
| Foreign exchange | HKD/AUD FX Rate | 5.02 | 607 | - | - | - | 607 |
| Cash flow hedges | | | | | | | |
| Interest rate | Interest Rate | 1.78% | 3,154 | 22,353 | 62,577 | 1,089 | 89,173 |
| Foreign exchange1 | AUD/USD FX Rate | 0.74 | - | - | - | 683 | 683 |
| USD/EUR FX Rate | 0.91 | | | | | |
| Net investment hedges | | | | | | | |
| Foreign exchange | NZD/AUD FX Rate | 1.09 | - | 47 | - | - | 47 |
| | | | | | | | |
| As at 30 September 2022 | | | | | | | |
| Fair value hedges | | | | | | | |
| Interest rate | Interest Rate | 1.75% | 10,931 | 13,466 | 48,011 | 25,138 | 97,546 |
| Foreign exchange | HKD/AUD FX Rate | 5.43 | 604 | - | - | - | 604 |
| Cash flow hedges | | | | | | | |
| Interest rate | Interest Rate | 1.37% | 1,708 | 22,611 | 69,600 | 1,009 | 94,928 |
| Foreign exchange1 | AUD/USD FX Rate | 0.74 | 40 | 121 | - | 656 | 817 |
| USD/EUR FX Rate | 0.91 | | | | | |
| Net investment hedges | | | | | | | |
| Foreign exchange | TWD/AUD FX Rate | 20.68 | - | 146 | - | - | 146 |
1. Hedges of foreign exchange risk cover multiple currency pairs. The table reflects the larger currency pairs only.
The impacts of ineffectiveness from our designated hedge relationships by type of hedge relationship and type of risk being hedged are:
| | | Ineffectiveness | | Amount reclassified |
| | | | from the cash flow |
| | | | hedge reserve or FCTR |
| | | | to profit or loss4 |
| Consolidated | | | | |
| Change in value | | | |
| of hedging | | | |
| instrument2 | | | |
| | Change in value | | |
| | of hedged item | | |
| | | Hedge ineffectiveness | |
| | | recognised in profit or | |
| | | loss3 | |
| As at 30 September 2023 | $m | $m | $m | $m |
| Fair value hedges1 | | | | |
| Interest rate | (846) | 870 | 24 | - |
| Foreign exchange | (4) | 4 | - | - |
| Cash flow hedges1 | | | | |
| Interest rate | 280 | (239) | 41 | (13) |
| Foreign exchange | - | - | - | 9 |
| Net investment hedges1 | | | | |
| Foreign exchange | (39) | 39 | - | 79 |
| As at 30 September 2022 | | | | |
| Fair value hedges1 | | | | |
| Interest rate | 697 | (719) | (22) | - |
| Foreign exchange | (55) | 55 | - | - |
| Cash flow hedges1 | | | | |
| Interest rate | (3,619) | 3,453 | (166) | (13) |
| Foreign exchange | (4) | 4 | - | 1 |
| Net investment hedges1 | | | | |
| Foreign exchange | 62 | (62) | - | - |
| | Ineffectiveness | | Amount reclassified |
| | | | from the cash flow |
| | | | hedge reserve or FCTR |
| | | | to profit or loss4 |
| The Company | | | | |
| Change in value | | | |
| of hedging | | | |
| instrument2 | | | |
| | Change in value | | |
| | of hedged item | | |
| | | Hedge ineffectiveness | |
| | | recognised in profit or | |
| | | loss3 | |
| As at 30 September 2023 | $m | $m | $m | $m |
| Fair value hedges1 | | | | |
| Interest rate | (797) | 814 | 17 | - |
| Foreign exchange | (4) | 4 | - | - |
| Cash flow hedges1 | | | | |
| Interest rate | 386 | (344) | 42 | (15) |
| Foreign exchange | - | - | - | 9 |
| Net investment hedges1 | | | | |
| Foreign exchange | (4) | 4 | - | - |
| As at 30 September 2022 | | | | |
| Fair value hedges1 | | | | |
| Interest rate | 1,570 | (1,586) | (16) | - |
| Foreign exchange | (55) | 55 | - | - |
| Cash flow hedges1 | | | | |
| Interest rate | (3,643) | 3,477 | (166) | (13) |
| Foreign exchange | (4) | 4 | - | 1 |
| Net investment hedges1 | | | | |
| Foreign exchange | 58 | (58) | - | - |
1. All hedging instruments are classified as derivative financial instruments.
2. Changes in value of hedging instruments is before any adjustments for Settle to Market clearing arrangements.
3. Recognised in Other operating income.
4. Recognised in Net interest income and Other operating income.
The hedged items in relation to the Group\u2019s fair value hedges are:
| | | Carrying amount | | | |
| | | | | Accumulated fair value | |
| | | | | hedge adjustments on | |
| | | | | | the hedged item | |
| Consolidated | | | | | | |
| Balance sheet | | | | | |
| presentation | Hedged risk | | | | |
| | | Assets | | | |
| | | $m | | | |
| | | | Liabilities | | |
| | | | $m | | |
| | | | | Assets | |
| | | | | $m | |
| | | | | | Liabilities |
| | | | | | $m |
| As at 30 September 2023 | | | | | | |
| Fixed rate loans and advances | Net loans and advances | Interest rate | 3,472 | - | (139) | - |
| Fixed rate debt issuance | Debt issuances | Interest rate | - | (66,190) | - | 4,163 |
| Fixed rate investment securities at FVOCI1 | Investment securities | Interest rate | 61,082 | - | (5,121) | - |
| Equity securities at FVOCI1 | Investment securities | Foreign exchange | 607 | - | 79 | - |
| Total | | | 65,161 | (66,190) | (5,181) | 4,163 |
| | | | | | | |
| As at 30 September 2022 | | | | | | |
| Fixed rate loans and advances | Net loans and advances | Interest rate | 10,252 | - | (369) | - |
| Fixed rate debt issuance | Debt issuances | Interest rate | - | (51,531) | - | 3,721 |
| Fixed rate investment securities at FVOCI1 | Investment securities | Interest rate | 53,915 | - | (5,349) | - |
| Equity securities at FVOCI1 | Investment securities | Foreign exchange | 604 | - | 75 | - |
| Total | | | 64,771 | (51,531) | (5,643) | 3,721 |
1. The carrying amount of debt and equity instruments at FVOCI does not include the fair value hedge adjustment. The fair value hedge adjustment is included in other comprehensive income.
The cumulative amount of fair value hedge adjustments relating to ceased hedge relationships remaining on the Balance Sheet is -$13 million
(2022: -$7 million).
The hedged items in relation to the Company\u2019s fair value hedges are:
| | | | Carrying amount | | |
| | | | | Accumulated fair value | |
| | | | | hedge adjustments on | |
| | | | | the hedged item | |
T | | | | | | |
| he Company | | | | | | |
| Balance sheet | | | | | |
| presentation | Hedged risk | | | | |
| | | Assets | | | |
| | | $m | | | |
| | | | Liabilities | | |
| | | | $m | | |
| | | | | Assets | |
| | | | | $m | |
| | | | | | Liabilities |
| | | | | | $m |
| As at 30 September 2023 | | | | | | |
| Fixed rate loans and advances | Net loans and advances | Interest rate | 3,472 | - | (139) | - |
| Fixed rate debt issuance | Debt issuances | Interest rate | - | (51,602) | - | 3,025 |
| Fixed rate investment securities at FVOCI1 | Investment securities | Interest rate | 52,336 | - | (4,342) | - |
| Equity securities at FVOCI1 | Investment securities | Foreign exchange | 607 | - | 79 | - |
| Total | | | 56,415 | (51,602) | (4,402) | 3,025 |
| | | | | | | |
| As at 30 September 2022 | | | | | | |
| | | | | | | |
| Fixed rate loans and advances | Net loans and advances | Interest rate | 10,252 | - | (369) | - |
| Fixed rate debt issuance | Debt issuances | Interest rate | - | (37,141) | - | 2,572 |
| Fixed rate investment securities at FVOCI1 | Investment securities | Interest rate | 44,038 | - | (4,489) | - |
| Equity securities at FVOCI1 | Investment securities | Foreign exchange | 604 | - | 75 | - |
| Total | | | 54,894 | (37,141) | (4,783) | 2,572 |
1. The carrying amount of debt and equity instruments at FVOCI does not include the fair value hedge adjustment. The fair value hedge adjustment is included in other comprehensive income.
The cumulative amount of fair value hedge adjustments relating to ceased hedge relationships remaining on the Balance Sheet is -$13 million
(2022: -$7 million).
The hedged items in relation to the Group\u2019s and the Company\u2019s cash flow and net investment hedges are:
| | | | Cash flow | | |
| | | hedge reserve | | |
| | | | | Foreign currency |
| | | | | translation reserve |
| | | | | | |
| | Continuing | | | |
| | hedges | | | |
| | | Discontinued | | |
| | | hedges | Continuing | |
| | | | hedges | |
| | | | | Discontinued |
| | | | | hedges |
| Consolidated | Hedged risk | $m | $m | $m | $m |
| As at 30 September 2023 | | | | | |
| Cash flow hedges | | | | | |
| Floating rate loans and advances | Interest rate | (3,482) | 11 | - | - |
| Floating rate customer deposits | Interest rate | 794 | (1) | - | - |
| Foreign currency debt issuances | Foreign exchange | - | - | - | - |
| Highly probable forecast transactions | Foreign exchange | - | - | - | - |
| Net investment hedges | | | | | |
| Foreign operations | Foreign exchange | - | - | 12 | 49 |
| | | | | | |
| As at 30 September 2022 | | | | | |
| Cash flow hedges | | | | | |
| Floating rate loans and advances | Interest rate | (4,286) | 19 | - | - |
| Floating rate customer deposits | Interest rate | 1,357 | 5 | - | - |
| Foreign currency debt issuances | Foreign exchange | (1) | (1) | - | - |
| Highly probable forecast transactions | Foreign exchange | (7) | - | - | - |
| Net investment hedges | | | | | |
| Foreign operations | Foreign exchange | - | - | 43 | (149) |
| | | | Cash flow | | |
| | | hedge reserve | | |
| | | | | Foreign currency |
| | | | | translation reserve |
| | | | | | |
| | Continuing | | | |
| | hedges | | | |
| | | Discontinued | | |
| | | hedges | Continuing | |
| | | | hedges | |
| | | | | Discontinued |
| | | | | hedges |
| The Company | Hedged risk | $m | $m | $m | $m |
| As at 30 September 2023 | | | | | |
| Cash flow hedges | | | | | |
| Floating rate loans and advances | Interest rate | (3,103) | 2 | - | - |
| Floating rate customer deposits | Interest rate | 495 | - | - | - |
| Foreign currency debt issuances | Foreign exchange | - | - | - | - |
| Highly probable forecast transactions | Foreign exchange | - | - | - | - |
| Net investment hedges | | | | | |
| Foreign operations | Foreign exchange | - | - | 12 | 49 |
| | | | | | |
| As at 30 September 2022 | | | | | |
| Cash flow hedges | | | | | |
| Floating rate loans and advances | Interest rate | (4,005) | 11 | - | - |
| Floating rate customer deposits | Interest rate | 1,053 | 6 | - | - |
| Foreign currency debt issuances | Foreign exchange | (1) | (1) | - | - |
| Highly probable forecast transactions | Foreign exchange | (7) | - | - | - |
| Net investment hedges | | | | | |
| Foreign operations | Foreign exchange | - | - | 88 | (149) |
The table below details the reconciliation of the Group\u2019s cash flow hedge reserve by risk type:
| | Interest rate | | |
| | Foreign | |
| | currency | |
| | | Total |
| | | |
| Consolidated | $m | $m | $m |
| Balance at 1 October 2021 | 398 | (5) | 393 |
| Fair value gains/(losses) | (3,453) | (4) | (3,457) |
| Transferred to profit or loss | (13) | 1 | (12) |
| Income taxes and others | 1,040 | - | 1,040 |
| Balance at 30 September 2022 | (2,028) | (8) | (2,036) |
| Fair value gains/(losses) | 239 | - | 239 |
| Transferred to profit or loss | (13) | 9 | (4) |
| Income taxes and others | (69) | (2) | (71) |
| Balance at 30 September 2023 | (1,871) | (1) | (1,872) |
Hedges of net investments in a foreign operation resulted in a $40 million increase in FCTR during the year (2022: $62 million increase).
The table below details the reconciliation of the Company\u2019s cash flow hedge reserve by risk type:
| | Interest rate | | |
| | Foreign | |
| | currency | |
| | | Total |
| | | |
| The Company | $m | $m | $m |
| Balance at 1 October 2021 | 389 | (5) | 384 |
| Fair value gains/(losses) | (3,477) | (4) | (3,481) |
| Transferred to profit or loss | (13) | 1 | (12) |
| Income taxes and others | 1,048 | - | 1,048 |
| Balance at 30 September 2022 | (2,053) | (8) | (2,061) |
| Fair value gains/(losses) | 344 | - | 344 |
| Transferred to profit or loss | (15) | 9 | (6) |
| Income taxes and others | (99) | (2) | (101) |
| Balance at 30 September 2023 | (1,823) | (1) | (1,824) |
Hedges of net investments in a foreign operation resulted in a $4 million decrease in FCTR during the year (2022: $58 million increase).
RECOGNITION AND MEASUREMENT
| Recognition | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| Initially and at each reporting date, we recognise all derivatives at fair value. If the fair value of a |
| derivative is positive, then we carry it as an asset, but if its value is negative, then we carry it as a |
| liability. |
| Valuation adjustments are integral in determining the fair value of derivatives. This includes: |
| \u2022 a credit valuation adjustment to reflect the counterparty risk and/or event of default; and |
| \u2022 a funding valuation adjustment to account for funding costs and benefits in the derivatives |
| portfolio. |
| Derecognition of | |
| assets and liabilities | |
| | |
| We remove derivative assets from our Balance Sheet when the contracts expire or we have transferred |
| substantially all the risks and rewards of ownership. We remove derivative liabilities from our Balance |
| Sheet when the Group\u2019s contractual obligations are discharged, cancelled or expired. |
| With respect to derivatives cleared through a central clearing counterparty or exchange, derivative |
| assets or liabilities may be derecognised in accordance with the principle above when collateral is |
| settled, depending on the legal arrangements in place for each instrument. |
| Impact on the | |
| Income Statement | |
| The recognition of gains or losses on derivative financial instruments depends on whether the |
| derivative is held for trading or is designated in a hedge accounting relationship. For derivative |
| financial instruments held for trading, gains or losses from changes in the fair value are recognised in |
| profit or loss. |
| For an instrument designated in a hedge accounting relationship, the recognition of gains or losses |
| depends on the nature of the item being hedged. Refer to the table on page 106 for details of the |
| recognition approach applied for each type of hedge accounting relationship. |
| Sources of hedge accounting ineffectiveness may arise from differences in the interest rate reference |
| rate, margins, or rate set differences and differences in discounting between the hedged items and the |
| hedging instruments. |
| Hedge effectiveness | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| To qualify for hedge accounting under AASB 139 |
| , |
| a hedge relationship is expected to be highly |
| effective. A hedge relationship is highly effective only if the following conditions are met: |
| \u2022 the hedge is expected to be highly effective in achieving offsetting changes in fair value or cash |
| flows attributable to the hedged risk during the period for which the hedge is designated |
| (prospective effectiveness); and |
| \u2022 the actual results of the hedge are within the range of 80-125% (retrospective effectiveness). |
| The Group monitors hedge effectiveness on a regular basis but at a minimum at each reporting date. |
KEY JUDGEMENTS AND ESTIMATES
Judgement is required when we select the valuation techniques used to determine the fair value of derivatives, particularly the selection of
valuation inputs that are not readily observable, and the application of valuation adjustments to certain derivatives. Refer to Note 18 Fair
Value of Financial Assets and Financial Liabilities for further details.
11. INVESTMENT SECURITIES
| | Consolidated | | The Company | |
| | 2023 | 2022 | 2023 | 2022 |
| | $m | $m | $m | $m |
| Investment securities measured at FVOCI | | | | |
| Debt securities | 88,271 | 76,817 | 76,320 | 65,257 |
| Equity securities | 946 | 1,353 | 945 | 1,027 |
| Investment securities measured at amortised cost | | | | |
| Debt securities | 7,752 | 7,943 | 5,936 | 6,115 |
| Investment Securities measured at FVTPL | | | | |
| Debt securities | - | 40 | - | - |
| Total | 96,969 | 86,153 | 83,201 | 72,399 |
During 2023, ANZBGL transferred its equity interests in the 1835i trusts, TIN and Pollination to ANZ NBH Pty Ltd as part of the Restructure.
The maturity profile of investment securities is as follows:
| Consolidated | Less than 3 | | | | | |
| months | | | | | |
| | 3 to 12 | | | | |
| | | months | 1 to 5 years | After 5 years | | |
| | | | | No | |
| | | | | maturity | |
| | | | | | Total |
| | | | | | |
| As at 30 September 2023 | $m | $m | $m | $m | $m | $m |
| Government securities | 8,807 | 10,233 | 29,482 | 36,081 | - | 84,603 |
| Corporate and financial institution securities | 358 | 1,205 | 5,973 | 58 | - | 7,594 |
| Other securities | 617 | 591 | 602 | 2,016 | - | 3,826 |
| Equity securities | - | - | - | - | 946 | 946 |
| Total | 9,782 | 12,029 | 36,057 | 38,155 | 946 | 96,969 |
| | | | | | | |
| As at 30 September 2022 | | | | | | |
| Government securities | 6,544 | 14,045 | 29,806 | 21,856 | - | 72,251 |
| Corporate and financial institution securities | 324 | 2,462 | 4,906 | 97 | 2 | 7,791 |
| Other securities | 429 | 423 | 543 | 3,363 | - | 4,758 |
| Equity securities | - | - | - | - | 1,353 | 1,353 |
| Total | 7,297 | 16,930 | 35,255 | 25,316 | 1,355 | 86,153 |
During the year, the Group recognised a net gain (before tax) of $9 million (2022: $28 million) in Other operating income from the recycling of
gains/losses previously recognised in Other comprehensive income in respect of debt securities at FVOCI.
2022
2023
72,251
4,758
7,791
Equity securities
Other securities
Government securities
Corporate and financial
institution securities
1,353
84,603
3,826
7,594
946
| The Company | Less than 3 | | | | | |
| months | | | | | |
| | 3 to 12 | | | | |
| | months | 1 to 5 years | After 5 years | | |
| | | | | No | |
| | | | | maturity | |
| | | | | | Total |
| As at 30 September 2023 | $m | $m | $m | $m | $m | $m |
| Government securities | 7,665 | 8,649 | 23,140 | 33,182 | - | 72,636 |
| Corporate and financial institution securities | 280 | 634 | 4,822 | 58 | - | 5,794 |
| Other securities | 617 | 591 | 602 | 2,016 | - | 3,826 |
| Equity securities | - | - | - | - | 945 | 945 |
| Total | 8,562 | 9,874 | 28,564 | 35,256 | 945 | 83,201 |
| | | | | | | |
| As at 30 September 2022 | | | | | | |
| Government securities | 5,715 | 11,647 | 23,100 | 19,853 | - | 60,315 |
| Corporate and financial institution securities | 276 | 1,972 | 3,993 | 58 | - | 6,299 |
| Other securities | 429 | 423 | 543 | 3,363 | - | 4,758 |
| Equity securities | - | - | - | - | 1,027 | 1,027 |
| Total | 6,420 | 14,042 | 27,636 | 23,274 | 1,027 | 72,399 |
During the year, the Company recognised a net loss (before tax) of $6 million (2022: $1 million gain) in Other operating income from the recycling of
gains/losses previously recognised in Other comprehensive income in respect of debt securities at FVOCI.
RECOGNITION AND MEASUREMENT
Investment securities are those financial assets in security form (that is, transferable debt or equity instruments) that are not held for trading
purposes. By way of exception, bills of exchange (a form of security/transferable instrument) which are used to facilitate the Group\u2019s
customer lending activities are classified as Loans and advances (rather than Investment securities) to better reflect the substance of the
arrangement.
Equity investments not held for trading purposes may be designated at FVOCI on an instrument by instrument basis. If this election is
made, gains or losses are not reclassified from Other comprehensive income to profit or loss on disposal of the investment. However, gains
or losses may be reclassified within equity.
Assets disclosed as Investment securities are subject to the general classification and measurement policy for Financial Assets outlined at
the commencement of the Group\u2019s financial asset disclosures on page 101. Additionally, expected credit losses associated with \u2018Investment
securities - debt securities at amortised cost\u2019 and \u2018Investment securities - debt securities at FVOCI\u2019 are recognised and measured in
accordance with the accounting policy outlined in Note 13 Allowance for Expected Credit Losses. For \u2018Investment securities - debt
securities at FVOCI\u2019, the allowance for Expected Credit Loss (ECL) is recognised in the FVOCI reserve in equity with a corresponding charge
to profit or loss.
KEY JUDGEMENTS AND ESTIMATES
Judgement is required when we select valuation techniques used to determine the fair value of assets not valued using quoted market
prices, particularly the selection of valuation inputs that are not readily observable. Refer to Note 18 Fair Value of Financial Assets and
Financial Liabilities for further details.
12. NET LOANS AND ADVANCES
The following table provides details of Net loans and advances:
| | Consolidated | | | |
| | | The Company | |
| | | | |
| | 2023 | 2022 | 2023 | 2022 |
| $m | $m | $m | $m |
| Overdrafts | 5,552 | 5,266 | 4,516 | 4,262 |
| Credit cards | 6,805 | 6,755 | 5,630 | 5,664 |
| Commercial bills | 4,682 | 5,214 | 4,682 | 5,214 |
| Term loans \u2013 housing | 404,491 | 374,625 | 304,772 | 282,965 |
| Term loans \u2013 non-housing | | | | |
| 1 | | | | |
| | 285,458 | 279,730 | 242,403 | 238,215 |
| Other | 1,292 | 2,035 | 1,244 | 1,929 |
| Subtotal | 708,280 | 673,625 | 563,247 | 538,249 |
| Unearned income | | | | |
| 2 | | | | |
| | (515) | (518) | (483) | (480) |
| Capitalised brokerage and other origination costs | | | | |
| 2 | | | | |
| | 3,475 | 2,882 | 3,048 | 2,501 |
| Gross loans and advances | 711,240 | 675,989 | 565,812 | 540,270 |
| Allowance for expected credit losses (refer to Note 13) | (3,546) | (3,582) | (2,795) | (2,925) |
| Net loans and advances | 707,694 | 672,407 | 563,017 | 537,345 |
| Residual contractual maturity: | | | | |
| Within one year | 152,318 | 146,142 | 128,045 | 121,513 |
| More than one year | 555,376 | 526,265 | 434,972 | 415,832 |
| Net loans and advances | 707,694 | 672,407 | 563,017 | 537,345 |
| Carried on Balance Sheet at: | | | | |
| Amortised cost | 685,806 | 667,732 | 541,777 | 533,082 |
| Fair value through profit or loss | | | | |
| 1 | | | | |
| | 21,888 | 4,675 | 21,240 | 4,263 |
| Net loans and advances | 707,694 | 672,407 | 563,017 | 537,345 |
1.
During 2023, the Group commenced the management of repurchase agreements and reverse repurchase agreements on a fair value basis within the trading book in its Markets business. This resulted in
the associated repurchase and reverse repurchase agreements being recognised and measured at FVTPL.
2.
Amortised over the expected life of the loan.
RECOGNITION AND MEASUREMENT
Loans and advances are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market and
are facilities the Group provides directly to customers or through third party channels.
Loans and advances are initially recognised at fair value plus transaction costs directly attributable to the issue of the loan or advance,
which are primarily brokerage and other origination costs which we amortise over the estimated life of the loan. Subsequently, we then
measure loans and advances at amortised cost using the effective interest rate method, net of any allowance for expected credit losses, or
at fair value when they are specifically designated on initial recognition as FVTPL, are classified as held for sale or when held for trading.
Refer to Note 18 Fair Value of Financial Assets and Financial Liabilities for further details.
We classify contracts to lease assets and hire purchase agreements as finance leases if they transfer substantially all the risks and rewards of
ownership of the asset to the customer or an unrelated third party. We include these facilities in \u2018Other\u2019 in the table above.
The Group enters into transactions in which it transfers financial assets that are recognised on its Balance Sheet. When the Group retains
substantially all of the risks and rewards of the transferred assets, the transferred assets remain on the Group\u2019s Balance Sheet, however if
substantially all the risks and rewards are transferred, the Group derecognises the asset. If the risks and rewards are partially retained and
control over the asset is lost, the Group derecognises the asset. If control over the asset is not lost, the Group continues to recognise the
asset to the extent of its continuing involvement.
We separately recognise the rights and obligations retained, or created, in the transfer of assets as appropriate.
Assets disclosed as Net loans and advances are subject to the general classification and measurement policy for financial assets outlined on
page 101. Additionally, expected credit losses associated with loans and advances at amortised cost are recognised and measured in
accordance with the accounting policy outlined in Note 13 Allowance for Expected Credit Losses.
13. ALLOWANCE FOR EXPECTED CREDIT LOSSES
| | 2023 | | | 2022 | | |
| Consolidated | | | | | | |
| Collectively | | | | | |
| assessed | | | | | |
| $m | | | | | |
| | Individually | | | | |
| | assessed | | | | |
| | $m | | | | |
| | | Total | | | |
| | | $m | | | |
| | | | Collectively | | |
| | | | assessed | | |
| | | | $m | | |
| | | | | Individually | |
| | | | | assessed | |
| | | | | $m | |
| | | | | | Total |
| | | | | | $m |
| Net loans and advances at amortised cost | 3,180 | 366 | 3,546 | 3,049 | 533 | 3,582 |
| Off-balance sheet commitments | 817 | 10 | 827 | 766 | 9 | 775 |
| Investment securities - debt securities at amortised cost | 35 | - | 35 | 38 | - | 38 |
| Total | 4,032 | 376 | 4,408 | 3,853 | 542 | 4,395 |
| Other comprehensive income | | | | | | |
| Investment securities - debt securities at FVOCI1 | 15 | - | 15 | 10 | - | 10 |
| | 2023 | | | 2022 | | |
T | | | | | | |
| he Company | | | | | | |
| Collectively | | | | | |
| assessed | | | | | |
| $m | | | | | |
| | Individually | | | | |
| | assessed | | | | |
| | $m | | | | |
| | | Total | | | |
| | | $m | | | |
| | | | Collectively | | |
| | | | assessed | | |
| | | | $m | | |
| | | | | Individually | |
| | | | | assessed | |
| | | | | $m | |
| | | | | | Total |
| | | | | | $m |
| Net loans and advances at amortised cost | 2,516 | 279 | 2,795 | 2,500 | 425 | 2,925 |
| Off-balance sheet commitments | 692 | 5 | 697 | 668 | 5 | 673 |
| Investment securities - debt securities at amortised cost | 1 | - | 1 | 1 | - | 1 |
| Total | 3,209 | 284 | 3,493 | 3,169 | 430 | 3,599 |
| Other comprehensive income | | | | | | |
| Investment securities - debt securities at FVOCI1 | 12 | - | 12 | 7 | - | 7 |
1. For FVOCI assets, the allowance for ECL does not alter the carrying amount which remains at fair value. Instead, the allowance for ECL is recognised in Other comprehensive income with a corresponding
charge to profit or loss.
The following tables present the movement in the allowance for ECL for the year.
Net loans and advances - at amortised cost
Allowance for ECL is included in Net loans and advances.
| | | | Stage 31 | | |
| Consolidated | | | | | |
| Stage 1 | | | | |
| $m | | | | |
| | Stage 2 | | | |
| | $m | | | |
| | | Collectively | | |
| | | assessed | | |
| | | $m | | |
| | | | Individually | |
| | | | assessed | |
| | | | $m | |
| | | | | Total |
| | | | | $m |
| As at 1 October 2021 | 968 | 1,994 | 417 | 666 | 4,045 |
| Transfer between stages | 219 | (224) | (95) | 100 | - |
| New and increased provisions (net of releases) | (48) | (202) | 42 | 420 | 212 |
| Write-backs | - | - | - | (222) | (222) |
| Bad debts written off (excluding recoveries) | - | - | - | (428) | (428) |
| Foreign currency translation and other movements2 | 2 | (20) | (4) | (3) | (25) |
| As at 30 September 2022 | 1,141 | 1,548 | 360 | 533 | 3,582 |
| Transfer between stages | 148 | (138) | (94) | 84 | - |
| New and increased provisions (net of releases) | (73) | 202 | 61 | 388 | 578 |
| Write-backs | - | - | - | (212) | (212) |
| Bad debts written off (excluding recoveries) | - | - | - | (409) | (409) |
| Foreign currency translation and other movements2 | 11 | 12 | 2 | (18) | 7 |
| As at 30 September 2023 | 1,227 | 1,624 | 329 | 366 | 3,546 |
1. The Group\u2019s credit exposures that are purchased or originated credit-impaired (POCI) are insignificant.
2. Other movements include the impacts of discount unwind on individually assessed allowance for ECL or the impact of divestments completed during the year.
| | | | Stage 31 | |
T | | | | | |
| he Company | | | | | |
| Stage 1 | | | | |
| $m | | | | |
| | Stage 2 | | | |
| | $m | | | |
| | | Collectively | | |
| | | assessed | | |
| | | $m | | |
| | | | Individually | |
| | | | assessed | |
| | | | $m | |
| | | | | Total |
| | | | | $m |
| As at 1 October 2021 | 797 | 1,679 | 348 | 563 | 3,387 |
| Transfer between stages | 192 | (201) | (84) | 93 | - |
| New and increased provisions (net of releases) | (59) | (220) | 31 | 354 | 106 |
| Write-backs | - | - | - | (193) | (193) |
| Bad debts written off (excluding recoveries) | - | - | - | (386) | (386) |
| Foreign currency translation and other movements2 | 16 | 1 | - | (6) | 11 |
| As at 30 September 2022 | 946 | 1,259 | 295 | 425 | 2,925 |
| Transfer between stages | 122 | (118) | (83) | 79 | - |
| New and increased provisions (net of releases) | (43) | 98 | 39 | 295 | 389 |
| Write-backs | - | - | - | (192) | (192) |
| Bad debts written off (excluding recoveries) | - | - | - | (310) | (310) |
| Foreign currency translation and other movements2 | 1 | - | - | (18) | (17) |
| As at 30 September 2023 | 1,026 | 1,239 | 251 | 279 | 2,795 |
1. The Company\u2019s credit exposures that are purchased or originated credit-impaired (POCI) are insignificant.
2. Other movements include the impact of discount unwind on individually assessed allowance for ECL.
Off-balance sheet commitments - undrawn and contingent facilities
Allowance for ECL is included in Other provisions.
| | | | Stage 31 | | |
| Consolidated | | | | | |
| Stage 1 | | | | |
| $m | | | | |
| | Stage 2 | | | |
| | $m | | | |
| | | Collectively | | |
| | | assessed | | |
| | | $m | | |
| | | | Individually | |
| | | | assessed | |
| | | | $m | |
| | | | | Total |
| | | | | $m |
| As at 1 October 2021 | 555 | 211 | 19 | 21 | 806 |
| Transfer between stages | 40 | (34) | (8) | 2 | - |
| New and increased provisions (net of releases) | 7 | (28) | 18 | (2) | (5) |
| Write-backs | - | - | - | (11) | (11) |
| Foreign currency translation and other movements2 | (9) | (5) | - | (1) | (15) |
| As at 30 September 2022 | 593 | 144 | 29 | 9 | 775 |
| Transfer between stages | 31 | (29) | (4) | 2 | - |
| New and increased provisions (net of releases) | - | 46 | (1) | 2 | 47 |
| Write-backs | - | - | - | (4) | (4) |
| Foreign currency translation and other movements2 | 6 | 1 | 1 | 1 | 9 |
| As at 30 September 2023 | 630 | 162 | 25 | 10 | 827 |
1. The Group\u2019s credit exposures that are POCI are insignificant.
2. Other movements include impact of divestments completed during the year.
| | | | Stage 31 | | |
T | | | | | |
| he Company | | | | | |
| Stage 1 | | | | |
| $m | | | | |
| | Stage 2 | | | |
| | $m | | | |
| | | Collectively | | |
| | | assessed | | |
| | | $m | | |
| | | | Individually | |
| | | | assessed | |
| | | | $m | |
| | | | | Total |
| | | | | $m |
| As at 1 October 2021 | 484 | 171 | 12 | 7 | 674 |
| Transfer between stages | 33 | (27) | (6) | - | - |
| New and increased provisions (net of releases) | 17 | (29) | 20 | - | 8 |
| Write-backs | - | - | - | (2) | (2) |
| Foreign currency translation and other movements2 | (4) | (3) | - | - | (7) |
| As at 30 September 2022 | 530 | 112 | 26 | 5 | 673 |
| Transfer between stages | 27 | (26) | (3) | 2 | - |
| New and increased provisions (net of releases) | (10) | 35 | (2) | - | 23 |
| Write-backs | - | - | - | (2) | (2) |
| Foreign currency translation | 3 | - | - | - | 3 |
| As at 30 September 2023 | 550 | 121 | 21 | 5 | 697 |
1. The Company\u2019s credit exposures that are purchased or originated credit-impaired (POCI) are insignificant.
2. Other movements include the impact of divestments completed during the year.
Investment securities - debt securities at amortised cost
Allowance for ECL is included in Investment securities.
| | | | Stage 3 | | |
| Consolidated | | | | | |
| Stage 1 | | | | |
| $m | | | | |
| | Stage 2 | | | |
| | $m | | | |
| | | Collectively | | |
| | | assessed | | |
| | | $m | | |
| | | | Individually | |
| | | | assessed | |
| | | | $m | |
| | | | | Total |
| | | | | $m |
| As at 30 September 2022 | 38 | - | - | - | 38 |
| As at 30 September 2023 | 35 | - | - | - | 35 |
| | | Stage 3 | |
| he Company | | | | | |
| Stage 1 | | | | |
| $m | | | | |
| | Stage 2 | | | |
| | $m | | | |
| | | Collectively | | |
| | | assessed | | |
| | | $m | | |
| | | | Individually | |
| | | | assessed | |
| | | | $m | |
| | | | | Total |
| | | | | $m |
| As at 30 September 2022 | 1 | - | - | - | 1 |
| As at 30 September 2023 | 1 | - | - | - | 1 |
Investment securities - debt securities at FVOCI
As FVOCI assets are measured at fair value, there is no separate allowance for ECL. Instead, the allowance for ECL is recognised in Other
comprehensive income with a corresponding charge to profit or loss.
| | | | Stage 3 | | |
| | | Consolidated | | |
| Stage 1 | | | | |
| $m | | | | |
| | Stage 2 | | | |
| | $m | | | |
| | | Collectively | | |
| | | assessed | | |
| | | $m | | |
| | | | Individually | |
| | | | assessed | |
| | | | $m | |
| | | | | Total |
| | | | | $m |
| As at 30 September 2022 | 10 | - | - | - | 10 |
| As at 30 September 2023 | 15 | - | - | - | 15 |
| | | | Stage 3 | | |
| The Company | | | | | |
| Stage 1 | | | | |
| $m | | | | |
| | Stage 2 | | | |
| | $m | | | |
| | | Collectively | | |
| | | assessed | | |
| | | $m | | |
| | | | Individually | |
| | | | assessed | |
| | | | $m | |
| | | | | Total |
| | | | | $m |
| As at 30 September 2022 | 7 | - | - | - | 7 |
| As at 30 September 2023 | 12 | - | - | - | 12 |
CREDIT IMPAIRMENT CHARGE - INCOME STATEMENT
Credit impairment charge/(release) analysis
| | Consolidated | | The Company | |
| | 2023 | 2022 | 2023 | 2022 |
| | $m | $m | $m | $m |
| New and increased provisions (net of releases)1,2 | | | | |
| - Collectively assessed | 152 | (311) | 41 | (333) |
| - Individually assessed | 476 | 520 | 376 | 447 |
| Write-backs3 | (216) | (233) | (194) | (195) |
| Recoveries of amounts previously written-off | (167) | (208) | (148) | (184) |
| Total credit impairment charge | 245 | (232) | 75 | (265) |
1. Includes the impact of transfers between collectively assessed and individually assessed.
2. New and increased provisions (net of releases) includes:
| Consolidated The | | | | Company | | | |
| 2023 | | 2022 | | 2023 | | 2022 | |
| Collectively | | | | | | | |
| assessed | | | | | | | |
| $m | | | | | | | |
| | Individually | | | | | | |
| | assessed | | | | | | |
| | $m | | | | | | |
| | | Collectively | | | | | |
| | | assessed | | | | | |
| | | $m | | | | | |
| | | | Individually | | | | |
| | | | assessed | | | | |
| | | | $m | | | | |
| | | | | Collectively | | | |
| | | | | assessed | | | |
| | | | | $m | | | |
| | | | | | Individually | | |
| | | | | | assessed | | |
| | | | | | $m | | |
| | | | | | | Collectively | |
| | | | | | | assessed | |
| | | | | | | $m | |
| | | | | | | | Individually |
| | | | | | | | assessed |
| | | | | | | | $m |
| Net loans and advances at amortised cost | 106 | 472 | (308) | 520 | 15 | 374 | (341) | 447 |
| Off-balance sheet commitments | 43 | 4 | (5) | - | 21 | 2 | 8 | - |
| Investment securities - debt securities at amortised cost | (1) | - | 3 | - | - | - | - | - |
| Investment securities - debt securities at FVOCI | 4 | - | (1) | - | 5 | - | - | - |
| Total | 152 | 476 | (311) | 520 | 41 | 376 | (333) | 447 |
3. Consists of write-backs in Net loans and advances at amortised cost of $212 million (2022: $222 million) for the Group and $192 million (2022: $193 million) for the Company, and Off-balance sheet
commitments of $4 million (2022: $11 million) for the Group and $2 million (2022: $2 million) for the Company.
The contractual amount outstanding on financial assets that were written off during the year and that are still subject to enforcement activity is
$147 million (2022: $143 million) for the Group, and $133 million (2022: $128 million) for the Company.
RECOGNITION AND MEASUREMENT
EXPECTED CREDIT LOSS MODEL
The measurement of expected credit losses reflects an unbiased, probability weighted prediction which evaluates a range of scenarios and
takes into account the time value of money, past events, current conditions and forecasts of future economic conditions.
Expected credit losses are either measured over 12 months or the expected lifetime of the financial asset, depending on credit
deterioration since origination, according to the following three-stage approach:
\u2022 Stage 1: At the origination of a financial asset, and where there has not been a Significant Increase in Credit Risk (SICR) since origination,
an allowance for ECL is recognised reflecting the expected credit losses resulting from default events that are possible within the next
12 months from the reporting date. For instruments with a remaining maturity of less than 12 months, expected credit losses are
estimated based on default events that are possible over the remaining time to maturity.
\u2022 Stage 2: Where there has been a SICR since origination, an allowance for ECL is recognised reflecting expected credit losses resulting
from all possible default events over the expected life of a financial instrument. If credit risk were to improve in a subsequent period
such that the increase in credit risk since origination is no longer considered significant, the exposure returns to a Stage 1 classification
with ECL measured accordingly.
\u2022 Stage 3: Where there is objective evidence of impairment, an allowance equivalent to lifetime ECL is recognised.
Expected credit losses are estimated on a collective basis for exposures in Stage 1 and Stage 2, and on either a collective or individual basis
when transferred to Stage 3.
MEASUREMENT OF EXPECTED CREDIT LOSS
ECL is calculated as the product of the following credit risk factors at a facility level, discounted to incorporate the time value of money:
\u2022 Probability of default (PD) - the estimate of the likelihood that a borrower will default over a given period;
\u2022 Exposure at default (EAD) - the expected balance sheet exposure at default taking into account repayments of principal and interest,
expected additional drawdowns and accrued interest; and
\u2022 Loss given default (LGD) - the expected loss in the event of the borrower defaulting, expressed as a percentage of the facility's EAD,
taking into account direct and indirect recovery costs.
These credit risk factors are adjusted for current and forward-looking information through the use of macroeconomic variables.
EXPECTED LIFE
When estimating ECL for exposures in Stage 2 and 3, the Group considers the expected lifetime over which it is exposed to credit risk.
For non-retail portfolios, the Group uses the maximum contractual period as the expected lifetime for non-revolving credit facilities. For
non-retail revolving credit facilities, such as corporate lines of credit, the expected life reflects the Group\u2019s contractual right to withdraw a
facility as part of a contractually agreed annual review, after taking into account the applicable notice period.
For retail portfolios, the expected lifetime is determined using a behavioural term, taking into account expected prepayment behaviour
and events that give rise to substantial modifications.
DEFINITION OF DEFAULT, CREDIT IMPAIRED AND WRITE-OFFS
The definition of default used in measuring ECL is aligned to the definition used for internal credit risk management purposes across all
portfolios. This definition is also in line with the regulatory definition of default. Default occurs when there are indicators that a debtor is
unlikely to fully satisfy contractual credit obligations to the Group, or the exposure is 90 days past due.
Financial assets, including those that are well secured, are considered credit impaired for financial reporting purposes when they default.
When there is no realistic probability of recovery, loans are written off against the related impairment allowance on completion of the
Group\u2019s internal processes and when all reasonably expected recoveries have been collected. In subsequent periods, any recoveries of
amounts previously written-off are recorded as a release to the credit impairment charge in the income statement.
MODIFIED FINANCIAL ASSETS
If the contractual terms of a financial asset are modified or an existing financial asset is replaced with a new one for either credit or
commercial reasons, an assessment is made to determine if the changes to the terms of the existing financial asset are considered
substantial. This assessment considers both changes in cash flows arising from the modified terms as well as changes in the overall
instrument risk profile; for example, changes in the principal (credit limit), term, or type of underlying collateral. Where a modification is
considered non-substantial, the existing financial asset is not derecognised and its date of origination continues to be used to determine
SICR. Where a modification is considered substantial, the existing financial asset is derecognised and a new financial asset is recognised at
its fair value on the modification date, which also becomes the date of origination used to determine SICR for this new asset.
SIGNIFICANT INCREASE IN CREDIT RISK (SICR)
Stage 2 assets are those that have experienced a SICR since origination. In determining what constitutes a SICR, the Group considers both
qualitative and quantitative information:
i. Internal credit rating grade
For the majority of portfolios, the primary indicator of a SICR is a significant deterioration in the internal credit rating grade of a facility
since origination and is measured by application of thresholds.
For non-retail portfolios, a SICR is determined by comparing the Customer Credit Rating (CCR) applicable to a facility at reporting date
to the CCR at origination of that facility. A CCR is assigned to each borrower which reflects the PD of the borrower and incorporates
both borrower and non-borrower specific information, including forward-looking information. CCRs are subject to review at least
annually or more frequently when an event occurs which could affect the credit risk of the customer.
For retail portfolios, a SICR is determined, depending on the type of facility, by either comparing the scenario weighted lifetime PD at
the reporting date to that at origination, or by reference to customer behavioural score thresholds. The scenario weighted lifetime
probability of default may increase significantly if:
\u2022 there has been a deterioration in the economic outlook, or an increase in economic uncertainty; or
\u2022 there has been a deterioration in the customer\u2019s overall credit position, or ability to manage their credit obligations.
ii. Backstop criteria
The Group uses 30 days past due arrears as a backstop criterion for both non-retail and retail portfolios. For retail portfolios only,
facilities are required to demonstrate three to six months of good payment behaviour prior to being allocated back to Stage 1.
FORWARD-LOOKING INFORMATION
Forward-looking information is incorporated into both our assessment of whether a financial asset has experienced a SICR since origination
and in our estimate of ECL. In applying forward-looking information for estimating ECL, the Group considers four probability-weighted
forecast economic scenarios as follows:
i. Base case scenario
The base case scenario is ANZ\u2019s view of future macroeconomic conditions. It reflects management\u2019s assumptions used for strategic
planning and budgeting, and also informs the Group Internal Capital Adequacy Assessment Process (ICAAP) which is the process the
Group applies in strategic and capital planning over a 3-year time horizon;
ii. Upside and iii. Downside scenarios
The upside and downside scenarios are fixed by reference to average economic cycle conditions (that is, they are not based on the
economic conditions prevailing at balance date) and are based on a combination of more optimistic (in the case of the upside) and
pessimistic (in the case of the downside) economic events and uncertainty over long term horizons; and
iv. Severe downside scenario
To better reflect the current economic conditions and geopolitical environment, the Group altered the severe downside scenario in
2022 from a scenario fixed by reference to average economic cycle conditions to one which aligns with the scenario used for Group-
wide stress testing.
The four scenarios are described in terms of macroeconomic variables used in the PD, LGD and EAD models (collectively the ECL models)
depending on the lending portfolio and country of the borrower. Examples of the macroeconomic variables include unemployment rates,
Gross Domestic Product (GDP) growth rates, residential property price indices, commercial property price indices and consumer price
indices.
Probability weighting of each scenario is determined by management considering the risks and uncertainties surrounding the base case
economic scenario, as well as specific portfolio considerations where required. The Group Asset and Liability Committee (GALCO) is
responsible for reviewing and approving the base case economic scenario and the Credit and Market Risk Committee (CMRC) approves the
probability weights applied to each scenario.
Where applicable, temporary adjustments may be made to account for situations where known or expected risks have not been adequately
addressed in the modelling process. CMRC is responsible for approving such adjustments.
KEY JUDGEMENTS AND ESTIMATES
Collectively assessed allowance for expected credit losses
In estimating collectively assessed ECL, the Group makes judgements and assumptions in relation to:
\u2022 the selection of an estimation technique or modelling methodology; and
\u2022 the selection of inputs for those models, and the interdependencies between those inputs.
The following table summarises the key judgements and assumptions in relation to the model inputs and the interdependencies between
those inputs, and highlights significant changes during the current period.
The judgements and associated assumptions have been made within the context of the uncertainty as to how various factors might
impact the global economy and reflect historical experience and other factors that are considered to be relevant, including expectations of
future events that are believed to be reasonable under the circumstances. The Group\u2019s ECL estimates are inherently uncertain and, as a
result, actual results may differ from these estimates.
| Judgement/Assumption | Description | Considerations for the year ended 30 September 2023 |
| Determining when a | | |
| Significant Increase in | | |
| Credit Risk has occurred | | |
| or reversed | | |
| | |
| In the measurement of ECL, judgement is | |
| involved in determining whether there has been | |
| a SICR since initial recognition of a loan, which | |
| would result in it moving from Stage 1 to Stage | |
| 2. This is a key area of judgement since transition | |
| from Stage 1 to Stage 2 increases the ECL from | |
| an allowance based on the probability of default | |
| (PD) in the next 12 months, to an allowance for | |
| lifetime expected credit losses. Subsequent | |
| decreases in credit risk resulting in transition | |
| from Stage 2 to Stage 1 may similarly result in | |
| significant changes in the ECL allowance. | |
| The setting of precise SICR trigger points | |
| requires judgement which may have a material | |
| impact upon the size of the ECL allowance. The | |
| Group monitors the effectiveness of SICR criteria | |
| on an ongoing basis. | |
| | |
| | The determination of SICR has been applied consistent |
| | with prior periods. |
KEY JUDGEMENTS AND ESTIMATES
(continued)
| Judgement/Assumption | Description | Considerations for the year ended 30 September 2023 |
| Measuring both 12- | | |
| month and lifetime | | |
| expected credit losses | | |
| The PD, LGD and EAD factors used in | |
| determining ECL are point-in-time measures | |
| reflecting the relevant forward-looking | |
| information determined by management. | |
| Judgement is involved in determining which | |
| forward-looking information is relevant for | |
| particular lending portfolios and for | |
| determining each portfolio\u2019s point-in-time | |
| sensitivity. | |
| In addition, judgement is required where | |
| behavioural characteristics are applied in | |
| estimating the lifetime of a facility which is used | |
| in measuring ECL. | |
| | The PD, LGD and EAD models are subject to the Group\u2019s |
| | model risk policy that stipulates periodic model |
| | monitoring and re-validation, and defines approval |
| | procedures and authorities according to model |
| | materiality. |
| | There were no material changes to the policy. |
| | | |
| Base case economic | | |
| forecast | | |
| The Group derives a forward-looking \u2018base case\u2019 | |
| economic scenario which reflects ANZ Research | |
| - Economics\u2019 (ANZ Economics) view of future | |
| macroeconomic conditions. | |
| | There have been no changes to the types of forward- |
| | looking variables (key economic drivers) used as model |
| | inputs. |
| | As at 30 September 2023, the base case assumptions |
| | have been updated to reflect slowing economies and |
| | reduced levels of household consumption in Australia |
| | and New Zealand associated with continuing high |
| | interest rates and elevated levels of inflation. |
| | The expected outcomes of key economic drivers for the |
| | base case scenario at 30 September 2023 are described |
| | below under the heading \u201cBase case economic forecast |
| | assumptions\u201d. |
| Probability weighting of | | |
| each economic scenario | | |
| (base case, upside, | | |
| downside and severe | | |
| downside scenarios) | | |
| 1 | | |
| |
| Probability weighting of each economic | |
| scenario is determined by management | |
| considering the risks and uncertainties | |
| surrounding the base case economic scenario | |
| at each measurement date. | |
| The assigned probability weightings in Australia, | |
| New Zealand and Rest of World are subject to a | |
| high degree of inherent uncertainty and | |
| therefore the actual outcomes may be | |
| significantly different to those projected. | |
| | Probability weightings in the current period have been |
| | adjusted to reflect our assessment of the downside risks |
| | from the impact of continued high interest rates and |
| | inflation on the economies in which the Group operates. |
| | Weightings for current and prior periods are as detailed in |
| | the section below under the heading on \u2018Probability |
| | weightings\u2019. |
| Management | | |
| temporary adjustments | | |
| Management temporary adjustments to the | |
| ECL allowance are used in circumstances where | |
| it is judged that our existing inputs, | |
| assumptions and model techniques do not | |
| capture all the risk factors relevant to our | |
| lending portfolios. Emerging local or global | |
| macroeconomic, microeconomic or political | |
| events, natural disasters, and natural hazards | |
| that are not incorporated into our current | |
| parameters, risk ratings, or forward-looking | |
| information are examples of such | |
| circumstances. | |
| | Management have continued to apply adjustments to |
| | accommodate uncertainty associated with higher |
| | inflation and interest rates. |
| | Management overlays have been made for risks particular |
| | to retail, including home loans, credit cards and small |
| | business in Australia, and for mortgages, commercial |
| | property and agri in New Zealand. |
| | Management has considered and concluded no |
| | temporary adjustment is required at 30 September 2023 |
| | to the ECL in relation to climate- or weather-related |
| | events during the year. |
1.
The upside and downside scenarios are fixed by reference to average economic cycle conditions (that is, they are not based on the economic conditions prevailing at balance date) and are
based on a combination of more optimistic (in the case of the upside) and pessimistic (in the case of the downside) economic conditions.
Base case economic forecast assumptions
Continuing uncertainties described above increase the risk of the economic forecast resulting in an understatement or overstatement of
the ECL balance.
The economic drivers of the base case economic forecasts, reflective of ANZ Economics\u2019 view of future macroeconomic conditions used at
30 September 2023 are set out below. For the years following the near term forecasts below, the ECL models apply simplified assumptions
for the economic conditions to calculate lifetime loss.
| | Forecast calendar year | |
| | | | |
| 2023 | 2024 | 2025 |
| Australia | | | |
| GDP (annual % change) | 1.5 | 1.3 | 2.2 |
| Unemployment rate (annual average) | 3.6 | 4.4 | 4.5 |
| Residential property prices (annual % change) | 5.9 | 2.8 | 4.3 |
| Consumer price index (annual average % change) | 5.6 | 3.5 | 2.9 |
| New Zealand | | | |
| GDP (annual % change) | 0.7 | 0.3 | 1.5 |
| Unemployment rate (annual average) | 3.8 | 4.8 | 5.1 |
| Residential property prices (annual % change) | -0.6 | 2.3 | 3.2 |
| Consumer price index (annual average % change) | 6.0 | 3.8 | 2.2 |
| Rest of world | | | |
| GDP (annual % change) | 1.8 | 0.9 | 2.0 |
| Consumer price index (annual average % change) | 3.9 | 2.9 | 2.2 |
The base case economic forecasts for Australia, New Zealand and Rest of World are for continuing slowdowns in economic activity.
Continued high inflation in Australia and New Zealand is expected to keep interest rates high and dampen growth over the forecast
period.
Probability weightings
Probability weightings for each scenario are determined by management considering the risks and uncertainties surrounding the base
case economic scenario including the uncertainties described above.
The average base case weighting has increased to 45.9% (Sep 22: 45%) as the downside and severe downside scenario weightings have
been revised. The average downside case weighting has increased to 41.2% (Sep 22: 40%), and the average severe downside case
weighting has decreased to 12.9% (Sep 22: 15%).
The assigned probability weightings in Australia, New Zealand and Rest of World are subject to a high degree of inherent uncertainty and
therefore the actual outcomes may be significantly different to those projected. The Group considers these weightings in each geography
to provide estimates of the possible loss outcomes and taking into account short and long term inter-relationships within the Group\u2019s
credit portfolios. The average weightings applied across the Group are set out below:
| | | Consolidated | | |
| | | | |
| | | The Company | |
| | | | | |
| 2023 | 2022 | 2023 | 2022 |
| Base | 45.9% | 45.0% | 45.0% | 45.0% |
| Upside | 0.0% | 0.0% | 0.0% | 0.0% |
| Downside | 41.2% | 40.0% | 42.1% | 40.0% |
| Severe downside | 12.9% | 15.0% | 12.9% | 15.0% |
ECL - Sensitivity analysis
Given current economic uncertainties and the judgement applied to factors used in determining the expected default of borrowers in
future periods, expected credit losses reported by the Group should be considered as a best estimate within a range of possible estimates.
The table below illustrates the sensitivity of collectively assessed ECL to key factors used in determining it as at 30 September 2023:
| | | Consolidated | | |
| | | The Company | |
| | | | | |
| | ECL | | | |
| $m | | | |
| | | Impact | | |
| | $m | | |
| | | ECL | |
| | | $m | |
| | | | | Impact |
| | | | $m |
| If 1% of Stage 1 facilities were included in Stage 2 | 4,116 | 84 | 3,283 | 73 |
| If 1% of Stage 2 facilities were included in Stage 1 | 4,027 | (5) | 3,206 | (4) |
| | | | | |
| 100% upside scenario | 1,274 | (2,758) | 1,050 | (2,160) |
| 100% base scenario | 1,790 | (2,242) | 1,406 | (1,804) |
| 100% downside scenario | 3,123 | (909) | 2,484 | (726) |
| 100% severe downside scenario | 9,251 | 5,219 | 7,457 | 4,247 |
Individually assessed allowance for expected credit losses
In estimating individually assessed ECL, the Group makes judgements and assumptions in relation to expected repayments, the realisable
value of collateral, business prospects for the customer, competing claims and the likely cost and duration of the work-out process.
Judgements and assumptions in respect of these matters have been updated to reflect amongst other things, the uncertainties described
above.
FINANCIAL LIABILITIES
Outlined below is a description of how we classify and measure financial liabilities relevant to the note disclosures that follow.
CLASSIFICATION AND MEASUREMENT
Financial liabilities
Financial liabilities are measured at amortised cost, or FVTPL when they are held for trading. Additionally, financial liabilities can be
designated at FVTPL where:
\u2022 the designation eliminates or significantly reduces an accounting mismatch which would otherwise arise;
\u2022 a group of financial liabilities are managed and their performance are evaluated on a fair value basis, in accordance with a documented
risk management strategy; or
\u2022 the financial liability contains one or more embedded derivatives unless:
a) the embedded derivative does not significantly modify the cash flows that otherwise would be required by the contract; or
b) the embedded derivative is closely related to the host financial liability.
Where financial liabilities are designated as measured at fair value, gains or losses relating to changes in the entity\u2019s own credit risk are
included in Other comprehensive income, except where doing so would create or enlarge an accounting mismatch in profit or loss.
14. DEPOSITS AND OTHER BORROWINGS
| | Consolidated | | The Company | |
| | | | | |
| 2023 | 2022 | 2023 | 2022 |
| $m | $m | $m | $m |
| Certificates of deposit | 41,919 | 34,049 | 39,426 | 32,411 |
| Term deposits | 247,893 | 200,064 | 196,309 | 157,479 |
| On demand and short term deposits | 356,601 | 369,460 | 297,195 | 310,857 |
| Deposits not bearing interest | 42,906 | 50,906 | 24,456 | 29,416 |
| Deposits from banks & securities sold under repurchase agreements | | | | |
| 1 | | | | |
| | 92,562 | 103,580 | 86,464 | 98,825 |
| Commercial paper and other borrowings | 33,322 | 39,222 | 31,225 | 36,619 |
| Deposits and other borrowings | 815,203 | 797,281 | 675,075 | 665,607 |
| Residual contractual maturity: | | | | |
| Within one year | 805,808 | 781,573 | 671,395 | 654,997 |
| More than one year | 9,395 | 15,708 | 3,680 | 10,610 |
| Deposits and other borrowings | 815,203 | 797,281 | 675,075 | 665,607 |
| Carried on Balance Sheet at: | | | | |
| Amortised cost | 781,314 | 794,621 | 643,868 | 665,567 |
| Fair value through profit or loss | | | | |
| 1 | | | | |
| | 33,889 | 2,660 | 31,207 | 40 |
| Deposits and other borrowings | 815,203 | 797,281 | 675,075 | 665,607 |
1.
During 2023, the Group commenced the management of repurchase agreements and reverse repurchase agreements on a fair value basis within the trading book in its Markets business. This resulted in
the associated repurchase and reverse repurchase agreements being recognised and measured at FVTPL.
RECOGNITION AND MEASUREMENT
For deposits and other borrowings that:
\u2022 are not designated at FVTPL on initial recognition, we measure them at amortised cost and recognise their interest expense using the
effective interest rate method; and
\u2022 are managed on a fair value basis, reduce or eliminate an accounting mismatch or contain an embedded derivative, we designate them
as measured at FVTPL.
Refer to Note 18 Fair Value of Financial Assets and Financial Liabilities for further details.
For deposits and other borrowings designated at fair value we recognise the amount of fair value gain or loss attributable to changes in
the Group\u2019s own credit risk in Other comprehensive income in retained earnings. Any remaining amount of fair value gain or loss we
recognise directly in profit or loss. Once we have recognised an amount in other comprehensive income, we do not later reclassify it to
profit or loss.
Securities sold under repurchase agreements represent a liability to repurchase the financial assets that remain on our balance sheet since
the risks and rewards of ownership remain with the Group. Over the life of the repurchase agreement, we recognise the difference
between the sale price and the repurchase price and charge it to interest expense in profit or loss.
20222023
Certificates of deposit
Term deposits
On demand and short
term deposits
Deposits not bearing interest
Deposits from banks &
securities sold under
repurchase agreements
200,064
369,460
50,906
39,222
103,580
Commercial paper and
other borrowings
34,049
247,893
356,601
42,906
33,322
92,562
41,919
15. PAYABLES AND OTHER LIABILITIES
Consolidated The Company
| | 2023 | 2022 | 2023 | 2022 |
| $m | $m | $m | $m |
| Payables and accruals | 5,811 | 2,896 | 4,582 | 2,189 |
| Liabilities at fair value | | | | |
| 1 | | | | |
| | 5,267 | 3,239 | 4,922 | 2,857 |
| Lease liabilities | 1,767 | 1,040 | 1,531 | 1,628 |
| Trail commission liabilities | 1,469 | 1,320 | 1,469 | 1,320 |
| Other liabilities | 1,618 | 1,340 | 775 | 568 |
| Payables and other liabilities | 15,932 | 9,835 | 13,279 | 8,562 |
1.
Relate to securities sold short classified as held for trading and measured at FVTPL.
RECOGNITION AND MEASUREMENT
The Group recognises liabilities when there is a present obligation to transfer economic resources as a result of past events.
Below is the measurement basis for each item classified as other liabilities:
\u2022 Payables, accruals and other liabilities are measured at the contractual amount payable or the best estimate of consideration required to
settle the payable.
\u2022 Liabilities at fair value relate to securities sold short, which we classify as held for trading and measure at FVTPL based on quoted prices
in active markets.
\u2022 Lease liabilities are initially measured at the present value of the future lease payments using the Group\u2019s incremental borrowing rate at
the lease commencement date. The carrying amount is then subsequently adjusted to reflect the interest on the lease liability, lease
payments that have been made and any lease reassessments or modifications.
\u2022 Trail commission liabilities are measured based on the present value of expected future trail commission payments taking into
consideration average behavioural loan life and outstanding balances of broker originated loans.
16. DEBT ISSUANCES
The Group, primarily via ANZBGL or other banking subsidiaries, uses a variety of funding programmes to issue senior debt (including covered bonds
and securitisations) and subordinated debt. The difference between senior debt and subordinated debt is that holders of senior debt of a Group issuer
take priority over holders of subordinated debt owed by that issuer. In the winding up of a Group issuer, the subordinated debt will be repaid by the
relevant issuer only after the repayment of claims of its depositors, other creditors and the senior debt holders of that issuer.
| Consolidated | | The Company | |
| | | | | |
| 2023 | 2022 | 2023 | 2022 |
| $m | $m | $m | $m |
| Senior debt | 63,233 | 52,324 | 50,671 | 40,325 |
| Covered bonds | 18,223 | 12,967 | 15,084 | 9,371 |
| Securitisation | 880 | 1,115 | - | - |
| Total unsubordinated debt | 82,336 | 66,406 | 65,755 | 49,696 |
| Subordinated debt | | | | |
| - ANZBGL Additional Tier 1 capital | 8,232 | 7,705 | 8,287 | 7,763 |
| - ANZBGL Tier 2 capital | 23,707 | 17,907 | 23,707 | 17,907 |
| - Other subordinated debt securities | 1,739 | 1,716 | 464 | 462 |
| Total subordinated debt | 33,678 | 27,328 | 32,458 | 26,132 |
| Total debt issued | 116,014 | 93,734 | 98,213 | 75,828 |
| Residual contractual maturity 1: | | | | |
| | | | | |
| Within one year | 21,746 | 25,208 | 18,499 | 21,990 |
| More than one year | 92,856 | 66,660 | 78,245 | 51,929 |
| No maturity date (instruments in perpetuity) | 1,412 | 1,866 | 1,469 | 1,909 |
| Total debt issued | 116,014 | 93,734 | 98,213 | 75,828 |
| Carried on Balance Sheet at: | | | | |
| | | | | |
| Amortised cost | 114,678 | 92,623 | 95,881 | 72,757 |
| Fair value through profit or loss | 1,336 | 1,111 | 2,332 | 3,071 |
| Total debt issued | 116,014 | 93,734 | 98,213 | 75,828 |
1. Based on the final maturity date or, in the case of Additional Tier 1 capital securities, the mandatory conversion date (if any).
TOTAL DEBT ISSUED BY CURRENCY
The table below shows the Group\u2019s issued debt by currency of issue, which broadly represents the debt holders\u2019 base location.
Consolidated
he Company
| | | 2023 | 2022 | 2023 | 2022 |
| | | $m | $m | $m | $m |
| USD | United States dollars | 32,723 | 25,527 | 24,074 | 17,206 |
| EUR Euro | 26,990 | 19,923 | 21,356 | 14,049 | |
| AUD Australian | dollars | 47,043 | 36,398 | 46,123 | 35,259 |
| NZD | New Zealand dollars | 1,575 | 1,628 | 43 | 46 |
| JPY Japanese | yen | 1,993 | 2,159 | 1,993 | 2,159 |
| CHF Swiss | francs | 1,039 | 954 | - | - |
| GBP Pounds | sterling | 2,230 | 5,261 | 2,230 | 5,261 |
| HKD | Hong Kong dollars | 1,407 | 771 | 1,407 | 771 |
| Other | Chinese yuan and Singapore dollars | 1,014 | 1,113 | 987 | 1,077 |
| Total debt issued | | 116,014 | 93,734 | 98,213 | 75,828 |
SUBORDINATED DEBT
At 30 September 2023, all subordinated debt issued by ANZBGL (other than its USD 300 million perpetual subordinated notes) qualifies as regulatory
capital for the Group. Depending on their terms and conditions, the subordinated debt instruments issued by ANZBGL are classified as either
Additional Tier 1 (AT1) capital for the Group (in the case of the ANZ Capital Notes (ANZ CN) and ANZ Capital Securities (ANZ CS)) or Tier 2 capital for
the Group (in the case of the term subordinated notes) for APRA\u2019s capital adequacy purposes.
Subordinated debt issued externally by ANZ Bank New Zealand will constitute subordinated debt of both ANZ Bank New Zealand and the Group.
Whilst it will constitute tier 2 capital for ANZ Bank New Zealand for the purposes of the Reserve Bank of New Zealand\u2019s (RBNZ) capital requirements, it
will not constitute Tier 2 capital for the Group as the terms of the subordinated debt does not satisfy APRA\u2019s capital requirements.
AT1 Capital
All outstanding AT1 capital instruments issued by ANZBGL are Basel III fully compliant instruments (refer to Note 24 Capital Management for further
information about Basel III) for APRA\u2019s capital adequacy purposes. Each of the ANZ CN and ANZ CS rank equally with each other.
Distributions on the AT1 capital instruments are non-cumulative and subject to the issuer\u2019s absolute discretion and certain payment conditions
(including regulatory requirements). Distributions on ANZ CNs are franked in line with the franking applied to ANZGHL\u2019s ordinary shares.
Where specified, the AT1 capital instruments provide the issuer with an early redemption or conversion option on a specified date and in certain other
circumstances (such as a tax or regulatory event). This redemption option is subject to APRA\u2019s prior written approval.
Each of the AT1 capital instruments will immediately convert into a variable number of ANZGHL\u2019s ordinary shares (based on the average market price
of the shares immediately prior to conversion less a 1% discount, subject to a maximum conversion number of ANZGHL\u2019s ordinary shares) if:
\u2022 The Group\u2019s or ANZBGL\u2019s Common Equity Tier 1 capital ratio is equal to or less than 5.125% - known as a Common Equity Capital Trigger Event; or
\u2022 APRA notifies ANZBGL that, without the conversion or write-off of certain securities or a public sector injection of capital (or equivalent support), it
considers that ANZBGL would become non-viable \u2013 known as a Non-Viability Trigger Event.
Where specified, AT1 capital instruments mandatorily convert into a variable number of ANZGHL\u2019s ordinary shares (based on the average market price
of the shares immediately prior to conversion less a 1% discount):
\u2022 on a specified mandatory conversion date; or
\u2022 on an earlier date under certain circumstances as set out in the terms.
However, the mandatory conversion is deferred for a specified period if certain conversion tests are not met.
If the AT1 capital securities convert, and the holders receive ANZGHL ordinary shares, then:
\u2022 the AT1 capital securities are transferred to ANZGHL for their face value;
\u2022 ANZBGL shall redeem the securities and simultaneously issue ordinary shares to its parent ANZ BH Limited (based on ANZBGL\u2019s share price
calculated by reference to its consolidated net assets, subject to a maximum conversion number); and
\u2022 ANZ BH Limited will issue shares to ANZGHL (calculated on the same basis for ANZ BH Limited).
Preference shares issued externally by ANZ Bank New Zealand will constitute additional tier 1 capital for ANZ Bank New Zealand for the purposes of
the RBNZ\u2019s capital requirements, however they will not constitute Additional Tier 1 capital for the Group as the terms of the preference shares do not
satisfy APRA\u2019s capital requirements. The preference shares are included within non-controlling interests in Note 23 Shareholders\u2019 Equity.
The tables below show the key details of the ANZBGL\u2019s AT1 capital instruments on issue at 30 September in both the current and prior years:
| Consolidated | | | |
| | | The Company | |
| | 2023 | 2022 | 2023 | 2022 |
| | $m | $m | $m | $m |
| ANZBGL's Additional Tier 1 capital (perpetual subordinated securities)1 | | | | |
| ANZ Capital Notes (ANZ CN) | | | | |
| AUD 970m ANZ CN32 | - | 970 | - | 985 |
| AUD 1,622m ANZ CN4 | 1,621 | 1,619 | 1,621 | 1,619 |
| AUD 931m ANZ CN5 | 929 | 928 | 929 | 928 |
| AUD 1,500m ANZ CN6 | 1,489 | 1,487 | 1,489 | 1,487 |
| AUD 1,310m ANZ CN7 | 1,298 | 1,297 | 1,298 | 1,297 |
| AUD 1,500m ANZ CN8 | 1,483 | - | 1,481 | - |
| ANZ Capital Securities (ANZ CS) | | | | |
| USD 1,000m ANZ Capital Securities | 1,412 | 1,404 | 1,469 | 1,447 |
| Total ANZBGL Additional Tier 1 capital3 | 8,232 | 7,705 | 8,287 | 7,763 |
1. Carrying values are net of issuance costs.
2. All of the ANZ Capital Notes 3 were redeemed on 24 March 2023 with approximately $502 million of the proceeds from redemption reinvested into ANZ Capital Notes 8 on the same date.
3. This forms part of the Group\u2019s qualifying Additional Tier 1 capital. Refer to Note 24 Capital Management for further details.
ANZ Capital Notes (ANZ CN)
| CN3 | CN4 | CN5 |
| Issuer | | | |
| | ANZBGL, acting through its | | |
| New Zealand branch | ANZBGL | ANZBGL |
| Issue date | 5 March 2015 | 27 September 2016 | 28 September 2017 |
| Issue amount | $970 million | $1,622 million | $931 million |
| Face value | $100 | $100 | $100 |
| Distribution frequency | Semi-annually in arrears | Quarterly in arrears | Quarterly in arrears |
| Distribution rate | | | |
| | | | |
| | | | |
| | | | |
| Floating rate: (180 day Bank | | |
| Bill rate +3.6%)x(1-Australian | | |
| corporate tax rate) | | |
| | | | |
| | Floating rate: (90 day Bank | |
| | Bill rate +4.7%)x(1-Australian | |
| | corporate tax rate) | |
| | | | |
| | | Floating rate: (90 day Bank |
| | | Bill rate +3.8%)x(1-Australian |
| | | corporate tax rate) |
| | | | |
| Issuer\u2019s early redemption or conversion option | 24 March 20231 | 20 March 2024 | 20 March 2025 |
| Mandatory conversion date | 24 March 20252 | 20 March 2026 | 20 March 2027 |
| Common equity capital trigger event | Yes | Yes | Yes |
| Non-viability trigger event | Yes | Yes | Yes |
| Carrying value (net of issue costs) | | | |
| | | | |
| nil | $1,621 million | $929 million |
| | (2022: $970 million) | (2022: $1,619 million) | (2022: $928 million) |
| CN6 | CN7 | CN8 |
| Issuer | ANZBGL | ANZBGL | ANZBGL |
| Issue date | 8 July 2021 | 24 March 2022 | 24 March 2023 |
| Issue amount | $1,500 million | $1,310 million | $1,500 million |
| Face value | $100 | $100 | $100 |
| Distribution frequency | Quarterly in arrears | Quarterly in arrears | Quarterly in arrears |
| Distribution rate | | | |
| | | | |
| | | | |
| | | | |
| Floating rate: (90 day Bank | | |
| Bill rate +3.0%)x(1-Australian | | |
| corporate tax rate) | | |
| | | |
| | Floating rate: (90 day Bank | |
| | Bill rate +2.7%)x(1-Australian | |
| | corporate tax rate) | |
| | | |
| | | Floating rate: (90 day Bank Bill |
| | | rate +2.75%)x(1-Australian |
| | | corporate tax rate) |
| | | |
| Issuer\u2019s early redemption or conversion option | 20 March 2028 | 20 March 2029 | 20 March 2030 |
| Mandatory conversion date | 20 September 2030 | 20 September 2031 | 20 September 2032 |
| Common equity capital trigger event | Yes | Yes | Yes |
| Non-viability trigger event | Yes | Yes | Yes |
| Carrying value (net of issue costs) | | | |
| | | | |
| $1,489 million | $1,298 million | $1,483 million |
| | (2022: $1,487 million) | (2022: $1,297 million) | (2022: nil) |
1. All of the ANZ Capital Notes 3 were redeemed on 24 March 2023 with approximately $502 million of the proceeds from redemption reinvested into ANZ Capital Notes 8 on the same date.
2. The mandatory conversion date is no longer applicable as all of CN3 have been redeemed.
ANZ Capital Securities (ANZ CS)
| Issuer | ANZBGL, acting through its London branch |
| Issue date | 15 June 2016 |
| Issue amount | USD 1,000 million |
| Face value | Minimum denomination of USD 200,000 and an integral multiple of USD 1,000 above that |
| Interest frequency | Semi-annually in arrears |
| Interest rate | |
| |
| Fixed at 6.75% p.a. until 15 June 2026. Reset on 15 June 2026 and each 5 year anniversary |
| to a floating rate: 5 year USD mid-market swap rate + 5.168% |
| Issuer\u2019s early redemption option | 15 June 2026 and each 5 year anniversary |
| Common equity capital trigger event | Yes |
| Non-viability trigger event | Yes |
| Carrying value (net of issue costs) | $1,412 million (2022: $1,404 million) |
TIER 2 CAPITAL
Convertible term subordinated notes issued by ANZBGL are Basel III fully compliant instruments for APRA\u2019s capital adequacy purposes. If a Non-
Viability Trigger Event occurs, each of the convertible term subordinated notes will immediately convert into ANZGHL ordinary shares (based on the
average market price of the ANZGHL shares immediately prior to conversion less a 1% discount, subject to a maximum conversion number).
If the Tier 2 capital securities convert, and the holders receive ANZGHL ordinary shares, then ANZBGL shall issue ordinary shares to its parent ANZ BH
Limited (based on ANZBGL\u2019s share price calculated by reference to its consolidated net assets, subject to a maximum conversion number) and ANZ
BH Limited will issue shares to ANZGHL (calculated on the same basis).
The table below shows the Tier 2 capital subordinated debt issued by ANZBGL at 30 September in both the current and prior year:
| | | | | Consolidated | | The Company | |
| | | | Next optional call date \u2013 | Interest | 2023 | 2022 | 2023 | 2022 |
| Currency | Face value | Maturity | subject to APRA\u2019s prior approval | rate | $m | $m | $m | $m |
| ANZBGL Tier 2 capital (term subordinated notes) | | | | | | | | |
| USD | 800m | 2024 | N/A | Fixed | 1,220 | 1,189 | 1,220 | 1,189 |
| JPY | 20,000m | 2026 | N/A | Fixed | 207 | 213 | 207 | 213 |
| USD | 1,500m | 2026 | N/A | Fixed | 2,125 | 2,113 | 2,125 | 2,113 |
| JPY | 10,000m | 2028 | 2023 | Fixed | - | 106 | - | 106 |
| AUD | 225m | 2032 | 2027 | Fixed | 225 | 225 | 225 | 225 |
| AUD | 1,750m | 2029 | 2024 | Floating | 1,750 | 1,750 | 1,750 | 1,750 |
| EUR | 1,000m | 2029 | 2024 | Fixed | 1,555 | 1,410 | 1,555 | 1,410 |
| AUD | 265m | 2039 | N/A | Fixed | 170 | 179 | 170 | 179 |
| USD | 1,250m | 2030 | 2025 | Fixed | 1,808 | 1,785 | 1,808 | 1,785 |
| AUD | 1,250m | 2031 | 2026 | Floating | 1,250 | 1,250 | 1,250 | 1,250 |
| USD | 1,500m | 2035 | 2030 | Fixed | 1,786 | 1,830 | 1,786 | 1,830 |
| AUD | 330m | 2040 | N/A | Fixed | 202 | 214 | 202 | 214 |
| AUD | 195m | 2040 | N/A | Fixed | 117 | 124 | 117 | 124 |
| EUR | 750m | 2031 | 2026 | Fixed | 1,104 | 1,003 | 1,104 | 1,003 |
| GBP | 500m | 2031 | 2026 | Fixed | 830 | 714 | 830 | 714 |
| AUD | 1,450m | 2032 | 2027 | Fixed | 1,400 | 1,390 | 1,400 | 1,390 |
| AUD | 300m | 2032 | 2027 | Floating | 300 | 300 | 300 | 300 |
| JPY | 59,400m | 2032 | 2027 | Fixed | 606 | 627 | 606 | 627 |
| SGD | 600m | 2032 | 2027 | Fixed | 659 | 618 | 659 | 618 |
| AUD | 900m | 2034 | 2029 | Fixed | 871 | 867 | 871 | 867 |
| USD | 1,250m | 2032 | N/A | Fixed | 1,803 | - | 1,803 | - |
| EUR | 1,000m | 2033 | 2028 | Fixed | 1,594 | - | 1,594 | - |
| AUD | 1,000m | 2038 | 2033 | Fixed | 975 | - | 975 | - |
| AUD | 275m | 2033 | 2028 | Fixed | 275 | - | 275 | - |
| AUD | 875m | 2033 | 2028 | Floating | 875 | - | 875 | - |
| Total ANZBGL Tier 2 capital1,2 | | | | | 23,707 | 17,907 | 23,707 | 17,907 |
1. Carrying values are net of issuance costs, and, where applicable, include fair value hedge accounting adjustments.
2. This forms part of the Group\u2019s qualifying Tier 2 capital. Refer to Note 24 Capital Management for further details.
OTHER SUBORDINATED DEBT SECURITIES
The term subordinated notes issued by ANZ Bank New Zealand constitute tier 2 capital under RBNZ requirements. However, they do not (among
other things) contain a Non-Viability Trigger Event and therefore do not meet APRA\u2019s requirements for Tier 2 capital instruments in order to qualify as
regulatory capital for the Group.
| | | | | Consolidated | | The Company | |
| | | | Interest | 2023 | 2022 | 2023 | 2022 |
| | | | rate | $m | $m | $m | $m |
| Currency | Face value | Maturity | Next optional call date | | | | | |
| | | 1 | | | | | |
| Non-Basel III compliant perpetual subordinated notes issued by ANZBGL | | | | | | | | |
| 2 | | | | | | | | |
| | | | | | | | | |
| USD | 300m | Perpetual | | | | | | |
| | | Each semi-annual interest payment | | | | | |
| | | date | Floating | 464 | 462 | 464 | 462 |
| Term subordinated notes issued | by ANZ Bank New Zealand Limited |
| NZD | 600m | 2031 | 2026 | Fixed | 555 | 524 | - | - |
| USD | 500m | 2032 | 2027 | Fixed | 720 | 730 | - | - |
| Other subordinated debt | | | | | 1,739 | 1,716 | 464 | 462 |
1.
Subject to APRA\u2019s or RBNZ\u2019s prior approval (as applicable).
2.
The USD 300 million perpetual subordinated notes were redeemed by ANZBGL on 31 October 2023.
RECOGNITION AND MEASUREMENT
Debt issuances are initially recognised at fair value and are subsequently measured at amortised cost, except where designated at FVTPL.
Interest expense on debt issuances is recognised using the effective interest rate method. Where the Group enters into a fair value hedge
accounting relationship, the fair value attributable to the hedged risk is reflected in adjustments to the carrying value of the debt.
Subordinated debt with capital-based conversion features (i.e. Common Equity Capital Trigger Events or Non-Viability Trigger Events) are
considered to contain embedded derivatives that we account for separately at FVTPL. The embedded derivatives arise because the
amount of shares issued on conversion following any of those trigger events is subject to the maximum conversion number, however they
have no significant value as of the reporting date given the remote nature of those trigger events.
17. FINANCIAL RISK MANAGEMENT
RISK MANAGEMENT FRAMEWORK AND MODEL
INTRODUCTION
The use of financial instruments is fundamental to the Group\u2019s businesses of providing banking and other financial services to our customers. The
associated financial risks (primarily credit, market, and liquidity risks) are a significant portion of the Group\u2019s key material risks.
We disclose details of all key material risks impacting the Group, and further information on the Group\u2019s risk management activities, in the Governance
and Risk Management sections of this Annual Report.
This note details the Group\u2019s financial risk management policies, processes and quantitative disclosures in relation to the key financial risks.
| Key material financial risks | Key sections applicable to this risk |
| Credit risk | |
| The risk of financial loss resulting from: | |
| \u2022 a counterparty failing to fulfil its obligations; or | |
| \u2022 a decrease in credit quality of a counterparty resulting in a | |
| financial loss. | |
| Credit risk incorporates the risks associated with us lending to | |
| customers who could be impacted by climate change, changes to | |
| laws, regulations, or other policies adopted by governments or | |
| regulatory authorities. Climate change impacts include both | |
| physical risks (climate- or weather-related events) and transition | |
| risks resulting from the adjustment to a low emissions | |
| economy. Transition risks include resultant changes to laws, | |
| regulations and policies noted above. | |
| \u2022 Credit risk overview, management and control responsibilities |
| \u2022 Maximum exposure to credit risk |
| \u2022 Credit quality |
| \u2022 Concentrations of credit risk |
| \u2022 Collateral management |
| Market risk | |
| The risk to the Group\u2019s earnings arising from: | |
| \u2022 changes in interest rates, foreign exchange rates, credit spreads, | |
| volatility and correlations; or | |
| \u2022 | |
| fluctuations in bond, commodity or equity prices. | |
| | |
| | |
| \u2022 Market risk overview, management and control responsibilities |
| \u2022 Measurement of market risk |
| \u2022 Traded and non-traded market risk |
| \u2022 Equity securities designated at FVOCI |
| \u2022 Foreign currency risk \u2013 structural exposure |
| Liquidity and funding risk | |
| The risk that the Group is unable to meet payment obligations as | |
| they fall due, including: | |
| \u2022 repaying depositors or maturing wholesale debt; or | |
| \u2022 the Group having insufficient capacity to fund increases in | |
| assets. | |
| \u2022 Liquidity risk overview, management and control responsibilities |
| \u2022 Key areas of measurement for liquidity risk |
| \u2022 Liquidity risk outcomes |
| \u2022 Residual contractual maturity analysis of the Group\u2019s liabilities |
OVERVIEW
AN OVERVIEW OF OUR RISK MANAGEMENT FRAMEWORK
This overview is provided to aid the users of the financial statements in understanding the context of the financial disclosures required under AASB 7
Financial Instruments: Disclosures.
It should be read in conjunction with the Governance and Risk Management sections of this Annual Report.
The Board is responsible for establishing and overseeing the Group\u2019s Risk Management Framework (RMF). The Board has delegated authority to the
Board Risk Committee (BRC) to develop and monitor compliance with the Group\u2019s risk management policies. The BRC reports regularly to the Board
on its activities.
The Board approves the strategic objectives of the Group including:
\u2022 the Risk Appetite Statement (RAS), which sets out the Board\u2019s expectations regarding the degree of risk that the Group is prepared to accept in
pursuit of its strategic objectives and business plan; and
\u2022 the Risk Management Strategy (RMS), which describes the Group\u2019s strategy for managing risks and the key elements of the RMF that give effect to
this strategy. This includes a description of each material risk, and an overview of how the RMF addresses each risk, with reference to the relevant
policies, standards and procedures. It also includes information on how the Group identifies, measures, evaluates, monitors, reports and controls or
mitigates material risks.
The Group, through its training and management standards and procedures, aims to maintain a disciplined and robust control environment in which
all employees understand their roles and obligations. At ANZ, risk is everyone\u2019s responsibility.
The Group has an independent risk management function, headed by the Chief Risk Officer who:
\u2022 is responsible for overseeing the risk profile and the risk management framework;
\u2022 can effectively challenge activities and decisions that materially affect the Group\u2019s risk profile; and
\u2022 has an independent reporting line to the BRC to enable the appropriate escalation of issues of concern.
The Internal Audit Function reports directly to the Board Audit Committee (BAC). Internal Audit provides:
\u2022 an independent evaluation of the Group\u2019s RMF annually that seeks to ensure compliance with, and the effectiveness of, the risk management
framework;
\u2022 facilitation of a comprehensive review every three years that seeks to ensure the appropriateness, effectiveness and adequacy of the risk
management framework; and
\u2022 recommendations to improve the framework and/or work practices to strengthen the effectiveness of day-to-day operations.
CREDIT RISK
CREDIT RISK OVERVIEW, MANAGEMENT AND CONTROL RESPONSIBILITIES
Granting credit facilities to customers is one of the Group\u2019s major sources of income. As this activity is also a principal risk, the Group dedicates
considerable resources to its management. The Group assumes credit risk in a wide range of lending and other activities in diverse markets and in
many jurisdictions. Credit risks arise from traditional lending to customers as well as from interbank, treasury, trade finance and capital markets
activities around the world.
Our credit risk management framework ensures we apply a consistent approach across the Group when we measure, monitor and manage the credit
risk appetite set by the Board. The Board is assisted and advised by the BRC in discharging its duty to oversee credit risk. The BRC:
\u2022 sets the credit risk appetite and credit strategies; and
\u2022 approves credit transactions beyond the discretion of executive management.
We quantify credit risk through an internal credit rating system (masterscales) to ensure consistency across exposure types and to provide a consistent
framework for reporting and analysis. The system uses models and other tools to measure the following for customer exposures:
| Probability of Default (PD) | Expressed by a Customer Credit Rating (CCR), reflecting the Group\u2019s assessment of a customer\u2019s ability |
| to service and repay debt. |
| Exposure at Default (EAD) | The expected balance sheet exposure at default taking into account repayments of principal and |
| interest, expected additional drawdowns and accrued interest at the time of default. |
| Loss Given Default (LGD) | Expressed by a Security Indicator (SI) ranging from A to G. The SI is calculated by reference to the |
| percentage of loan covered by security which the Group can realise if a customer defaults. The A-G |
| scale is supplemented by a range of other SIs which cover factors such as cash cover and sovereign |
| backing. For retail and some small business lending, we group exposures into large homogenous pools |
| \u2013 and the LGD is assigned at the pool level. |
Our specialist credit risk teams develop and validate the Group\u2019s PD and LGD rating models. The outputs from these models drive our day-to-day
credit risk management decisions including origination, pricing, approval levels, regulatory capital adequacy, economic capital allocation, and credit
provisioning.
All customers with whom the Group has a credit relationship are assigned a CCR at origination via either of the following assessment approaches:
| Large and more complex lending | Retail and some small business lending |
| Rating models provide a consistent and structured assessment, with | |
| judgement required around the use of out-of-model factors. We | |
| handle credit approval on a dual approval basis, jointly with the | |
| business writer and an independent credit officer. | |
| Automated assessment of credit applications using a combination of |
| scoring (application and behavioural), policy rules and external credit |
| reporting information. If the application does not meet the automated |
| assessment criteria, then it is subject to manual assessment. |
We use the Group\u2019s internal CCRs to manage the credit quality of financial assets. To enable wider comparisons, the Group\u2019s CCRs are mapped to
external rating agency scales as follows:
| Credit Quality | | | | |
| Description | Internal CCR | ANZ Customer Requirements | | |
| | | Moody\u2019s | |
| | | Rating | |
| | | | S&P Global |
| | | | Ratings |
| Strong | CCR 0+ to 4- | Demonstrated superior stability in their operating and financial | | |
| | performance over the long-term, and whose earnings capacity | | |
| | is not significantly vulnerable to foreseeable events. | | |
| | | Aaa \u2013 Baa3 | AAA \u2013 BBB- |
| Satisfactory | CCR 5+ to 6- | 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. | | |
| | | Ba1 \u2013 B1 | BB |
| | | | + |
| | | | \u2013 B+ |
| Weak | CCR 7+ to 8= | Demonstrated some operational and financial instability, with | | |
| | variability and uncertainty in profitability and liquidity | | |
| | projected to continue over the short and possibly medium | | |
| | term. | | |
| | | B2 - Caa | B |
| | | | - CCC |
| Defaulted | CCR 8- to 10 | When doubt arises as to the collectability of a credit facility, the | | |
| | financial instrument (or \u2018the facility\u2019) is classified as defaulted. | | |
| | | N/A | N/A |
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 instruments which are primarily subject to
market risk, or bank notes and coins.
For undrawn facilities, this maximum exposure to credit risk is the full amount of the committed facilities. 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.
The table below shows our maximum exposure to credit risk of on-balance sheet and off-balance sheet positions before taking account of any
collateral held or other credit enhancements.
| | Reported | | Excluded1 | | | |
| | | | | Maximum exposure | |
| | | | | to credit risk | |
| | 2023 | 2022 | 2023 | 2022 | 2023 | 2022 |
| Consolidated | $m | $m | $m | $m | $m | $m |
| On-balance sheet positions | | | | | | |
| Net loans and advances | 707,694 | 672,407 | - | - | 707,694 | 672,407 |
| | | | | | | |
| Other financial assets: | | | | | | |
| Cash and cash equivalents | 168,154 | 168,132 | 1,070 | 1,147 | 167,084 | 166,985 |
| Settlement balances owed to ANZ | 9,349 | 4,762 | 9,349 | 4,762 | - | - |
| Collateral paid | 8,558 | 12,700 | - | - | 8,558 | 12,700 |
| Trading assets | 37,004 | 35,237 | 4,881 | 3,860 | 32,123 | 31,377 |
| Derivative financial instruments | 60,406 | 90,174 | - | - | 60,406 | 90,174 |
| Investment securities | | | | | | |
| - debt securities at amortised cost | 7,752 | 7,943 | - | - | 7,752 | 7,943 |
| - debt securities at FVOCI | 88,271 | 76,817 | - | - | 88,271 | 76,817 |
| - equity securities at FVOCI | 946 | 1,353 | 946 | 1,353 | - | - |
| - debt securities at FVTPL | - | 40 | - | - | - | 40 |
| Regulatory deposits | 646 | 632 | - | - | 646 | 632 |
| Other financial assets2 | 4,378 | 2,943 | - | - | 4,378 | 2,943 |
| Total other financial assets | 385,464 | 400,733 | 16,246 | 11,122 | 369,218 | 389,611 |
| Subtotal | 1,093,158 | 1,073,140 | 16,246 | 11,122 | 1,076,912 | 1,062,018 |
| Off-balance sheet positions | | | | | | |
| Undrawn and contingent facilities3 | 290,055 | 285,041 | - | - | 290,055 | 285,041 |
| Total | 1,383,213 | 1,358,181 | 16,246 | 11,122 | 1,366,967 | 1,347,059 |
1. Coins, notes and cash at bank within Cash and cash equivalents; Trade dated assets within Settlement balances owed to ANZ; precious metal exposures and carbon credits within Trading assets; and Equity
securities within Investment securities were excluded as they do not have credit risk exposure.
2. Other financial assets mainly comprise accrued interest and acceptances.
3. Undrawn and contingent facilities include guarantees, letters of credit and performance related contingencies, net of collectively assessed and individually assessed allowance for expected credit losses.
| | Reported | | Excluded1 | | | |
| | | | | Maximum exposure | |
| | | | | to credit risk | |
| | 2023 | 2022 | 2023 | 2022 | 2023 | 2022 |
| The Company | $m | $m | $m | $m | $m | $m |
| On-balance sheet positions | | | | | | |
| Net loans and advances | 563,017 | 537,345 | - | - | 563,017 | 537,345 |
| | | | | | | |
| Other financial assets: | | | | | | |
| Cash and cash equivalents | 154,408 | 155,483 | 667 | 787 | 153,741 | 154,696 |
| Settlement balances owed to ANZ | 8,935 | 4,024 | 8,935 | 4,024 | - | - |
| Collateral paid | 7,717 | 11,368 | - | - | 7,717 | 11,368 |
| Trading assets | 30,693 | 28,073 | 4,472 | 3,348 | 26,221 | 24,725 |
| Derivative financial instruments | 59,989 | 88,056 | - | - | 59,989 | 88,056 |
| Investment securities | | | | | | |
| - debt securities at amortised cost | 5,936 | 6,115 | - | - | 5,936 | 6,115 |
| - debt securities at FVOCI | 76,320 | 65,257 | - | - | 76,320 | 65,257 |
| - equity securities at FVOCI | 945 | 1,027 | 945 | 1,027 | - | - |
| Regulatory deposits | 284 | 249 | - | - | 284 | 249 |
| Due from controlled entities | 26,067 | 22,860 | - | - | 26,067 | 22,860 |
| Other financial assets2 | 3,024 | 1,882 | - | - | 3,024 | 1,882 |
| Total other financial assets | 374,318 | 384,394 | 15,019 | 9,186 | 359,299 | 375,208 |
| Subtotal | 937,335 | 921,739 | 15,019 | 9,186 | 922,316 | 912,553 |
| Off-balance sheet positions | | | | | | |
| Undrawn and contingent facilities3 | 252,415 | 246,722 | - | - | 252,415 | 246,722 |
| Total | 1,189,750 | 1,168,461 | 15,019 | 9,186 | 1,174,731 | 1,159,275 |
1. Coins, notes and cash at bank within Cash and cash equivalents; Trade dated assets within Settlement balances owed to ANZ; precious metal exposures, and carbon credits within Trading assets; and Equity
securities within Investment securities were excluded as they do not have credit risk exposure.
2. Other financial assets mainly comprise accrued interest and acceptances.
3. Undrawn and contingent facilities include guarantees, letters of credit and performance related contingencies, net of collectively assessed and individually assessed allowance for expected credit losses.
CREDIT QUALITY
An analysis of the Group\u2019s credit risk exposure is presented in the following tables based on the Group\u2019s internal credit quality rating by stage without
taking account of the effects of any collateral or other credit enhancements:
Net loans and advances
| | | | Stage 3 | | |
| | Stage 1 | Stage 2 | | | |
| | | Collectively | | |
| | | assessed | | |
| | | | Individually | |
| | | | assessed | |
| | | | | Total |
| | | | | |
| Consolidated | $m | $m | $m | $m | $m |
| As at 30 September 2023 | | | | | |
| Strong | 411,583 | 17,063 | - | - | 428,646 |
| Satisfactory | 193,170 | 37,977 | - | - | 231,147 |
| Weak | 11,306 | 10,398 | - | - | 21,704 |
| Defaulted | - | - | 3,858 | 1,037 | 4,895 |
| Gross loans and advances at amortised cost | 616,059 | 65,438 | 3,858 | 1,037 | 686,392 |
| Allowance for ECL | (1,227) | (1,624) | (329) | (366) | (3,546) |
| Net loans and advances at amortised cost | 614,832 | 63,814 | 3,529 | 671 | 682,846 |
| Coverage ratio | 0.20% | 2.48% | 8.53% | 35.29% | 0.52% |
| Loans and advances at FVTPL | | | | | 21,888 |
| Unearned income | | | | | (515) |
| Capitalised brokerage and other origination costs | | | | | 3,475 |
| Net carrying amount | | | | | 707,694 |
| | | | | | |
| As at 30 September 2022 | | | | | |
| Strong | 443,571 | 15,880 | - | - | 459,451 |
| Satisfactory | 154,823 | 31,864 | - | - | 186,687 |
| Weak | 9,197 | 9,244 | - | - | 18,441 |
| Defaulted | - | - | 3,328 | 1,043 | 4,371 |
| Gross loans and advances at amortised cost | 607,591 56,988 | 3,328 | 1,043 | | 668,950 |
| Allowance for ECL | (1,141) | (1,548) | (360) | (533) | (3,582) |
| Net loans and advances at amortised cost | 606,450 55,440 | | 2,968 | 510 | 665,368 |
| Coverage ratio | 0.19% | 2.72% | 10.82% | 51.10% | 0.54% |
| Loans and advances at FVTPL | | | | | 4,675 |
| Unearned income | | | | | (518) |
| Capitalised brokerage and other origination costs | | | | | 2,882 |
| Net carrying amount | | | | | 672,407 |
Net loans and advances
| | | | Stage 3 | | |
| | Stage 1 | Stage 2 | | | |
| | | Collectively | | |
| | | assessed | | |
| | | | Individually | |
| | | | assessed | |
| | | | | Total |
| | | | | |
| The Company | $m | $m | $m | $m | $m |
| As at 30 September 2023 | | | | | |
| Strong | 315,206 | 11,682 | - | - | 326,888 |
| Satisfactory | 160,357 | 31,769 | - | - | 192,126 |
| Weak | 10,906 | 8,362 | - | - | 19,268 |
| Defaulted | - | - | 2,994 | 731 | 3,725 |
| Gross loans and advances at amortised cost | 486,469 | 51,813 | 2,994 | 731 | 542,007 |
| Allowance for ECL | (1,026) | (1,239) | (251) | (279) | (2,795) |
| Net loans and advances at amortised cost | 485,443 | 50,574 | 2,743 | 452 | 539,212 |
| Coverage ratio | 0.21% | 2.39% | 8.38% | 38.17% | 0.52% |
| Loans and advances at FVTPL | | | | | 21,240 |
| Unearned income | | | | | (483) |
| Capitalised brokerage and other origination costs | | | | | 3,048 |
| Net carrying amount | | | | | 563,017 |
| | | | | | |
| As at 30 September 2022 | | | | | |
| Strong | 334,850 | 9,641 | - | - | 344,491 |
| Satisfactory | 142,772 | 26,186 | - | - | 168,958 |
| Weak | 9,181 | 7,759 | - | - | 16,940 |
| Defaulted | - | - | 2,744 | 853 | 3,597 |
| Gross loans and advances at amortised cost | 486,803 43,586 | 2,744 | 853 | | 533,986 |
| Allowance for ECL | (946) | (1,259) | (295) | (425) | (2,925) |
| Net loans and advances at amortised cost | 485,857 42,327 | | 2,449 | 428 | 531,061 |
| Coverage ratio | 0.19% | 2.89% | 10.75% | 49.82% | 0.55% |
| Loans and advances at FVTPL | | | | | 4,263 |
| Unearned income | | | | | (480) |
| Capitalised brokerage and other origination costs | | | | | 2,501 |
| Net carrying amount | | | | | 537,345 |
Of
-balance sheet commitments - undrawn and contingent facilities
| | | | Stage 3 | | |
| | Stage 1 | Stage 2 | | | |
| | | Collectively | | |
| | | assessed | | |
| | | | Individually | |
| | | | assessed | Total |
| Consolidated | $m | $m | $m | $m | $m |
| As at 30 September 2023 | | | | | |
| Strong | 189,980 | 1,234 | - | - | 191,214 |
| Satisfactory | 30,007 | 4,276 | - | - | 34,283 |
| Weak | 975 | 746 | - | - | 1,721 |
| Defaulted | - | - | 79 | 47 | 126 |
| Gross undrawn and contingent facilities subject to ECL | 220,962 | 6,256 | 79 | 47 | 227,344 |
| Allowance for ECL included in Other provisions (refer to Note 22) | (630) | (162) | (25) | (10) | (827) |
| Net undrawn and contingent facilities subject to ECL | 220,332 | 6,094 | 54 | 37 | 226,517 |
| Coverage ratio | 0.29% | 2.59% | 31.65% | 21.28% | 0.36% |
| Undrawn and contingent facilities not subject to ECL1 | | | | | 63,538 |
| Net undrawn and contingent facilities | | | | | 290,055 |
| | | | | | |
| As at 30 September 2022 | | | | | |
| Strong | 191,363 | 1,703 | - | - | 193,066 |
| Satisfactory | 18,583 | 3,078 | - | - | 21,661 |
| Weak | 774 | 706 | - | - | 1,480 |
| Defaulted | - | - | 113 | 19 | 132 |
| Gross undrawn and contingent facilities subject to ECL | 210,720 | 5,487 | 113 | 19 | 216,339 |
| Allowance for ECL included in Other provisions (refer to Note 22) | (593) | (144) | (29) | (9) | (775) |
| Net undrawn and contingent facilities subject to ECL | 210,127 | 5,343 | 84 | 10 | 215,564 |
| Coverage ratio | 0.28% | 2.62% | 25.66% | 47.37% | 0.36% |
| Undrawn and contingent facilities not subject to ECL1 | | | | | 69,477 |
| Net undrawn and contingent facilities | | | | | 285,041 |
1. Commitments that can be unconditionally cancelled at any time without notice.
Of
-balance sheet commitments - undrawn and contingent facilities
| | | | Stage 3 | | |
| | Stage 1 | Stage 2 | | | |
| | | Collectively | | |
| | | assessed | | |
| | | | Individually | |
| | | | assessed | |
| | | | | Total |
| | | | | |
| The Company | $m | $m | $m | $m | $m |
| As at 30 September 2023 | | | | | |
| Strong | 167,251 | 1,065 | - | - | 168,316 |
| Satisfactory | 25,966 | 3,554 | - | - | 29,520 |
| Weak | 753 | 466 | - | - | 1,219 |
| Defaulted | - | - | 64 | 35 | 99 |
| Gross undrawn and contingent facilities subject to ECL | 193,970 | 5,085 | 64 | 35 | 199,154 |
| Allowance for ECL included in Other provisions (refer to Note 22) | (550) | (121) | (21) | (5) | (697) |
| Net undrawn and contingent facilities subject to ECL | 193,420 | 4,964 | 43 | 30 | 198,457 |
| Coverage ratio | 0.28% | 2.38% | 32.81% | 14.29% | 0.35% |
| Undrawn and contingent facilities not subject to ECL1 | | | | | 53,958 |
| Net undrawn and contingent facilities | | | | | 252,415 |
| | | | | | |
| As at 30 September 2022 | | | | | |
| Strong | 185,979 | 1,725 | - | - | 187,704 |
| Satisfactory | 15,496 | 2,306 | - | - | 17,802 |
| Weak | 711 | 463 | - | - | 1,174 |
| Defaulted | - | - | 97 | 13 | 110 |
| Gross undrawn and contingent facilities subject to ECL | 202,186 4,494 | 97 | 13 | 206,790 | |
| Allowance for ECL included in Other provisions (refer to Note 22) | (530) | (112) | (26) | (5) | (673) |
| Net undrawn and contingent facilities subject to ECL | 201,656 | 4,382 | 71 | 8 | 206,117 |
| Coverage ratio | 0.26% | 2.49% | 26.80% | 38.46% | 0.33% |
| Undrawn and contingent facilities not subject to ECL1 | | | | | 40,605 |
| Net undrawn and contingent facilities | | | | | 246,722 |
1. Commitments that can be unconditionally cancelled at any time without notice.
Investment securities - debt securities at amortised cost
| | | | Stage 3 | | |
| | Stage 1 | Stage 2 | | | |
| | | Collectively | | |
| | | assessed | | |
| | | | Individually | |
| | | | assessed | |
| | | | | Total |
| | | | | |
| Consolidated | $m | $m | $m | $m | $m |
| As at 30 September 2023 | | | | | |
| Strong | 6,117 | - | - | - | 6,117 |
| Satisfactory | 112 | - | - | - | 112 |
| Weak | 1,558 | - | - | - | 1,558 |
| Gross investment securities - debt securities at amortised cost | 7,787 | - | - | - | 7,787 |
| Allowance for ECL | (35) | - | - | - | (35) |
| Net investment securities - debt securities at amortised cost | 7,752 | - | - | - | 7,752 |
| Coverage ratio | 0.45% | - | - | - | 0.45% |
| | | | | | |
| As at 30 September 2022 | | | | | |
| Strong | 6,279 | - | - | - | 6,279 |
| Satisfactory | 113 | - | - | - | 113 |
| Weak | 1,589 | - | - | - | 1589 |
| Gross investment securities - debt securities at amortised cost | 7,981 | - | - | - | 7,981 |
| Allowance for ECL | (38) | - | - | - | (38) |
| Net investment securities - debt securities at amortised cost | 7,943 | - | - | - | 7,943 |
| Coverage ratio | 0.48% | - | - | - | 0.48% |
| | | | Stage 3 | | |
| | Stage 1 | Stage 2 | | | |
| | | Collectively | | |
| | | assessed | | |
| | | | Individually | |
| | | | assessed | |
| | | | | Total |
| | | | | |
| The Company | $m | $m | $m | $m | $m |
| As at 30 September 2023 | | | | | |
| Strong | 5,796 | - | - | - | 5,796 |
| Satisfactory | 97 | - | - | - | 97 |
| Weak | 44 | - | - | - | 44 |
| Gross investment securities - debt securities at amortised cost | 5,937 | - | - | - | 5,937 |
| Allowance for ECL | (1) | - | - | - | (1) |
| Net investment securities - debt securities at amortised cost | 5,936 | - | - | - | 5,936 |
| Coverage ratio | 0.02% | - | - | - | 0.02% |
| | | | | | |
| As at 30 September 2022 | | | | | |
| Strong | 6,032 | - | - | - | 6,032 |
| Satisfactory | 84 | - | - | - | 84 |
| Gross investment securities - debt securities at amortised cost | 6,116 | - | - | - | 6,116 |
| Allowance for ECL | (1) | - | - | - | (1) |
| Net investment securities - debt securities at amortised cost | 6,115 | - | - | - | 6,115 |
| Coverage ratio | 0.02% | - | - | - | 0.02% |
Investment securities - debt securities at FVOCI
| | | | Stage 3 | | |
| | Stage 1 | Stage 2 | | | |
| | | Collectively | | |
| | | assessed | | |
| | | | Individually | |
| | | | assessed | |
| | | | | Total |
| | | | | |
| Consolidated | $m | $m | $m | $m | $m |
| As at 30 September 2023 | | | | | |
| Strong | 88,271 | - | - | - | 88,271 |
| Satisfactory | - | - | - | | - |
| Investment securities - debt securities at FVOCI | 88,271 | - | - | - | 88,271 |
| Allowance for ECL recognised in Other comprehensive income | (15) | - | - | - | (15) |
| Coverage ratio | 0.02% | - | - | - | 0.02% |
| | | | | | |
| As at 30 September 2022 | | | | | |
| Strong | 76,668 | - | - | - | 76,668 |
| Satisfactory | 149 | - | - | - | 149 |
| Investment securities - debt securities at FVOCI | 76,817 | - | - | - | 76,817 |
| Allowance for ECL recognised in Other comprehensive income | (10) | - | - | - | (10) |
| Coverage ratio | 0.01% | - | - | - | 0.01% |
| | | | Stage 3 | | |
| | Stage 1 | Stage 2 | | | |
| | | Collectively | | |
| | | assessed | | |
| | | | Individually | |
| | | | assessed | |
| | | | | Total |
| | | | | |
| The Company | $m | $m | $m | $m | $m |
| As at 30 September 2023 | | | | | |
| Strong | 76,320 | - | - | - | 76,320 |
| Satisfactory | - | - | - | - | - |
| Investment securities - debt securities at FVOCI | 76,320 | - | - | - | 76,320 |
| Allowance for ECL recognised in Other comprehensive income | (12) | - | - | - | (12) |
| Coverage ratio | 0.02% | - | - | - | 0.02% |
| | | | | | |
| As at 30 September 2022 | | | | | |
| Strong | 65,257 | - | - | - | 65,257 |
| Satisfactory | - | - | - | - | - |
| Investment securities - debt securities at FVOCI | 65,257 | - | - | - | 65,257 |
| Allowance for ECL recognised in Other comprehensive income | (7) | - | - | - | (7) |
| Coverage ratio | 0.01% | - | - | - | 0.01% |
Other financial assets
| | Consolidated | | | |
| | | The Company | |
| | | | |
| | 2023 | 2022 | 2023 | 2022 |
| | $m | $m | $m | $m |
| Strong | | | | |
| 270,012 | 301,735 | 274,741 | 301,771 |
| Satisfactory1 | 2,579 | 2,164 | 2,022 | 1,707 |
| Weak | 604 | 945 | 280 | 351 |
| Defaulted | - | 7 | - | 7 |
| Total carrying amount | 273,195 | 304,851 | 277,043 | 303,836 |
1. Includes Investment Securities - debt securities at FVTPL of $nil (2022: $40 million) for the Group and $nil (2022: $nil) for the Company..
CONCENTRATIONS OF CREDIT RISK
Credit risk becomes concentrated when a number of customers are engaged in similar activities, have similar economic characteristics, or have similar
activities within the same geographic region \u2013 therefore, they may be similarly affected by changes in economic or other conditions. The Group
monitors its credit portfolio to manage risk concentration and rebalance the portfolio. The Group also applies single customer counterparty limits to
protect against unacceptably large exposures to one single customer.
Composition of financial instruments that give rise to credit risk by industry group are presented below:
| | Loans | | Other financial | | | | | |
| | | | | Off-balance sheet | | | |
| | | | | credit related | | | |
| | and advances | | assets | | commitments | | Total | |
| Consolidated | | | | | | | | |
| 2023 | 2022 | 2023 | 2022 | 2023 | 2022 | 2023 | 2022 |
| $m | $m | $m | $m | $m | $m | $m | $m |
| Agriculture, forestry, fishing and mining | 35,797 | 33,668 | 612 | 781 | 16,707 | 17,694 | 53,116 | 52,143 |
| Business services | 8,138 | 9,252 | 207 | 242 | 7,003 | 6,245 | 15,348 | 15,739 |
| Construction | 5,506 | 6,155 | 36 | 48 | 7,212 | 6,594 | 12,754 | 12,797 |
| Electricity, gas and water supply | 8,626 | 9,650 | 463 | 790 | 11,837 | 9,865 | 20,926 | 20,305 |
| Entertainment, leisure and tourism | 13,486 | 12,886 | 78 | 89 | 3,889 | 3,691 | 17,453 | 16,666 |
| Financial, investment and insurance | 77,454 | 75,118 | 278,218 | 305,148 | 62,409 | 58,075 | 418,081 | 438,341 |
| Government and official institutions | 8,300 | 7,280 | 80,544 | 71,139 | 1,075 | 1,592 | 89,919 | 80,011 |
| Manufacturing | 30,261 | 28,072 | 1,287 | 1,279 | 47,302 | 46,701 | 78,850 | 76,052 |
| Personal lending | 392,702 | 363,539 | 1,394 | 955 | 59,185 | 57,989 | 453,281 | 422,483 |
| Property services | 58,064 | 55,203 | 439 | 606 | 17,503 | 17,862 | 76,006 | 73,671 |
| Retail trade | 12,900 | 11,648 | 113 | 98 | 8,131 | 7,076 | 21,144 | 18,822 |
| Transport and storage | 12,110 | 12,311 | 369 | 327 | 9,215 | 8,423 | 21,694 | 21,061 |
| Wholesale trade | 12,538 | 15,215 | 660 | 1,235 | 25,783 | 28,042 | 38,981 | 44,492 |
| Other | 32,398 | 33,628 | 4,833 | 6,912 | 13,631 | 15,967 | 50,862 | 56,507 |
| Gross total | 708,280 | 673,625 | 369,253 | 389,649 | 290,882 | 285,816 | 1,368,415 | 1,349,090 |
| Allowance for ECL | (3,546) | (3,582) | (35) | (38) | (827) | (775) | (4,408) | (4,395) |
| Subtotal | 704,734 | 670,043 | 369,218 | 389,611 | 290,055 | 285,041 | 1,364,007 | 1,344,695 |
| Unearned income | (515) | (518) | - | - | - | - | (515) | (518) |
| Capitalised brokerage and other origination costs | 3,475 | 2,882 | - | - | - | - | 3,475 | 2,882 |
| Maximum exposure to credit risk | 707,694 | 672,407 | 369,218 | 389,611 | 290,055 | 285,041 | 1,366,967 | 1,347,059 |
Composition of financial instruments that give rise to credit risk by industry group are presented below:
| | Loans | | Other financial | | | | | |
| | | | | Off-balance sheet | | | |
| | | | | credit related | | | |
| | and advances | | assets | | commitments | | Total | |
T | | | | | | | | |
| he Company | | | | | | | | |
| 2023 | 2022 | 2023 | 2022 | 2023 | 2022 | 2023 | 2022 |
| $m | $m | $m | $m | $m | $m | $m | $m |
| Agriculture, forestry, fishing and mining | 20,622 | 19,065 | 586 | 751 | 15,198 | 16,304 | 36,406 | 36,120 |
| Business services | 7,165 | 8,382 | 183 | 202 | 6,237 | 5,517 | 13,585 | 14,101 |
| Construction | 4,545 | 5,004 | 30 | 42 | 6,038 | 5,376 | 10,613 | 10,422 |
| Electricity, gas and water supply | 7,956 | 8,820 | 302 | 533 | 10,409 | 8,526 | 18,667 | 17,879 |
| Entertainment, leisure and tourism | 11,721 | 11,267 | 67 | 58 | 3,390 | 3,192 | 15,178 | 14,517 |
| Financial, investment and insurance | 74,836 | 71,889 | 282,701 | 306,318 | 58,806 | 53,970 | 416,343 | 432,177 |
| Government and official institutions | 8,294 | 7,272 | 68,361 | 58,342 | 384 | 910 | 77,039 | 66,524 |
| Manufacturing | 26,394 | 24,645 | 935 | 664 | 40,027 | 39,279 | 67,356 | 64,588 |
| Personal lending | 303,801 | 282,095 | 1,347 | 912 | 47,961 | 47,596 | 353,109 | 330,603 |
| Property services | 44,903 | 42,592 | 368 | 531 | 15,794 | 15,640 | 61,065 | 58,763 |
| Retail trade | 11,099 | 10,048 | 85 | 74 | 7,342 | 6,279 | 18,526 | 16,401 |
| Transport and storage | 10,968 | 11,231 | 288 | 270 | 8,331 | 7,252 | 19,587 | 18,753 |
| Wholesale trade | 10,320 | 13,055 | 480 | 791 | 22,385 | 24,185 | 33,185 | 38,031 |
| Other | 20,623 | 22,884 | 3,567 | 5,721 | 10,810 | 13,369 | 35,000 | 41,974 |
| Gross total | 563,247 | 538,249 | 359,300 | 375,209 | 253,112 | 247,395 | 1,175,659 | 1,160,853 |
| Allowance for ECL | (2,795) | (2,925) | (1) | (1) | (697) | (673) | (3,493) | (3,599) |
| Subtotal | 560,452 | 535,324 | 359,299 | 375,208 | 252,415 | 246,722 | 1,172,166 | 1,157,254 |
| Unearned income | (483) | (480) | - | - | - | - | (483) | (480) |
| Capitalised brokerage and other origination | | | | | | | | |
| costs | 3,048 | 2,501 | - | - | - | - | 3,048 | 2,501 |
| Maximum exposure to credit risk | 563,017 | 537,345 | 359,299 | 375,208 | 252,415 | 246,722 | 1,174,731 | 1,159,275 |
COLLATERAL MANAGEMENT
We use collateral for on and off-balance sheet exposures to mitigate credit risk if a counterparty cannot meet its repayment obligations. Where there is
sufficient collateral, an expected credit loss is not recognised. This is largely the case for certain lending products, such as margin loans and reverse
repurchase agreements that are secured by the securities purchased using the lending. For some products, the collateral provided by customers is
fundamental to the product\u2019s structuring, so it is not strictly the secondary source of repayment - for example, lending secured by trade receivables is
typically repaid by the collection of those receivables. During the period there was no change in our collateral policies.
The nature of collateral or security held for the relevant classes of financial assets is as follows:
| Net loans and advances | |
| Loans - housing and | |
| personal | |
| Housing loans are secured by mortgage(s) over property and additional security may take the form of |
| guarantees and deposits. |
| Personal lending (including credit cards and overdrafts) is predominantly unsecured. If we take security, then |
| it is restricted to eligible vehicles, motor homes and other assets. |
| Loans - business | Business loans may be secured, partially secured or unsecured. Typically, we take security by way of a |
| mortgage over property and/or a charge over the business or other assets. |
| If appropriate, we may take other security to mitigate the credit risk, such as guarantees, standby letters of |
| credit or derivative protection. |
| Other financial assets |
| Trading assets, Investment |
| securities, Derivatives and |
| Other financial assets |
| For trading assets, we do not seek collateral directly from the issuer or counterparty. However, the collateral |
| may be implicit in the terms of the instrument (for example, with an asset-backed security). The terms of |
| debt securities may include collateralisation. |
| For derivatives, we typically terminate all contracts with the counterparty and settle on a net basis at market |
| levels current at the time of a counterparty default under International Swaps and Derivatives Association |
| (ISDA) Master Agreements. |
| Our preferred practice is to use a Credit Support Annex (CSA) to the ISDA so that open derivative positions |
| with the counterparty are aggregated and cash collateral (or other forms of eligible collateral) is exchanged |
| daily. The collateral is provided by the counterparty when their position is out of the money (or provided to |
| the counterparty by ANZ when our position is out of the money). |
| Off-balance sheet positions | |
| Undrawn and contingent | |
| facilities | |
| Collateral for off-balance sheet positions is mainly held against undrawn facilities, and they are typically |
| performance bonds or guarantees. Undrawn facilities that are secured include housing loans secured by |
| mortgages over residential property and business lending secured by commercial real estate and/or charges |
| over business assets. |
The table below shows the estimated value of collateral we hold and the net unsecured portion of credit exposures:
| | Maximum exposure to credit risk | | Total value of collateral | | | |
| | | | | Unsecured portion of | |
| | | | | credit exposure | |
| | 2023 | 2022 | 2023 | 2022 | 2023 | 2022 |
| Consolidated | $m | $m | $m | $m | $m | $m |
| Net loans and advances | 707,694 | 672,407 | 569,283 | 531,815 | 138,411 | 140,592 |
| Other financial assets | 369,218 | 389,611 | 38,612 | 24,758 | 330,606 | 364,853 |
| Off-balance sheet positions | 290,055 | 285,041 | 65,723 | 60,544 | 224,332 | 224,497 |
| Total | 1,366,967 | 1,347,059 | 673,618 | 617,117 | 693,349 | 729,942 |
| | Maximum exposure to credit risk |
| | | Total value of collateral |
| | | |
| | | | | Unsecured portion of | |
| | | | | | credit exposure | |
| | 2023 | 2022 | 2023 | 2022 | 2023 | 2022 |
| The Company | $m | $m | $m | $m | $m | $m |
| Net loans and advances | 563,017 | 537,345 | 436,544 | 407,610 | 126,473 | 129,735 |
| Other financial assets | 359,299 | 375,208 | 35,542 | 19,492 | 323,757 | 355,716 |
| Off-balance sheet positions | 252,415 | 246,722 | 50,880 | 38,618 | 201,535 | 208,104 |
| Total | 1,174,731 | 1,159,275 | 522,966 | 465,720 | 651,765 | 693,555 |
MARKET RISK
MARKET RISK OVERVIEW, MANAGEMENT AND CONTROL RESPONSIBILITIES
Market risk stems from the Group\u2019s trading and balance sheet management activities and the impact of changes and correlations between interest
rates, foreign exchange rates, credit spreads, commodities, equities and the volatility within these asset classes.
The BRC delegates responsibility for day-to-day management of both market risks and compliance with market risk policies to the Credit and Market
Risk Committee (CMRC) and the Group Asset and Liability Committee (GALCO).
Within overall strategies and policies established by the BRC, business units and risk management have joint responsibility for the control of market
risk at the Group level. The Market Risk team (a specialist risk management unit independent of the business) allocates market risk limits at various
levels and monitors and reports on them daily. This detailed framework allocates individual limits to manage and control exposures using risk factors
and profit and loss limits.
Management, measurement and reporting of market risk is undertaken in two broad categories:
| Traded Market Risk | Non-Traded Market Risk |
| | Risk of loss from changes in the value of financial instruments due |
| to movements in price factors for both physical and derivative |
| trading positions. Principal risk categories monitored are: |
| 1. | Currency risk \u2013 potential loss arising from changes in foreign |
| exchange rates or their implied volatilities. | |
| 2. | Interest rate risk \u2013 potential loss from changes in market interest |
| rates or their implied volatilities. | |
| 3. | Credit spread risk \u2013 potential loss arising from a movement in |
| margin or spread relative to a benchmark. | |
| 4. | Commodity risk \u2013 potential loss arising from changes in |
| commodity prices or their implied volatilities. | |
| 5. | Equity risk \u2013 potential loss arising from changes in equity prices. |
| Risk of loss associated with the management of non-traded interest rate risk, | |
| liquidity risk and foreign exchange exposures. This includes interest rate risk | |
| in the banking book. This risk of loss arises from adverse changes in the | |
| overall and relative level of interest rates for different tenors, differences in | |
| the actual versus expected net interest margin, and the potential valuation | |
| risk associated with embedded options in financial instruments and bank | |
| products. | |
MEASUREMENT OF MARKET RISK
We primarily manage and control market risk using Value at Risk (VaR), sensitivity analysis and stress testing.
VaR measures the Group\u2019s possible daily loss based on historical market movements. The Group\u2019s VaR approach for both traded and non-traded risk is
historical simulation. We use historical changes in market rates, prices and volatilities over a 500 business day window using a one-day holding period.
Back testing is used to ensure our VaR models remain accurate.
ANZ measures VaR at a 99% confidence interval which means there is a 99% chance that a loss will not exceed the VaR for the relevant holding period.
TRADED AND NON-TRADED MARKET RISK
Traded market risk
The table below shows the traded market risk VaR on a diversified basis by risk categories:
| | 2022 | | | | 2023 | | | |
| Consolidated | | | | | | | | |
| As at | | | | | | | |
| | High for | | | | | | |
| | | year | | | | | | |
| | | Low for | | | | | |
| | | | year | | | | | |
| | | | Average | | | | |
| | | | for year | As at | | | |
| | | | | | High for | | |
| | | | | | year | | |
| | | | | | | Low for | |
| | | | | | | year | |
| | | | | | | | Average |
| | | | | | | | | for year |
| $m | $m | $m | $m | $m | $m | $m | $m |
| Traded value at risk 99% confidence | | | | | | | | |
| Foreign exchange | 2.8 | 6.2 | 1.6 | 3.0 | 1.8 | 4.8 | 1.1 | 2.4 |
| Interest rate | 6.7 | 18.3 | 5.1 | 8.5 | 7.9 | 22.7 | 5.0 | 9.5 |
| Credit | 5.9 | 7.7 | 2.5 | 4.5 | 2.6 | 11.8 | 1.6 | 4.9 |
| Commodities | 4.0 | 6.6 | 1.8 | 3.0 | 4.3 | 7.0 | 1.4 | 2.9 |
| Equity | - | - | - | - | - | - | - | - |
| Diversification benefit1 | (9.7) | n/a | n/a | (8.1) | (7.2) | n/a | n/a | (7.1) |
| Total VaR | 9.7 | 18.2 | 7.2 | 10.9 | 9.4 | 26.9 | 5.6 | 12.6 |
| | 2023 | | | | 2022 | | | |
| The Company | | | | | | | | |
| As at | | | | | | | |
| | High for | | | | | | |
| | year | | | | | | |
| | | Low for | | | | | |
| | | year | | | | | |
| | | | Average | | | | |
| | | | for year | As at | | | |
| | | | | | High for | | |
| | | | | | year | | |
| | | | | | | Low for | |
| | | | | | | year | |
| | | | | | | | Average |
| | | | | | | | for year |
| $m | $m | $m | $m | $m | $m | $m | $m |
| Traded value at risk 99% confidence | | | | | | | | |
| Foreign exchange | 2.6 | 6.0 | 1.5 | 2.8 | 2.0 | 5.1 | 0.9 | 2.4 |
| Interest rate | 6.3 | 15.5 | 4.8 | 8.0 | 6.7 | 18.6 | 4.9 | 8.8 |
| Credit | 5.6 | 7.1 | 1.9 | 4.3 | 2.0 | 11.9 | 1.3 | 4.7 |
| Commodity | 2.1 | 4.5 | 1.1 | 2.7 | 1.4 | 7.2 | 0.9 | 2.8 |
| Equity | - | - | - | - | - | - | - | - |
| Diversification benefit1 | (8.6) | n/a | n/a | (7.8) | (4.2) | n/a | n/a | (7.4) |
| Total VaR | 8.0 | 16.2 | 6.7 | 10.0 | 7.9 | 23.4 | 5.4 | 11.3 |
1. The diversification benefit reflects risks that offset across categories. The high and low VaR figures reported for each factor did not necessarily occur on the same day as the high and low VaR reported for the
Group as a whole. Consequently, a diversification benefit for high and low would not be meaningful and is therefore omitted from the table.
Non-traded market risk
Balance sheet risk management
The principal objectives of balance sheet risk management are to maintain acceptable levels of interest rate and liquidity risk to mitigate the negative
impact of movements in interest rates on the earnings and market value of the Group\u2019s banking book, while ensuring the Group maintains sufficient
liquidity to meet its obligations as they fall due.
Interest rate risk management
Non-traded interest rate risk relates to the potential adverse impact of changes in market interest rates on the Group\u2019s future Net interest income. This
risk arises from two principal sources, namely mismatches between the repricing dates of interest bearing assets and liabilities; and the investment of
capital and other non-interest bearing liabilities and assets. Interest rate risk is reported using VaR and scenario analysis (based on the impact of a 1%
rate shock). The table below shows VaR figures for non-traded interest rate risk for the combined Group as well as Australia, New Zealand and Rest of
World geographies which are calculated separately.
| | 2023 | | | | 2022 | | | |
| Consolidated | | | | | | | | |
| As at | | | | | | | |
| | High for | | | | | | |
| | year | | | | | | |
| | | Low for | | | | | |
| | | year | | | | | |
| | | | Average | | | | |
| | | | for year | As at | | | |
| | | | | | High for | | |
| | | | | | year | | |
| | | | | | | Low for | |
| | | | | | | year | |
| | | | | | | | Average |
| | | | | | | | for year |
| $m | $m | $m | $m | $m | $m | $m | $m |
| Non-traded value at risk 99% confidence | | | | | | | | |
| Australia | 81.2 | 93.2 | 72.0 | 82.2 | 78.5 | 93.4 | 63.0 | 76.1 |
| New Zealand | 35.3 | 35.3 | 26.1 | 31.1 | 25.4 | 27.1 | 20.2 | 23.9 |
| Rest of World | 32.2 | 32.8 | 23.2 | 27.9 | 21.7 | 38.0 | 16.8 | 25.8 |
| Diversification benefit1 | (52.6) | n/a | n/a | (45.6) | (38.1) | n/a | n/a | (33.7) |
| Total VaR | 96.1 | 101.5 | 86.4 | 95.6 | 87.5 | 104.9 | 66.8 | 92.1 |
| | 2023 | | | | 2022 | | | |
T | | | | | | | | |
| he Company | | | | | | | | |
| As at | | | | | | | |
| | High for | | | | | | |
| | year | | | | | | |
| | | Low for | | | | | |
| | | year | | | | | |
| | | | Average | | | | |
| | | | for year | As at | | | |
| | | | | | High for | | |
| | | | | | year | | |
| | | | | | | Low for | |
| | | | | | | year | |
| | | | | | | | Average |
| | | | | | | | for year |
| $m | $m | $m | $m | $m | $m | $m | $m |
| Non-traded value at risk 99% confidence | | | | | | | | |
| Australia | 81.2 | 93.2 | 72.0 | 82.2 | 78.5 | 93.4 | 63.0 | 76.1 |
| New Zealand | - | 0.1 | - | - | 0.0 | 0.1 | 0.0 | 0.0 |
| Rest of World | 34.0 | 34.5 | 23.7 | 28.4 | 22.1 | 37.7 | 16.7 | 25.6 |
| Diversification benefit1 | (30.5) | n/a | n/a | (26.6) | (17.1) | n/a | n/a | (20.2) |
| Total VaR | 84.7 | 92.4 | 76.4 | 84.0 | 83.5 | 94.5 | 62.9 | 81.5 |
1. The diversification benefit reflects risks that offset across categories. The high and low VaR figures reported for each factor did not necessarily occur on the same day as the high and low VaR reported for the
Group as a whole. Consequently, a diversification benefit for high and low would not be meaningful and is therefore omitted from the table.
We undertake scenario analysis to stress test the impact of extreme events on the Group\u2019s market risk exposures. We model a 1% overnight parallel
positive shift in the yield curve to determine the potential impact on our Net interest income over the next 12 months. This is a standard risk measure
which assumes the parallel shift is reflected in all wholesale and customer rates.
The table below shows the outcome of this risk measure for the current and previous financial years, expressed as a percentage of reported Net
interest income.
| | Consolidated | | | The Company |
| | 2023 | 2022 | 2023 | 2022 |
| Impact of 1% rate shock on the next 12 months' net interest income | | | | |
| As at period end | 0.96% | 1.29% | 0.73% | 0.90% |
| Maximum exposure | 1.17% | 2.08% | 0.90% | 1.65% |
| Minimum exposure | 0.38% | 1.15% | 0.02% | 0.71% |
| Average exposure (in absolute terms) | 0.80% | 1.56% | 0.56% | 1.11% |
EQUITY SECURITIES DESIGNATED AT FVOCI
Our investment securities contain equity investment holdings which predominantly comprises Bank of Tianjin. The market risk impact on these equity
investments is not captured by the Group\u2019s VaR processes for traded and non-traded market risks. Therefore, the Group regularly reviews the
valuations of the investments within the portfolio and assesses whether the investments are appropriately measured based on the recognition and
measurement policies set out in Note 11 Investment Securities.
FOREIGN CURRENCY RISK \u2013 STRUCTURAL EXPOSURES
Our investment of capital in foreign operations - for example, branches, subsidiaries or associates with functional currencies other than the Australian
Dollar - exposes the Group to the risk of changes in foreign exchange rates. Variations in the value of these foreign operations arising as a result of
exchange differences are reflected in the foreign currency translation reserve in equity. Where considered appropriate, the Group enters into hedges
of the foreign exchange exposures from its foreign operations.
Similarly, the Group may enter into economic hedges against larger foreign exchange denominated revenue streams (primarily New Zealand Dollar,
US Dollar and US Dollar correlated). The primary objective of hedging is to ensure that, if practical, the effect of changes in foreign exchange rates on
the consolidated capital ratios are minimised.
LIQUIDITY AND FUNDING RISK
LIQUIDITY RISK OVERVIEW, MANAGEMENT AND CONTROL RESPONSIBILITIES
Liquidity risk is the risk that the Group is either:
\u2022 unable to meet its payment obligations (including repaying depositors or maturing wholesale debt) when they fall due; or
\u2022 does not have the appropriate amount, tenor and composition of funding and liquidity to fund increases in its assets.
Management of liquidity and funding risks are overseen by GALCO. The Group\u2019s liquidity and funding risks are governed by a set of principles
approved by the BRC and include:
\u2022 maintaining the ability to meet all payment obligations in the immediate term;
\u2022 ensuring that the Group has the ability to meet \u2018survival horizons\u2019 under a range of ANZ specific, and general market, liquidity stress scenarios, at a
country and Group-wide level, to meet cash flow obligations over the short to medium term;
\u2022 maintaining strength in the Group\u2019s balance sheet structure to ensure long term resilience in the liquidity and funding risk profile;
\u2022 ensuring the liquidity management framework is compatible with local regulatory requirements;
\u2022 preparing daily liquidity reports and scenario analysis to quantify the Group\u2019s positions;
\u2022 targeting a diversified funding base to avoid undue concentrations by investor type, maturity, market source and currency;
\u2022 holding a portfolio of high quality liquid assets to protect against adverse funding conditions and to support day-to-day operations; and
\u2022 establishing detailed contingency plans to cover different liquidity crisis events.
Following the Restructure on 3 January 2023, the Group has operated under a non-operating holding company structure whereby:
\u2022 ANZBGL\u2019s liquidity risk management framework remains unchanged and continues to operate its own liquidity and funding program, governance
frameworks and reporting regime reflecting its authorised deposit-taking institution (ADI) operations;
\u2022 ANZGHL (parent entity) has no material liquidity risk given the structure and nature of the balance sheet; and
\u2022 ANZ Non-Bank Group is not expected to have separate funding arrangements and will rely on ANZGHL for funding.
A separate liquidity policy has been established for ANZGHL and ANZ Bank Group to reflect the differing nature of liquidity risk inherent in each
business model. ANZGHL will ensure that the parent entity and ANZ Non-Bank Group holds sufficient cash reserves to meet operating and financing
requirements.
KEY AREAS OF MEASUREMENT FOR LIQUIDITY RISK
Scenario modelling of funding sources
Group\u2019s liquidity risk appetite is defined by a range of regulatory and internal liquidity metrics mandated by the ANZBGL Board. The metrics cover a
range of scenarios of varying duration and level of severity.
The objective of this framework is to:
\u2022 Provide protection against shorter term extreme market dislocation and stress.
\u2022 Maintain structural strength in the balance sheet by ensuring that an appropriate amount of longer-term assets are funded with longer-term
funding.
\u2022 Ensure that no undue timing concentrations exist in the Group\u2019s funding profile.
Key components of this framework are the Liquidity Coverage Ratio (LCR), which is a severe short term liquidity stress scenario and Net Stable Funding
Ratio (NSFR) a longer term structural liquidity measure, both of which are mandated by banking regulators including APRA.
Liquid assets
Group holds a portfolio of high quality (unencumbered) liquid assets to protect Group\u2019s liquidity position in a severely stressed environment and to
meet regulatory requirements. High quality liquid assets comprise three categories consistent with Basel III LCR requirements:
\u2022 Highest-quality liquid assets - cash and highest credit quality government, central bank or public sector securities eligible for repurchase with
central banks to provide same-day liquidity.
\u2022 High-quality liquid assets - 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.
\u2022 Alternative liquid assets (ALA) - eligible securities that the RBNZ will accept in its domestic market operations and asset qualifying as collateral for
the CLF.
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 ANZBGL Board.
LIQUIDITY RISK OUTCOMES1
Liquidity Coverage Ratio - ANZBGL\u2019s Liquidity Coverage Ratio (LCR) averaged 130% for 2023, (2022: 131%) and above the regulatory minimum of
100%.
Net Stable Funding Ratio - ANZBGL\u2019s Net Stable Funding Ratio (NSFR) as at 30 September 2023 was 116% (2022: 119%), above the regulatory
minimum of 100%.
1. This information is not within the scope of the external audit of the Group Financial Report by the Group\u2019s external auditor, KPMG. The Liquidity Coverage Ratio and Net Stable Funding Ratio are non-IFRS
disclosures and are disclosed as part of the Group's
APS 330 Public Disclosure
which is subject to specific review procedures in accordance with the
Australian Standard on Related Services (ASRS) 4400
Agreed upon Procedures Engagements to Report Factual Findings.
Liquidity crisis contingency planning
Group maintains APRA-endorsed liquidity crisis contingency plans for analysing and responding to a liquidity threatening event at a country and
Group-wide level. Key liquidity contingency crisis planning requirements and guidelines include:
| Ongoing business management | Early signs/ mild stress | Severe stress |
| \u2022 establish crisis/severity levels | | |
| \u2022 liquidity limits | | |
| \u2022 early warning indicators | | |
| \u2022 monitoring and review | |
| \u2022 management actions not requiring | |
| business rationalisation | |
| | \u2022 activate contingency funding plans |
| | \u2022 management actions for altering asset and liability |
| | behaviour |
| Assigned responsibility for internal and external communications and the appropriate timing to communicate | | |
Since the precise nature of any stress event cannot be known in advance, we design the plans to be flexible to the nature and severity of the stress
event with multiple variables able to be accommodated in any plan.
Group funding
Group monitors the composition and stability of its funding so that it remains within the Group\u2019s funding risk appetite. This approach ensures that an
appropriate proportion of the Group\u2019s assets are funded by stable funding sources, including customer deposits; longer-dated wholesale funding
(with a remaining term exceeding one year); and equity.
| Funding plans prepared | Considerations in preparing funding plans |
| \u2022 3 year strategic plan prepared annually | |
| \u2022 annual funding plan as part of the Group\u2019s planning | |
| process | |
| \u2022 forecasting in light of actual results as a calibration to the | |
| annual plan | |
| \u2022 customer balance sheet growth |
| \u2022 changes in wholesale funding including: targeted funding volumes; markets; |
| investors; tenors; and currencies for senior, secured, subordinated, hybrid |
| transactions and market conditions |
RBA Term Funding Facility
As an additional source of funding, in March 2020, the RBA announced a Term Funding Facility (TFF) for the banking system to support lending to
Australian businesses. The TFF is a three-year secured funding facility to ADIs at a fixed rate of 0.25% for drawdowns up to 4 November 2020, and
reduced to 0.10% for new drawdowns from 4 November 2020 onwards. The TFF was closed to drawdowns on 30 June 2021.
As at 30 September 2023, $8.1 billion remains drawn under the RBA\u2019s TFF (2022: $20.1 billion).
RBNZ Funding for Lending Programme and Term Lending Facility
Between May 2020 and July 2021, the RBNZ made funds available under a Term Lending Facility (TLF) to promote lending to businesses. The TLF is a
five-year secured funding facility for New Zealand banks at a fixed rate of 0.25%.
In November 2020 the RBNZ announced a Funding for Lending Programme (FLP) which aimed to lower the cost of borrowing for New Zealand
businesses and households. The FLP is a three-year secured funding facility for New Zealand banks at a floating rate of the New Zealand Official Cash
Rate (OCR). New Zealand banks were able to obtain initial funding of up to 4% of their lending to New Zealand resident households, non-financial
businesses and non-profit institutions serving households as at 31 October 2020 (eligible loans). The initial allocation closed on 6 June 2022. An
additional allocation of up to 2% of eligible loans was available, subject to certain conditions until 6 December 2022.
As at 30 September 2023, ANZ Bank New Zealand had drawn $0.3 billion under the TLF (2022: $0.3 billion) and $3.2 billion under the FLP (2022: $2.3
billion).
RESIDUAL CONTRACTUAL MATURITY ANALYSIS OF THE GROUP\u2019S LIABILITIES
The tables below provide residual contractual maturity analysis of financial liabilities as at 30 September within relevant maturity groupings. All
outstanding debt issuance and subordinated debt is profiled on the earliest date on which the Group may be required to pay. All at-call liabilities are
reported in the \u2018Less than 3 months\u2019 category unless there is a longer minimum notice period. The amounts represent principal and interest cash flows
and therefore may differ from equivalent amounts reported on balance sheet.
It should be noted that this is not how the Group manages its liquidity risk. The management of this risk is detailed on page 155.
| Less than | | | | |
| 3 months | | | | |
| | 3 to 12 | | | |
| | months | | | |
| | | | 1 to 5 | | |
| | | years | | |
| | | | After | |
| | | | 5 years | |
| | | | | Total |
| | | | | |
| | $m | $m | $m | $m | $m |
| As at 30 September 2023 | | | | | |
| Settlement balances owed by ANZ | 19,267 | - | - | - | 19,267 |
| Collateral received | 10,382 | - | - | - | 10,382 |
| Deposits and other borrowings | 674,762 | 137,488 | 9,762 | 241 | 822,253 |
| Liability for acceptances | 646 | - | - | - | 646 |
| Debt issuances1 | 4,738 | 23,908 | 88,270 | 16,017 | 132,933 |
| Derivative liabilities (excluding those held for balance sheet management)2 | 48,150 | - | - | - | 48,150 |
| Lease liabilities | 100 | 264 | 872 | 743 | 1,979 |
| Derivative assets and liabilities (balance sheet management)3 | | | | | |
| - Funding: | | | | | |
| Receive leg | (29,459) | (40,907) | (90,906) | (14,001) | (175,273) |
| Pay leg | 28,852 | 41,385 | 90,230 | 13,986 | 174,453 |
| - Other balance sheet management: | | | | | |
| Receive leg | (142,289) | (44,586) | (35,720) | (19,866) | (242,461) |
| Pay leg | 138,899 | 42,867 | 34,198 | 19,872 | 235,836 |
| As at 30 September 2022 | | | | | |
| Settlement balances owed by ANZ | 13,766 | - | - | - | 13,766 |
| Collateral received | 16,230 | - | - | - | 16,230 |
| Deposits and other borrowings | 667,568 | 117,166 | 15,960 | 160 | 800,854 |
| Liability for acceptances | 352 | - | - | - | 352 |
| Debt issuances1 | 7,591 | 22,315 | 60,716 | 13,667 | 104,289 |
| Derivative liabilities (excluding those held for balance sheet management) | 2 71,073 - - - 71,073 | | | | |
| Lease liabilities | 81 210 654 168 1,113 | | | | |
| Derivative assets and liabilities (balance sheet management)3 | | | | | |
| - Funding: | | | | | |
| Receive leg | (33,155) | (49,030) | (66,661) | (12,851) | (161,697) |
| Pay leg | 30,845 | 49,191 | 68,211 | 12,913 | 161,160 |
| - Other balance sheet management: | | | | | |
| Receive leg | (125,122) | (44,835) | (29,188) | (10,063) | (209,208) |
| Pay leg | 120,959 | 44,126 | 31,026 | 15,170 | 211,281 |
1. Callable wholesale debt instruments have been included at their next call date. Balance includes subordinated debt instruments that may be settled in cash or in equity, at the option of the Group and
subordinated debt issued by ANZ New Zealand which constitutes Tier 2 capital under RBNZ requirements but does not qualify as the APRA Tier 2 requirements.
2. The full mark-to-market after any adjustments for Settle to Market of derivative liabilities (excluding those held for balance sheet management) is included in the \u2018Less than 3 months\u2019 category.
3. Includes derivatives designated into hedging relationships of $272 million (2022: $356 million) and $9,060 million (2022: $13,720 million) categorised as held for trading but form part of the Group\u2019s balance
sheet managed activities.
At 30 September 2023, $240,711 million (2022: $236,051 million) of the Group\u2019s undrawn facilities and $50,171 million (2022: $49,765 million) of its
issued guarantees mature in less than 1 year, based on the earliest date on which the Group may be required to pay.
| Less than | | | | |
| 3 months | | | | |
| | 3 to 12 | | | |
| | months | | | |
| | | 1 to 5 | | |
| | | years | | |
| | | | After | |
| | | | 5 years | Total |
| The Company | $m | $m | $m | $m | $m |
| As at 30 September 2023 | | | | | |
| Settlement balances owed by ANZ | 16,574 | - | - | - | 16,574 |
| Collateral received | 9,452 | - | - | - | 9,452 |
| Deposits and other borrowings | 567,239 | 109,010 | 3,718 | 232 | 680,199 |
| Liability for acceptances | 391 | - | - | - | 391 |
| Debt issuances1 | 4,321 | 20,669 | 75,192 | 13,297 | 113,479 |
| Derivative liabilities (excluding those held for balance sheet management)2 | 53,111 | - | - | - | 53,111 |
| Lease liabilities | 80 | 207 | 715 | 725 | 1,727 |
| Derivative assets and liabilities (balance sheet management)3 | | | | | |
| - Funding: | | | | | |
| Receive leg | (26,321) | (31,549) | (70,627) | (10,871) | (139,368) |
| Pay leg | 25,602 | 31,952 | 69,816 | 10,860 | 138,230 |
| - Other balance sheet management: | | | | | |
| Receive leg | (136,668) | (38,700) | (27,047) | (18,876) | (221,291) |
| Pay leg | 133,496 | 37,540 | 26,247 | 18,914 | 216,197 |
| As at 30 September 2022 | | | | | |
| Settlement balances owed by ANZ | 10,224 | - | - | - | 10,224 |
| Collateral received | 14,425 | - | - | - | 14,425 |
| Deposits and other borrowings | 564,147 | 93,197 | 10,639 | 157 | 668,140 |
| Liability for acceptances | 144 | - | - | - | 144 |
| Debt issuances1 | 7,648 | 18,951 | 48,323 | 9,970 | 84,892 |
| Derivative liabilities (excluding those held for balance sheet management)2 | 75,810 | - | - | - | 75,810 |
| Lease liabilities | 76 | 202 | 744 | 826 | 1,848 |
| Derivative assets and liabilities (balance sheet management)3 | | | | | |
| - Funding: | | | | | |
| Receive leg | (29,397) | (39,350) | (46,997) | (8,857) | (124,601) |
| Pay leg | 27,413 | 40,237 | 48,281 | 9,064 | 124,995 |
| - Other balance sheet management: | | | | | |
| Receive leg | (121,112) | (40,061) | (21,417) | (9,498) | (192,088) |
| Pay leg | 116,992 | 39,921 | 24,081 | 14,666 | 195,660 |
1. Callable wholesale debt instruments have been included at their next call date. Balance includes subordinated debt instruments that may be settled in cash or in equity, at the option of the Company.
2. The full mark-to-market after any adjustments for Settle to Market of derivative liabilities (excluding those held for balance sheet management) is included in the \u2018Less than 3 months\u2019 category.
3. Includes derivatives designated into hedging relationships of $255 million (2022: $300 million) and $4,145 million (2022: $8,390 million) categorised as held for trading but form part of the Company\u2019s
balance sheet managed activities.
At 30 September 2023, $206,405 million (2022: $201,204 million) of the Company\u2019s undrawn facilities and $46,707 million (2022: $46,191 million) of its
issued guarantees mature in less than 1 year, based on the earliest date on which the Company may be required to pay.
18. FAIR VALUE OF FINANCIAL ASSETS AND FINANCIAL LIABILITIES
CLASSIFICATION OF FINANCIAL ASSETS AND FINANCIAL LIABILITIES
The Group recognises and measures financial instruments at either fair value or amortised cost, with a significant number of financial instruments on
the balance sheet at fair value.
Fair value is the best estimate of the price that would be received to sell an asset, or paid to transfer a liability, in an orderly transaction between
market participants at the measurement date.
The following tables set out the classification of financial asset and liabilities according to their measurement bases together with their carrying
amounts as recognised on the balance sheet.
| | 2023 | | | 2022 | | |
| | | | | | | | |
| | At | | | | | |
| | amortised | | | | | |
| | cost | | | | | |
| | | At | | | | |
| | | fair | | | | |
| | | value | | | | |
| | | | Total | | | |
| | | | | At | | |
| | | | | amortised | | |
| | | | | cost | | |
| | | | | | At | |
| | | | | | fair | |
| | | | | | value | |
| | | | | | | Total |
| Consolidated | Note | $m | $m | $m | $m | $m | $m |
| Financial assets | | | | | | | |
| Cash and cash equivalents1 | 8 | | | | | | |
| | 140,588 | 27,566 | 168,154 | 168,132 | - | 168,132 |
| Settlement balances owed to ANZ | | 9,349 | - | 9,349 | 4,762 | - | 4,762 |
| Collateral paid | | 8,558 | - | 8,558 | 12,700 | - | 12,700 |
| Trading assets | 9 | - | 37,004 | 37,004 | - | 35,237 | 35,237 |
| Derivative financial instruments | 10 | - | 60,406 | 60,406 | - | 90,174 | 90,174 |
| Investment securities | 11 | 7,752 | 89,217 | 96,969 | 7,943 | 78,210 | 86,153 |
| Net loans and advances1 | 12 | | | | | | |
| | 685,806 | | 21,888 | 707,694 | 667,732 4,675 | 672,407 |
| Regulatory deposits | | 646 | - | 646 | 632 | - | 632 |
| Other financial assets | | 4,378 | - | 4,378 | 2,943 | - | 2,943 |
| Total | | 857,077 | 236,081 | 1,093,158 | 864,844 | 208,296 | 1,073,140 |
| Financial liabilities | | | | | | | |
| Settlement balances owed by ANZ | | 19,267 | - | 19,267 | 13,766 | - | 13,766 |
| Collateral received | | 10,382 | - | 10,382 | 16,230 | - | 16,230 |
| Deposits and other borrowings1 | 14 | | | | | | |
| | 781,314 | 33,889 | 815,203 | 794,621 | 2,660 | 797,281 |
| Derivative financial instruments | 10 | - | 57,482 | 57,482 | - | 85,149 | 85,149 |
| Payables and other liabilities | 15 | 10,665 | 5,267 | 15,932 | 6,596 | 3,239 | 9,835 |
| Debt issuances | 16 | 114,678 | 1,336 | 116,014 | 92,623 | 1,111 | 93,734 |
| Total | | 936,306 | 97,974 | 1,034,280 | 923,836 | 92,159 | 1,015,995 |
1. During 2023, the Group commenced the management of repurchase agreements and reverse repurchase agreements on a fair value basis within the trading book in its Markets business. This resulted in the
associated repurchase and reverse repurchase agreements being recognised and measured at FVTPL.
18. FAIR VALUE OF FINANCIAL ASSETS AND FINANCIAL LIABILITIES
(continued)
CLASSIFICATION OF FINANCIAL ASSETS AND FINANCIAL LIABILITIES (continued)
| | | 2023 | | | 2022 | |
| | | | | | | | |
| | At | | | | | |
| | amortised | | | | | |
| | cost | | | | | |
| | | At | | | | |
| | | fair | | | | |
| | | value | | | | |
| | | | Total | | | |
| | | | | At | | |
| | | | | amortised | | |
| | | | | cost | | |
| | | | | | At | |
| | | | | | fair | |
| | | | | | value | |
| | | | | | | Total |
| The Company | Note | $m | $m | $m | $m | $m | $m |
| Financial assets | | | | | | | |
| Cash and cash equivalents1 | 8 | | | | | | |
| | 127,309 | 27,099 | 154,408 | 155,483 | - | 155,483 |
| Settlement balances owed to ANZ | | 8,935 | - | 8,935 | 4,024 | - | 4,024 |
| Collateral paid | | 7,717 | - | 7,717 | 11,368 | - | 11,368 |
| Trading assets | 9 | - | 30,693 | 30,693 | - | 28,073 | 28,073 |
| Derivative financial instruments | 10 | - | 59,989 | 59,989 | - | 88,056 | 88,056 |
| Investment securities | 11 | 5,936 | 77,265 | 83,201 | 6,115 | 66,284 | 72,399 |
| Net loans and advances1 | 12 | | | | | | |
| | 541,777 | 21,240 | 563,017 | 533,082 | 4,263 | 537,345 |
| Regulatory deposits | | 284 | - | 284 | 249 | - | 249 |
| Due from controlled entities | | 24,173 | 1,894 | 26,067 | 20,360 | 2,500 | 22,860 |
| Other financial assets | | 3,024 | - | 3,024 | 1,882 | - | 1,882 |
| Total | | 719,155 | 218,180 | 937,335 | 732,563 | 189,176 | 921,739 |
| Financial liabilities | | | | | | | |
| Settlement balances owed by ANZ | | 16,574 | - | 16,574 | 10,224 | - | 10,224 |
| Collateral received | | 9,452 | - | 9,452 | 14,425 | - | 14,425 |
| Deposits and other borrowings1 | 14 | | | | | | |
| | 643,868 | 31,207 | 675,075 | 665,567 | 40 | 665,607 |
| Derivative financial instruments | 10 | - | 57,511 | 57,511 | - | 84,500 | 84,500 |
| Due to controlled entities | | 26,737 | 157 | 26,894 | 25,305 | - | 25,305 |
| Payables and other liabilities | 15 | 8,357 | 4,922 | 13,279 | 5,705 | 2,857 | 8,562 |
| Debt issuances | 16 | 95,881 | 2,332 | 98,213 | 72,757 | 3,071 | 75,828 |
| Total | | 800,869 | 96,129 | 896,998 | 793,983 | 90,468 | 884,451 |
1. During 2023, within the trading book in its Markets business, the Company commenced the management of repurchase agreements and associated reverse repurchase agreements on a fair value basis. This
resulted in repurchase and associated reverse repurchase agreements being recognised and measured at FVTPL.
160 Australia and New Zealand Banking Group Limited 2023 Annual Report Notes to the \ue002nancial statements (continued)
FINANCIAL ASSETS AND FINANCIAL LIABILITIES MEASURED AT FAIR VALUE
The fair valuation of financial assets and financial liabilities is generally determined at the individual instrument level.
If the Group holds offsetting risk positions, then we use the portfolio exception in AASB 13
Fair Value Measurement
(AASB 13) to measure the fair value
of such groups of financial assets and financial liabilities. The Group measure the portfolio based on the price that would be received to sell a net long
position (an asset) for a particular risk exposure, or to transfer a net short position (a liability) for a particular risk exposure.
Fair value designation
The Group designate certain loans and advances and certain deposits and other borrowings and debt issuances as fair value through profit or loss:
\u2022 where they contain a separable embedded derivative which significantly modifies the instruments\u2019 cash flow ensuring we recognise the fair value
movements on the assets or liabilities in profit or loss in the same period as the movement on the associated hedging instruments; or
\u2022 in order to eliminate an accounting mismatch which would arise if the asset or liabilities were otherwise carried at amortised cost. This mismatch
arises due to measuring the derivative financial instruments (which we use to mitigate interest rate risk of these assets or liabilities) at fair value
through profit or loss.
Our approach ensures that we recognise the fair value movements on the assets or liabilities in profit or loss in the same period as the movement on
the associated derivatives.
The Group may also designate certain loans and advances, certain deposits and other borrowings and debt issuances as fair value through profit or
loss where they are managed on a fair value basis to align the measurement with how the instruments are managed.
FAIR VALUE APPROACH AND VALUATION TECHNIQUES
We use valuation techniques to estimate the fair value of assets and liabilities for recognition, measurement and disclosure purposes where no quoted
price in an active market exists for that asset or liability. This includes the following:
| Asset or Liability | Fair Value Approach |
| Financial instruments classified as: | |
| - Derivative financial assets and financial liabilities | |
| (including trading and non-trading) | |
| - Repurchase agreements < 90 days | |
| - Net loans and advances | |
| - Deposits and other borrowings | |
| - Debt issuances | |
| Discounted cash flow techniques are used whereby contractual future cash flows of |
| the instrument are discounted using wholesale market interest rates, or market |
| borrowing rates for debt or loans with similar maturities or yield curve appropriate for |
| the remaining term to maturity. |
| Other financial instruments held for trading: | |
| - Securities sold short | |
| - Debt and equity securities | |
| Valuation techniques are used that incorporate observable market inputs for financial |
| instruments with similar credit risk, maturity and yield characteristics. |
| Equity securities where an active market does not exist are measured using |
| comparable company valuation multiples (such as price-to-book ratios). |
| Financial instruments classified as: | |
| - Investment securities \u2013 debt or equity | |
| Valuation techniques use comparable multiples (such as price-to-book ratios) or |
| discounted cashflow (DCF) techniques incorporating, to the extent possible, |
| observable inputs from instruments with similar characteristics. |
There were no significant changes to valuation approaches during the current or prior periods.
FAIR VALUE HIERARCHY
The Group categorises assets and liabilities carried at fair value into a fair value hierarchy in accordance with AASB 13 based on the observability of
inputs used to measure the fair value:
\u2022 Level 1 - valuations based on quoted prices (unadjusted) in active markets for identical assets or liabilities;
\u2022 Level 2 - valuations using inputs other than quoted prices included within Level 1 that are observable for a similar asset or liability, either directly or
indirectly; and
\u2022 Level 3 - valuations where significant unobservable inputs are used to measure the fair value of the asset or liability.
The following table presents assets and liabilities carried at fair value in accordance with the fair value hierarchy:
| | | | Fair value measurements | | | | | |
| Quoted price in | | | | | | | |
| active markets | | | | | | | |
| (Level 1) | | | | | | | |
| | | Using observable | | | | | |
| | | inputs (Level 2) | | | | | |
| | | | | Using unobservable | | | |
| | | | | inputs (Level 3) | | | |
| | | | | | | Total | |
| | | | | | | | |
| | 2023 | 2022 | 2023 | 2022 | 2023 | 2022 | 2023 | 2022 |
| Consolidated | $m | $m | $m | $m | $m | $m | $m | $m |
| Assets | | | | | | | | |
| Cash and cash equivalents (measured at fair value)1 | - | - | 27,566 | - | - | - | 27,566 | - |
| Trading assets2 | 26,388 | 28,455 | 10,614 | 6,782 | 2 | - | 37,004 | 35,237 |
| Derivative financial instruments | 935 | 944 | 59,448 | 89,185 | 23 | 45 | 60,406 | 90,174 |
| Investment securities2,3 | 71,355 | 68,211 | 16,924 | 8,614 | 938 | 1,385 | 89,217 | 78,210 |
| Net loans and advances1 | - | - | 21,159 | 4,272 | 729 | 403 | 21,888 | 4,675 |
| Total | 98,678 | 97,610 | 135,711 | 108,853 | 1,692 | 1,833 | 236,081 | 208,296 |
| Liabilities | | | | | | | | |
| Deposits and other borrowings (designated at fair value)1 | - | - | 33,889 | 2,660 | - | - | 33,889 | 2,660 |
| Derivative financial instruments | 218 | 309 | 57,241 | 84,809 | 23 | 31 | 57,482 | 85,149 |
| Payables and other liabilities | 4,841 | 2,842 | 426 | 397 | - | - | 5,267 | 3,239 |
| Debt issuances (designated at fair value) | - | - | 1,336 | 1,111 | - | - | 1,336 | 1,111 |
| Total | 5,059 | 3,151 | 92,892 | 88,977 | 23 | 31 | 97,974 | 92,159 |
1. During 2023, the Group commenced the management of repurchase agreements and reverse repurchase agreements on a fair value basis within the trading book in its Markets business. This resulted in the
associated repurchase and reverse repurchase agreements being recognised and measured at FVTPL.
2. During 2023, $3,624 million of assets were transferred from Level 1 to Level 2 (2022: $1,043 million transferred from Level 1 to Level 2), and $1,452 million of assets were transferred from Level 2 to Level 1
(2022: $1,677 million transferred from Level 2 to Level 1) due to a change of the observability of valuation inputs. There were no other material transfers between Level 1 and Level 2 during the year.
Transfers into and out of levels are measured at the beginning of the reporting period in which the transfer occurred.
3. During 2023, ANZBGL sold its equity interests in the 1835i trusts, TIN and Pollination to ANZ NBH Pty Ltd as part of the Restructure. These investments were classified as Level 3 assets in the fair value
hierarchy in September 2022, with a fair valuation of $402 million.
| | | Fair value measurements | | | | | | |
| Quoted price in | | | | | | | |
| active markets | | | | | | | |
| (Level 1) | | | | | | | |
| | | Using observable | | | | | |
| | | inputs (Level 2) | | | | | |
| | | | | Using unobservable | | | |
| | | | | inputs (Level 3) | | | |
| | | | | | | Total | |
| | | | | | | | |
| | | | | | | | | |
| | 2023 | 2022 | 2023 | 2022 | 2023 | 2022 | 2023 | 2022 |
| The Company | $m | $m | $m | $m | $m | $m | $m | $m |
| Assets | | | | | | | | |
| Cash and cash equivalents (measured at fair value)1 | - | - | 27,099 | - | - | - | 27,099 | - |
| Trading assets2 | 22,264 | 23,037 | 8,427 | 5,036 | 2 | - | 30,693 | 28,073 |
| Derivative financial instruments | 900 | 848 | 59,066 | 87,181 | 23 | 27 | 59,989 | 88,056 |
| Investment securities2,3 | 63,879 | 58,259 | 12,449 | 7,006 | 937 | 1,019 | 77,265 | 66,284 |
| Net loans and advances1 | - | - | 20,511 | 3,860 | 729 | 403 | 21,240 | 4,263 |
| Due from controlled entities | - | - | 1,894 | 2,500 | - | - | 1,894 | 2,500 |
| Total | 87,043 | 82,144 | 129,446 | 105,583 | 1,691 | 1,449 | 218,180 | 189,176 |
| Liabilities | | | | | | | | |
| Deposits and other borrowings (designated at fair value)1 | - | - | 31,207 | 40 | - | - | 31,207 | 40 |
| Derivative financial instruments | 210 | 301 | 57,287 | 84,179 | 14 | 20 | 57,511 | 84,500 |
| Payables and other liabilities | 4,500 | 2,510 | 422 | 347 | - | - | 4,922 | 2,857 |
| Debt issuances (designated at fair value) | - | 985 | 2,332 | 2,086 | - | - | 2,332 | 3,071 |
| Due to controlled entities | - | - | 157 | - | - | - | 157 | - |
| Total | 4,710 | 3,796 | 91,405 | 86,652 | 14 | 20 | 96,129 | 90,468 |
1. During 2023, within the trading book in its Markets business, the Company commenced the management of repurchase agreements and associated reverse repurchase agreements on a fair value basis. This
resulted in repurchase and associated reverse repurchase agreements being recognized and measured at FVTPL.
2. During 2023, $2,139 million of assets were transferred from Level 1 to Level 2 (2022: $1,043 million transferred from Level 1 to Level 2), and $1,155 million of assets were transferred from Level 2 to Level 1
(2022: $1,677 million transferred from Level 2 to Level 1) due to a change of the observability of valuation inputs. There were no other material transfers during the year. Transfers into and out of levels are
measured at the beginning of the reporting period in which the transfer occurred.
3. During 2023, ANZBGL sold its equity interests in the 1835i trusts, TIN and Pollination to ANZ NBH Pty Ltd as part of the Restructure. These investments were classified as Level 3 assets in the fair value
hierarchy in September 2022, with a fair valuation of $402 million.
FAIR VALUE MEASUREMENT INCORPORATING UNOBSERVABLE MARKET DATA
Level 3 fair value measurements
Level 3 financial instruments are a net asset of $1,669 million (2022: $1,802 million) for the Group and $1,676 million (2022: $1,429 million) for the
Company.
The assets and liabilities which incorporate significant unobservable inputs are:
\u2022 equity and debt securities for which there is no active market or traded prices cannot be observed;
\u2022 loans and advances measured at fair value for which there is no observable market data; and
\u2022 derivatives referencing market rates that cannot be observed primarily due to lack of market activity.
Level 3 Transfers
During the year, the Group and the Company transferred $218 million (2022: $312 million) of Loan and advances measured at fair value from Level 2
to Level 3, as a result of valuation parameters becoming unobservable during the year. There were no other material transfers into or out of Level 3
during the period.
The material Level 3 financial instruments as at 30 September 2023 are listed as below:
i)
Investment Securities - equity holdings classified as FVOCI
Bank of Tianjin (BoT)
The Group holds an investment in the Bank of Tianjin. The investment is valued based on comparative price-to-book (P/B) multiples (a P/B multiple is
the ratio of the market value of equity to the book value of equity). The extent of judgement applied in determining the appropriate multiple and
comparator group from which the multiple is derived resulted in the Level 3 classification. As at September 2023, the BoT equity holding balance was
$849 million (2022: $854 million). The decrease in the BoT fair valuation was due to a decrease in the P/B multiple used in the valuation.
Other equity investments
The Group holds $89 million (2022: $491 million) and the Company holds $87 million (2022: $165 million) of unlisted equities classified as FVOCI for
which there are no active markets or traded prices available, resulting in Level 3 classification. The decrease in unlisted equity holdings balance was
due to the sale of equity securities to the ANZ Non-Bank Group as part of the establishment of the new Group organisational structure.
ii)
Net loans and advances - classified as FVTPL
Syndication Loans
The Group holds $729 million (2022: $403 million) of syndication loans for sale which are measured at FVTPL for which there is no observable market
data available for the valuation. The increase in the Level 3 loan balances during the financial year was mainly due to increased syndication loans for
sale as at reporting date, and loans and advances transferred from Level 2 to Level 3.
Sensitivity to Level 3 data inputs
When we make assumptions due to significant inputs to a valuation not being directly observable (Level 3 inputs), then changing these assumptions
changes the Group\u2019s estimate of the instrument\u2019s fair value. Favourable and unfavourable changes are determined by changing the primary
unobservable parameters used to derive the fair valuation.
Investment Securities - equity holdings
The valuation of the equity investments are sensitive to variations in select unobservable inputs, with valuation techniques used including P/B
multiples and discounted cashflow techniques. If for example, a 10% increase or decrease to the primary input into the valuations were to occur (such
as the P/B multiple), it would result in a $94 million increase or decrease in the fair value of the portfolio, which would be recognised in shareholders\u2019
equity in the Group ($93 million for the Company), with no impact to net profit or loss.
Net Loans and Advances
Syndicated loan valuations are sensitive to credit spreads in determining their fair valuation. However as these are primarily investment-grade loans,
an increase or decrease in credit spreads and or interest yield would have an immaterial impact on net profit or net assets of the Group.
Other
The remaining Level 3 balance is immaterial and changes in inputs have a minimal impact on net profit and net assets of the Group.
Deferred fair value gains and losses
Where fair values are determined using unobservable inputs significant to the fair value of a financial instrument, the Group does not immediately
recognise the difference between the transaction price and the amount we determine based on the valuation technique (day one gain or loss) in
profit or loss. After initial recognition, we recognise the deferred amount in profit or loss on a straight-line basis over the life of the transaction or until
all inputs become observable. Day one gains and losses which have been deferred are not material.
FINANCIAL ASSETS AND FINANCIAL LIABILITIES NOT MEASURED AT FAIR VALUE
The financial assets and financial liabilities listed below are carried at amortised cost on the Group\u2019s Balance Sheet. While this is the value at which we
expect the assets will be realised and the liabilities settled, the Group provides an estimate of the fair value of the financial assets and financial liabilities
at balance date in the tables below.
Fair values of financial assets and liabilities carried at amortised cost not included in the table below approximate their carrying values. These financial
assets and liabilities are either short term in nature or are floating rate instruments that are re-priced to market interest rates on or near the end of the
reporting period.
| | | | Categorised into fair value hierarchy | | | | | | | |
| | | | | | | | | | | |
| | | Quoted price | | | | | | | |
| | | active markets | | Using observable | | | | | |
| | | | | | | With significant non- | | | |
| | | | | | | observable inputs | | | |
| | At amortised cost | | (Level 1) | | inputs (Level 2) | | (Level 3) | | Total fair value | |
| | 2023 | 2022 | 2023 | 2022 | 2023 | 2022 | 2023 | 2022 | 2023 | 2022 |
| Consolidated | $m | $m | $m | $m | $m | $m | $m | $m | $m | $m |
| Financial assets | | | | | | | | | | |
| Investment securities1 | 7,752 | 7,943 | - | - | 7,712 | 7,918 | - | - | 7,712 | 7,918 |
| Net loans and advances | 685,806 | 667,732 | - | - | 19,619 | 29,460 | 664,120 | 634,272 | 683,739 | 663,732 |
| Total | 693,558 | 675,675 | - | - | 27,331 | 37,378 | 664,120 | 634,272 | 691,451 | 671,650 |
| Financial liabilities | | | | | | | | | | |
| Deposits and other borrowings | 781,314 | 794,621 | - | - | 781,106 | 794,124 | - | - | 781,106 | 794,124 |
| Debt issuances | 114,678 | 92,623 | 30,786 | 22,982 | 83,867 | 69,028 | - | - | 114,653 | 92,010 |
| Total | 895,992 | 887,244 | 30,786 | 22,982 | 864,973 | 863,152 | - | - | 895,759 | 886,134 |
| | | Categorised into fair value hierarchy | | | | | | | | |
| | | | | | | | | | | |
| | Quoted price | | | | | | | | |
| | active markets | Using observable | | | | | | | |
| | | | | | | With significant non- | | | |
| | | | | | | observable inputs | | | |
| | At amortised cost | | (Level 1) | | inputs (Level 2) | (Level 3) | | | Total fair value | |
| | 2023 | 2022 | 2023 | 2022 | 2023 | 2022 | 2023 | 2022 | | 2023 2022 | | |
| The Company | $m | $m | $m | $m | $m | $m | $m | $m | $m | $m |
| Financial assets | | | | | | | | | | |
| Investment securities1 | 5,936 | 6,115 | - | - | 5,896 | 6,092 | - | - | 5,896 | 6,092 |
| Net loans and advances | 541,777 | 533,082 | - | - | 19,224 | 28,708 | 521,474 | 501,795 | 540,698 | 530,503 |
| Total | 547,713 | 539,197 | - | - | 25,120 | 34,800 | 521,474 | 501,795 | 546,594 | 536,595 |
| Financial liabilities | | | | | | | | | | |
| Deposits and other borrowings | 643,868 | 665,567 | - | - | 643,755 | 665,242 | - | - | 643,755 | 665,242 |
| Debt issuances | 95,881 | 72,757 | 28,496 | 19,741 | 67,309 | 52,453 | - | - | 95,805 | 72,194 |
| Total | 739,749 | 738,324 | 28,496 | 19,741 | 711,064 | 717,695 | - | - | 739,560 | 737,436 |
1. Investment securities at amortised cost includes $4,558 million of assets that are part of the Group\u2019s liquidity portfolio for the Group (2022: $3,976 million) and $2,917 million of assets for the Company (2022:
$2,304 million) that are part of the Group\u2019s and Company\u2019s liquidity portfolio. These are all short tenor (<1 year) instruments primarily in the Group\u2019s Rest of World geography and represent <2% of the
Group\u2019s total liquid assets at 30 September 2023.
The following table sets out the Group\u2019s basis of estimating the fair values of financial assets and liabilities carried at amortised cost where the carrying
value is not typically a reasonable approximation of fair value.
| Financial Asset and Liability | Fair Value Approach |
| Investment securities - debt securities at amortised cost | Calculated based on quoted market prices or observable inputs as applicable. If |
| quoted market prices are not available, we use a discounted cash flow model using a |
| yield curve appropriate for the remaining term to maturity of the debt instrument. |
| T |
| he fair value reflects adjustments to credit spreads applicable for that instrument. |
| Net loans and advances to banks | Discounted cash flows using prevailing market rates for loans with similar |
| credit quality. |
| Net loans and advances to customers | Present value of future cash flows, discounted using a curve that incorporates |
| changes in wholesale market rates, the Group\u2019s cost of wholesale funding and the |
| customer margin, as appropriate. |
| Deposit liability without a specified maturity or at call | |
| T |
| he amount payable on demand at the reporting date. We do not adjust the fair |
| value for any value we expect the Group to derive from retaining the deposit for a |
| future period. |
| Interest bearing fixed maturity deposits and other |
| borrowings and acceptances with quoted market rates |
| Market borrowing rates of interest for debt with a similar maturity are used to |
| discount contractual cash flows to derive the fair value. |
| Debt issuances | Calculated based on quoted market prices or observable inputs as applicable. If |
| quoted market prices are not available, we use a discounted cash flow model using a |
| yield curve appropriate for the remaining term to maturity of the debt instrument. |
| T |
| he fair value reflects adjustments to credit spreads applicable to ANZ for that |
| instrument. |
KEY JUDGEMENTS AND ESTIMATES
A significant portion of financial instruments are carried on the balance sheet at fair value. The Group therefore regularly evaluates the key
valuation assumptions used in the determination of the fair valuation of financial instruments incorporated within the financial statements,
as this can involve a high degree of judgement and estimation in determining the carrying values at the balance date.
In determining the fair valuation of financial instruments, the Group has considered the impact of related economic and market conditions
on fair value measurement assumptions and the appropriateness of valuation inputs in these estimates, notably valuation adjustments, as
well as the impact of these matters on the classification of financial instruments in the fair value hierarchy.
Most of the valuation models the Group uses employ only observable market data as inputs. For certain financial instruments, we may use
data that is not readily observable in current markets. If we use unobservable market data, then we need to exercise more judgement to
determine fair value depending on the significance of the unobservable input to the overall valuation. Generally, we derive unobservable
inputs from other relevant market data and compare them to observed transaction prices where available. When establishing the fair value
of a financial instrument using a valuation technique, the Group also considers any required valuation adjustments in determining the fair
value. We may apply adjustments (such as credit valuation adjustments and funding valuation adjustments \u2013 refer to Note 10 Derivative
Financial Instruments) to reflect the Group\u2019s assessment of factors that market participants would consider in determining fair value of a
particular financial instrument.
19. ASSETS CHARGED AS SECURITY FOR LIABILITIES AND COLLATERAL ACCEPTED AS
SECURITY FOR ASSETS
The following disclosure excludes the amounts presented as collateral paid and received in the Balance Sheet that relate to derivative liabilities and
derivative assets respectively. The terms and conditions of those collateral agreements are included in the standard Credit Support Annex that forms
part of the International Swaps and Derivatives Association Master Agreement under which most of our derivatives are executed.
ASSETS CHARGED AS SECURITY FOR LIABILITIES
Assets charged as security for liabilities include the following types of instruments:
\u2022 securities provided as collateral for repurchase transactions. These transactions are governed by standard industry agreements;
\u2022 specified residential mortgages provided as security for notes and bonds issued to investors as part of ANZ\u2019s covered bond programs;
\u2022 collateral provided to central banks; and
\u2022 collateral provided to clearing houses.
The carrying amount of assets pledged as security are as follows:
| | Consolidated | | The Company | |
| | 2023 | 2022 | 2023 | 2022 |
| $m | $m | $m | $m |
| Securities sold under arrangements to repurchase1 | 47,552 | 52,757 | 42,002 | 47,846 |
| Residential mortgages provided as security for covered bonds | 31,188 | 27,575 | 21,017 | 17,953 |
| Other | 6,152 | 5,601 | 6,077 | 5,527 |
1. The amounts disclosed as securities sold under arrangements to repurchase include both:
\u2022 assets pledged as security which continue to be recognised on the Group's balance sheet; and
\u2022 assets repledged, which are included in the disclosure below.
COLLATERAL ACCEPTED AS SECURITY FOR ASSETS
ANZ has received collateral associated with various financial transactions. Under certain arrangements ANZ has the right to sell, or to repledge, the
collateral received. These arrangements are governed by standard industry agreements.
The fair value of collateral we have received and that which we have sold or repledged is as follows:
| | Consolidated | | | |
| | | | |
| | | The Company | |
| | 2023 | 2022 | 2023 | 2022 |
| $m | $m | $m | $m |
| Fair value of assets which can be sold or repledged | 52,184 | 32,389 | 51,519 | 30,647 |
| Fair value of assets sold or repledged | 33,493 | 21,269 | 33,218 | 20,359 |
20. OFFSETTING
We offset financial assets and financial liabilities on the balance sheet (in accordance with AASB 132
Financial Instruments: Presentation
) when there is:
\u2022 a current legally enforceable right to set off the recognised amounts in all circumstances; and
\u2022 an intention to settle the asset and liability on a net basis, or to realise the asset and settle the liability simultaneously.
The following table identifies financial assets and financial liabilities which have not been offset but are subject to enforceable master netting
agreements (or similar arrangements) and the related amounts not offset in the balance sheet. We have not taken into account the effect of over-
collateralisation.
| | | | Amount subject to master netting agreement or similar | | | |
| | | | | | | |
| Total amounts | | | | | |
| recognised | | | | | |
| in the | | | | | |
| Balance Sheet | | | | | |
| | Amounts not | | | | |
| | subject to | | | | |
| | master netting | | | | |
| | agreement or | | | | |
| | similar | Total | | | |
| | | | Financial | | |
| | | | instruments5 | | |
| | | | | Financial | |
| | | | | collateral | |
| | | | | (received)/ | |
| | | | | pledged5 | Net amount |
| Consolidated | $m | $m | $m | $m | $m | $m |
| As at 30 September 2023 | | | | | | |
| Derivative financial assets1 | 60,406 | (3,290) | 57,116 | (38,070) | (13,049) | 5,997 |
| Reverse repurchase, securities borrowing and | | | | | | |
| similar agreements2 | | | | | | |
| - at amortised cost | 4,145 | (124) | 4,021 | - | (4,021) | - |
| - at fair value through profit or loss3 | 44,088 | (10,505) | 33,583 | (2,401) | (31,182) | - |
| Total financial assets | 108,639 | (13,919) | 94,720 | (40,471) | (48,252) | 5,997 |
| Derivative financial liabilities1 | (57,482) | 5,096 | (52,386) | 38,070 | 6,547 | (7,769) |
| Repurchase, securities lending and similar | | | | | | |
| agreements4 | | | | | |
| - at amortised cost | (12,744) | 1,117 | (11,627) | - | 11,627 | - |
| - at fair value through profit or loss3 | (31,710) | 13,304 | (18,406) | 2,401 | 16,005 | - |
| Total financial liabilities | (101,936) | 19,517 | (82,419) | 40,471 | 34,179 | (7,769) |
| |
| As at 30 September 2022 |
| Derivative financial assets | 1 | | 90,174 | (6,983) | 83,191 (56,491) (16,951) | | 9,749 |
| Reverse repurchase, securities borrowing and |
| similar agreements | 2 |
| - at amortised cost | 29,776 | | (6,697) | 23,079 | (1,985) | (21,094) | - |
| Total financial assets | 119,950 (13,680) | 106,270 (58,476) (38,045) | 9,749 | |
| Derivative financial liabilities | 1 | | (85,149) 9,936 | | (75,213) | 56,491 9,964 | (8,758) |
| Repurchase, securities lending and similar |
| agreements | 4 |
| - at amortised cost | (47,229) | 12,497 | | (34,732) | | 1,985 | | 32,747 | - |
| Total financial liabilities | (132,378) | 22,433 | (109,945) 58,476 42,711 (8,758) |
1. Derivative assets and liabilities recognised in the Balance Sheet reflect the impact of certain central clearing collateral arrangements, whereby collateral that qualifies as legal settlement has reduced the
carrying value of those associated derivative balances.
2. Reverse repurchase agreements:
\u2022 with less than 90 days to maturity are presented in the Balance Sheet within Cash and cash equivalents; or
\u2022 with 90 days or more to maturity are presented in the Balance Sheet within Net loans and advances.
3. During 2023, the Group commenced the management of repurchase agreements and reverse repurchase agreements on a fair value basis within the trading book in its Markets business. This resulted in
the associated repurchase and reverse repurchase agreements being recognised and measured at FVTPL.
4. Repurchase agreements are presented on the Balance Sheet within Deposits and other borrowings.
5. The amount of financial instruments and financial collateral disclosed is limited to the net balance sheet exposure of the relevant financial assets or liabilities, and any over-collateralisation is excluded from
the tables.
| | | | Amount subject to master netting agreement or similar | | | |
| | Total amounts | | | | | |
| recognised | | | | | |
| in the | | | | | |
| Balance Sheet | | | | | |
| | Amounts not | | | | |
| | subject to | | | | |
| | master netting | | | | |
| | agreement or | | | | |
| | similar | | | | |
| | | Total | | | |
| | | | | | |
| | | | Financial | | |
| | | | instruments5 | | |
| | | | | Financial | |
| | | | | collateral | |
| | | | | (received)/ | |
| | | | | pledged5 | Net amount |
| The Company | $m | $m | $m | $m | $m | $m |
| As at 30 September 2023 | | | | | | |
| Derivative financial assets1 | 59,989 | (1,096) | 58,893 | (41,574) | (11,716) | 5,603 |
| Reverse repurchase, securities borrowing and | | | | | | |
| similar agreements2 | | | | | | |
| - at amortised cost | 4,021 | - | 4,021 | - | (4,021) | - |
| - at fair value through profit or loss3 | 43,553 | (10,143) | 33,410 | (2,248) | (31,162) | - |
| Total financial assets | 107,563 | (11,239) | 96,324 | (43,822) | (46,899) | 5,603 |
| Derivative financial liabilities1 | (57,511) | 2,760 | (54,751) | 41,574 | 6,356 | (6,821) |
| Repurchase, securities lending and similar | | | | | | |
| agreements4 | | | | | | |
| - at amortised cost | (8,955) | 865 | (8,090) | - | 8,090 | - |
| - at fair value through profit or loss3 | (31,125) | 12,872 | (18,253) | 2,248 | 16,005 | - |
| Total financial liabilities | (97,591) | 16,497 | (81,094) | 43,822 | 30,451 | (6,821) |
| | | | | | | |
| As at 30 September 2022 | | | | | | |
| Derivative financial assets1 | 88,056 | (4,242) | 83,814 | (61,038) | (14,876) | 7,900 |
| Reverse repurchase, securities borrowing and | | | | | | |
| similar agreements2 | | | | | | |
| - at amortised cost | 28,045 | (5,323) | 22,722 | (1,629) | (21,093) | - |
| Total financial assets | 116,101 | (9,565) | 106,536 | (62,667) | (35,969) | 7,900 |
| Derivative financial liabilities1 | (84,500) | 6,839 | (77,661) | 61,038 | 8,548 | (8,075) |
| Repurchase, securities lending and similar | | | | | | |
| agreements4 | | | | | | |
| - at amortised cost | (42,940) | 11,021 | (31,919) | 1,629 | 30,290 | - |
| Total financial liabilities | (127,440) | 17,860 | (109,580) | 62,667 | 38,838 | (8,075) |
1. Derivative assets and liabilities recognised in the Balance Sheet reflect the impact of certain central clearing collateral arrangements, whereby collateral that qualifies as legal settlement has reduced the
carrying value of those associated derivative balances.
2. Reverse repurchase agreements:
\u2022 with less than 90 days to maturity are presented in the Balance Sheet within Cash and cash equivalents; or
\u2022 with 90 days or more to maturity are presented in the Balance Sheet within Net loans and advances.
3. During 2023, the Group commenced the management of repurchase agreements and reverse repurchase agreements on a fair value basis within the trading book in its Markets business. This resulted in the
associated repurchase and reverse repurchase agreements being recognised and measured at FVTPL.
4. Repurchase agreements are presented on the Balance Sheet within Deposits and other borrowings.
5. The amount of financial instruments and financial collateral disclosed is limited to the net balance sheet exposure of the relevant financial assets or liabilities, and any over-collateralisation is excluded from
the tables.
21. GOODWILL AND OTHER INTANGIBLE ASSETS
| | Goodwill1 | | Software | | Other Intangibles | | Total | |
| Consolidated | | | | | | | | |
| 2023 | 2022 | 2023 | 2022 | 2023 | 2022 | 2023 | 2022 |
| $m | $m | $m | $m | $m | $m | $m | $m |
| Balance at start of year | 2,906 | 3,089 | 896 | 960 | 75 | 75 | 3,877 | 4,124 |
| Additions2 | - | 78 | 332 | 315 | - | 10 | 332 | 403 |
| Amortisation expense | - | - | (316) | (375) | (2) | (4) | (318) | (379) |
| Impairment expense | - | - | - | (3) | - | - | - | (3) |
| Written-off on disposal/exit3 | (78) | (40) | - | - | (7) | - | (85) | (40) |
| Foreign currency exchange difference | 150 | (221) | 1 | (1) | 4 | (6) | 155 | (228) |
| Balance at end of year | 2,978 | 2,906 | 913 | 896 | 70 | 75 | 3,961 | 3,877 |
| Cost4 | 2,978 | 2,906 | 8,127 | 7,843 | 78 | 83 | 11,183 | 10,832 |
| Accumulated amortisation | n/a | n/a | (7,214) | (6,947) | (8) | (8) | (7,222) | (6,955) |
| Carrying amount | 2,978 | 2,906 | 913 | 896 | 70 | 75 | 3,961 | 3,877 |
| | Goodwill1 | | Software | | Other Intangibles | | | Total |
T | | | | | | | | |
| he Company | | | | | | | | |
| 2023 | 2022 | 2023 | 2022 | 2023 | 2022 | 2023 | 2022 |
| $m | $m | $m | $m | $m | $m | $m | $m |
| Balance at start of year | 62 | 62 | 872 | 952 | 1 | 3 | 935 | 1,017 |
| Additions | - | - | 310 | 287 | - | - | 310 | 287 |
| Amortisation expense | - | - | (310) | (363) | (1) | (3) | (311) | (366) |
| Impairment expense | - | - | - | (3) | - | - | - | (3) |
| Foreign currency exchange difference | - | - | 1 | (1) | - | 1 | 1 | - |
| Balance at end of year | 62 | 62 | 873 | 872 | - | 1 | 935 | 935 |
| | | | | | | | | |
| Cost4 | 62 | 62 | 7,800 | 7,544 | 7 | 7 | 7,869 | 7,613 |
| Accumulated amortisation | n/a | n/a | (6,927) | (6,672) | (7) | (6) | (6,934) | (6,678) |
| Carrying amount | 62 | 62 | 873 | 872 | - | 1 | 935 | 935 |
1. Goodwill excludes notional goodwill in equity accounted investments.
2. 2022 goodwill addition relates to acquisition of Cashrewards.
3. 2023 goodwill written-off on disposal/exit relates to the disposal of Cashrewards to ANZ NBH Pty Ltd. 2022 goodwill written-off on disposal/exit relates to the exit of the financial planning and advice
business.
4. Includes impact of foreign currency translation differences.
IMPAIRMENT TESTING FOR CASH GENERATING UNITS CONTAINING GOODWILL
Goodwill acquired in a business combination is tested for impairment annually and whenever there are indicators of potential impairment. Goodwill is
allocated at the date of acquisition to the cash generating unit (CGU) or group of CGUs that are expected to benefit from the synergies of the related
business combination.
Goodwill is considered to be impaired if the carrying amount of the relevant CGU exceeds its recoverable amount. We estimate the recoverable
amount of each CGU to which goodwill is allocated using a fair value less costs of disposal (FVLCOD) approach, with a value-in-use (VIU) assessment
performed where the FVLCOD is less than the carrying amount.
Goodwill is allocated to the following CGUs based on the lowest level at which goodwill is monitored.
Cash generating units:
| 2023 | |
| $m | |
| | 2022 |
| | $m |
| Australia Retail | | |
| 100 | 178 |
| New Zealand | | |
| 1,617 | 1,530 |
| Institutional | | |
| 1,261 | 1,198 |
We estimate the FVLCOD of each CGU to which goodwill is allocated by applying observable price earnings multiples of comparable companies to
the estimated future maintainable earnings of each CGU. A deduction is then made for estimated costs of disposal. The valuation is considered to be
level 3 in the fair value hierarchy due to unobservable inputs used in the valuation.
Management\u2019s approach and the key assumptions used in determining FVLCOD are as follows:
| Key assumption | Approach to determining the value (or values) for each key assumption |
| Future maintainable earnings | Future maintainable earnings for each CGU is estimated as the sum of: |
| \u2022 The Group\u2019s 2024 financial plan for each CGU; and |
| \u2022 An allocation of the central costs recorded outside of the CGUs to which goodwill is allocated. |
| Where relevant, adjustments are made to the Group\u2019s financial plan to reflect the long-term expectations for |
| items such as expected credit losses and investment spend. |
| Price/Earnings (P/E) multiple | P/E multiples applicable to each CGU have been derived from a comparator group of publicly traded |
| companies, and include a 30% control premium, discussed below. |
| In the case of the New Zealand and Institutional CGUs, management has made downwards adjustments to |
| P/E multiples to address specific factors relevant to those CGUs. |
| A control premium has been applied which recognises the increased consideration a potential acquirer |
| would be willing to pay in order to gain sufficient ownership to achieve control over the relevant activities of |
| the CGU. For each CGU, the control premium has been estimated as 30% of the comparator group P/E |
| multiple based on historical transactions. |
| Costs of disposal | Costs of disposal have been estimated as 2% of the fair value of the CGU based on those observed from |
| historical and recent transactions. |
As noted above, our impairment testing did not result in the identification of any material impairment of goodwill as at 30 September 2023.
The FVLCOD estimates for each CGU are sensitive to assumptions about P/E multiples, future maintainable earnings and control premium (30%).
However, each CGU would continue to show a surplus in recoverable amount over carrying amount even where other reasonably possible alternative
estimates were used.
RECOGNITION AND MEASUREMENT
The table below details how we recognise and measure different intangible assets:
| Goodwill | Software | Other Intangibles |
| Definition | | | |
| | | | |
| | | | |
| | | | |
| | | | |
| Excess amount the Group has paid | | |
| in acquiring a business over the fair | | |
| value of the identifiable assets and | | |
| liabilities acquired. | | |
| | Purchased software owned by the Group | |
| | is capitalised. | |
| | Internal and external costs incurred in | |
| | building software and computer systems | |
| | costing greater than $20 million are | |
| | capitalised as assets. Those less than $20 | |
| | million are expensed in the year in which | |
| | the costs are incurred. | |
| | Costs incurred in planning or evaluating | |
| | software proposals or in maintaining | |
| | systems after implementation are | |
| | not capitalised. | |
| | | Management fee rights arising |
| | | from acquisition of funds |
| | | management business and |
| | | other intangible assets arising |
| | | from contractual rights. |
| Carrying value | | | |
| | | | |
| | | | |
| | | | |
| | | | |
| Cost less any accumulated | | |
| impairment losses. | | |
| Allocated to the cash generating | | |
| unit to which the | | |
| acquisition relates. | | |
| | | | |
| | Initially, measured at cost. | |
| | Subsequently, carried at cost less | |
| | accumulated amortisation and | |
| | impairment losses. | |
| | | Initially, measured at fair value at |
| | | acquisition. |
| | | Subsequently, carried at cost |
| | | less accumulated amortisation |
| | | and impairment losses. |
| Useful life | | | |
| | | | |
| | | | |
| | | | |
| | | | |
| Indefinite. | | |
| Goodwill is reviewed for | | |
| impairment at least annually or | | |
| when there is an indication of | | |
| impairment. | | |
| | Except for major core infrastructure, | |
| | amortised over periods between | |
| | 2-5 years; however major core | |
| | infrastructure may be amortised over 7 | |
| | years subject to approval by the Audit | |
| | Committee. | |
| | Purchased software is amortised over 2 | |
| | years unless it is considered integral to | |
| | other assets with a longer useful life. | |
| | | Management fee rights with an |
| | | indefinite life are reviewed for |
| | | impairment at least annually or |
| | | when there is an indication of |
| | | impairment. Other intangible |
| | | assets are amortised over 3 |
| | | years. |
| Depreciation | | | |
| method | | | |
| Not applicable. | Straight-line method. | Not applicable to indefinite life |
| | | intangible assets. Straight-line |
| | | method for assets with a finite |
| | | life. |
KEY JUDGEMENTS AND ESTIMATES
Management judgement is used to assess the recoverable value of goodwill and other intangible assets, and the useful economic life of an
asset, or whether an asset has an indefinite life. We reassess the recoverability of the carrying value at each reporting date.
Goodwill
A number of key judgements are required in the determination of whether or not a goodwill balance is impaired including:
\u2022 the level at which goodwill is allocated \u2013 consistent with prior periods the CGUs to which goodwill is allocated are the Group\u2019s revenue
generating segments that benefit from relevant historical business combinations generating goodwill.
\u2022 determination of the carrying amount of each CGU which includes an allocation, on a reasonable and consistent basis, of corporate
assets and liabilities that are not directly attributable to the CGUs to which goodwill is allocated.
\u2022 assessment of the recoverable amount of each CGU including:
o selection of the model used to determine the fair value \u2013 the Group has used the market multiple approach to estimate the fair
value; and
o selection of the key assumptions in respect of future maintainable earnings, the P/E multiple applied, including selection of an
appropriate comparator group and determination of an appropriate control premium, and costs of disposal as described above.
Software and other intangible assets
At each reporting date, software and other intangible assets are assessed for indicators of impairment and, where such indicators are
identified, an impairment assessment is performed. In the event that an asset\u2019s carrying amount is determined to be greater than its
recoverable amount, the carrying amount of the asset is written down immediately. Those assets not yet ready for use are tested for
impairment annually.
In addition, the expected useful lives of intangible assets are assessed at each reporting date. The assessment requires management
judgement, and in relation to our software assets, a number of factors can influence the expected useful lives. These factors include
changes to business strategy, significant divestments and the pace of technological change.
22. OTHER PROVISIONS
| | Consolidated | | The Company | |
| | 2023 | 2022 | 2023 | 2022 |
| | $m | $m | $m | $m |
| ECL allowance on undrawn and contingent facilities1 | 827 | 775 | 697 | 673 |
| Customer remediation | 459 | 662 | 425 | 600 |
| Restructuring costs | 98 | 68 | 83 | 47 |
| Non-lending losses, frauds and forgeries | 73 | 105 | 62 | 93 |
| Other | 257 | 262 | 232 | 235 |
| Total other provisions | 1,714 | 1,872 | 1,499 | 1,648 |
| | Customer | | | |
| remediation | | | |
| | Restructuring | | |
| | costs | | |
| | | Non-lending | |
| | | losses, frauds | |
| | | and forgeries | Other |
| Consolidated | $m | $m | $m | $m |
| Balance at 1 October 2022 | 662 | 68 | 105 | 262 |
| New and increased provisions made during the year | 147 | 91 | 11 | 66 |
| Provisions used during the year | (321) | (40) | (32) | (61) |
| Unused amounts reversed during the year | (29) | (21) | (11) | (10) |
| Balance at 30 September 2023 | 459 | 98 | 73 | 257 |
| | Customer | | | |
| remediation | | | |
| | Restructuring | | |
| | costs | | |
| | | Non-lending | |
| | | losses, frauds | |
| | | and forgeries | Other |
| The Company | $m | $m | $m | $m |
| Balance at 1 October 2022 | 600 | 47 | 93 | 235 |
| New and increased provisions made during the year | 146 | 83 | 9 | 63 |
| Provisions used during the year | (295) | (27) | (29) | (59) |
| Unused amounts reversed during the year | (26) | (20) | (11) | (7) |
| Balance at 30 September 2023 | 425 | 83 | 62 | 232 |
1. Refer to Note 13 Allowance for Expected Credit Losses for movement analysis.
Customer remediation
Customer remediation includes provisions for expected refunds to customers, remediation project costs and related customer and regulatory claims,
penalties and litigation costs and outcomes.
Restructuring costs
Provisions for restructuring costs arise from activities related to material changes in the scope of business undertaken by the Group or the manner in
which that business is undertaken and include employee termination benefits. Costs relating to on-going activities are not provided for and are
expensed as incurred.
Non-lending losses, frauds and forgeries
Non-lending losses include losses arising from certain legal actions not directly related to amounts of principal outstanding for loans and advances
and losses arising from forgeries, frauds and the correction of operational issues. The amounts recognised are the best estimate of the consideration
required to settle the present obligation at the reporting date, taking into account the risks and uncertainties that surround the events and
circumstances that affect the provision.
Other
Other provisions comprise various other provisions including workers compensation, make-good provisions associated with leased premises,
warranties and indemnities provided in connection with various disposals of businesses and assets, and contingent liabilities recognised as part of a
business combination.
RECOGNITION AND MEASUREMENT
The Group recognises provisions when there is a present obligation arising from a past event, an outflow of economic resources is
probable, and the amount of the provision can be measured reliably.
The amount recognised is the best estimate of the consideration required to settle the present obligation at the reporting date, taking into
account the risks and uncertainties surrounding the timing and amount of the obligation. Where a provision is measured using the
estimated cash flows required to settle the present obligation, its carrying amount is the present value of those cash flows.
KEY JUDGEMENTS AND ESTIMATES
The Group holds provisions for various obligations including customer remediation, restructuring costs, non-lending losses, frauds and
forgeries and litigation related claims. These provisions involve judgements regarding the timing and outcome of future events, including
estimates of expenditure required to satisfy such obligations. Where relevant, expert legal advice has been obtained and, in light of such
advice, provisions and/or disclosures as deemed appropriate have been made.
In relation to customer remediation, determining the amount of the provisions, which represent management\u2019s best estimate of the cost
of settling the identified matters, requires the exercise of significant judgement. It will often be necessary to form a view on a number of
different assumptions, including the number of impacted customers, the average refund per customer, the associated remediation project
costs, and the implications of regulatory exposures and customer claims having regard to their specific facts and circumstances. There is a
heightened level of estimation uncertainty where the customer remediation provision relates to a legal proceeding or matter. The
appropriateness of the underlying assumptions is reviewed on a regular basis against actual experience and other relevant evidence
including expert legal advice, and adjustments are made to the provisions where appropriate.
23. SHAREHOLDERS\u2019 EQUITY
SHAREHOLDERS' EQUITY
| Consolidated | | The Company | |
| | 2023 | 2022 | 2023 | 2022 |
| $m | $m | $m | $m |
| Ordinary share capital | 29,082 | 28,797 | 29,005 | 28,720 |
| Reserves | | | | |
| Foreign currency translation reserve1 | 570 | (148) | 58 | (6) |
| Share option reserve | 82 | 78 | 82 | 78 |
| FVOCI reserve | (554) | (478) | (538) | (557) |
| Cash flow hedge reserve | (1,872) | (2,036) | (1,824) | (2,061) |
| Transactions with non-controlling interests reserve | (22) | (22) | - | - |
| Total reserves | (1,796) | (2,606) | (2,222) | (2,546) |
| Retained earnings | 41,306 | 39,716 | 34,195 | 32,859 |
| Share capital and reserves attributable to shareholders of the Company | 68,592 | 65,907 | 60,978 | 59,033 |
| Non-controlling interests2 | 522 | 494 | - | - |
| Total shareholders\u2019 equity | 69,114 | 66,401 | 60,978 | 59,033 |
1. As a result of the closure of ANZ (Thai) Public Company Limited, ANZ International (Hong Kong) Limited and ANZ Singapore Limited, the associated foreign currency translation reserve was recycled from
Other comprehensive income to profit or loss, resulting in a $43 million gain recognised in Other operating income in 2023 (2022: $65 million loss from the dissolution of Minerva Holdings Limited and ANZ
Asia Limited).
2. ANZ Bank New Zealand issued $484 million of perpetual preference shares in 2022 that are considered non-controlling interests to the Group.
ORDINARY SHARE CAPITAL
The table below details the movement in ordinary shares and share capital for the year.
| | 2023 | 2022 | | |
| Number of | | | |
| shares | | | |
| | | Number of | |
| | | shares | |
| Consolidated | | $m | | $m |
| Balance at start of the year | 2,989,923,751 | 28,797 | 2,823,563,652 | 25,984 |
| Dividend reinvestment plan issuances | 8,406,978 | 206 | 7,195,108 | 183 |
| Bonus option plan | 1,657,422 | - | 2,890,268 | - |
| Employee share and option plans | 3,378,631 | 79 | - | (21) |
| Share buy-back1 | - | - | (30,831,227) | (846) |
| Share entitlement issue2 | - | - | 187,105,950 | 3,497 |
| Balance at end of year | 3,003,366,782 | 29,082 | 2,989,923,751 | 28,797 |
| Less: Treasury Shares | - | - | (4,209,150) | - |
| Balance at end of year | 3,003,366,782 | 29,082 | 2,985,714,601 | 28,797 |
| | 2023 | | 2022 | |
| Number of | | | |
| shares | | | |
| | | Number of | |
| | | shares | |
T | | | | |
| he Company | | $m | | $m |
| Balance at start of the year | 2,989,923,751 | 28,720 | 2,823,563,652 | 25,907 |
| Dividend reinvestment plan issuances | 8,406,978 | 206 | 7,195,108 | 183 |
| Bonus option plan | 1,657,422 | - | 2,890,268 | - |
| Employee share and option plans | 3,378,631 | 79 | - | (21) |
| Share buy-back1 | - | - | (30,831,227) | (846) |
| Share entitlement issue2 | - | - | 187,105,950 | 3,497 |
| Balance at end of year | 3,003,366,782 | 29,005 | 2,989,923,751 | 28,720 |
1. The Group completed its $1.5 billion on-market share buy-back of ANZ ordinary shares in 2022, purchasing $846 million worth of shares resulting in 31 million shares being cancelled in 2022.
2. On 18 July 2022, the Group announced a fully underwritten pro rata accelerated renounceable entitlement offer of new ANZ ordinary shares to help fund the Group\u2019s anticipated acquisition of Suncorp
Bank. All eligible shareholders were invited to purchase one new ordinary share for every 15 existing ordinary shares held on 21 July 2022 at an issue price of $18.90 per share. The Group issued a total of
187.1 million ordinary shares under the offer, raising $3,497 million of new share capital (net of issue costs).
NON-CONTROLLING INTERESTS
| Profit attributable to | | | | | |
| non-controlling interests | | | | | |
| | | Equity attributable to | | | |
| | | non-controlling interests | | | |
| | | | | Dividend paid to | |
| | | | | non-controlling interests | |
| | 2023 | 2022 | 2023 | 2022 | 2023 | 2022 |
| Consolidated | $m | $m | $m | $m | $m | $m |
| ANZ Bank New Zealand PPS | 26 | - | 512 | 484 | 26 | - |
| Other | 2 | 1 | 10 | 10 | 1 | 2 |
| Total | 28 | 1 | 522 | 494 | 27 | 2 |
ANZ Bank New Zealand Preference Shares
ANZ Bank New Zealand Limited (ANZ Bank New Zealand), a member of the Group, issued $484 million (NZD 550 million) of Perpetual Preference
Shares (PPS) on 18 July 2022. These are considered non-controlling interests of the Group.
The key terms of the PPS are as follows:
PPS dividends
PPS dividends are payable at the discretion of the Directors of ANZ Bank New Zealand and are non-cumulative. ANZ Bank New Zealand must not
authorise or pay a dividend on its ordinary shares, acquire its ordinary shares or otherwise undertake a capital reduction in respect of its ordinary
shares until the next PPS dividend payment date if a PPS dividend is not paid.
Should ANZ Bank New Zealand elect to pay a PPS dividend, the PPS dividend is 6.95% per annum until 18 July 2028, and a floating rate equal to the
aggregate of the New Zealand 3 month bank bill rate plus 3.25%, multiplied by one minus the New Zealand company tax rate (where the PPS
dividend is fully imputed) thereafter, with PPS dividend payments scheduled to be paid on 18 January, 18 April, 18 July and 18 October each year.
Redemption features
Holders of PPS have no right to require that the PPS be redeemed. ANZ Bank New Zealand may at its option redeem all of the PPS on an optional
redemption date (each PPS dividend date from 18 July 2028); or at any time following the occurrence of a tax event or regulatory event, in each case
subject to prior written approval of RBNZ and other conditions being met.
RECOGNITION AND MEASUREMENT
| Ordinary shares | |
| | |
| | |
| | |
| Ordinary shares have no par value. They entitle holders to receive dividends, or proceeds |
| available on winding up of the Company, in proportion to the number of fully paid ordinary |
| shares held. They are recognised at the amount paid per ordinary share net of directly |
| attributable costs. Every holder of fully paid ordinary shares present at a meeting of the |
| Company in person, or by proxy, is entitled to: |
| \u2022 on a show of hands, one vote; and |
| \u2022 on a poll, one vote, for each share held. |
| Treasury shares | |
| | |
| | |
| | |
| | |
| | |
| Treasury shares are shares in the Company which: |
| \u2022 the ANZ Employee Share Acquisition Plan purchases on market and have not yet |
| distributed, or |
| \u2022 the Company issues to the ANZ Employee Share Acquisition Plan and have not yet been |
| distributed. |
| Treasury shares are deducted from share capital and excluded from the weighted average |
| number of ordinary shares used in the earnings per share calculations. |
| Reserves: | |
| Foreign currency translation reserve | |
| | |
| | |
| Includes differences arising on translation of assets and liabilities into Australian dollars when |
| the functional currency of a foreign operation (including subsidiaries and branches) is not |
| Australian dollars. In this reserve, we reflect any offsetting gains or losses on hedging these |
| exposures, together with any tax effect. |
| Cash flow hedge reserve | Includes fair value gains and losses associated with the effective portion of designated cash |
| flow hedging instruments together with any tax effect. |
| FVOCI reserve | Includes changes in the fair value of certain debt securities and equity securities included |
| within Investment Securities together with any tax effect. |
| In respect of debt securities classified as measured at FVOCI, the FVOCI reserve records |
| accumulated changes in fair value arising subsequent to initial recognition, except for those |
| relating to allowance for expected credit losses, interest income and foreign currency |
| exchange gains and losses which are recognised in profit or loss. As debt securities at FVOCI |
| are recorded at fair value, the balance of the FVOCI reserve is net of the ECL allowance |
| associated with such assets. When a debt security measured at FVOCI is derecognised, the |
| cumulative gain or loss recognised in the FVOCI reserve in respect of that security is |
| reclassified to profit or loss and presented in other operating income. |
| In respect of the equity securities classified as measured at FVOCI, the FVOCI reserve records |
| accumulated changes in fair value arising subsequent to initial recognition (including any |
| related foreign exchange gains or losses). When an equity security measured at FVOCI is |
| derecognised, the cumulative gain or loss recognised in the FVOCI reserve in respect of that |
| security is not recycled to profit or loss. |
| Share option reserve | Includes amounts which arise on the recognition of share-based compensation expense. |
| Transactions with non-controlling | |
| interests reserve | |
| Includes the impact of transactions with non-controlling shareholders in their capacity as |
| shareholders. |
| Non-controlling interests | |
| | |
| Share in the net assets of controlled entities attributable to equity interests which the Group |
| does not own directly or indirectly. |
24. CAPITAL MANAGEMENT
CAPITAL MANAGEMENT FRAMEWORK
ANZ\u2019s capital management framework includes managing capital at Level 1 and Level 2.
ANZ\u2019s framework includes managing to Board approved risk appetite settings and maintaining all regulatory requirements. APRA requirements at
Level 1 and Level 2 include ANZ operating at or above APRAs expectation for Domestic Systematically Important Banks (D-SIBs) following the
implementation of APRA\u2019s Capital Reform which was effective January 2023.
All requirements were satisfied at 30 September 2023.
CAPITAL MANAGEMENT STRATEGY
ANZ\u2019s capital management strategy aims to protect the interests of depositors, creditors and shareholders. We achieve this through an Internal
Capital Adequacy Assessment Process (ICAAP) whereby ANZ conducts detailed strategic and capital planning over a 3 year time horizon.
The process involves:
\u2022 forecasting economic variables, financial performance of ANZ\u2019s divisions and the financial impact of new strategic initiatives to be implemented
during the planning period;
\u2022 performing stress tests under different economic scenarios to determine the level of additional capital (stress capital buffer) needed to absorb
losses that may be experienced under an economic downturn;
\u2022 reviewing capital ratios and targets across various classes of capital against ANZ\u2019s risk profile; and
\u2022 developing a capital plan, taking into account capital ratio targets, current and future capital issuances requirements and options around capital
products, timing and markets to execute the capital plan under differing market and economic conditions.
The capital plan is approved by the Board and updated as required. The Board and senior management are provided with regular updates of ANZ\u2019s
capital position. Any material actions required to ensure ongoing prudent capital management are submitted to the Board for approval. Throughout
the year, the Group maintained compliance with all the regulatory requirements related to Capital Adequacy in the jurisdictions in which it operates.
REGULATORY ENVIRONMENT
Australia
As the ANZ Bank Group is an Authorised Deposit-taking Institution (ADI) in Australia, it is primarily regulated by APRA under the
Banking Act 1959
(Cth)
. ANZ Bank Group must comply with the minimum regulatory capital requirements, prudential capital ratios and specific reporting levels that
APRA sets and which are consistent with the global Basel III capital framework. This is the common framework for determining the appropriate level of
bank regulatory capital as set by the Basel Committee on Banking Supervision. APRA minimum requirements are summarised below:
| Regulatory Capital Definition | | | |
| Common Equity Tier 1 (CET1) Capital | Tier 1 Capital | Tier 2 Capital | Total Capital |
| Shareholders\u2019 equity adjusted for | | | |
| specific items. | | | |
| CET1 Capital plus certain | | |
| securities with complying loss | | |
| absorbing characteristics known | | |
| as Additional Tier 1 Capital. | | |
| | Subordinated debt instruments | |
| | which have a minimum term of 5 | |
| | years at issue date. | |
| | | Tier 1 plus Tier 2 Capital. |
| Minimum Prudential Capital Ratios (PCRs) | | |
| CET1 Ratio | Tier 1 Ratio | Total Capital Ratio |
| CET1 Capital divided by total risk | | |
| weighted assets must be at least 4.5%. | | |
| Tier 1 Capital divided by total risk | |
| weighted assets must be at least | |
| 6.0%. | |
| | Total Capital divided by total risk |
| | weighted assets must be at least |
| | 8.0%. For D-SIBs, Total Capital |
| | Ratio must be of at least 11% from |
| | 1st Jan 2024. Refer below for |
| | details. |
| Reporting Levels | | |
| Level 1 | Level 2 | Level 3 |
| The ADI on a stand-alone basis (that is | | |
| ANZBGL and specified subsidiaries | | |
| which are consolidated to form the | | |
| ADI\u2019s Extended Licensed Entity). | | |
| The consolidated Group less | |
| certain subsidiaries and associates | |
| that are excluded under | |
| prudential standards. | |
| | A conglomerate ANZGHL Group at the widest level. |
As at 30 September 2023, APRA also requires the ADI to hold additional CET1 buffers as follows:
\u2022 a capital conservation buffer (CCB) of 4.75% which is inclusive of the additional 1% surcharge for domestically systemically important banks (D-SIBs).
APRA has determined that ANZ is a D-SIB.
\u2022 a countercyclical capital buffer which is set on a jurisdictional basis. The requirement is currently set at 1% for Australia.
Additionally in December 2021, APRA announced that it requires all D-SIBs including ANZ to increase its minimum total capital ratio requirement by
3% of RWA by January 2024, and a further 1.5% of RWA by January 2026 (total increase of 4.5%). APRA expects this to be predominantly met by Tier 2
Capital, with an equivalent decrease in other senior funding. ANZ is on track to meet these requirements at reporting date.
Insurance and Funds Management
As required by APRA\u2019s Prudential Standards, insurance and funds management activities are:
\u2022 de-consolidated for the purposes of calculating capital adequacy; and
\u2022 excluded from the risk-based capital adequacy framework.
We deduct the investment in these controlled entities 100% from CET1 capital, and if we include any profits from these activities in the ANZ Bank
Group\u2019s results, then we exclude them from the determination of CET1 capital to the extent they have not been remitted.
Outside Australia
In addition to APRA, ANZ\u2019s branch operations and major banking subsidiary operations are also overseen by local regulators such as the Reserve Bank
of New Zealand, the US Federal Reserve, the UK Prudential Regulation Authority, the Monetary Authority of Singapore, the Hong Kong Monetary
Authority and the China Banking and Insurance Regulatory Commission. They may impose minimum capital levels on operations in their individual
jurisdictions.
APRA Capital Reform
APRA released new bank capital adequacy requirements applying to Australian incorporated registered banks, which are set out in APRA\u2019s Banking
Prudential Standard documents. ANZ implemented these new requirements from 1 January 2023.
The new capital adequacy key requirements include changes to APS 110
Capital Adequacy
(APS 110), APS 112
Capital Adequacy: Standardised
Approach to Credit Risk
(APS 112) and APS 113
Capital Adequacy: Internal Ratings-based Approach to Credit Risk
(APS 113) with key features of the
reforms including:
\u2022 improving the flexibility of the capital framework through larger capital buffers that can be used by banks to support lending during periods of
stress;
\u2022 changes to risk weighted assets (RWA) through more risk-sensitive risk weights increasing capital requirements for higher risk lending and
decreasing it for lower risks;
\u2022 changes to loss given default rates (LGD) including approved use of an internal ratings-based (IRB) approved LGD model for mortgage portfolios;
\u2022 an increase in the IRB scaling factor (from 1.06x to 1.1x);
\u2022 requirement that IRB ADIs calculate and disclose RWA under the standardised approach and the introduction of a capital floor at 72.5% of
standardised RWA; and
\u2022 use of prescribed New Zealand authority\u2019s equivalent prudential rules for the purpose of calculating the Level 2 regulatory capital requirement.
In addition, operational RWA is now calculated under APS 115
Capital Adequacy: Standardised Measurement Approach to Operational Risk (APS 115)
which replaced the previous advanced methodology from December 2022.
The application of APRA Capital Reform in January 2023 reduced RWA by $34.5 billion, equivalent to a 100 bps CET1 ratio benefit. This was partially
offset by APRA\u2019s expectations that ADIs operate a higher capital ratio to maintain an unquestionably strong level.
ANZ BANK GROUP1
The following table provides details of ANZ Bank Group\u2019s capital adequacy ratios at 30 September:
| | Consolidated | |
| | 2023 | 2022 |
| | $m | $m |
| Qualifying capital | | |
| Tier 1 | | |
| Shareholders' equity and non-controlling interests | 69,114 | 66,401 |
| Prudential adjustments to shareholders' equity | (425) | (175) |
| Gross Common Equity Tier 1 capital | 68,689 | 66,226 |
| Deductions | (10,895) | (10,354) |
| Common Equity Tier 1 capital | 57,794 | 55,872 |
| Additional Tier 1 capital2 | | |
| 8,232 | 7,686 | |
| Tier 1 capital | 66,026 | 63,558 |
| Tier 2 capital3 | 24,959 | 19,277 |
| Total qualifying capital | 90,985 | 82,835 |
| Capital adequacy ratios (Level 2) | | |
| Common Equity Tier 1 | 13.3% | 12.3% |
| Tier 1 | 15.2% | 14.0% |
| Tier 2 | 5.8% | 4.2% |
| Total capital ratio | 21.0% | 18.2% |
| Risk weighted assets | 433,327 | 454,718 |
1. This information is not within the scope of the external audit of the Group Financial Report by the Group\u2019s external auditor, KPMG. The information presented in this table is a regulatory requirement
disclosed in Part A of the
APRA Reporting Form (ARF) 110 Capital Adequacy
which will be subject to audit in accordance with
Prudential Standard APS 310 Audit and Related Matters
.
2. This includes Additional Tier 1 capital of $8,232 million (2022: $7,705 million) (refer to Note 16 Debt Issuances), regulatory adjustments and deductions of nil (2022: -$19 million).
3. This includes Tier 2 capital of $23,707 million (2022: $17,907 million) (refer to Note 16 Debt Issuances), general reserve for impairment of financial assets of $1,776 million (2022: $1,233 million) and regulatory
adjustments and deductions of -$525 million (2022: $137 million).
25. CONTROLLED ENTITIES
| The ultimate parent of the Group is ANZ Group Holdings Limited | | |
| Incorporated in | |
| Australia | |
| | Nature of Business |
| | Banking |
| The Group holds 100% of the voting interests in all controlled entities, unless noted otherwise. | | |
| | | |
| The material controlled entities of the Group are: | | |
| ANZ Bank (Vietnam) Limited1 | Vietnam | Banking |
| ANZ Funds Pty. Ltd. | Australia | Holding Company |
| ANZ Bank (Kiribati) Limited1 (75% ownership) | Kiribati | Banking |
| ANZ Bank (Samoa) Limited1 | Samoa | Banking |
| ANZ Bank (Vanuatu) Limited2 | Vanuatu | Banking |
| ANZ Holdings (New Zealand) Limited1 | New Zealand | Holding Company |
| ANZ Bank New Zealand Limited1 | New Zealand | Banking |
| ANZ Investment Services (New Zealand) Limited1 | New Zealand | Funds Management |
| ANZ New Zealand (Int\u2019l) Limited1 | New Zealand | Finance |
| ANZ New Zealand Investments Holdings Limited1 | New Zealand | Holding Company |
| ANZ New Zealand Investments Limited1 | New Zealand | Funds Management |
| ANZNZ Covered Bond Trust1,4 | New Zealand | Finance |
| ANZ International Private Limited1 | Singapore | Holding Company |
| ANZcover Insurance Private Ltd1 | Singapore | Captive-Insurance |
| ANZ Lenders Mortgage Insurance Pty. Limited | Australia Mortgage | Insurance |
| ANZ Residential Covered Bond Trust4 | Australia | Finance |
| Australia and New Zealand Bank (China) Company Limited1 | China | Banking |
| Australia and New Zealand Banking Group (PNG) Limited1 | Papua New Guinea | Banking |
| Citizens Bancorp3 | Guam Holding | Company |
| ANZ Guam Inc3 | Guam | Banking |
| Institutional Securitisation Services Limited | Australia | Securitisation Manager |
| PT Bank ANZ Indonesia1 (99% ownership) | Indonesia | Banking |
1. Audited by overseas KPMG firms \u2014 either as part of the Group audit, or for standalone financial statements as required.
2. Audited by Law Partners.
3. Audited by Deloitte Guam.
4. Not owned by the Group. Control exists as the Group retains substantially all the risks and rewards of the operations.
CHANGES TO MATERIAL CONTROLLED ENTITIES
ANZ Singapore Limited was deregistered on 18 August 2023. ANZ International (Hong Kong) Limited, ANZ (Thai) Public Company Limited (formerly
ANZ Bank (Thai) Public Company Limited), and Chongqing Liangping ANZ Rural Bank Company Limited are in liquidation as at 30 September 2023.
SIGNIFICANT RESTRICTIONS
Controlled entities that are subject to prudential regulation may be required to maintain minimum capital or other regulatory requirements which
may, from time to time, limit the entity\u2019s ability to transfer assets, pay dividends or make other capital distributions to the parent entity or to other
entities in the Group. The Group manages such restrictions within our risk management framework, as outlined in Note 17 Financial Risk Management
and our capital management strategy, as outlined in Note 24 Capital Management.
As at 30 September 2023, restrictions on the ability of an entity within the Group to transfer assets, pay dividends or make other capital distributions to
other entities in the Group were not material to the liquidity or capital management of the Group.
RECOGNITION AND MEASUREMENT
The Group\u2019s subsidiaries are those entities it controls through:
\u2022 being exposed to, or having rights to, variable returns from the entity; and
\u2022 being able to affect those returns through its power over the entity.
The Group assesses whether it has power over those entities by examining the Group\u2019s existing rights to direct the relevant activities of the
entity.
If the Group sells or acquires subsidiaries during the year, it includes their operating results in the Group results to the date of disposal or
from the date of acquisition. When the Group\u2019s control ceases, it derecognises the assets and liabilities of the subsidiary, any related non-
controlling interest and other components of equity.
If the Group\u2019s ownership interest in a subsidiary changes in a way that does not result in a loss of control, then the Group accounts for that
as a transaction with equity holders in their capacity as equity holders.
All transactions between Group entities are eliminated on consolidation.
26. INVESTMENTS IN ASSOCIATES
Significant associates of the Group are:
| | Ordinary share | | | |
| | interest | | Carrying amount $m | |
| Name of entity | Principal activity | 2023 | 2022 | 2023 | 2022 |
| AMMB Holdings Berhad (AmBank) | Banking and insurance | 22% | 22% | 881 | 790 |
| PT Bank Pan Indonesia (PT Panin) | Consumer and business bank | 39% | 39% | 1,440 | 1,318 |
| Worldline Australia Pty Ltd (Worldline)1 | Payment and transactional services | - | 49% | - | 47 |
| Aggregate other individually immaterial associates | | - | n/a | - | 26 |
| Total carrying value of associates2 | | | | 2,321 | 2,181 |
1. As part of the Restructure, ANZBGL\u2019s investment in Worldline Australia Pty Ltd was transferred to ANZ NBH Pty Ltd.
2. Includes the impact of foreign currency translation recognised in the foreign currency translation reserve.
FINANCIAL INFORMATION ON SIGNIFICANT ASSOCIATES
Set out below is the summarised financial information of each associate that is significant to the Group. The summarised financial information is based
on the associates\u2019 IFRS financial information and may require the use of unaudited financial information as each associate has a different financial year
to the Group (PT Panin 31 December, AmBank 31 March, Worldline 31 December).
| AMMB Holdings Berhad | | PT Bank Pan Indonesia | | | |
| | | | | Worldline Australia | |
| | | | | Pty Ltd1 | |
| Principal place of business and country of incorporation | Malaysia | | Indonesia | | Australia | |
| | 2023 | 2022 | 2023 | 2022 | 2023 | 2022 |
| | $m | $m | $m | $m | $m | $m |
| Summarised results | | | | | | |
| Operating income | 1,517 | 1,511 | 1,273 | 1,206 | - | 57 |
| Profit/(Loss) for the year | 545 | 529 | 372 | 198 | - | (21) |
| Other comprehensive income/(loss) | 87 | (128) | 24 | 6 | - | - |
| Total comprehensive income/(loss) | 632 | 401 | 396 | 204 | - | (21) |
| Less: Total comprehensive (income)/loss attributable to non\u2013 | | | | | | |
| controlling interests | (8) | (18) | (69) | 25 | - | - |
| Total comprehensive income/(loss) attributable to owners of | | | | | | |
| associate | 624 | 383 | 327 | 229 | - | (21) |
| Summarised financial position | | | | | | |
| Total assets2 | 62,057 | 57,220 | 20,498 | 20,537 | - | 203 |
| Total liabilities2 | 58,015 | 53,234 | 16,928 | 17,234 | - | 90 |
| Total net assets2 | 4,042 | 3,986 | 3,570 | 3,303 | - | 113 |
| Less: Non-controlling interests of associate | (301) | (402) | (348) | (315) | - | - |
| Net assets attributable to owners of associate | 3,741 | 3,584 | 3,222 | 2,988 | - | 113 |
| Reconciliation to carrying amount of Group's interest in associate | | | | | | |
| Carrying amount at the beginning of the year | 790 | 719 | 1,318 | 1,210 | - | - |
| Acquired | - | - | | - | | 57 |
| Group's share of total comprehensive income/(loss) | 138 | 81 | 138 | 71 | - | (10) |
| Dividends received from associate | (42) | (12) | - | (18) | - | - |
| Foreign currency translation reserve adjustments | (5) | 2 | (16) | 55 | - | - |
| Carrying amount at the end of the year | 881 | 790 | 1,440 | 1,318 | - | 47 |
| Market value of Group's investment in associate3 | 875 | 929 | 1,167 | 2,016 | n/a | n/a |
1. As part of the Restructure, ANZBGL\u2019s investment in Worldline Australia Pty Ltd was transferred to ANZ NBH Pty Ltd.
2. Includes market value adjustments (including goodwill) the Group made at the time of acquisition (and adjustments for any differences in accounting policies).
IMPAIRMENT ASSESSMENT
The Group assesses the carrying value of its associates investments for impairment indicators.
At 30 September 2023, the impairment assessment of non-lending assets identified that one of the Group\u2019s associated investments PT Panin had
indicators of impairment. No impairment was recognised as its carrying value is supported by its VIU calculations.
RECOGNITION AND MEASUREMENT
An associate is an entity over which the Group has significant influence over its operating and financial policies but does not control. The
Group accounts for associates using the equity method. Its investments in associates are carried at cost plus the post-acquisition share of
changes in the associate\u2019s net assets less accumulated impairments. Dividends the Group receives from associates are recognised as a
reduction in the carrying amount of the investment. The Group includes goodwill recognised by the associate in the carrying amount of
the investment. It does not individually test the goodwill incorporated in the associates carrying amount for impairment.
At least at each reporting date, the Group reviews investments in associates for any indication of impairment. If an indication of impairment
exists, then the Group determines the recoverable amount of the associate using the higher of:
\u2022 the associate\u2019s fair value less cost of disposal; and
\u2022 its value-in-use.
We use a discounted cash flow methodology, and when applicable, other methodologies (such as capitalisation of earnings methodology),
to determine the recoverable amount when determining a VIU.
KEY JUDGEMENTS AND ESTIMATES
Investments in associates and joint ventures are assessed at each reporting date and tested for impairment when there is an indication that
the investment may be impaired. In addition, the Group is required to assess at each reporting date whether the recoverable amount of
the Group\u2019s investment has increased to such a level as to support the reversal of prior period impairments.
Significant management judgment is required to determine the key assumptions underpinning the VIU calculation. Factors that may
change in subsequent periods and lead to potential future impairments include lower than forecast earnings levels in the near term and/or
a decrease in the long term growth forecasts, increases to required levels of regulatory capital and an increase in the post-tax discount rate
arising from an increase in the risk premium or risk-free rates.
The key assumptions used in the VIU calculation are outlined below:
| | As at 30 September 2023 | PT Panin |
| | Post-tax discount rate | 12.2% |
| | Terminal growth rate | 5.0% |
| | Expected earnings growth (compound annual growth rate \u2013 5 years) | 5.4% |
| | Common Equity Tier 1 ratio (5 year average) | 12.8% |
The VIU calculations are sensitive to changes in the underlying assumptions with reasonably possible changes in key assumptions having a
positive or negative impact on the VIU outcome, and as such the recoverable amount of the investment.
\u2022 A change in the September 2023 post-tax discount rate by +/- 50bps would impact the VIU outcome for PT Panin by $(91 million)/
$105 million.
\u2022 A change in the September 2023 terminal growth rate by +/- 25bps would impact the VIU outcome for PT Panin by $55 million/
($51 million).
The investment would not be impaired if the discount rate were increased or the terminal growth rate reduced by the reasonably possible
changes above.
27. STRUCTURED ENTITIES
A Structured Entity (SE) is an entity that has been designed such that voting or similar rights are not the dominant factor in determining who controls
the entity. SEs are generally established with restrictions on their ongoing activities in order to achieve narrow and well defined objectives.
SEs are classified as subsidiaries and consolidated when control exists. If the Group does not control a SE, then it is not consolidated. This note
provides information on both consolidated and unconsolidated SEs.
The Group\u2019s involvement with SEs is as follows:
| Type | Details |
| Securitisation | The Group establishes SEs to securitise customer loans and advances that it has originated, in order to diversify |
| sources of funding for liquidity management. Securitisation programs include customer loans and advances |
| assigned to bankruptcy remote SEs to provide either security for obligations payable on notes issued by the SEs |
| to external investors or create assets held by the Group eligible for repurchase agreements with applicable |
| central banks. |
| The Group retains control over these SEs and therefore they are consolidated. Refer to Note 28 Transfers of |
| Financial Assets for further details. |
| The Group also establishes SEs on behalf of customers to securitise their loans or receivables. The Group may |
| manage these securitisation vehicles or provide liquidity or other support. Additionally, the Group may acquire |
| interests in securitisation vehicles set up by third parties through holding securities issued by such entities. In |
| limited circumstances where control exists, the Group consolidates the SE. |
| Covered bond issuances | Certain loans and advances have been assigned to bankruptcy remote SEs to provide security for issuances of |
| debt securities by the Group. The Group retains control over these SEs and therefore they are consolidated. Refer |
| to Note 28 Transfers of Financial Assets for further details. |
| Structured finance | |
| arrangements | |
| The Group is involved with SEs established: |
| \u2022 in connection with structured lending transactions to facilitate debt syndication and/or to ring-fence |
| collateral; and |
| \u2022 to own assets that are leased to customers in structured leasing transactions. |
| The Group may manage the SE, hold minor amounts of the SE\u2019s capital, or provide risk management products |
| (derivatives) to the SE. In most instances, the Group does not control these SEs. In limited circumstances where |
| control exists, the Group consolidates the SE. |
| Funds management activities | The Group is the scheme manager for a number of Managed Investment Schemes (MIS) in New Zealand. These |
| MIS are financed through the issue of units to investors and the Group considers them to be SEs. The Group\u2019s |
| interests in these MIS are limited to receiving fees for services or providing risk management products |
| (derivatives). These interests do not create significant exposures that would allow the Group to control the funds. |
| Therefore, these MIS are not consolidated. |
CONSOLIDATED STRUCTURED ENTITIES
FINANCIAL OR OTHER SUPPORT PROVIDED TO CONSOLIDATED STRUCTURED ENTITIES
The Group provides financial support to consolidated SEs as outlined below.
| Securitisation and covered | |
| bond issuances | |
| The Group provides lending facilities, derivatives and commitments to these SEs and/or holds debt instruments |
| they have issued. |
| Structured finance | |
| arrangements | |
| The assets held by these SEs are normally pledged as collateral for financing provided. Certain consolidated SEs |
| are financed entirely by the Group while others are financed by syndicated loan facilities in which the Group is a |
| participant. The financing provided by the Group includes lending facilities where the Group\u2019s exposure is limited |
| to the amount of the loan and any undrawn amount. Additionally, the Group has provided Letters of Support to |
| these consolidated SEs confirming that the Group will not demand repayment of the financing provided for the |
| ensuing 12 month period. |
The Group did not provide any non-contractual support to consolidated SEs during the year (2022: nil). Other than as disclosed above, the Group does
not have any current intention to provide financial or other support to consolidated SEs.
UNCONSOLIDATED STRUCTURED ENTITIES
GROUP\u2019S INTEREST IN UNCONSOLIDATED STRUCTURED ENTITIES
An \u2018interest\u2019 in an unconsolidated SE is any form of contractual or non-contractual involvement with a SE that exposes the Group to variability of
returns from the performance of that SE. These interests include, but are not limited to: holdings of debt or equity securities; derivatives that pass-on
risks specific to the performance of the SE, lending, loan commitments, financial guarantees, and fees from funds management activities.
For the purpose of disclosing interests in unconsolidated SEs:
\u2022 no disclosure is made if the Group\u2019s involvement is not more than a passive interest - for example: when the Group\u2019s involvement constitutes a
typical customer-supplier relationship. On this basis, exposures to unconsolidated SEs that arise from lending, trading and investing activities are
not considered disclosable interests - unless the design of the structured entity allows the Group to participate in decisions about the relevant
activities (being those that significantly affect the entity\u2019s returns).
\u2022 \u2018interests\u2019 do not include derivatives intended to expose the Group to market-risk (rather than performance risk specific to the SE) or derivatives
through which the Group creates, rather than absorbs, variability of the unconsolidated SE (such as purchase of credit protection under a credit
default swap).
The table below sets out the Group\u2019s interests in unconsolidated SEs together with the maximum exposure to loss that could arise from
those interests:
| | Securitisation | | Structured finance | | Total | |
| | 2023 | 2022 | 2023 | 2022 | 2023 | 2022 |
| | $m | $m | $m | $m | $m | $m |
| On-balance sheet interests | | | | | | |
| Investment securities | 2,070 | 3,352 | - | - | 2,070 | 3,352 |
| Gross loans and advances | 10,367 | 9,433 | 24 | 43 | 10,391 | 9,476 |
| Total on-balance sheet | 12,437 | 12,785 | 24 | 43 | 12,461 | 12,828 |
| Off-balance sheet interests | | | | | | |
| Commitments (facilities undrawn) | 3,270 | 2,078 | - | - | 3,270 | 2,078 |
| Guarantees | 50 | 50 | - | - | 50 | 50 |
| Total off-balance sheet | 3,320 | 2,128 | - | - | 3,320 | 2,128 |
| Maximum exposure to loss | 15,757 | 14,913 | 24 | 43 | 15,781 | 14,956 |
In addition to the interests above, the Group earned funds management fees from unconsolidated investment funds of $177 million
(2022: $181 million) during the year.
The Group\u2019s maximum exposure to loss represents the maximum amount of loss that the Group could incur as a result of its involvement with
unconsolidated SEs if loss events were to take place - regardless of the probability of occurrence. This does not in any way represent the actual losses
expected to be incurred. Furthermore, the maximum exposure to loss is stated gross of the effects of hedging and collateral arrangements entered
into to mitigate ANZ\u2019s exposure to loss.
The maximum exposure to loss has been determined as:
\u2022 the carrying amount of Investment securities measured at amortised cost; and
\u2022 the carrying amount plus the undrawn amount of any committed loans and advances.
The size of unconsolidated SEs is indicated by total assets which vary by SE with the largest single SE having a value of approximately $4.3 billion.
The Group did not provide any non-contractual support to unconsolidated SEs during the year (2022: nil) nor does it have any current intention to
provide financial or other support to unconsolidated SEs.
SPONSORED UNCONSOLIDATED STRUCTURED ENTITIES
The Group may also sponsor unconsolidated SEs in which it has no disclosable interest.
For the purposes of this disclosure, the Group considers itself the \u2018sponsor\u2019 of an unconsolidated SE if it is the primary party involved in the design and
establishment of that SE and:
\u2022 the Group is the major user of that SE; or
\u2022 the Group\u2019s name appears in the name of that SE, or on its products; or
\u2022 the Group provides implicit or explicit guarantees of that SE\u2019s performance.
The Group has sponsored the ANZ PIE Fund in New Zealand, which invests only in deposits with ANZ Bank New Zealand. The Group does not provide
any implicit or explicit guarantees of the capital value or performance of investments in the ANZ PIE Fund. There was no income received from, nor
assets transferred to, this entity during the year.
KEY JUDGEMENTS AND ESTIMATES
Significant judgement is required in assessing whether the Group has control over Structured Entities. Judgement is required to determine
the existence of:
\u2022 power over the relevant activities (being those that significantly affect the entity\u2019s returns); and
\u2022 exposure to variable returns of the entity.
28. TRANSFERS OF FINANCIAL ASSETS
In the normal course of business the Group enters into transactions where it transfers financial assets directly to third parties or to SEs. These transfers
may result in the Group fully, or partially, derecognising those financial assets - depending on the Group\u2019s exposure to the risks and rewards or control
over the transferred assets. If the Group retains substantially all of the risk and rewards of a transferred asset, the transfer does not qualify for
derecognition and the asset remains on the Group\u2019s balance sheet in its entirety.
SECURITISATIONS
Net loans and advances include residential mortgages securitised under the Group\u2019s securitisation programs which are assigned to bankruptcy
remote SEs to provide security for obligations payable on the notes issued by the SEs. The holders of the issued notes have full recourse to the pool of
residential mortgages which have been securitised and the Group cannot otherwise pledge or dispose of the transferred assets.
In some instances, the Group is also the holder of the securitised notes issued by the SEs. In addition, the Group is entitled to any residual income of
the SEs and sometimes enters into derivatives with the SEs. The Group retains the risks and rewards of the residential mortgages and continues to
recognise the mortgages as financial assets.
The Group is exposed to variable returns from its involvement with these securitisation SEs and has the ability to affect those returns through its
power over the SEs activities. The SEs are therefore consolidated by the Group.
COVERED BONDS
The Group operates various global covered bond programs to raise funding in its primary markets. Net loans and advances include residential
mortgages assigned to bankruptcy remote SEs associated with these covered bond programs. In respect of each program, a covered bond guarantor
has guaranteed payments of interest and principal pursuant to a guarantee which is secured over its assets, including these residential mortgages.
Substantially all of the assets of each covered bond guarantor consist of that covered bond guarantor\u2019s equitable interests in mortgage loans secured
by residential real estate.
The covered bond holders have dual recourse to the issuer and the cover pool of assets. The issuer cannot otherwise pledge or dispose of the
transferred assets, however, subject to legal arrangements it may repurchase and substitute assets as long as the required cover is maintained.
The Group is required to maintain the cover pool at a level sufficient to cover the bond obligations. In addition, the Group is entitled to any residual
income of the covered bond SEs (after all payments to the covered bond holders and external parties) and enters into derivatives with the SEs. The
Group retains the majority of the risks and rewards of the residential mortgages and continues to recognise the mortgages as financial assets.
The Group is exposed to variable returns from its involvement with the covered bond SEs and has the ability to affect those returns through its power
over the SEs activities. The SEs are therefore consolidated by the Group. The covered bonds issued externally are included within debt issuances.
REPURCHASE AGREEMENTS
When the Group sells securities subject to repurchase agreements under which we retain substantially all the risks and rewards of ownership, then
those assets do not qualify for derecognition. An associated liability is recognised for the consideration received from the counterparty.
STRUCTURED FINANCE ARRANGEMENTS
The Group arranges funding for certain customer transactions through structured leasing. These transactions are recognised on Group\u2019s balance sheet
as lease receivables or loans. At times, other financial institutions participate in the funding of these arrangements. This participation involves a
proportionate transfer of the rights to the assets recognised by the Group. The participating banks have limited recourse to the leased assets and
related proceeds. Where the Group continues to be exposed to some of the risks of the transferred assets through a derivative or other continuing
involvement, the Group does not derecognise the lease receivable or loan. Instead, the Group recognises an associated liability representing its
obligations to the participating financial institutions.
The tables below set out the balance of assets transferred that do not qualify for derecognition, along with the associated liabilities.
| Securitisations1,2 | | Covered bonds | | | | | |
| | | | | Repurchase | | | |
| | | | | agreements | | | |
| | | | | | | Structured finance | |
| | | | | | | arrangements | |
| | 2023 | 2022 | 2023 | 2022 | 2023 | 2022 | 2023 | 2022 |
| Consolidated | $m | $m | $m | $m | $m | $m | $m | $m |
| Current carrying amount of assets transferred | 886 | 1,121 | 31,188 | 27,575 | 47,552 | 52,757 | 27 | 36 |
| Carrying amount of associated liabilities | 880 | 1,115 | 18,223 | 12,967 | 44,454 | 47,229 | 27 | 36 |
| | Securitisations1,2 | | Covered bonds | | | | | |
| | | | | Repurchase | | | |
| | | | | agreements | | | |
| | | | | | | Structured finance | |
| | | | | | | arrangements | |
| | 2023 | 2022 | 2023 | 2022 | 2023 | 2022 | 2023 | 2022 |
| The Company | $m | $m | $m | $m | $m | $m | $m | $m |
| Current carrying amount of assets transferred | 886 | 1,121 | 21,017 | 17,953 | 42,002 | 47,846 | - | - |
| Carrying amount of associated liabilities | 886 | 1,121 | 21,017 | 17,953 | 40,080 | 42,940 | - | - |
1. Does not include transfers to internal structured entities where there are no external investors.
2. The securitisation noteholders have recourse only to the pool of residential mortgages which have been securitised. The carrying value of securitised assets and the associated liabilities approximates their
fair value.
29. SUPERANNUATION AND POST EMPLOYMENT BENEFIT OBLIGATIONS
Set out below is a summary of amounts recognised in the Balance Sheet in respect of the defined benefit superannuation schemes:
| | Consolidated | | The Company | |
| | 2023 | 2022 | 2023 | 2022 |
| $m | $m | $m | $m |
| Defined benefit obligation and scheme assets | | | | |
| Present value of funded defined benefit obligation | (959) | (930) | (839) | (809) |
| Fair value of scheme assets | 1,131 | 1,123 | 991 | 988 |
| Net defined benefit asset | 172 | 193 | 152 | 179 |
| As represented in the Balance Sheet | | | | |
| Net liabilities arising from defined benefit obligations included in Payables | | | | |
| and other liabilities | (4) | (6) | (4) | (6) |
| Net assets arising from defined benefit obligations included in Other assets | 176 | 199 | 156 | 185 |
| Net defined benefit asset | 172 | 193 | 152 | 179 |
| Weighted average duration of the benefit payments reflected in the defined | | | | |
| benefit obligation (years) | 11.4 | 14.8 | 10.9 | 14.9 |
As at the most recent reporting dates of the schemes, the aggregate surplus of net market value of assets over the value of accrued benefits on a
funding basis was $53 million (2022: $69 million surplus). In 2023, the Group made defined benefit contributions totalling $2 million
(2022: $2 million). It expects to make contributions of approximately $2 million next financial year.
GOVERNANCE OF THE SCHEMES AND FUNDING OF THE DEFINED BENEFIT SECTIONS
The main defined benefit superannuation schemes in which the Group participates operate under trust law and are managed and administered on
behalf of the members in accordance with the terms of the relevant trust deed and rules and all relevant legislation. These schemes have corporate
trustees, which are wholly owned subsidiaries of the Group. The trustees are the legal owners of the assets, which are held separately from the assets
of the Group, and are responsible for setting investment policy and agreeing funding requirements with the employer through the triennial actuarial
valuation process.
The Group has defined benefit arrangements in Australia, Japan, New Zealand, Philippines, Taiwan and United Kingdom. The defined benefit section
of the ANZ Australian Staff Superannuation Scheme, the ANZ UK Staff Pension Scheme and the ANZ National Retirement Scheme in New Zealand are
the three largest plans. They have been closed to new members since 1987, 2004 and 1991 respectively. None of the schemes had a material deficit,
or surplus, at the last funding valuation. The Group has no present liability under any of the schemes\u2019 trust deeds to fund a deficit (measured on a
funding basis). A contingent liability of the Group may arise if any of the schemes were wound up.
RECOGNITION AND MEASUREMENT
Defined benefit superannuation schemes
The Group operates a small number of defined benefit schemes. Independent actuaries calculate the liability and expenses related to
providing benefits to employees under each defined benefit scheme. They use the Projected Unit Credit Method to value the liabilities. The
balance sheet includes:
\u2022 a defined benefit liability if the obligation is greater than the fair value of the schemes assets; and
\u2022 an asset (capped to its recoverable amount) if the fair value of the assets is greater than the obligation.
In each reporting period, the movements in the net defined benefit liability are recognised as follows:
\u2022 the net movement relating to the current period\u2019s service cost, net interest on the defined benefit liability, past service costs and other
costs (such as the effects of any curtailments and settlements) as operating expenses;
\u2022 remeasurements of the net defined benefit liability (which comprise actuarial gains and losses and return on scheme assets, excluding
interest income included in net interest) directly in retained earnings through other comprehensive income; and
\u2022 contributions of the Group directly against the net defined benefit position.
Defined contribution superannuation schemes
The Group operates a number of defined contribution schemes. It also contributes (according to local law, in the various countries in which
it operates) to Government and other plans that have the characteristics of defined contribution plans. The Group\u2019s contributions to these
schemes are recognised as personnel expenses when they are incurred.
KEY JUDGEMENTS AND ESTIMATES
The main assumptions we use in valuing defined benefit obligations are listed in the table below. A change to any assumptions, or
applying different assumptions, could have an effect on the Statement of Other Comprehensive Income and Balance Sheet.
| | | | Sensitivity analysis | | |
| | | change in significant | | |
| | | assumptions | | |
| | | | Increase/(decrease) in | |
| | | | defined benefit | |
| | | | obligation | |
| | | | | 2023 | |
| | | | $m | |
| | | | | 2022 |
| | | | | $m |
| Consolidated | 2023 | 2022 | | | |
| Discount rate (% p.a.) | 1.15-5.6 | 1.35-5.45 | 0.5% increase | (43) | (49) |
| Future salary increases (% p.a.) | 2.0-3.5 | 1.5-3.8 | | | |
| Future pension indexation | | | | | |
| In payment (% p.a.)/In deferment (% p.a.) | 2.9-3.4 | 3.1-3.5/3.0 | 0.5% increase | 34 | 32 |
| Life expectancy at age 60 for current pensioners | | | 1 year increase | 33 | 40 |
| \u2013 Males (years) | 26.3-28.3 | 26.2-28.3 | | | |
| \u2013 Females (years) | 29.2-30.2 | 29.1-30.2 | | | |
| | | | Sensitivity analysis | | |
| | | change in significant | | |
| | | assumptions | | |
| | | | Increase/(decrease) in | |
| | | | defined benefit | |
| | | | obligation | |
| | | | | 2023 | |
| | | | $m | |
| | | | | 2022 |
| | | | | $m |
| | | | | | |
T | | | | | |
| he Company | 2023 | 2022 | | | |
| Discount rate (% p.a.) | 5.5-5.6 | 5.1-5.45 | 0.5% increase | (38) | (43) |
| Future salary increases (% p.a.) | 3.5 | 3.8 | | | |
| Future pension indexation | | | | | |
| In payment (% p.a.)/In deferment (% p.a.) | 2.9-3.3/2.8 | 3.1-3.5/3.0 | 0.5% increase | 29 | 26 |
| Life expectancy at age 60 for current pensioners | | | 1 year increase | 29 | 35 |
| \u2013 Males (years) | 26.3-28.3 | 26.2-28.3 | | | |
| \u2013 Females (years) | 29.2-30.2 | 29.1-30.2 | | | |
30. EMPLOYEE SHARE AND OPTION PLANS
On 3 January 2023, ANZBGL established, by a scheme of arrangement, a non-operating holding company, ANZGHL, as the new listed parent holding
company of the ANZ Group. There is no impact to employee equity (deferred shares, deferred share rights, restricted rights and performance rights) as
a result of the Restructure.
ANZ operates a number of employee share and option schemes under the ANZ Employee Share Acquisition Plan and the ANZ Share Option Plan
which are operated by the Company\u2019s ultimate parent, ANZGHL. These are Group share based payment arrangements under which shares in ANZGHL
(ANZ shares) are allocated or granted to employees of the Group.
ANZ EMPLOYEE SHARE ACQUISITION PLAN
ANZ Employee Share Acquisition Plan schemes that operated during 2023 and 2022 were the Deferred Share Plan and the Variable Pay to Shares (VPS)
Offer. The ANZ Incentive Plan (ANZIP) (the variable remuneration plan operating across ANZ) has Short Term Variable Remuneration or Variable
Remuneration delivered under the Deferred Share Plan or ANZ Share Option Plan for eligible employees.
Deferred Share Plan
i) ANZ Incentive Plan (ANZIP) \u2013 Short term Variable Remuneration (STVR) and Variable Remuneration (VR) \u2013 deferred shares
| Award Type | STVR (deferred shares) | STVR/VR historical (deferred shares) | VR (deferred shares) |
| Eligibility | Chief Executive Officer (CEO), Group Executive Committee (ExCo) and Group | | |
| General Manager Internal Audit (GGM IA)1. | | |
| | | All other employees (excluding |
| | | select roles in the United Kingdom |
| | | (UK)/China2) |
| Financial Year (FY) of | | | |
| grant | | | |
| 2022 Performance and | | |
| Remuneration Review (PRR): granted | | |
| in FY23 | | |
| | 2021 PRR: granted in FY22 | |
| | Historical grants: on foot during FY23 | |
| | & FY22 | |
| | | 2022 and 2021 PRR: granted in FY23 |
| | | & FY22 |
| | | Historical grants: on foot during FY23 |
| | | & FY22 |
| Grant approach | 50% of the CEO, ExCo and GGM IA\u2019s | | |
| Short Term Variable Remuneration | | |
| (STVR) deferred as shares. | | |
| | 50% of the CEO\u2019s STVR, 25% of ExCo\u2019s | |
| | Variable Remuneration (VR) (except | |
| | for the Chief Risk Officer (CRO)), and | |
| | 33% of the CRO and GGM IA\u2019s VR, | |
| | deferred as shares. | |
| | | If VR is at or exceeds AUD 100,000, |
| | | then 60% of total VR amount is |
| | | deferred as shares. |
| Conditions | Deferred over years two and three, where year 1 includes the performance | | |
| period (i.e., 1 October to 30 September). Granted in late November. | | |
| | | Deferred over years two, three and |
| | | four, where year 1 includes the |
| | | performance period. Granted in late |
| | | November. |
| Allocation value | Deferred shares granted based on | | |
| the Volume Weighted Average Price | | |
| (VWAP) of ANZ shares traded on the | | |
| ASX in the five trading days leading | | |
| up to and including 1 October. | | |
| | Deferred shares granted based on the VWAP of ANZ shares traded on the | |
| | ASX in the five trading days leading up to and including the date of grant. | |
1. All Banking Executive Accountability Regime (BEAR) Accountable Executives.
2. Specific deferral arrangements also exist under ANZIP for roles defined as UK Material Risk Takers (MRTs) and China MRTs, in line with local regulatory requirements.
ii) Exceptional circumstances
Remuneration
foregone
In exceptional circumstances, we grant deferred shares to certain employees when they start with ANZ to
compensate them for remuneration they have forgone from their previous employer. The vesting period generally
aligns with the remaining vesting period of the remuneration they have forgone, and therefore varies between
grants.
Retention We may grant deferred shares to high performing employees who are regarded as a significant retention risk to ANZ.
iii) Further information
| Cessation | Unless the Board1 decides otherwise, employees forfeit their unvested deferred shares if they resign, are terminated |
| on notice, or are dismissed for serious misconduct. The deferred shares may be held in trust beyond the deferral |
| period. |
| Dividends | Dividends are reinvested in the Dividend Reinvestment Plan. |
| Instrument | Deferred share rights may be granted instead of deferred shares in some countries as locally appropriate (see |
| deferred share rights section). |
| Expensing value (fair | |
| value) | |
| We expense the fair value of deferred shares on a straight-line basis over the relevant vesting period and we |
| recognise the expense as a share-based compensation expense with a corresponding increase in equity. Deferred |
| shares are expensed based on the one-day VWAP at the date of grant. |
| 2023 and 2022 grants | During the 2023 year, we granted 2,244,181 deferred shares (2022: 1,971,715) with a weighted average allocation |
| value of $24.37 (2022: $27.52). |
| Downward adjustment | Deferred shares remain at risk and the Board has the discretion to adjust the number of deferred shares downwards, |
| including to zero at any time before the vesting date (malus), and limited to select employees2, recovery post vesting |
| (i.e., clawback). ANZ\u2019s downward adjustment provisions are detailed in section 7.3 of the 2023 Remuneration Report. |
| Board discretion was not exercised to apply malus or clawback to any deferred shares in 2023 (2022: nil). |
1. References to \u2018the Board\u2019 throughout this note means the Boards of ANZGHL and ANZBGL.
2. Clawback applies to the CEO, ExCo and GGM IA (for awards granted in 2023 financial year), and to select senior employees in jurisdictions where clawback regulations apply.
Variable Pay to Shares (VPS) Offer
| Eligibility, grant | |
| approach and | |
| conditions | |
| VPS provides employees in Australia the opportunity to receive up to $1,000 worth of ANZ shares with concessional |
| tax treatment (where criteria are met). All ANZ shares are held by a custodian or nominee appointed by the Trustee |
| on the Trustee\u2019s behalf and are restricted for 3 years. During this time employees benefit from dividend payments |
| which are reinvested through the Dividend Reinvestment Plan (DRP) and have voting entitlements. After the |
| restriction period has been reached the shares can sold or transferred. |
| Allocation value | Granted based on the VWAP of ANZ shares traded on the ASX in the five trading days leading up to and including the |
| date of grant. | |
| Expensing value | |
| (fair value) | |
| Expensed based on the one-day VWAP at the date of grant. |
| 2023 grants | During the 2023 year, we granted 55,600 shares on 22 November 2022 at an issue price of $24.46 (no grants were |
| made in relation to the VPS Offer in the 2022 year). |
Expensing of the ANZ Employee Share Acquisition Plan
| Expensing value | |
| (fair value) | |
| The fair value of shares we granted during 2023 under the Deferred Share Plan and VPS Offer, measured as at the date |
| of grant of the shares, is $56.5 million (2022: $52.6 million Deferred Share Plan only) based on 2,299,781 shares |
| (2022: 1,971,715 Deferred Share Plan only) at VWAP of $24.57 (2022: $26.69). | |
ANZ SHARE OPTION PLAN
| Allocation | We may grant selected employees options/rights which entitle them to acquire fully paid ordinary ANZ shares at a |
| fixed price at the time the options/rights vest. Voting and dividend rights will be attached to the ordinary shares |
| allocated on exercise of the options/rights. |
| Each option/right entitles the holder to one ordinary share subject to the terms and conditions imposed on grant. |
| Exercise price of options, determined in accordance with the rules of the plan, is generally based on the VWAP of the |
| shares traded on the ASX in the week leading up to and including the date of grant. For rights, the exercise price is nil. |
| Rules | Prior to the exercise of the option/right if ANZ changes its share capital due to a bonus share issue, pro-rata new share |
| issue or reorganisation the following adjustments are required: |
| \u2022Issue of bonus shares - When the holder exercises their option, they are also entitled to be issued the number of |
| bonus shares they would have been entitled to had they held the underlying shares at the time of the bonus issue; |
| \u2022Pro-rata share offer - We will adjust the exercise price of the option in the manner set out in the ASX Listing Rules; |
| and |
| \u2022Reorganisation - In respect of rights, if there is a bonus issue or reorganisation of ANZ\u2019s share capital, then the |
| Board may adjust the number of rights or the number of underlying shares so that there is no advantage or |
| disadvantage to the holder. |
| Holders otherwise have no other entitlements to participate: |
| \u2022in any new issue of ANZ securities before they exercise their options/rights; or |
| \u2022in a share issue of a body corporate other than ANZ (such as a subsidiary). |
| Any portion of the award which vests may, at the Boards discretion, be satisfied by a cash equivalent payment rather |
| than shares. |
| Expensing value | |
| (fair value) | |
| We expense the fair value of options/rights on a straight-line basis over the relevant vesting period and we recognise |
| the expense as a share-based compensation expense with a corresponding increase in equity. Factors considered in |
| determining the fair value include: the market performance conditions, share price volatility, life of the instrument, |
| dividend yield, and share price at grant date. |
| Satisfying vesting | Any portion of the award of options/rights (that have met the applicable time and performance conditions) may be |
| satisfied by a cash equivalent payment rather than shares at Board discretion. |
| In financial year 2023, all deferred share rights were satisfied through a share allocation, other than 70,231 deferred |
| share rights (2022: 55,977) for which a cash payment was made. |
| There were no performance rights (PR) due to vest in financial year 2023, as a result of a change in the performance |
| period from three years to four years. In financial year 2022, the PR that vested (previously granted in |
| November/December 2018) were satisfied through a share allocation, other than 24,011 PR for which a cash payment |
| was made. |
| Cessation | The provisions that apply if the employee\u2019s employment ends are in section 10.2.3 of the 2023 Remuneration Report. |
| Downward adjustment | As per Deferred Share Plan. |
Option Plans that operated during 2023 and 2022
i) Long Term Variable Remuneration (LTVR) and Variable Remuneration (VR) - restricted rights (RR), performance rights (PR), and deferred
share rights (DSR)
| Award Type | LTVR (RR & PR) | LTVR / VR historical (PR) | ANZIP VR (DSR) |
| Eligibility | CEO, ExCo and GGM IA1 | CEO and ExCo1 | All other employees (excluding |
| | | select roles in the UK/China2) in |
| | | countries where DSR may be |
| | | granted instead of deferred shares |
| FY of grant | 2022 PRR: granted in FY23 | 2021 PRR: granted in FY22 | |
| | Historical grants: on foot during FY23 | |
| | & FY22 | |
| | | 2022 and 2021 PRR: granted in FY23 |
| | | & FY22 |
| | | Historical grants: on foot during FY23 |
| | | & FY22 |
| Grant approach | 50% of the CEO and ExCo\u2019s (except | | |
| for the CRO) LTVR was received as RR | | |
| and 50% as PR. 100% of the CRO and | | |
| GGM IA\u2019s LTVR was received as RR. | | |
| | 100% of the CEO\u2019s LTVR and 50% of | |
| | ExCo\u2019s VR (except for the CRO who | |
| | received 50% VR as DSR instead) was | |
| | received as PR. | |
| | | If VR is at or exceeds AUD 100,000, |
| | | then 60% of total VR amount is |
| | | deferred. |
| Conditions | RR and PR provide a right to acquire | | |
| one ordinary ANZ share at nil cost \u2013 | | |
| subject to time and performance | | |
| conditions. | | |
| Awarded subject to: | | |
| \u2022RR: pre-grant assessment (risk- | | |
| based measures) | | |
| \u2022RR and PR: shareholder approval | | |
| at Annual General Meeting (AGM) | | |
| for CEO award | | |
| Performance condition tested at end | | |
| of four-year performance period: | | |
| \u2022RR: pre-vest assessment (risk- | | |
| based measures) | | |
| \u2022PR: relative and absolute Total | | |
| Shareholder Return (TSR) hurdles | | |
| Deferral period3 = four-year | | |
| performance period (commencing 1 | | |
| October) + holding period (which | | |
| commences the day after end of | | |
| performance period and finishes on | | |
| the 4th, 5th or 6th anniversary of grants | | |
| (CEO only for year 6)). | | |
| Further details provided in section | | |
| 7.2 of the 2023 Remuneration Report. | | |
| | Awarded at the end of the year | |
| | subject to shareholder approval at | |
| | AGM for CEO award. | |
| | PR performance condition tested | |
| | (relative and absolute TSR hurdles) at | |
| | the end of four-year performance | |
| | period. | |
| | The four-year performance period | |
| | commenced on 22 November to 21 | |
| | November four years later. | |
| | The deferral period is four years. | |
| | Further details are provided in section | |
| | 5.2.3a of the 2021 Remuneration | |
| | Report. | |
| | | DSR provide a right to acquire one |
| | | ordinary ANZ share at nil cost after a |
| | | specified vesting period. |
| | | Deferred over years two, three and |
| | | four, where year 1 includes the |
| | | performance period. |
| Allocation value | Face value of ANZ shares traded on the ASX in the five trading days leading up | | |
| to and including 1 October (beginning of the financial year). | | |
| | | The fair value at the date of grant is |
| | | used to determine the number of |
| | | DSR to be allocated and is also used |
| | | for expensing purposes. The fair |
| | | value is adjusted for the absence of |
| | | dividends during the vesting period. |
1. All BEAR Accountable Executives.
2. Specific deferral arrangements also exist under ANZIP for roles defined as UK MRTs and China MRTs, in line with local regulatory requirements.
3. A dividend equivalent payment (DEP) is paid in cash at the end of the relevant deferral period, but is only made to the extent that all or part of the underlying rights meet the relevant performance
condition and vest to the individual. Dividend equivalents accrue over the full deferral period for RR, and only during the holding period for PR.
| Award Type | LTVR (RR & PR) | LTVR / VR historical (PR) | ANZIP VR (DSR) |
| Allocation timing | LTVR awarded around late November/December (subject to shareholder | | |
| approval for CEO). | | |
| | | Granted in late November. |
| Start of FY | End of FY | |
| 2023 grants | During 2023, we granted 393,419 RR | | |
| and 325,880 PR (2022: 542,747 PR). | | |
| | | During 2023, we granted 2,386,278 |
| | | DSR (no performance hurdles) |
| | | (2022: 2,576,907). |
| Downward adjustment | Board discretion was not exercised to apply malus or clawback to any RR or PR | | |
| in 2023 (2022: nil PR). | | |
| | | Board discretion was not exercised |
| | | to apply malus or clawback to any |
| | | deferred share rights in 2023 |
| | | (2022: nil). |
i
ii) Exceptional circumstances
| Remuneration forgone | As per Deferred Share Plan in countries where DSR may be granted instead of deferred shares. |
| Retention | |
Options, Deferred Share Rights, Restricted Rights and Performance Rights on Issue
As at 10 November 2023, there were 396 holders of 4,839,042 DSR on issue, 10 holders of 362,991 RR on issue and 10 holders of 1,510,080 PR on issue.
Options/Rights Movements
This table shows the options/rights over unissued ANZ shares and their related weighted average (WA) exercise prices as at the beginning and end of
2023 and the movements during 2023:
| Opening | | | | | |
| balance | | | | | |
| 1 Oct 2022 | Granted | Forfeited1 | Expired | Exercised | |
| | | | | | Closing |
| | | | | | balance |
| | | | | | 30 Sep 2023 |
| Number of options/rights | 6,209,040 | 3,105,577 | (428,483) | 0 | (2,166,618) | 6,719,516 |
| WA exercise price | $0.00 | $0.00 | $0.00 | $0.00 | $0.00 | $0.00 |
| WA closing share price | | | | | | $24.30 |
| WA remaining contractual life | | | | | | 1.9 years |
| WA exercise price of all exercisable | | | | | | |
| options/rights outstanding | | | | | | $0.00 |
| Outstanding exercisable options/rights | | | | | | 124,377 |
This table shows the options/rights over unissued ANZ shares and their related weighted average exercise prices as at the beginning and end of 2022
and the movements during 2022:
| Opening | | | | | |
| balance | | | | | |
| 1 Oct 2021 | Granted | Forfeited1 | Expired | Exercised | |
| | | | | | Closing |
| | | | | | balance |
| | | | | | 30 Sep 2022 |
| Number of options/rights | 6,307,778 | 3,119,654 | (747,744) | 0 | (2,470,648) | 6,209,040 |
| WA exercise price | $0.00 | $0.00 | $0.00 | $0.00 | $0.00 | $0.00 |
| WA closing share price | | | | | | $25.56 |
| WA remaining contractual life | | | | | | 1.9 years |
| WA exercise price of all exercisable | | | | | | |
| options/rights outstanding | | | | | | $0.00 |
| Outstanding exercisable options/rights | | | | | | 141,633 |
1. Refers to any circumstance where equity can be forfeited (for example on cessation, downward adjustment or performance conditions not met).
All of the shares issued as a result of the exercise of options/rights during 2023 and 2022, were issued at a nil exercise price.
As at the date of the signing of the Directors\u2019 Report on 10 November 2023:
\u2022no options/rights over ordinary shares have been granted since the end of 2023; and
\u2022no shares issued as a result of the exercise of options/rights since the end of 2023.
Fair Value Assumptions
When determining the fair value, we apply the standard market techniques for valuation, including Monte Carlo and/or Black Scholes pricing models.
We do so in accordance with the requirements of AASB 2
Share-based Payments
. The models take into account early exercise of vested equity, non-
transferability and internal/external performance hurdles (if any).
The table below shows the significant assumptions we used as inputs into our fair value calculation of instruments granted during the period. We
present the values as weighted averages, but the specific values we use for each allocation are the ones we use for the fair value calculation.
| 2023 | | | 2022 | |
| Deferred | | | | |
| share | | | | |
| rights | | | | |
| | Restricted | | | |
| | rights | | | |
| | | Performance | | |
| | | rights | | |
| | | | Deferred | |
| | | | share | |
| | | | rights | |
| | | | | Performance |
| | | | | rights |
| Exercise price ($) | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 |
| Share closing price at grant date ($) | 24.67 | 24.54 | 24.51 | 26.62 | 26.92 |
| Expected volatility of ANZ share price (%)1 | 20.0 | 20.0 | 20.0 | 20.0 | 20.0 |
| Equity term (years) | 2.1 | 6.6 | 6.6 | 2.2 | 6.0 |
| Vesting period (years) | 2.0 | 4.6 | 4.6 | 2.1 | 4.0 |
| Expected life (years) | 2.0 | 4.6 | 4.6 | 2.1 | 4.0 |
| Expected dividend yield (%) | 6.25 | 6.25 | 6.25 | 5.50 | 5.50 |
| Risk free interest rate (%) | 3.20 | 3.36 | 3.36 | 0.80 | 1.25 |
| Fair value ($) | 21.81 | 18.61 | 9.85 | 23.71 | 10.38 |
1. Expected volatility represents a measure of the amount by which ANZ\u2019s share price is expected to fluctuate over the life of the rights. The measure of volatility used in the model is the annualised standard
deviation of the continuously compounded rates of return on the historical share price over a defined period of time preceding the date of grant. This historical average annualised volatility is then used to
estimate a reasonable expected volatility over the expected life of the rights.
SATISFYING EQUITY AWARDS
All shares underpinning equity awards may be purchased on market, reallocated or be newly issued shares, or a combination.
The equity we purchased on market during the 2023 financial year (either under the ANZ Employee Share Acquisition Plan and the ANZ Share Option
Plan, or to satisfy options or rights) for all employees amounted to 816,023 shares at an average price of $24.35 per share (2022: 4,230,962 shares at an
average price of $27.57 per share).
31. RELATED PARTY DISCLOSURES
KEY MANAGEMENT PERSONNEL COMPENSATION
Key Management Personnel (KMP) are Directors of ANZBGL (whether executive directors or otherwise), and those personnel with a key responsibility
for the strategic direction and management of the Group (i.e., members of the Group Executive Committee (ExCo)) who have Banking Executive
Accountability Regime (BEAR) accountability and who report to the Chief Executive Officer (CEO). KMP compensation included within total personnel
expenses in Note 4 Operating Expenses is as follows:
| Consolidated | |
| 20231 | 2022 |
| $'000 | $'000 |
| Short-term benefits | 21,072 | 18,294 |
| Post-employment benefits | 483 | 394 |
| Other long-term benefits | 212 | 160 |
| Termination benefits | 31 | - |
| Share-based payments | 8,303 | 7,368 |
| Total | 30,101 | 26,216 |
1. Includes former disclosed KMP until the end of their employment.
KEY MANAGEMENT PERSONNEL LOAN TRANSACTIONS
Loans made to KMP are made in the ordinary course of business and on normal commercial terms and conditions that are no more favourable than
those given to other employees or customers, including the term of the loan, security required and the interest rate. No amounts have been written
off during the period, or individual provisions raised in respect of these balances. Details of the terms and conditions of lending products can be
found on anz.com. The aggregate balance of loans (including credit card balances) made, guaranteed or secured, and undrawn facilities to KMP
including their related parties, were as follows:
| Consolidated | | The | |
| | | Company | |
| 2023 | 2022 | 2023 | 2022 |
| $'000 | $'000 | $'000 | $'000 |
| Loans advanced1 | 31,068 | 30,679 | 21,824 | 17,610 |
| Undrawn facilities1 | 1,582 | 2,020 | 1,373 | 1,822 |
| Interest charged2 | 1,346 | 790 | 523 | 293 |
1. Balances are as at the balance date (for KMP in office at balance date) or at the date of cessation of former KMP. Comparatives have been amended to include opening balances (at date of commencement)
for new KMP in the current period.
2. Interest charged is for all KMP\u2019s during the period.
KEY MANAGEMENT PERSONNEL HOLDINGS OF ANZ SECURITIES
KMP, including their related parties, held the Company\u2019s subordinated debt and following the Restructure, shares, share rights and options over shares
in the ultimate controlling entity, ANZ Group Holdings Limited directly, indirectly or beneficially as shown below:
| Consolidated | |
| 2023 | 2022 |
| Number | Number |
| Shares, options and rights1 | 3,478,840 | 2,842,789 |
| Subordinated debt1 | 26,140 | 26,140 |
1. Balances are as at the balance sheet date (for KMP in office at balance sheet date) or at the date of cessation of former KMP. Comparatives have been amended to include opening balances (at date of
commencement) for new KMP in the current period.
OTHER TRANSACTIONS OF KEY MANAGEMENT PERSONNEL AND THEIR RELATED PARTIES
The aggregate of deposits of KMP and their related parties with the Group were $41 million (2022: $30 million) and with the Company were $27
million (2022: $21 million).
Other transactions with KMP and their related parties included amounts paid to the Group in respect of investment management service fees,
brokerage and bank fees and charges. The Group has reimbursed KMP for the costs incurred for security and secretarial services associated with the
performance of their duties. These transactions are conducted on normal commercial terms and conditions no more favourable than those given to
other employees or customers. Gifts were provided to KMP on retirement amounting to $2,476 during the year (2022: $4,944).
ASSOCIATES
We disclose significant associates in Note 26 Investments in Associates. During the course of the financial year, transactions conducted with all
associates were on terms equivalent to those made on an arm\u2019s length basis.
| Consolidated | | The | |
| | | Company | |
| 2023 | 2022 | 2023 | 2022 |
| $'000 | $'000 | $'000 | $'000 |
| Amounts receivable from associates | 13 | 86,469 | - | 18,572 |
| Amounts payable to associates | 990 | 102,042 | - | 101,198 |
| Interest revenue from associates | 9,391 | 5,570 | 7,860 | 4,477 |
| Interest expense to associates | 353 | 34 | 307 | 26 |
| Other revenue from associates | 5,816 | 14,296 | 5,816 | 14,296 |
| Other expenses paid to associates | 3,088 | 11,159 | 704 | 8,592 |
| Guarantees given to associates | - | 72 | - | 72 |
| Dividend income from associates | 42,316 | 38,692 | - | - |
| Undrawn facilities | - | 94,097 | - | 94,097 |
There have been no material guarantees given or received. No amounts receivable from the associates have been written-off during the period, or
individual provisions raised in respect of these balances.
SUBSIDIARIES
We disclose material controlled entities in Note 25 Controlled Entities. During the financial year, subsidiaries conducted transactions with each other
and with associates on terms equivalent to those on an arm\u2019s length basis. As at 30 September 2023, we consider all outstanding amounts on these
transactions to be fully collectible.
Other intragroup transactions include providing management and administrative services, staff training, data processing facilities, transfer of tax losses,
and the leasing of premises and equipment. The Company also issued letters of comfort and guarantees in respect of certain subsidiaries in the
normal course of business.
RELATED ENTITIES
Following the Restructure of the Group on 3 January 2023, ANZ Group Holdings Limited became the ultimate controlling entity of the Group and ANZ
Bank HoldCo became the immediate parent entity of ANZBGL. Since the Restructure, a number of transactions have occurred between the Group and
related parties within the ANZ Group. These transactions include leasing arrangements, funding activities, deposits and tax funding arrangements.
Additionally, as part of the Restructure, certain associate entities of the Group were transferred to ANZ NBH Pty Ltd. Following the transfer, these
investments ceased being associates of the Group and became other related parties of the Group.
These transactions are conducted on terms equivalent to those on an arm\u2019s length basis. As at 30 September 2023, we consider all outstanding
amounts on these transactions to be fully recoverable.
The following balances with related ANZ Group entities were outstanding at 30 September 2023:
| 2023 |
| $m |
| Amounts due from ultimate controlling entity | 85 |
| Amounts due from other related entities | 696 |
| Amounts due to ultimate controlling entity | 1 |
| Amounts due to other related entities | 270 |
| Deposits from ultimate controlling entity | 183 |
| Deposits from other related entities | 111 |
| Undrawn facilities for other related entities | 31 |
During 2023, the following transactions occurred with related ANZ Group entities:
| 2023 |
| $m |
| Dividend paid to parent entity | 4,387 |
| Interest paid to ultimate controlling entity | 6 |
| Interest paid to other related entities | 26 |
| Interest received from other related entities | 42 |
| Other revenue received from other related entities | 18 |
In addition, ANZBGL has right-of-use assets of $689 million and lease liabilities of $815 million with ANZ Group Services Pty Ltd at 30 September 2023.
For the year ended 30 September 2023, the associated depreciation on the right-of-use assets was $36 million and interest paid on the lease liabilities
was $15 million (the interest paid on lease liabilities has been included in the table above within interest paid to other related entities).
32. COMMITMENTS, CONTINGENT LIABILITIES AND CONTINGENT ASSETS
CREDIT RELATED COMMITMENTS AND CONTINGENCIES
| | Consolidated | | The Company | |
| | 2023 | 2022 | 2023 | 2022 |
| | $m | $m | $m | $m |
| Contract amount of: | | | | |
| Undrawn facilities | 240,711 | 236,051 | 206,405 | 201,204 |
| Guarantees and letters of credit | 23,556 | 23,729 | 20,816 | 21,557 |
| Performance related contingencies | 26,615 | 26,036 | 25,891 | 24,634 |
| Total | 290,882 | 285,816 | 253,112 | 247,395 |
UNDRAWN FACILITIES
The majority of undrawn facilities are subject to customers maintaining specific credit and other requirements or conditions. Many of these facilities
are expected to be only partially used, and others may never be used at all. As such, the total of the nominal principal amounts is not necessarily
representative of future liquidity risks or future cash requirements. Based on the earliest date on which the Group or the Company may be required to
pay, the full amount of undrawn facilities for the Group and the Company mature within 12 months.
GUARANTEES, LETTERS OF CREDIT AND PERFORMANCE RELATED CONTINGENCIES
Guarantees, letters of credit and performance related contingencies relate to transactions that the Group has entered into as principal \u2013 including
guarantees, standby letters of credit and documentary letters of credit.
Documentary letters of credit involve the Group issuing letters of credit guaranteeing payment in favour of an exporter. They are secured against an
underlying shipment of goods or backed by a confirmatory letter of credit from another bank.
Performance-related contingencies are liabilities that oblige the Group to make payments to a third party if the customer fails to fulfil its non-
monetary obligations under the contract.
To reflect the risk associated with these transactions, we apply the same credit origination, portfolio management and collateral requirements that we
apply to loans. The contract amount represents the maximum potential amount that we could lose if the counterparty fails to meet its financial
obligations. As the facilities may expire without being drawn upon, the notional amounts do not necessarily reflect future cash requirements. Based
on the earliest date on which the Group or the Company may be required to pay, the full amount of guarantees and letters of credit and performance-
related contingencies for the Group and the Company mature within 12 months.
OTHER CONTINGENT LIABILITIES
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 (refer to Note 22 Other 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.
A description of contingent liabilities and contingent assets as at 30 September 2023 is set out below.
REGULATORY AND CUSTOMER EXPOSURES
The Group regularly engages with its regulators in relation to regulatory investigations, surveillance and reviews, reportable situations, civil
enforcement actions (whether by court action or otherwise), formal and informal inquiries and regulatory supervisory activities in Australia and
globally. The Group has received various notices and requests for information from its regulators as part of both industry-wide and Group-specific
reviews and has also made disclosures to its regulators at its own instigation. The nature of these interactions can be wide ranging and, for example,
include or have included in recent years a range of matters including responsible lending practices, regulated lending requirements, product
suitability and distribution, interest and fees and the entitlement to charge them, customer remediation, wealth advice, insurance distribution, pricing,
competition, conduct in financial markets and financial transactions, capital market transactions, anti-money laundering and counter-terrorism
financing obligations, privacy obligations and information security, business continuity management, reporting and disclosure obligations and
product disclosure documentation. 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.
SOUTH AFRICAN RATE ACTION
In February 2017, the South African Competition Commission commenced proceedings against local and international banks including the Company
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.
CAPITAL RAISING ACTION
In September 2018, the Australian Securities and Investments Commission (ASIC) commenced civil penalty proceedings against the Company alleging
failure to comply with continuous disclosure obligations in connection with the Company\u2019s August 2015 underwritten institutional share placement.
In October 2023, the Federal Court of Australia found that the Company should have notified the ASX of the joint lead managers\u2019 take-up of
placement shares. No order has yet been made in respect of payment of legal costs or the amount of a civil penalty. The maximum penalty is $1
million.
ESANDA DEALER CAR LOAN LITIGATION
In August 2020, a class action was brought against the Company alleging unfair conduct, misleading or deceptive conduct and equitable mistake in
relation to the use of flex commissions in dealer arranged Esanda car loans. The Company is defending the allegations.
ONEPATH SUPERANNUATION LITIGATION
In December 2020, a class action was brought against OnePath Custodians, OnePath Life and the Company alleging that OnePath Custodians
breached its obligations under superannuation legislation, and its duties as trustee, in respect of superannuation investments and fees. The claim also
alleges that the Company was involved in some of OnePath Custodians\u2019 investment breaches. The Company is defending the allegations.
NEW ZEALAND LOAN INFORMATION LITIGATION
In September 2021, a representative proceeding was brought against ANZ Bank New Zealand Limited, alleging breaches of disclosure requirements
under consumer credit legislation in respect of variation letters sent to certain loan customers. ANZ Bank New Zealand Limited is defending the
allegations.
CREDIT CARDS LITIGATION
In November 2021, a class action was brought against the Company alleging that certain interest terms in credit card contracts were unfair contract
terms and that it was unconscionable for the Company to rely on them. The Company is defending the allegations.
ROYAL COMMISSION
The Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry released its final report on 4 February 2019.
Following the Royal Commission there have been, and continue to be, additional costs and further exposures, including exposures associated with
further regulator activity or potential customer exposures such as class actions, individual claims or customer remediation or compensation activities.
The outcomes and total costs associated with these 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. These claims will be
defended.
WARRANTIES, INDEMNITIES AND PERFORMANCE MANAGEMENT FEES
The Group has provided warranties, indemnities and other commitments in favour of the purchaser and other persons in connection with various
disposals of businesses and assets and other transactions, covering a range of matters and risks. It is exposed to claims under those warranties,
indemnities and commitments, some of which are currently active. The outcomes and total costs associated with these exposures remain uncertain.
The Group has entered an arrangement to pay performance management fees to external fund managers in the event predetermined performance
criteria are satisfied in relation to certain Group investments. The satisfaction of the performance criteria and associated performance management fee
remains uncertain.
CLEARING AND SETTLEMENT OBLIGATIONS
Certain group companies have a commitment to comply with rules governing various clearing and settlement arrangements which could result in a
credit risk exposure and loss if another member institution fails to settle its payment clearing activities. The Group\u2019s potential exposure arising from
these arrangements is unquantifiable in advance.
Certain group companies hold memberships of central clearing houses, including ASX Clear (Futures), London Clearing House (LCH), SwapClear and
RepoClear, Korea Exchange (KRX), Hong Kong Exchange (HKEX), Clearing Corporation of India and the Shanghai Clearing House. These memberships
allow the relevant group company to centrally clear derivative instruments in line with cross-border regulatory requirements. Common to all of these
memberships is the requirement for the relevant group company to make default fund contributions. In the event of a default by another member,
the relevant group company could potentially be required to commit additional default fund contributions which are unquantifiable in advance.
PARENT ENTITY GUARANTEES
Certain group companies have issued letters of comfort and guarantees in respect of certain subsidiaries in the normal course of business. Under
these letters and guarantees, the issuing entity undertakes to ensure that those subsidiaries continue to meet their financial obligations, subject to
certain conditions including that the subsidiary remains a controlled entity.
SALE OF GRINDLAYS BUSINESS
On 31 July 2000, the Company completed the sale to Standard Chartered Bank (SCB) of ANZ Grindlays Bank Limited (Grindlays) and certain other
businesses. The Company provided warranties and indemnities relating to those businesses.
The indemnified matters include civil penalty proceedings and criminal prosecutions brought by Indian authorities against Grindlays and certain of its
officers, in relation to certain transactions conducted in 1991 that are alleged to have breached the
Foreign Exchange Regulation Act, 1973
. Civil
penalties were imposed in 2007 which are the subject of appeals. The criminal prosecutions are being defended.
CONTINGENT ASSETS
NATIONAL HOUSING BANK
The Company is pursuing recovery of the proceeds of certain disputed cheques which were credited to the account of a former Grindlays customer in
the early 1990s.
The disputed cheques were drawn on the National Housing Bank (NHB) in India. Proceedings between Grindlays and NHB concerning the proceeds of
the cheques were resolved in early 2002.
Recovery is now being pursued from the estate of the Grindlays customer who received the cheque proceeds. Any amounts recovered are to be
shared between the Company and NHB.
33. AUDITOR FEES
| | Consolidated | | The Company | |
| | 2023 | 2022 | 2023 | 2022 |
| $\u2019000 | $\u2019000 | $\u2019000 | $\u2019000 |
| KPMG Australia | | | | |
| Audit or review of financial reports1 | 9,567 | 8,217 | 9,134 | 7,726 |
| Audit-related services2 | 3,882 | 6,037 | 3,808 | 5,956 |
| Non-audit services3 | 10 | 8 | 10 | 8 |
| Total4 | 13,459 | 14,262 | 12,952 | 13,690 |
| | | | | |
| Overseas related practices of KPMG Australia | | | | |
| Audit or review of financial reports | 6,157 | 5,808 | 1,994 | 2,033 |
| Audit-related services2 | 1,933 | 1,459 | 911 | 831 |
| Non-audit services3 | 95 | - | - | - |
| Total | 8,185 | 7,267 | 2,905 | 2,864 |
| Total auditor fees | 21,644 | 21,529 | 15,857 | 16,554 |
1. Includes audit fees paid on behalf of other entities outside the Group.
2. Group audit-related services comprise prudential and regulatory services of $4.11 million (2022: $6.26 million), comfort letters $0.57 million (2022: $0.52 million) and other services $1.14 million (2022: $0. 71
million). Company audit-related services comprise prudential and regulatory services of $3.69 million (2022: $5.90 million), comfort letters $0.53 million (2022: $0.48 million) and other services $0.50 million
(2022: $0.41 million).
3. The nature of non-audit services for the Group and the Company includes methodology, procedural and administrative reviews. Further details are provided in the Directors\u2019 Report.
4. Inclusive of goods and services tax.
The Group\u2019s Policy allows KPMG Australia or any of its related practices to provide assurance and other audit-related services that, while outside the
scope of the statutory audit, are consistent with the role of an external auditor. These include regulatory and prudential reviews requested by
regulators such as APRA. Any other services that are not audit or audit-related services are non-audit services. The Policy allows certain non-audit
services to be provided where the service would not contravene auditor independence requirements. KPMG Australia or any of its related practices
may not provide services that are perceived to be in conflict with the role of the external auditor or breach auditor independence. These include
consulting advice and subcontracting of operational activities normally undertaken by management, and engagements where the external auditor
may ultimately be required to express an opinion on its own work.
34. PENDING ORGANISATIONAL CHANGES IMPACTING FUTURE REPORTING PERIODS
Suncorp Bank Acquisition
On 18 July 2022, the ANZ Group announced an agreement to purchase 100% of the shares in SBGH Limited, the immediate non-operating holding
company of Suncorp Bank. The acquisition was subject to Australian Competition and Consumer Commission (ACCC) authorisation or approval. The
ACCC declined to grant authorisation for this acquisition in August 2023 and this decision is currently subject to review by the Australian Competition
Tribunal. In addition, the acquisition remains subject to satisfaction of certain conditions, including Federal Treasurer approval and certain
amendments to the
State Financial Institutions and Metway Merger Act 1996 (QLD)
. ANZBGL will also have a termination right under the Suncorp
Bank Sale Agreement if APRA issues a written communication to ANZBGL under or in connection with APS 222
Associations with Related Entities
to
the effect that ANZBGL must not proceed with completion of the acquisition. Assuming these conditions are satisfied, and merger approval is granted,
it is expected to occur in mid-calendar year 2024.
35. EVENTS SINCE THE END OF THE FINANCIAL YEAR
There have been no significant events from 30 September 2023 to the date of signing this report.
1. ABOUT OUR FINANCIAL STATEMENTS
ORGANISATIONAL RESTRUCTURE
On 3 January 2023, Australia and New Zealand Banking Group Limited (ANZBGL) established by a scheme of arrangement, a non-operating holding
company, ANZ Group Holdings Limited (ANZGHL), as the new listed parent holding company of the ANZ Group and implemented a restructure to
separate ANZ\u2019s banking and certain non-banking businesses into the ANZ Bank Group and ANZ Non-Bank Group (the Restructure). The ANZ Bank
Group comprises the majority of the businesses and subsidiaries that were held in ANZBGL prior to the Restructure. The ANZ Non-Bank Group
comprises banking-adjacent businesses developed or acquired by the ANZ Group to focus on bringing new technology and banking-adjacent
services to the ANZ Group\u2019s customers, and a separate service company.
On Restructure, each ANZ shareholder received one ANZGHL ordinary share for each ANZ ordinary share that they held prior to the implementation of
the Restructure. The Restructure is accounted for as a reverse acquisition in the ANZGHL consolidated financial statements as at 30 September 2023,
with ANZBGL identified as the acquirer in accordance with AASB 3
Business Combinations
.
As a result of the Restructure, the ANZBGL consolidated results for the 2023 financial year end consist of:
\u2022 the results of the former ANZ Group for the period 1 October 2022 to 2 January 2023;
\u2022 the result of ANZBGL and its subsidiaries (Group) for the period 3 January to 30 September 2023.
Refer to Accounting Policies Applicable to the Restructure section below for further details.
GENERAL INFORMATION
These are the financial statements for ANZBGL (the Company) and its controlled entities (together, the Group or Consolidated Entity) for the year
ended 30 September 2023. The Company is a public company incorporated and domiciled in Australia with debt listed on securities exchanges. The
Company is a subsidiary of ANZGHL and is regulated by APRA as an ADI. The address of the Company\u2019s registered office and its principal place of
business is ANZ Centre, 833 Collins Street, Docklands, Victoria, Australia 3008. The Group provides banking and financial services to individuals and
business customers and operates in and across 29 markets.
On 10 November 2023, the Directors resolved to authorise the issue of these financial statements. Information in the financial statements is included
only to the extent we consider it material and relevant to the understanding of the financial statements. A disclosure is considered material and
relevant if, for example:
\u2022 the amount is significant in size (quantitative factor);
\u2022 the information is significant by nature (qualitative factor);
\u2022 the user cannot understand the Group\u2019s results without the specific disclosure (qualitative factor);
\u2022 the information is critical to a user\u2019s understanding of the impact of significant changes in the Group\u2019s business during the period - for example,
business acquisitions or disposals (qualitative factor);
\u2022 the information relates to an aspect of the Group\u2019s operations that is important to its future performance (qualitative factor); and
\u2022 the information is required under legislative requirements of the
Corporations Act 2001
, the
Banking Act 1959 (Cth)
or by the Group\u2019s principal
regulators, including the Australian Securities and Investments Commission (ASIC) and the Australian Prudential Regulation Authority (APRA).
This section of the financial statements:
\u2022 outlines the basis upon which the Group\u2019s financial statements have been prepared; and
\u2022 discusses any new accounting standards or regulations that directly impact the financial statements.
BASIS OF PREPARATION
This financial report is a general purpose (Tier 1) financial report prepared by a \u2018for profit\u2019 entity, in accordance with Australian Accounting Standards
(AASs) and other authoritative pronouncements of the Australian Accounting Standards Board (AASB), the
Corporations Act 2001
, and
International
Financial Reporting Standards
(IFRS) and interpretations published by the International Accounting Standards Board (IASB).
We present the financial statements of the Group in Australian dollars, which is the Company\u2019s functional and presentation currency. We have
rounded values to the nearest million dollars ($m), unless otherwise stated, as allowed under the
ASIC Corporations (Rounding in Financial/Directors
Report) Instrument 2016/191
. We measure the financial statements of each entity in the Group using the currency of the primary economic
environment in which that entity operates (the functional currency).
BASIS OF MEASUREMENT AND PRESENTATION
We have prepared the financial information in accordance with the historical cost basis - except the following assets and liabilities which we have
stated at their fair value:
\u2022 derivative financial instruments and in the case of fair value hedging, a fair value adjustment made to the underlying hedged item;
\u2022 financial instruments held for trading;
\u2022 financial assets and financial liabilities designated at fair value through profit or loss (FVTPL);
\u2022 financial assets at fair value through other comprehensive income (FVOCI); and
\u2022 assets and liabilities classified as held for sale (except those required to be at carrying value).
In accordance with AASB 119
Employee Benefits
we have measured defined benefit obligations using the Projected Unit Credit Method.
There were no discontinued operations in the current period. For the purpose of comparative information, discontinued operations in the prior period
are separately presented from the results of the continuing operations as a single line item \u2018Profit/(Loss) after tax from discontinued operations\u2019 in the
Income Statement.
BASIS OF CONSOLIDATION
The consolidated financial statements of the Group comprise the financial statements of the Company and all its subsidiaries. An entity, including a
structured entity, is considered a subsidiary of the Group when we determine that the Company has control over the entity. Control exists when the
Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its
power over the entity. We assess power by examining existing rights that give the Company the current ability to direct the relevant activities of the
entity. We have eliminated, on consolidation, the effect of all transactions between entities in the Group.
FOREIGN CURRENCY TRANSLATION
TRANSACTIONS AND BALANCES
Foreign currency transactions are translated into the relevant functional currency at the exchange rate prevailing at the date of the transaction. At the
reporting date, monetary assets and liabilities denominated in foreign currencies are translated into the functional currency at the relevant spot rate.
Any foreign currency translation gains or losses that arise are included in profit or loss in the period they arise.
We measure translation differences on non-monetary items classified as FVTPL and report them as part of the fair value gain or loss on these items. For
non-monetary items classified as investment securities measured at FVOCI, translation differences are included in other comprehensive income.
FINANCIAL STATEMENTS OF FOREIGN OPERATIONS THAT HAVE A FUNCTIONAL CURRENCY THAT IS NOT AUSTRALIAN DOLLARS
The financial statements of our foreign operations are translated into Australian dollars for consolidation into the Group financial statements using the
following method:
| Foreign currency item | Exchange rate used |
| Assets and liabilities | The reporting date rate |
| Equity | The initial investment date rate |
| Income and expenses | The average rate for the period \u2013 but for a significant transaction if we believe the average rate is not |
| reasonable, then we use the rate at the date of the transaction |
Exchange differences arising from the translation of financial statements of foreign operations are recognised in the foreign currency translation
reserve in equity. When we dispose of a foreign operation, the cumulative exchange differences are transferred to profit or loss.
FIDUCIARY ACTIVITIES
The Group provides fiduciary services to third parties including custody, nominee and trustee services. This involves the Group holding assets on
behalf of third parties and making decisions regarding the purchase and sale of financial instruments. If ANZ is not the beneficial owner or does not
control the assets, then we do not recognise these transactions in these financial statements, except when required by accounting standards or
another legislative requirement.
ACCOUNTING POLICIES APPLICABLE TO THE RESTRUCTURE
The implementation of the non-operating holding company involved the transfer of assets and entities between companies within the wider
ANZGHL Group. This had implications for the ANZBGL consolidated financial statements due to the transfers extending outside of the Group. From an
accounting perspective, since the transfers were between wholly owned entities, these are considered common control transactions. As there is no
specific accounting standard for such transfers, the Group is required to make an accounting policy choice.
The Group\u2019s accounting policy for the transfer of the assets and entities between companies under common control is to apply book value
accounting. Under this approach, any differences between book value and the transfer price are recorded in equity. The accounting policy choice did
not have a material impact on profit and loss or equity when the assets were transferred as part of the Restructure. Refer to Note 31 Related Party
Disclosures for details of the transfer.
KEY JUDGEMENTS AND ESTIMATES
In the process of applying the Group\u2019s accounting policies, management has made a number of judgements and applied estimates and
assumptions about past and future events. Further information on the key judgements and estimates that we consider material to the
financial statements are contained within each relevant note to the financial statements.
The global economy is facing challenges associated with high inflation and interest rates, labour market constraints, and continuing
geopolitical tensions which contribute to an elevated level of estimation uncertainty involved in the preparation of these financial
statements.
The Group has made various accounting estimates in this Financial Report based on forecasts of economic conditions which reflect
expectations and assumptions at 30 September 2023 about future events considered reasonable in the circumstances. Thus there is a
considerable degree of judgement involved in preparing these estimates. Actual economic conditions are likely to be different from those
forecast since anticipated events frequently do not occur as expected, and the effect of these differences may significantly impact
accounting estimates included in these financial statements. The significant accounting estimates impacted by these forecasts and
associated uncertainties are predominantly related to expected credit losses and recoverable amounts of non-financial assets.
The impact of these uncertainties on each of these accounting estimates is discussed in the relevant notes in this Financial Report. Readers
should consider these disclosures in light of the inherent uncertainties described above.
INTEREST RATE BENCHMARK REFORM
Interbank offered rates (IBORs) reform is the global transition away from IBORs and their replacement by risk-free rates (RFRs). IBOR reforms have had a
wide-ranging impact for the Group and our customers given the fundamental differences between IBORs and RFRs. Accordingly, the Group
established an enterprise-wide Benchmark Transition Program to manage the operational, market, legal, conduct and financial reporting risks
associated with IBOR transition.
As at 30 September 2023 the Group\u2019s Program is largely complete, and included the implementation of the required processes, technology and
product capabilities that ensured the transitions were successfully undertaken. In line with regulatory announcements made in early 2021, IBOR rates
including Pound Sterling (GBP), Euro (EUR), Swiss Franc (CHF) and Japanese Yen (JPY), and the 1-week and 2-month US Dollar (USD) London Interbank
Offered Rate (LIBOR) rate settings ceased on 31 December 2021 and were replaced by alternative RFRs. The Group\u2019s exposure to IBOR reform was
primarily concentrated in other USD LIBOR settings which ceased on 30 June 2023. No material changes were made to the Group\u2019s risk management
strategy because of IBOR reform and the use of IBOR rates in new products was phased out in accordance with industry and supervisory guidance. The
transition activities had an immaterial impact to the Group\u2019s profit and loss.
To support any legacy contracts referencing these benchmarks across the industry, the 1-month, 3-month and 6-month USD settings will continue to
be published using an alternative \u2018synthetic\u2019 methodology. The Group continues to manage a small number of loan and derivative contracts whose
transition is being managed with customers, and a small number of debt issuances with investors. These remaining contracts will either mature or
transition ahead of the synthetic USD LIBOR cessation date of 30 September 2024. The Group has an immaterial exposure to other announced
benchmark cessation events expected to occur between 2024 and 2026.
ACCOUNTING STANDARDS ADOPTED IN THE PERIOD
Accounting policies have been consistently applied, unless otherwise noted.
AASB 2023-2
AMENDMENTS TO AUSTRALIAN ACCOUNTING STANDARDS \u2013 INTERNATIONAL TAX REFORM \u2013 PILLAR TWO MODEL RULES
In May 2023, the Federal Government announced it will implement key aspects of Pillar Two of the OECD/G20 Two-Pillar Solution to address the tax
challenges arising from digitalisation of the economy. This measure is not yet law. Other jurisdictions in which ANZ operates are also considering
implementation of the regime. The ANZ Group is expected to be within the scope of associated legislation. In anticipation of legislation being
enacted, the AASB issued AASB 2023-2
Amendments to Australian Accounting Standards \u2013 International Tax Reform \u2013 Pillar Two Model Rules
in June
2023. The Group has applied the mandatory exemption included in para. 4A of this standard and will apply the whole amending standard from 1
October 2023. This amending standard stipulates a mandatory temporary exemption from recognising deferred tax assets and liabilities related to
Pillar Two income taxes. The Group is monitoring progress of associated legislation and has not yet determined the expected impact on its financial
statements.
ACCOUNTING STANDARDS NOT EARLY ADOPTED
A number of new standards, amendments to standards and interpretations have been published but are not mandatory for the financial statements
for the year ended 30 September 2023 and have not been applied by the Group in preparing these financial statements. Further details of these are
set out below.
GENERAL HEDGE ACCOUNTING
AASB 9
Financial Instruments
(AASB 9) introduced new hedge accounting requirements which more closely align accounting with risk management
activities undertaken when hedging both financial and non-financial risks. AASB 9 provided the Group with an accounting policy choice to continue
to apply the AASB 139
Financial Instruments: Recognition and Measurement
(AASB 139) hedge accounting requirements until the International
Accounting Standards Board\u2019s ongoing project on Dynamic Risk Management (macro hedge accounting) is completed. The Group continues to apply
the hedge accounting requirements of AASB 139.
AASB 17
INSURANCE CONTRACTS
(AASB 17)
The final version of AASB 17 was issued in July 2017 and is not effective for the Group until 1 October 2023. It will replace AASB 4
Insurance Contracts
,
AASB 1023
General Insurance Contracts
and AASB 1038
Life Insurance Contracts
. AASB 17 establishes principles for the recognition, measurement,
presentation and disclosure of insurance contracts.
The measurement, presentation and disclosure requirements under AASB 17 are significantly different from current accounting standards. Although
the overall profit recognised in respect of insurance contracts will not change, it is expected that the timing of profit recognition will change.
AASB 17 will not have a material impact on the Group.
DEFERRED TAX RELATED TO ASSETS AND LIABILITIES ARISING FROM A SINGLE TRANSACTION
AASB 2021-5
Amendments to Australian Accounting Standards \u2013 Deferred Tax related to Assets and Liabilities arising from a Single Transaction
amends AASB 112
Income Taxes.
It
clarifies that entities are required to recognise deferred tax on transactions for which there is both an asset and a
liability and that give rise to equal taxable and deductible temporary differences which may apply to leases and decommissioning or restoration
obligations. This amendment is effective for the Group from 1 October 2023 and will not have a material impact on the Group.
LEASE LIABILITY IN A SALE AND LEASEBACK
AASB 2022-5
Amendments to Australian Accounting Standards \u2013 Lease Liability in a Sale and Leaseback
amends AASB 16
Leases
and specifies the
accounting for variable lease payments by seller-lessees in sale and leaseback transactions. The amendment is effective from 1 October 2024 and will
not have a material impact on the Group.
ORGANISATIONAL RESTRUCTURE
On 3 January 2023, Australia and New Zealand Banking Group Limited (ANZBGL) established by a scheme of arrangement, a non-operating holding
company, ANZ Group Holdings Limited (ANZGHL), as the new listed parent holding company of the ANZ Group and implemented a restructure to
separate ANZ\u2019s banking and certain non-banking businesses into the ANZ Bank Group and ANZ Non-Bank Group (the Restructure). The ANZ Bank
Group comprises the majority of the businesses and subsidiaries that were held in ANZBGL prior to the Restructure. The ANZ Non-Bank Group
comprises banking-adjacent businesses developed or acquired by the ANZ Group to focus on bringing new technology and banking-adjacent
services to the ANZ Group\u2019s customers, and a separate service company.
On Restructure, each ANZ shareholder received one ANZGHL ordinary share for each ANZ ordinary share that they held prior to the implementation of
the Restructure. The Restructure is accounted for as a reverse acquisition in the ANZGHL consolidated financial statements as at 30 September 2023,
with ANZBGL identified as the acquirer in accordance with AASB 3
Business Combinations
.
As a result of the Restructure, the ANZBGL consolidated results for the 2023 financial year end consist of:
\u2022 the results of the former ANZ Group for the period 1 October 2022 to 2 January 2023;
\u2022 the result of ANZBGL and its subsidiaries (Group) for the period 3 January to 30 September 2023.
Refer to Accounting Policies Applicable to the Restructure section below for further details.
",
"dimensions": {
"concept": "anz:DisclosureOfOrganisationalRestructureExplanatory",
"language": "en",
"entity": "scheme:JHE42UYNWWTJB8YTTU19",
"period": "2022-10-01T00:00:00/2023-10-01T00:00:00"
}
},
"ifrs-full_NameOfReportingEntityOrOtherMeansOfIdentification_E3_CY": {
"value": "Australia and New Zealand Banking Group Limited",
"dimensions": {
"concept": "ifrs-full:NameOfReportingEntityOrOtherMeansOfIdentification",
"language": "en",
"entity": "scheme:JHE42UYNWWTJB8YTTU19",
"period": "2022-10-01T00:00:00/2023-10-01T00:00:00"
}
},
"ifrs-full_NameOfUltimateParentOfGroup_E12_CY": {
"value": "ANZ Group Holdings Limited",
"dimensions": {
"concept": "ifrs-full:NameOfUltimateParentOfGroup",
"language": "en",
"entity": "scheme:JHE42UYNWWTJB8YTTU19",
"period": "2022-10-01T00:00:00/2023-10-01T00:00:00"
}
},
"fact_ifrs-full_DisclosureOfGeneralInformationAboutFinancialStatementsExplanatory_D69980713_CY": {
"value": "GENERAL INFORMATION
These are the financial statements for ANZBGL (the Company) and its controlled entities (together, the Group or Consolidated Entity) for the year
ended 30 September 2023. The Company is a public company incorporated and domiciled in Australia with debt listed on securities exchanges. The
Company is a subsidiary of ANZGHL and is regulated by APRA as an ADI. The address of the Company\u2019s registered office and its principal place of
business is ANZ Centre, 833 Collins Street, Docklands, Victoria, Australia 3008. The Group provides banking and financial services to individuals and
business customers and operates in and across 29 markets.
On 10 November 2023, the Directors resolved to authorise the issue of these financial statements. Information in the financial statements is included
only to the extent we consider it material and relevant to the understanding of the financial statements. A disclosure is considered material and
relevant if, for example:
\u2022 the amount is significant in size (quantitative factor);
\u2022 the information is significant by nature (qualitative factor);
\u2022 the user cannot understand the Group\u2019s results without the specific disclosure (qualitative factor);
\u2022 the information is critical to a user\u2019s understanding of the impact of significant changes in the Group\u2019s business during the period - for example,
business acquisitions or disposals (qualitative factor);
\u2022 the information relates to an aspect of the Group\u2019s operations that is important to its future performance (qualitative factor); and
\u2022 the information is required under legislative requirements of the
Corporations Act 2001
, the
Banking Act 1959 (Cth)
or by the Group\u2019s principal
regulators, including the Australian Securities and Investments Commission (ASIC) and the Australian Prudential Regulation Authority (APRA).
This section of the financial statements:
\u2022 outlines the basis upon which the Group\u2019s financial statements have been prepared; and
\u2022 discusses any new accounting standards or regulations that directly impact the financial statements.
",
"dimensions": {
"concept": "ifrs-full:DisclosureOfGeneralInformationAboutFinancialStatementsExplanatory",
"language": "en",
"entity": "scheme:JHE42UYNWWTJB8YTTU19",
"period": "2022-10-01T00:00:00/2023-10-01T00:00:00"
}
},
"ifrs-full_LegalFormOfEntity_E6_CY": {
"value": "public company",
"dimensions": {
"concept": "ifrs-full:LegalFormOfEntity",
"language": "en",
"entity": "scheme:JHE42UYNWWTJB8YTTU19",
"period": "2022-10-01T00:00:00/2023-10-01T00:00:00"
}
},
"ifrs-full_DomicileOfEntity_E5_CY": {
"value": "Australia",
"dimensions": {
"concept": "ifrs-full:DomicileOfEntity",
"language": "en",
"entity": "scheme:JHE42UYNWWTJB8YTTU19",
"period": "2022-10-01T00:00:00/2023-10-01T00:00:00"
}
},
"ifrs-full_CountryOfIncorporation_E7_CY": {
"value": "Australia",
"dimensions": {
"concept": "ifrs-full:CountryOfIncorporation",
"language": "en",
"entity": "scheme:JHE42UYNWWTJB8YTTU19",
"period": "2022-10-01T00:00:00/2023-10-01T00:00:00"
}
},
"ifrs-full_AddressOfRegisteredOfficeOfEntity_E8_CY": {
"value": "ANZ Centre, 833 Collins Street, Docklands, Victoria, Australia 3008",
"dimensions": {
"concept": "ifrs-full:AddressOfRegisteredOfficeOfEntity",
"language": "en",
"entity": "scheme:JHE42UYNWWTJB8YTTU19",
"period": "2022-10-01T00:00:00/2023-10-01T00:00:00"
}
},
"ifrs-full_PrincipalPlaceOfBusiness_E9_CY": {
"value": "ANZ Centre, 833 Collins Street, Docklands, Victoria, Australia 3008",
"dimensions": {
"concept": "ifrs-full:PrincipalPlaceOfBusiness",
"language": "en",
"entity": "scheme:JHE42UYNWWTJB8YTTU19",
"period": "2022-10-01T00:00:00/2023-10-01T00:00:00"
}
},
"ifrs-full_DescriptionOfNatureOfEntitysOperationsAndPrincipalActivities_E10_CY": {
"value": "The Group provides banking and financial services to individuals and business customers and operates in and across 29 markets.",
"dimensions": {
"concept": "ifrs-full:DescriptionOfNatureOfEntitysOperationsAndPrincipalActivities",
"language": "en",
"entity": "scheme:JHE42UYNWWTJB8YTTU19",
"period": "2022-10-01T00:00:00/2023-10-01T00:00:00"
}
},
"fact_ifrs-full_DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory_D70435477_CY": {
"value": "BASIS OF PREPARATION
This financial report is a general purpose (Tier 1) financial report prepared by a \u2018for profit\u2019 entity, in accordance with Australian Accounting Standards
(AASs) and other authoritative pronouncements of the Australian Accounting Standards Board (AASB), the
Corporations Act 2001
, and
International
Financial Reporting Standards
(IFRS) and interpretations published by the International Accounting Standards Board (IASB).
We present the financial statements of the Group in Australian dollars, which is the Company\u2019s functional and presentation currency. We have
rounded values to the nearest million dollars ($m), unless otherwise stated, as allowed under the
ASIC Corporations (Rounding in Financial/Directors
Report) Instrument 2016/191
. We measure the financial statements of each entity in the Group using the currency of the primary economic
environment in which that entity operates (the functional currency).
",
"dimensions": {
"concept": "ifrs-full:DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory",
"language": "en",
"entity": "scheme:JHE42UYNWWTJB8YTTU19",
"period": "2022-10-01T00:00:00/2023-10-01T00:00:00"
}
},
"fact_ifrs-full_ExplanationOfMeasurementBasesUsedInPreparingFinancialStatements_D1087757960_CY": {
"value": "BASIS OF MEASUREMENT AND PRESENTATION
We have prepared the financial information in accordance with the historical cost basis - except the following assets and liabilities which we have
stated at their fair value:
\u2022 derivative financial instruments and in the case of fair value hedging, a fair value adjustment made to the underlying hedged item;
\u2022 financial instruments held for trading;
\u2022 financial assets and financial liabilities designated at fair value through profit or loss (FVTPL);
\u2022 financial assets at fair value through other comprehensive income (FVOCI); and
\u2022 assets and liabilities classified as held for sale (except those required to be at carrying value).
In accordance with AASB 119
Employee Benefits
we have measured defined benefit obligations using the Projected Unit Credit Method.
There were no discontinued operations in the current period. For the purpose of comparative information, discontinued operations in the prior period
are separately presented from the results of the continuing operations as a single line item \u2018Profit/(Loss) after tax from discontinued operations\u2019 in the
Income Statement.
",
"dimensions": {
"concept": "ifrs-full:ExplanationOfMeasurementBasesUsedInPreparingFinancialStatements",
"language": "en",
"entity": "scheme:JHE42UYNWWTJB8YTTU19",
"period": "2022-10-01T00:00:00/2023-10-01T00:00:00"
}
},
"fact_ifrs-full_DisclosureOfBasisOfConsolidationExplanatory_D580622619_CY": {
"value": "BASIS OF CONSOLIDATION
The consolidated financial statements of the Group comprise the financial statements of the Company and all its subsidiaries. An entity, including a
structured entity, is considered a subsidiary of the Group when we determine that the Company has control over the entity. Control exists when the
Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its
power over the entity. We assess power by examining existing rights that give the Company the current ability to direct the relevant activities of the
entity. We have eliminated, on consolidation, the effect of all transactions between entities in the Group.
",
"dimensions": {
"concept": "ifrs-full:DisclosureOfBasisOfConsolidationExplanatory",
"language": "en",
"entity": "scheme:JHE42UYNWWTJB8YTTU19",
"period": "2022-10-01T00:00:00/2023-10-01T00:00:00"
}
},
"fact_ifrs-full_DescriptionOfAccountingPolicyForForeignCurrencyTranslationExplanatory_D653549305_CY": {
"value": "FOREIGN CURRENCY TRANSLATION
TRANSACTIONS AND BALANCES
Foreign currency transactions are translated into the relevant functional currency at the exchange rate prevailing at the date of the transaction. At the
reporting date, monetary assets and liabilities denominated in foreign currencies are translated into the functional currency at the relevant spot rate.
Any foreign currency translation gains or losses that arise are included in profit or loss in the period they arise.
We measure translation differences on non-monetary items classified as FVTPL and report them as part of the fair value gain or loss on these items. For
non-monetary items classified as investment securities measured at FVOCI, translation differences are included in other comprehensive income.
FINANCIAL STATEMENTS OF FOREIGN OPERATIONS THAT HAVE A FUNCTIONAL CURRENCY THAT IS NOT AUSTRALIAN DOLLARS
The financial statements of our foreign operations are translated into Australian dollars for consolidation into the Group financial statements using the
following method:
| Foreign currency item | Exchange rate used |
| Assets and liabilities | The reporting date rate |
| Equity | The initial investment date rate |
| Income and expenses | The average rate for the period \u2013 but for a significant transaction if we believe the average rate is not |
| reasonable, then we use the rate at the date of the transaction |
Exchange differences arising from the translation of financial statements of foreign operations are recognised in the foreign currency translation
reserve in equity. When we dispose of a foreign operation, the cumulative exchange differences are transferred to profit or loss.
",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForForeignCurrencyTranslationExplanatory",
"language": "en",
"entity": "scheme:JHE42UYNWWTJB8YTTU19",
"period": "2022-10-01T00:00:00/2023-10-01T00:00:00"
}
},
"fact_ifrs-full_DescriptionOfAccountingPolicyForFunctionalCurrencyExplanatory_D1602477774_CY": {
"value": "FOREIGN CURRENCY TRANSLATION
TRANSACTIONS AND BALANCES
Foreign currency transactions are translated into the relevant functional currency at the exchange rate prevailing at the date of the transaction. At the
reporting date, monetary assets and liabilities denominated in foreign currencies are translated into the functional currency at the relevant spot rate.
Any foreign currency translation gains or losses that arise are included in profit or loss in the period they arise.
We measure translation differences on non-monetary items classified as FVTPL and report them as part of the fair value gain or loss on these items. For
non-monetary items classified as investment securities measured at FVOCI, translation differences are included in other comprehensive income.
FINANCIAL STATEMENTS OF FOREIGN OPERATIONS THAT HAVE A FUNCTIONAL CURRENCY THAT IS NOT AUSTRALIAN DOLLARS
The financial statements of our foreign operations are translated into Australian dollars for consolidation into the Group financial statements using the
following method:
| Foreign currency item | Exchange rate used |
| Assets and liabilities | The reporting date rate |
| Equity | The initial investment date rate |
| Income and expenses | The average rate for the period \u2013 but for a significant transaction if we believe the average rate is not |
| reasonable, then we use the rate at the date of the transaction |
Exchange differences arising from the translation of financial statements of foreign operations are recognised in the foreign currency translation
reserve in equity. When we dispose of a foreign operation, the cumulative exchange differences are transferred to profit or loss.
",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForFunctionalCurrencyExplanatory",
"language": "en",
"entity": "scheme:JHE42UYNWWTJB8YTTU19",
"period": "2022-10-01T00:00:00/2023-10-01T00:00:00"
}
},
"fact_anz_DescriptionOfAccountingForPolicyFiduciaryActivitiesExplanatory_D324995376_CY": {
"value": "FIDUCIARY ACTIVITIES
The Group provides fiduciary services to third parties including custody, nominee and trustee services. This involves the Group holding assets on
behalf of third parties and making decisions regarding the purchase and sale of financial instruments. If ANZ is not the beneficial owner or does not
control the assets, then we do not recognise these transactions in these financial statements, except when required by accounting standards or
another legislative requirement.
",
"dimensions": {
"concept": "anz:DescriptionOfAccountingForPolicyFiduciaryActivitiesExplanatory",
"language": "en",
"entity": "scheme:JHE42UYNWWTJB8YTTU19",
"period": "2022-10-01T00:00:00/2023-10-01T00:00:00"
}
},
"fact_anz_DescriptionOfAccountingPolicyForApplicableToTheRestructureExplanatory_D1263478488_CY": {
"value": "ACCOUNTING POLICIES APPLICABLE TO THE RESTRUCTURE
The implementation of the non-operating holding company involved the transfer of assets and entities between companies within the wider
ANZGHL Group. This had implications for the ANZBGL consolidated financial statements due to the transfers extending outside of the Group. From an
accounting perspective, since the transfers were between wholly owned entities, these are considered common control transactions. As there is no
specific accounting standard for such transfers, the Group is required to make an accounting policy choice.
The Group\u2019s accounting policy for the transfer of the assets and entities between companies under common control is to apply book value
accounting. Under this approach, any differences between book value and the transfer price are recorded in equity. The accounting policy choice did
not have a material impact on profit and loss or equity when the assets were transferred as part of the Restructure. Refer to Note 31 Related Party
Disclosures for details of the transfer.
",
"dimensions": {
"concept": "anz:DescriptionOfAccountingPolicyForApplicableToTheRestructureExplanatory",
"language": "en",
"entity": "scheme:JHE42UYNWWTJB8YTTU19",
"period": "2022-10-01T00:00:00/2023-10-01T00:00:00"
}
},
"fact_ifrs-full_DisclosureOfAccountingJudgementsAndEstimatesExplanatory_D1601009912_CY": {
"value": "KEY JUDGEMENTS AND ESTIMATES
In the process of applying the Group\u2019s accounting policies, management has made a number of judgements and applied estimates and
assumptions about past and future events. Further information on the key judgements and estimates that we consider material to the
financial statements are contained within each relevant note to the financial statements.
The global economy is facing challenges associated with high inflation and interest rates, labour market constraints, and continuing
geopolitical tensions which contribute to an elevated level of estimation uncertainty involved in the preparation of these financial
statements.
The Group has made various accounting estimates in this Financial Report based on forecasts of economic conditions which reflect
expectations and assumptions at 30 September 2023 about future events considered reasonable in the circumstances. Thus there is a
considerable degree of judgement involved in preparing these estimates. Actual economic conditions are likely to be different from those
forecast since anticipated events frequently do not occur as expected, and the effect of these differences may significantly impact
accounting estimates included in these financial statements. The significant accounting estimates impacted by these forecasts and
associated uncertainties are predominantly related to expected credit losses and recoverable amounts of non-financial assets.
The impact of these uncertainties on each of these accounting estimates is discussed in the relevant notes in this Financial Report. Readers
should consider these disclosures in light of the inherent uncertainties described above.
",
"dimensions": {
"concept": "ifrs-full:DisclosureOfAccountingJudgementsAndEstimatesExplanatory",
"language": "en",
"entity": "scheme:JHE42UYNWWTJB8YTTU19",
"period": "2022-10-01T00:00:00/2023-10-01T00:00:00"
}
},
"fact_anz_DescriptionOfAccountingPolicyForInterestRateBenchmarkReformExplanatory_D81560828_CY": {
"value": "INTEREST RATE BENCHMARK REFORM
Interbank offered rates (IBORs) reform is the global transition away from IBORs and their replacement by risk-free rates (RFRs). IBOR reforms have had a
wide-ranging impact for the Group and our customers given the fundamental differences between IBORs and RFRs. Accordingly, the Group
established an enterprise-wide Benchmark Transition Program to manage the operational, market, legal, conduct and financial reporting risks
associated with IBOR transition.
As at 30 September 2023 the Group\u2019s Program is largely complete, and included the implementation of the required processes, technology and
product capabilities that ensured the transitions were successfully undertaken. In line with regulatory announcements made in early 2021, IBOR rates
including Pound Sterling (GBP), Euro (EUR), Swiss Franc (CHF) and Japanese Yen (JPY), and the 1-week and 2-month US Dollar (USD) London Interbank
Offered Rate (LIBOR) rate settings ceased on 31 December 2021 and were replaced by alternative RFRs. The Group\u2019s exposure to IBOR reform was
primarily concentrated in other USD LIBOR settings which ceased on 30 June 2023. No material changes were made to the Group\u2019s risk management
strategy because of IBOR reform and the use of IBOR rates in new products was phased out in accordance with industry and supervisory guidance. The
transition activities had an immaterial impact to the Group\u2019s profit and loss.
To support any legacy contracts referencing these benchmarks across the industry, the 1-month, 3-month and 6-month USD settings will continue to
be published using an alternative \u2018synthetic\u2019 methodology. The Group continues to manage a small number of loan and derivative contracts whose
transition is being managed with customers, and a small number of debt issuances with investors. These remaining contracts will either mature or
transition ahead of the synthetic USD LIBOR cessation date of 30 September 2024. The Group has an immaterial exposure to other announced
benchmark cessation events expected to occur between 2024 and 2026.
",
"dimensions": {
"concept": "anz:DescriptionOfAccountingPolicyForInterestRateBenchmarkReformExplanatory",
"language": "en",
"entity": "scheme:JHE42UYNWWTJB8YTTU19",
"period": "2022-10-01T00:00:00/2023-10-01T00:00:00"
}
},
"fact_anz_DescriptionOfAccountingStandardsAdoptedInThePeriodExplanatory_D1102565323_CY": {
"value": "ACCOUNTING STANDARDS ADOPTED IN THE PERIOD
Accounting policies have been consistently applied, unless otherwise noted.
AASB 2023-2
AMENDMENTS TO AUSTRALIAN ACCOUNTING STANDARDS \u2013 INTERNATIONAL TAX REFORM \u2013 PILLAR TWO MODEL RULES
In May 2023, the Federal Government announced it will implement key aspects of Pillar Two of the OECD/G20 Two-Pillar Solution to address the tax
challenges arising from digitalisation of the economy. This measure is not yet law. Other jurisdictions in which ANZ operates are also considering
implementation of the regime. The ANZ Group is expected to be within the scope of associated legislation. In anticipation of legislation being
enacted, the AASB issued AASB 2023-2
Amendments to Australian Accounting Standards \u2013 International Tax Reform \u2013 Pillar Two Model Rules
in June
2023. The Group has applied the mandatory exemption included in para. 4A of this standard and will apply the whole amending standard from 1
October 2023. This amending standard stipulates a mandatory temporary exemption from recognising deferred tax assets and liabilities related to
Pillar Two income taxes. The Group is monitoring progress of associated legislation and has not yet determined the expected impact on its financial
statements.
",
"dimensions": {
"concept": "anz:DescriptionOfAccountingStandardsAdoptedInThePeriodExplanatory",
"language": "en",
"entity": "scheme:JHE42UYNWWTJB8YTTU19",
"period": "2022-10-01T00:00:00/2023-10-01T00:00:00"
}
},
"fact_anz_DescriptionOfAccountingStandardsNotEarlyAdoptedExplanatory_D1036106693_CY": {
"value": "ACCOUNTING STANDARDS NOT EARLY ADOPTED
A number of new standards, amendments to standards and interpretations have been published but are not mandatory for the financial statements
for the year ended 30 September 2023 and have not been applied by the Group in preparing these financial statements. Further details of these are
set out below.
GENERAL HEDGE ACCOUNTING
AASB 9
Financial Instruments
(AASB 9) introduced new hedge accounting requirements which more closely align accounting with risk management
activities undertaken when hedging both financial and non-financial risks. AASB 9 provided the Group with an accounting policy choice to continue
to apply the AASB 139
Financial Instruments: Recognition and Measurement
(AASB 139) hedge accounting requirements until the International
Accounting Standards Board\u2019s ongoing project on Dynamic Risk Management (macro hedge accounting) is completed. The Group continues to apply
the hedge accounting requirements of AASB 139.
INSURANCE CONTRACTS
(AASB 17)
The final version of AASB 17 was issued in July 2017 and is not effective for the Group until 1 October 2023. It will replace AASB 4
Insurance Contracts
,
AASB 1023
General Insurance Contracts
and AASB 1038
Life Insurance Contracts
. AASB 17 establishes principles for the recognition, measurement,
presentation and disclosure of insurance contracts.
The measurement, presentation and disclosure requirements under AASB 17 are significantly different from current accounting standards. Although
the overall profit recognised in respect of insurance contracts will not change, it is expected that the timing of profit recognition will change.
AASB 17 will not have a material impact on the Group.
DEFERRED TAX RELATED TO ASSETS AND LIABILITIES ARISING FROM A SINGLE TRANSACTION
AASB 2021-5
Amendments to Australian Accounting Standards \u2013 Deferred Tax related to Assets and Liabilities arising from a Single Transaction
amends AASB 112
Income Taxes.
It
clarifies that entities are required to recognise deferred tax on transactions for which there is both an asset and a
liability and that give rise to equal taxable and deductible temporary differences which may apply to leases and decommissioning or restoration
obligations. This amendment is effective for the Group from 1 October 2023 and will not have a material impact on the Group.
LEASE LIABILITY IN A SALE AND LEASEBACK
AASB 2022-5
Amendments to Australian Accounting Standards \u2013 Lease Liability in a Sale and Leaseback
amends AASB 16
Leases
and specifies the
accounting for variable lease payments by seller-lessees in sale and leaseback transactions. The amendment is effective from 1 October 2024 and will
not have a material impact on the Group.
",
"dimensions": {
"concept": "anz:DescriptionOfAccountingStandardsNotEarlyAdoptedExplanatory",
"language": "en",
"entity": "scheme:JHE42UYNWWTJB8YTTU19",
"period": "2022-10-01T00:00:00/2023-10-01T00:00:00"
}
},
"fact_ifrs-full_DisclosureOfInterestIncomeExpenseExplanatory_D291871691_CY": {
"value": "
2.
NET INTEREST INCOME
| Consolidated | | The Company | |
| 2023 | 2022 | 2023 | 2022 |
| $m | $m | $m | $m |
| Net interest income | | | | |
| Interest income by type of financial asset | | | | |
| Financial assets at amortised cost | 44,303 | 21,737 | 35,000 | 16,289 |
| Investment securities at FVOCI | 2,615 | 1,107 | 2,235 | 834 |
| Trading assets | 1,654 | 700 | 1,413 | 547 |
| Financial assets at FVTPL | 1,355 | 65 | 1,449 | 177 |
| External interest income | 49,927 | 23,609 | 40,097 | 17,847 |
| Controlled entities' income | - | - | 1,047 | 561 |
| Interest income | 49,927 | 23,609 | 41,144 | 18,408 |
| Interest expense by type of financial liability | | | | |
| Financial liabilities at amortised cost | (31,334) | (8,019) | (26,016) | (6,170) |
| Securities sold short | (451) | (214) | (392) | (191) |
| Financial liabilities designated at FVTPL | (1,214) | (162) | (1,104) | (151) |
| External interest expense | (32,999) | (8,395) | (27,512) | (6,512) |
| Controlled entities expense | - | - | (1,161) | (581) |
| Interest expense | (32,999) | (8,395) | (28,673) | (7,093) |
| Major bank levy | (353) | (340) | (353) | (340) |
| Net interest income | 16,575 | 14,874 | 12,118 | 10,975 |
RECOGNITION AND MEASUREMENT
NET INTEREST INCOME
Interest Income and Expense
We recognise interest income and expense in net interest income for all financial instruments, including those classified as held for trading,
assets measured at FVOCI, and assets and liabilities designated at FVTPL. We use the effective interest rate method to calculate the
amortised cost of assets held at amortised cost and to recognise interest income on financial assets measured at amortised cost and FVOCI.
The effective interest rate is the rate that discounts the stream of estimated future cash receipts or payments over the expected life of the
financial instrument or, when appropriate, a shorter period, to the net carrying amount of the financial asset or liability. For assets subject to
prepayment, we determine their expected life on the basis of historical behaviour of the particular asset portfolio taking into account
contractual obligations and prepayment experience.
We recognise fees and costs, which form an integral part of the financial instrument (for example loan origination fees and costs), using the
effective interest rate method. These are presented as part of interest income or expense depending on whether the underlying financial
instrument is a financial asset or financial liability.
Major Bank Levy
The Major Bank Levy Act 2017
(levy or major bank levy) applies a rate of 0.06% to certain liabilities of ANZBGL. The levy represents a finance
cost and it is presented as interest expense in the Income Statement.
3.
NON-INTEREST INCOME
| Consolidated | | The Company | |
| | 2023 | 2022 | 2023 | 2022 |
| | $m | $m | $m | $m |
| Non-interest income | | | | |
| Fee and commission income | | | | |
| Lending fees1 | 397 | 374 | 362 | 340 |
| Non-lending fees | 2,275 | 2,394 | 1,533 | 1,744 |
| Commissions | 85 | 103 | 55 | 74 |
| Funds management income | 246 | 261 | 22 | 27 |
| External fee and commission income | 3,003 | 3,132 | 1,972 | 2,185 |
| Controlled entities' income | - | - | 187 | 244 |
| Fee and commission income | 3,003 | 3,132 | 2,159 | 2,429 |
| Fee and commission expense | (1,057) | (1,160) | (553) | (695) |
| Net fee and commission income | 1,946 | 1,972 | 1,606 | 1,734 |
| Other income | | | | |
| Net foreign exchange earnings and other financial instruments income2 | 1,535 | 1,993 | 1,272 | 1,296 |
| Gain on completion of ANZ Worldline partnership | - | 307 | - | 307 |
| Impairment of interest in controlled entities | - | - | - | (180) |
| Release of foreign currency translation reserve | 43 | (65) | - | - |
| Loss on disposal of financial planning and advice business | - | (62) | - | (22) |
| Loss on disposal of data centres in Australia | (43) | - | (32) | - |
| Dividends received from controlled entities | - | - | 2,562 | 3,181 |
| Other | 96 | 90 | (7) | 108 |
| Other income | 1,631 | 2,263 | 3,795 | 4,690 |
| Other operating income | 3,577 | 4,235 | 5,401 | 6,424 |
| Net income from insurance business | 89 | 140 | - | - |
| Share of associates' profit/(loss) | 225 | 177 | (18) | (12) |
| Non-interest income | 3,891 | 4,552 | 5,383 | 6,412 |
1. Lending fees exclude fees treated as part of the effective yield calculation in Interest income.
2. 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, ineffective
portions of cash flow hedges, and fair value movements in financial assets and liabilities designated at FVTPL.
RECOGNITION AND MEASUREMENT
OTHER OPERATING INCOME
Fee and Commission Revenue
We recognise fee and commission revenue arising from contracts with customers (a) over time when the performance obligation is
satisfied across more than one reporting period, or (b) at a point in time when the performance obligation is satisfied immediately or is
satisfied within one reporting period.
\u2022 lending fees exclude fees treated as part of the effective yield calculation of interest income. Lending fees include certain guarantee and
commitment fees where the loan or guarantee is not likely to be drawn upon, and other fees charged for providing customers a distinct
good or service that are recognised separately from the underlying lending product.
\u2022 non-lending fees include fees associated with deposit and credit card accounts, interchange fees and fees charged for specific customer
transactions such as international transaction fees. Where the Group provides multiple goods or services to a customer under the same
contract, the Group allocates the transaction price of the contract to distinct performance obligations based on the relative stand-alone
selling price of each performance obligation. Revenue is recognised as each performance obligation is satisfied.
\u2022 commissions represent fees from third parties where we act as an agent by arranging a third party (such as an insurance provider) to
provide goods and services to a customer. In such cases, we are not primarily responsible for providing the underlying good or service
to the customer. If the Group collects funds on behalf of a third party when acting as an agent, we only recognise the net commission
retained as revenue. When the commission is variable based on factors outside our control (such as a trail commission), revenue is only
recognised if it is highly probable that a significant reversal of the variable amount will not be required in future periods.
\u2022 funds management income represents fees earned from customers for providing asset management services. Revenue is recognised
over the period in which the asset management services are delivered. Performance fees associated with funds management activities
are only recognised when it becomes highly probable the performance hurdle will be achieved.
Net Foreign Exchange Earnings and Other Financial Instruments Income
We recognise the following as net foreign exchange earnings and other financial instruments income:
\u2022 exchange rate differences arising on the settlement of monetary items and translation differences on monetary items translated at rates
different to those at which they were initially recognised or included in a previous financial report;
\u2022 fair value movements (excluding realised and accrued interest) on derivatives not designated as accounting hedges that we use to
manage interest rate and foreign exchange risk on funding instruments;
\u2022 the ineffective portions of fair value hedges, cash flow hedges and net investment hedges;
\u2022 immediately upon sale or repayment of a hedged item, the unamortised fair value adjustments to items designated as fair value hedges
and amounts accumulated in equity related to designated cash flow hedges;
\u2022 fair value movements on financial assets and financial liabilities designated at FVTPL or held for trading;
\u2022 amounts released from the FVOCI reserve when a debt instrument classified as FVOCI is sold; and
\u2022 the gain or loss on derecognition of financial assets or liabilities measured at amortised cost.
Gain or Loss on Disposal of Non-Financial Assets
The gain or loss on the disposal of assets is the difference between the carrying value of the asset and the proceeds of disposal net of costs.
This is recognised in Other income in the year in which control of the asset transfers to the buyer.
When a non-financial asset or group of assets is classified as held for sale, it is measured at the lower of its carrying amount immediately
prior to reclassification and fair value less costs to sell, with any remeasurement recognised in Other operating income to align with the
classification of gain or loss on sale that would have applied if the sale had completed during the year.
RECOGNITION AND MEASUREMENT
NET INCOME FROM INSURANCE BUSINESS
We recognise
:
\u2022 premiums received (net of reinsurance premiums paid) based on an assessment of the likely pattern in which risk will emerge over the
term of the policies written. This assessment is undertaken periodically and updated in accordance with the latest pattern of risk
emergence; and
\u2022 claims incurred net of reinsurance, on an accruals basis once the liability to the policy owner has been established under the terms of
the contract and through actuarial assumptions of future claims.
SHARE OF ASSOCIATES\u2019 PROFIT/(LOSS)
The equity method is applied to accounting for associates. Under the equity method, our share of the after tax results of associates is
included in the Income Statement and the Statement of Comprehensive Income.
4. OPERATING EXPENSES
| | Consolidated | | The Company | |
| | 2023 | 2022 | 2023 | 2022 |
| | $m | $m | $m | $m |
| Personnel | | | | |
| Salaries and related costs | 5,157 | 4,754 | 3,791 | 3,494 |
| Superannuation costs | 396 | 375 | 335 | 317 |
| Other | 183 | 167 | 154 | 127 |
| Personnel | 5,736 | 5,296 | 4,280 | 3,938 |
| Premises | | | | |
| Rent | 71 | 88 | 50 | 67 |
| Depreciation | 437 | 419 | 338 | 344 |
| Other | 176 | 214 | 123 | 168 |
| Premises | 684 | 721 | 511 | 579 |
| Technology | | | | |
| Depreciation and amortisation | 501 | 578 | 455 | 521 |
| Subscription licences and outsourced services | 1,007 | 899 | 695 | 648 |
| Other | 178 | 144 | 144 | 162 |
| Technology | 1,686 | 1,621 | 1,294 | 1,331 |
| Restructuring | 169 | 101 | 146 | 78 |
| Other | | | | |
| Advertising and public relations | 176 | 165 | 133 | 128 |
| Professional fees | 857 | 935 | 795 | 864 |
| Freight, stationery, postage and communication | 175 | 172 | 128 | 128 |
| Other | 604 | 568 | 1,201 | 1,077 |
| Other | 1,812 | 1,840 | 2,257 | 2,197 |
| Operating expenses | 10,087 | 9,579 | 8,488 | 8,123 |
RECOGNITION AND MEASUREMENT
OPERATING EXPENSES
Operating expenses are recognised as services are provided to the Group, over the period in which an asset is consumed, or once a liability
is created.
SALARIES AND RELATED COSTS - ANNUAL LEAVE, LONG SERVICE LEAVE AND OTHER EMPLOYEE BENEFITS
Wages and salaries, annual leave and other employee entitlements expected to be paid or settled within twelve months of employees
rendering service are measured at their nominal amounts using remuneration rates that the Group expects to pay when the liabilities are
settled.
We accrue employee entitlements relating to long service leave using an actuarial calculation. It includes assumptions regarding staff
departures, leave utilisation and future salary increases. The result is then discounted using market yields at the reporting date. The market
yields are determined from a blended rate of high quality corporate bonds with terms to maturity that closely match the estimated future
cash outflows.
If we expect to pay short term cash bonuses, then a liability is recognised when the Group has a present legal or constructive obligation to
pay this amount (as a result of past service provided by the employee) and the obligation can be reliably measured.
Personnel expenses also include share-based payments which may be cash or equity settled. We calculate the fair value of equity settled
remuneration at grant date, which is then amortised over the vesting period, with a corresponding increase in share capital or the share
option reserve as applicable. When we estimate the fair value, we take into account market vesting conditions, such as share price
performance conditions. We take non-market vesting conditions, such as service conditions, into account by adjusting the number of
equity instruments included in the expense.
After the grant of an equity-based award, the amount we recognise as an expense is reversed when non-market vesting conditions are not
met, for example an employee fails to satisfy the minimum service period specified in the award due to resignation, termination or notice
of dismissal for serious misconduct. However, we do not reverse the expense if the award does not vest due to the failure to meet a
market-based performance condition.
Further information on share-based payment schemes operated by the Group during the current and prior year is included in Note 30
Employee Share and Option Plans.
5. INCOME TAX
INCOME TAX EXPENSE
Reconciliation of the prima facie income tax expense on pre-tax profit with the income tax expense recognised in profit or loss:
| | Consolidated | | The Company | |
| | 2023 | 2022 | 2023 | 2022 |
| $m | $m | $m | $m |
| Profit before income tax from continuing operations | 10,134 | 10,079 | 8,938 | 9,529 |
| Prima facie income tax expense at 30% | 3,040 | 3,024 | 2,681 | 2,859 |
| Tax effect of permanent differences: | | | | |
| Net (gain)/loss from divestments/closures | - | (83) | - | (113) |
| Share of associates' (profit)/loss | (68) | (53) | 5 | 4 |
| Interest on convertible instruments | 92 | 49 | 92 | 49 |
| Overseas tax rate differential | (163) | (128) | (95) | (70) |
| Provision for foreign tax on dividend repatriation | 41 | 155 | 35 | 150 |
| Rebatable and non-assessable dividends | - | - | (769) | (954) |
| Impairment of interest in controlled entities | - | - | - | 54 |
| Other | (2) | 4 | 23 | (21) |
| Subtotal | 2,940 | 2,968 | 1,972 | 1,958 |
| Income tax (over)/under provided in previous years | 1 | (28) | (8) | (25) |
| Income tax expense | 2,941 | 2,940 | 1,964 | 1,933 |
| Current tax expense | 2,887 | 2,694 | 2,012 | 1,725 |
| Adjustments recognised in the current year in relation to the current tax of | | | | |
| prior years | 1 | (28) | (8) | (25) |
| Deferred tax expense/(income) relating to the origination and reversal of | | | | |
| temporary differences | 53 | 274 | (40) | 233 |
| Income tax expense | 2,941 | 2,940 | 1,964 | 1,933 |
| Australia | 1,640 | 1,844 | 1,568 | 1,755 |
| Overseas | 1,301 | 1,096 | 396 | 178 |
| Effective tax rate | 29.0% | 29.2% | 22.0% | 20.3% |
DEFERRED TAX ASSETS AND LIABILITIES
| | Consolidated | | The Company | |
| | 2023 | 2022 | 2023 | 2022 |
| $m | $m | $m | $m |
| Deferred tax assets balances comprise temporary differences | | | | |
| attributable to: | | | | |
| Amounts recognised in the Income Statement: | | | | |
| Collectively assessed allowances for expected credit losses | 1,128 | 1,065 | 897 | 880 |
| Individually assessed allowances for expected credit losses | 102 | 148 | 79 | 119 |
| Provision for employee entitlements | 294 | 252 | 243 | 206 |
| Other provisions | 263 | 314 | 209 | 240 |
| Software | 917 | 867 | 781 | 708 |
| Other | 290 | 285 | 238 | 218 |
| Total | 2,994 | 2,931 | 2,447 | 2,371 |
| Amounts recognised directly in Other Comprehensive Income: | | - | | |
| Cash flow hedge reserve | 818 | 882 | 789 | 891 |
| Other reserves | 29 | 20 | 27 | 16 |
| Total | 847 | 902 | 816 | 907 |
| Total deferred tax assets (before set-off) | 3,841 | 3,833 | 3,263 | 3,278 |
| Set-off of deferred tax balances pursuant to set-off provisions | (455) | (449) | (275) | (286) |
| Net deferred tax assets | 3,386 | 3,384 | 2,988 | 2,992 |
| | 2023 | 2022 | 2023 | 2022 |
| $m | $m | $m | $m |
| Deferred tax liabilities balances comprise temporary differences | | | | |
| attributable to: | | | | |
| Amounts recognised in the Income Statement: | | | | |
| Finance leases | 95 | 79 | 6 | (15) |
| Other | 303 | 300 | 212 | 232 |
| Total | 398 | 379 | 218 | 217 |
| Amounts recognised directly in Other Comprehensive Income: | | | | |
| Foreign currency translation reserve | 36 | 36 | 36 | 36 |
| Cash flow hedge reserve | 17 | 8 | 7 | 8 |
| FVOCI reserve | 17 | 57 | 19 | 31 |
| Defined benefit obligations | 47 | 52 | 42 | 48 |
| Total | 117 | 153 | 104 | 123 |
| Total deferred tax liabilities (before set-off) | 515 | 532 | 322 | 340 |
| Set-off of deferred tax balances pursuant to set-off provisions | (455) | (449) | (275) | (286) |
| Net deferred tax liabilities | 60 | 83 | 47 | 54 |
TAX CONSOLIDATION
The Company and all its wholly owned Australian resident entities are part of a tax-consolidated group under Australian taxation law. Following the
Restructure on 3 January 2023, ANZGHL is the head entity in the tax-consolidated group. We recognise each of the following in the separate financial
statements of members of the tax consolidated group on a \u2018group allocation\u2019 basis: tax expense/income, and deferred tax liabilities/assets that arise
from temporary differences for members of the tax-consolidated group.
Under a tax funding arrangement between the entities in the tax-consolidated group, amounts are recognised as payable to or receivable by each
member of the tax-consolidated group in relation to the tax contribution amounts payable or receivable between members of the tax-consolidated
group and the head entity ANZGHL.
Members of the tax-consolidated group have also entered into a tax sharing agreement that provides for the allocation of income tax liabilities
between the entities were the head entity to default on its income tax payment obligations.
UNRECOGNISED DEFERRED TAX ASSETS AND LIABILITIES
Unrecognised deferred tax assets related to unused realised tax losses (on revenue account) total $1 million (2022: $1 million) for the Group and nil
(2022: nil) for the Company.
Unrecognised deferred tax liabilities related to additional potential foreign tax costs (assuming all retained earnings in offshore branches and
subsidiaries are repatriated) total $286 million (2022: $250 million) for the Group and $30 million (2022: $18 million) for the Company.
RECOGNITION AND MEASUREMENT
INCOME TAX EXPENSE
Income tax expense comprises both current and deferred taxes and is based on the accounting profit adjusted for differences in the
accounting and tax treatments of income and expenses (that is, taxable income). We recognise tax expense in profit or loss except when
the tax relates to items recognised directly in equity and other comprehensive income, in which case we recognise the tax directly in
equity or other comprehensive income respectively.
CURRENT TAX EXPENSE
Current tax is the tax we expect to pay on taxable income for the year, based on tax rates (and tax laws) which are enacted at the reporting
date. We recognise current tax as a liability (or asset) to the extent that it is unpaid (or refundable).
DEFERRED TAX ASSETS AND LIABILITIES
We account for deferred tax using the balance sheet method. Deferred tax arises because the accounting income is not always the same as
the taxable income. This creates temporary differences, which usually reverse over time. Until they reverse, we recognise a deferred tax
asset, or liability, on the balance sheet. We measure deferred taxes at the tax rates that we expect will apply to the period(s) when the asset
is realised, or the liability settled, based on tax rates (and tax laws) that have been enacted or substantially enacted at the reporting date.
We offset current and
deferred tax assets and liabilities only to the extent that:
\u2022 they relate to income taxes imposed by the same taxation authority;
\u2022 there is a legal right and intention to settle on a net basis; and
\u2022
it is allowed under the tax law
of the relevant jurisdiction.
KEY JUDGEMENTS AND ESTIMATES
Judgement is required in determining provisions held in respect of uncertain tax positions. The Group estimates its tax liabilities based on
its understanding of the relevant law in each of the countries in which it operates and seeks independent advice where appropriate.
6. DIVIDENDS
ORDINARY SHARE DIVIDENDS
Dividends determined by the Board of the Company are recognised with a corresponding reduction of retained earnings on the dividend payment
date. Accordingly, the final dividend announced for the current financial year is paid in the following financial year. Following the Restructure on 3
January 2023, ANZGHL is the head entity in the tax-consolidated group, and the franking and imputation credits have been transferred by the
Company to ANZGHL.
| | | | |
| | Amount | Total dividend |
| Dividends | | | |
| % of total | per share | $m |
| Financial Year 2022 | | | |
| 2021 final dividend paid1,2 | | 72 cents | 2,030 |
| 2022 interim dividend paid1,2 | | 72 cents | 2,012 |
| Bonus option plan adjustment | | | (77) |
| Dividends paid during the year ended 30 September 2022 | | | |
| | | | |
| | | 3,965 |
| Cash | 90.2% | | 3,577 |
| Dividend reinvestment plan3 | 9.8% | | 388 |
| Dividends paid during the year ended 30 September 2022 | | | |
| | | | |
| | | 3,965 |
| Financial Year 2023 | | | |
| 2022 final dividend paid1,2 | | 74 cents | 2,213 |
| 2023 special dividend paid to ANZ BH Pty Ltd | | 33 cents | 1,000 |
| 2023 interim dividend paid to ANZ BH Pty Ltd | | 79 cents | 2,387 |
| Dividends paid during the year ended 30 September 2023 | | | 5,600 |
| Cash | 96.3% | | 5,394 |
| Dividend reinvestment plan | 3.7% | | 206 |
| Dividends paid during the year ended 30 September 2023 | | | 5,600 |
| | | Total |
| | | dividend |
| | | Amount | |
| Dividends announced and to be paid after year-end | Payment date | per share | $m |
| 2023 final dividend | 22 December 2023 | 94 cents | 2,825 |
1. Carries New Zealand imputation credits of NZD 9 cents for the 2022 final dividend and 2022 interim dividend, and NZD 8 cents for the 2021 final dividend.
2. Fully franked for Australian tax purposes (30% tax rate).
3. Includes on-market share purchases for the DRP of $204 million.
DIVIDEND REINVESTMENT PLAN AND BONUS OPTION PLAN
ANZBGL\u2019s Dividend Reinvestment Plan (DRP) and Bonus Option Plan (BOP) ceased to operate following implementation of the Restructure on 3
January 2023.
RESTRICTIONS ON THE PAYMENT OF DIVIDENDS
APRA\u2019s written approval is required before paying dividends on the ordinary shares of the Company if:
\u2022 the aggregate dividends exceed the Company\u2019s after tax earnings (in calculating those after tax earnings, we take into account any payments we
made on senior capital instruments) in the financial year to which they relate; or
\u2022 ANZ\u2019s Common Equity Tier 1 capital ratio falls within capital range buffers specified by APRA.
If the Company fails to pay a dividend or distribution on its ANZ Capital Notes or ANZ Capital Securities on the scheduled payment date, it may
(subject to a number of exceptions) be restricted from resolving to pay or paying any dividend on the Company\u2019s ordinary shares.
7. SEGMENT REPORTING
DESCRIPTION OF SEGMENTS
The Group\u2019s six operating segments are presented on a basis that is consistent with the information provided internally to the Chief Executive Officer,
who is the chief operating decision maker. This reflects the way the Group\u2019s businesses are managed, rather than the legal structure of the Group.
We measure the performance of operating segments on a cash profit basis. To calculate cash profit, we exclude items from profit after tax attributable
to shareholders. For 2023 and 2022, the adjustments relate to impacts of economic hedges and revenue and expense hedges which represent timing
differences that will reverse through earnings in the future. Transactions between divisions across segments within ANZ are conducted on an arm\u2019s-
length basis and disclosed as part of the income and expenses of these segments.
The presentation of divisional results has been impacted by the following structural changes during the period. Prior period comparatives have been
restated:
\u2022 Non-banking businesses - transfer of non-banking businesses held in the Australia Commercial and Institutional divisions to the Group Centre
division which were then disposed as part of the Restructure.
\u2022 Corporate customer re-segmentation - certain business and property finance customers were transferred from the New Zealand division to the
Institutional division.
\u2022 Cost reallocations - certain costs were reallocated across the Australia Retail, Australia Commercial, Institutional and Group Centre divisions.
The reportable segments are divisions engaged in providing either different products or services or similar products and services in different
geographical areas. They are as follows:
Australia Retail
The Australia Retail division provides a full range of banking services to Australian consumers. This includes Home Loans, Deposits, Credit Cards and
Personal Loans. Products and services are provided via the branch network, home loan specialists, contact centres, a variety of self-service channels
(digital and internet banking, website, ATMs and phone banking) and third-party brokers. It also includes the costs related to the development and
operation of the ANZ Plus proposition for retail customers.
Australia Commercial
The Australia Commercial division provides a full range of banking products and financial services, including asset financing, across the following
customer segments: SME Banking (small business owners and medium commercial customers), and Specialist Business (large commercial customers,
and high net worth individuals and family groups).
Institutional
The Institutional division services global institutional and corporate customers, and governments across Australia, New Zealand and International
(including Papua New Guinea (PNG)) via the following business units:
\u2022 Transaction Banking provides customers with working capital and liquidity solutions including documentary trade, supply chain financing,
commodity financing as well as cash management solutions, deposits, payments and clearing.
\u2022 Corporate Finance provides customers with loan products, loan syndication, specialised loan structuring and execution, project and export
finance, debt structuring and acquisition finance and corporate advisory services.
\u2022 Markets provides customers with risk management services in foreign exchange, interest rates, credit, commodities, and debt capital markets in
addition to managing the Group's interest rate exposure and liquidity position.
New Zealand
The New Zealand division comprises the following business units:
\u2022 Personal provides a full range of banking and wealth management services to consumer and private banking customers. We deliver our services
via our internet and app-based digital solutions and a network of branches, mortgage specialists, relationship managers and contact centres.
\u2022 Business and Agri (previously Business) provides a full range of banking services through our digital, branch and contact centre channels, and
traditional relationship banking and sophisticated financial solutions through dedicated managers. These cover privately owned small, medium
and large enterprises, the agricultural business segment, government and government-related entities.
Pacific
The Pacific division provides products and services to retail and commercial customers (including multi-nationals) and to governments located in the
Pacific region, excluding PNG which forms part of the Institutional division.
Group Centre
Group Centre division provides support to the operating divisions, including technology, property, risk management, financial management, treasury,
strategy, marketing, human resources, corporate affairs, and shareholder functions. It also includes minority investments in Asia.
OPERATING SEGMENTS
| | Australia | | | | | | |
| Retail | | | | | | |
| | Australia | | | | | |
| | Commercial | Institutional | | | | |
| | | | New | | | |
| | | | Zealand | Pacific | | |
| | | | | | Group | |
| | | | | | Centre | |
| | | | | | | Group |
| | | | | | | Total |
| Year ended 30 September 2023 | $m | $m | $m | $m | $m | $m | $m |
| Net interest income | 5,716 | 3,224 | 4,040 | 3,149 | 123 | 323 | 16,575 |
| Net fee and commission income | 546 | 322 | 685 | 398 | 19 | (24) | 1,946 |
| Net income from insurance business | 89 | - | - | - | - | - | 89 |
| Other income1,2 | 16 | 43 | 2,009 | 11 | 66 | (80) | 2,065 |
| Share of associates\u2019 profit/(loss) | - | - | - | - | - | 225 | 225 |
| Other operating income | 651 | 365 | 2,694 | 409 | 85 | 121 | 4,325 |
| Operating income1,2 | 6,367 | 3,589 | 6,734 | 3,558 | 208 | 444 | 20,900 |
| Operating expenses | (3,542) | (1,423) | (2,708) | (1,291) | (145) | (978) | (10,087) |
| Cash profit before credit impairment and income tax | 2,825 | 2,166 | 4,026 | 2,267 | 63 | (534) | 10,813 |
| Credit impairment (charge)/release | (135) | (107) | 80 | (112) | 28 | 1 | (245) |
| Cash profit before income tax | 2,690 | 2,059 | 4,106 | 2,155 | 91 | (533) | 10,568 |
| Income tax expense and non-controlling interests1,2 | (816) | (619) | (1,143) | (603) | (20) | 105 | (3,096) |
| Cash profit/(loss) from continuing operations | 1,874 | 1,440 | 2,963 | 1,552 | 71 | (428) | 7,472 |
| Cash profit/(loss) from discontinued operations | | | | | | | - |
| Cash profit/(loss) | | | | | | | 7,472 |
| Economic hedges1 | | | | | | | (217) |
| Revenue and expense hedges2 | | | | | | | (90) |
| Profit after tax attributable to shareholders | | | | | | | 7,165 |
| Includes non-cash items: | | | | | | | |
| Share of associates\u2019 profit/(loss) | - | - | - | - | - | 225 | 225 |
| Depreciation and amortisation | (77) | (5) | (164) | (105) | (10) | (580) | (941) |
| Equity-settled share based payment expenses | (6) | (2) | (73) | (4) | - | (20) | (105) |
| Credit impairment (charge)/release | (135) | (107) | 80 | (112) | 28 | 1 | (245) |
| | Australia | | | | | | |
| Retail | | | | | | |
| | Australia | | | | | |
| | Commercial | Institutional | | | | |
| | | | New | | | |
| | | | Zealand | Pacific | | |
| | | | | | Group | |
| | | | | | Centre | |
| | | | | | | Group |
| | | | | | | Total |
| Financial position | $m | $m | $m | $m | $m | $m | $m |
| Goodwill | 100 | - | 1,261 | 1,617 | - | - | 2,978 |
| Investments in associates | - | - | - | - | - | 2,321 | 2,321 |
| Total external assets | 315,184 | 61,916 | 538,827 | 125,178 | 3,391 | 61,545 | 1,106,041 |
| Total external liabilities | 168,866 | 119,341 | 452,779 | 122,924 | 3,862 | 169,155 | 1,036,927 |
1. The cash profit adjustment for economic hedges applies to the Institutional, New Zealand and Group Centre divisions with $305 million loss recognised in Other operating income and $88 million benefit
recognised in Income tax expense.
2. The cash profit adjustment for revenue and expense hedges applies to the Group Centre division with $129 million loss recognised in Other operating income and $39 million benefit recognised in Income
tax expense.
| Australia | | | | | | |
| Retail | | | | | | |
| | Australia | | | | | |
| | Commercial | Institutional | | | | |
| | | | New | | | |
| | | | Zealand | Pacific | | |
| | | | | | Group | |
| | | | | | Centre | |
| | | | | | | Group |
| | | | | | | Total |
| Year ended 30 September 2022 | $m | $m | $m | $m | $m | $m | $m |
| Net interest income | 5,527 | 2,568 | 3,697 | 2,871 | 96 | 115 | 14,874 |
| Net fee and commission income | 477 | 404 | 648 | 428 | 26 | (11) | 1,972 |
| Net income from insurance business | 140 | - | - | - | - | - | 140 |
| Other income1,2 | 5 | 258 | 1,003 | 32 | 42 | 44 | 1,384 |
| Share of associates\u2019 profit/(loss) | - | - | - | - | - | 177 | 177 |
| Other operating income | 622 | 662 | 1,651 | 460 | 68 | 210 | 3,673 |
| Operating income1,2 | 6,149 | 3,230 | 5,348 | 3,331 | 164 | 325 | 18,547 |
| Operating expenses | (3,397) | (1,301) | (2,566) | (1,273) | (153) | (889) | (9,579) |
| Cash profit before credit impairment and income tax | 2,752 | 1,929 | 2,782 | 2,058 | 11 | (564) | 8,968 |
| Credit impairment (charge)/release | 129 | 133 | 27 | (45) | 6 | (18) | 232 |
| Cash profit before income tax | 2,881 | 2,062 | 2,809 | 2,013 | 17 | (582) | 9,200 |
| Income tax expense and non-controlling interests1,2 | (872) | (511) | (872) | (564) | (8) | 142 | (2,685) |
| Cash profit/(loss) from continuing operations | 2,009 | 1,551 | 1,937 | 1,449 | 9 | (440) | 6,515 |
| Cash profit/(loss) from discontinued operations | | | | | | | (19) |
| Cash profit/(loss) | | | | | | | 6,496 |
| Economic hedges1 | | | | | | | 569 |
| Revenue and expense hedges2 | | | | | | | 54 |
| Profit after tax attributable to shareholders | | | | | | | 7,119 |
| Includes non-cash items: | | | | | | | |
| Share of associates\u2019 profit/(loss) | - | - | - | - | - | 177 | 177 |
| Depreciation and amortisation | (87) | (12) | (158) | (116) | (10) | (626) | (1,009) |
| Equity-settled share based payment expenses | (5) | (1) | (72) | (4) | (1) | (19) | (102) |
| Credit impairment (charge)/release | 129 | 133 | 27 | (45) | 6 | (18) | 232 |
| Australia | | | | | | |
| Retail | | | | | | |
| | Australia | | | | | |
| | Commercial | Institutional | | | | |
| | | | New | | | |
| | | | Zealand | Pacific | | |
| | | | | | Group | |
| | | | | | Centre | |
| | | | | | | Group |
| | | | | | | Total |
| Financial position | $m | $m | $m | $m | $m | $m | $m |
| Goodwill | 178 | - | 1,198 | 1,530 | - | - | 2,906 |
| Investments in associates | - | - | - | - | - | 2,181 | 2,181 |
| Total external assets | 292,876 | 59,983 | 544,066 | 116,218 | 3,707 | 68,879 | 1,085,729 |
| Total external liabilities | 153,494 | 118,355 | 473,114 | 115,263 | 4,065 | 155,037 | 1,019,328 |
1. The cash profit adjustment for economic hedges applies to the Institutional, New Zealand and Group Centre divisions with $802 million gain recognised in Other operating income and $233 million
expense recognised in Income tax expense.
2. The cash profit adjustment for economic hedges applies to the Group Centre division with $77 million gain recognised in Other operating income and $23 million expense recognised in Income tax
expense.
SEGMENT INCOME BY PRODUCTS AND SERVICES
The primary sources of our external income across all divisions are Interest income and Other operating income, which includes net fee and
commission income, net foreign exchange earnings and other financial instruments income. The Australia Retail, Australia Commercial, New Zealand,
and Pacific divisions derive income from products and services in retail and commercial banking. The Institutional division derives its income from
institutional products and market services. No single customer amounts to greater than 10% of the Group\u2019s income.
GEOGRAPHICAL INFORMATION
The reportable segments operate across three geographical regions as follows:
\u2022 Australia Retail division - Australia
\u2022 Australia Commercial division - Australia
\u2022 Institutional division - all three geographical regions
\u2022 New Zealand division - New Zealand
\u2022 Pacific division \u2013 Rest of World
\u2022 Group Centre division - all three geographical regions
Discontinued operations results are included in the Australia geography. The Rest of World geography includes Asia, Pacific, Europe and the Americas.
The following table sets out total operating income earned including discontinued operations and assets to be recovered in more than one year
based on the geographical regions in which the Group operates.
| | Australia | | New Zealand | | Rest of World | | | |
| | | | | | | Total | |
| | 2023 | 2022 | 2023 | 2022 | 2023 | 2022 | 2023 | 2022 |
| | $m | $m | $m | $m | $m | $m | $m | $m |
| Total operating income1 | 12,677 | 12,462 | 4,463 | 4,501 | 3,326 | 2,547 | 20,466 | 19,510 |
| Assets to be recovered in more than one year2 | 407,221 | 384,724 | 119,278 | 109,191 | 28,877 | 32,350 | 555,376 | 526,265 |
1. Includes Operating income earned from discontinued operations of nil (2022: $84 million).
2. Represents Net loans and advances based on the contractual maturity.
FINANCIAL ASSETS
Outlined below is a description of how we classify and measure financial assets as they apply to the note disclosures that follow.
CLASSIFICATION AND MEASUREMENT
Financial assets - general
There are three measurement classifications for financial assets under AASB 9: amortised cost, FVTPL and FVOCI. Financial assets are
classified into these measurement classifications on the basis of two criteria:
\u2022 the business model within which the financial asset is managed; and
\u2022 the contractual cash flow characteristics of the financial asset (specifically whether the contractual cash flows represent solely payments
of principal and interest).
The resultant financial asset classifications are as follows:
\u2022 Amortised cost: Financial assets with contractual cash flows that comprise solely payments of principal and interest and which are held
in a business model whose objective is to collect their cash flows;
\u2022 FVOCI: Financial assets with contractual cash flows that comprise solely payments of principal and interest and which are held in a
business model whose objective is to collect their cash flows or to sell the assets; and
\u2022 FVTPL: Any other financial assets not falling into the categories above are measured at FVTPL.
Fair value option for financial assets
A financial asset may be irrevocably designated on initial recognition:
\u2022 at FVTPL when the designation eliminates or significantly reduces an accounting mismatch that would otherwise arise; or
\u2022 at FVOCI for investments in equity securities, where that instrument is neither held for trading nor contingent consideration recognised
by an acquirer in a business combination.
",
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"period": "2022-10-01T00:00:00/2023-10-01T00:00:00"
}
},
"fact_ifrs-full_DisclosureOfCashAndCashEquivalentsExplanatory_D1567351199_CY": {
"value": "8. CASH AND CASH EQUIVALENTS
Cash and cash equivalents comprise cash on hand and other balances, as outlined below, that are convertible into cash with an insignificant risk of
changes in value and with remaining maturities of three months or less, including reverse repurchase agreements.
| | Consolidated | | The Company | |
| | 2023 | 2022 | 2023 | 2022 |
| | $m | $m | $m | $m |
| Coins, notes and cash at bank | 1,070 | 1,147 | 667 | 787 |
| Securities purchased under agreements to resell in less than 3 months | | | | |
| 1 | | | | |
| | 31,711 | 15,996 | 31,120 | 14,372 |
| Balances with central banks | 105,689 | 127,790 | 94,389 | 118,928 |
| Settlement balances owed to ANZ within 3 months | 29,684 | 23,199 | 28,232 | 21,396 |
| Cash and cash equivalents | 168,154 | 168,132 | 154,408 | 155,483 |
1.
During 2023, the Group commenced the management of repurchase agreements and reverse repurchase agreements on a fair value basis within the trading book in its Markets business. This resulted in the
associated repurchase and reverse repurchase agreements being recognised and measured at FVTPL.
",
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},
"fact_anz_DisclosureOfTradingAssetsExplanatory_D1330944541_CY": {
"value": "
9. TRADING ASSETS
| Consolidated | | The Company | |
| | 2023 | 2022 | 2023 | 2022 |
| | $m | $m | $m | $m |
| Government debt securities and notes | 28,074 | 27,291 | 23,144 | 21,881 |
| Corporate and financial institution securities | 3,885 | 3,941 | 2,914 | 2,700 |
| Commodities | 4,881 | 3,860 | 4,471 | 3,348 |
| Other securities | 164 | 145 | 164 | 144 |
| Total | 37,004 | 35,237 | 30,693 | 28,073 |
RECOGNITION AND MEASUREMENT
Trading assets are financial instruments or other assets we either:
\u2022 acquire principally for the purpose of selling in the short-term; or
\u2022 hold as part of a portfolio we manage for short-term profit making.
Trading assets include commodity inventories measured at fair value less cost to sell in accordance with the broker trader exemption under
AASB 102
Inventories
.
We recognise purchases and sales of trading assets on trade date:
\u2022 initially, we measure them at fair value; and
\u2022 subsequently, we measure them in the balance sheet at their fair value with any change in fair value recognised in profit or loss.
Assets disclosed as Trading assets are subject to the general classification and measurement policy for Financial Assets outlined at the
commencement of the Group\u2019s financial assets disclosures on page 101.
KEY JUDGEMENTS AND ESTIMATES
Judgement is required when applying the valuation techniques used to determine the fair value of trading assets not valued using quoted
market prices. Refer to Note 18 Fair Value of Financial Assets and Financial Liabilities for further details.
2022
2023
27,291
145
3,941
3,860
Other securities
Commodities
Government debt
securities and notes
Corporate and financial
institution securities
28,074
164
3,885
4,881
10. DERIVATIVE FINANCIAL INSTRUMENTS
| Consolidated | | | | |
| | | | | |
| Assets | | | |
| 2023 | | | |
| | Liabilities | | |
| | 2023 | | |
| | | Assets | |
| | | 2022 | |
| | | | Liabilities |
| | | | 2022 |
| Fair Value | $m | $m | $m | $m |
| Derivative financial instruments - held for trading | 60,059 | (57,210) | 89,716 | (84,793) |
| Derivative financial instruments - designated in hedging relationships | 347 | (272) | 458 | (356) |
| Derivative financial instruments | 60,406 | (57,482) | 90,174 | (85,149) |
| The Company | | | | |
| | | | | |
| Assets | | | |
| 2023 | | | |
| | Liabilities | | |
| | 2023 | | |
| | | Assets | |
| | | 2022 | |
| | | | Liabilities |
| | | | 2022 |
| Fair Value | $m | $m | $m | $m |
| Derivative financial instruments - held for trading | 59,649 | (57,256) | 87,650 | (84,200) |
| Derivative financial instruments - designated in hedging relationships | 340 | (255) | 406 | (300) |
| Derivative financial instruments | 59,989 | (57,511) | 88,056 | (84,500) |
FEATURES
Derivative financial instruments are contracts:
\u2022 whose value is derived from an underlying price index (or other variable) defined in the contract - sometimes the value is derived from more than
one variable;
\u2022 that require little or no initial net investment; and
\u2022 that are settled at a future date.
Movements in the price of the underlying variables, which cause the value of the contract to fluctuate, are reflected in the fair value of the derivative.
PURPOSE
The Group\u2019s derivative financial instruments have been categorised as following:
| Trading | Derivatives held in order to: |
| \u2022 meet customer needs for managing their own risks. |
| \u2022 manage risks in the Group that are not in a designated hedge accounting relationship (some elements of balance |
| sheet management). |
| \u2022 undertake market making and positioning activities to generate profits from short-term fluctuations in prices |
| or margins. |
| Designated in Hedging | |
| Relationships | |
| Derivatives designated into hedge accounting relationships in order to minimise profit or loss volatility by matching |
| movements in underlying positions relating to: |
| \u2022 hedges of the Group\u2019s exposures to interest rate risk and currency risk. |
| \u2022 hedges of other exposures relating to non-trading positions. |
TYPES
The Group offers or uses four different types of derivative financial instruments:
| Forwards | A contract documenting the rate of interest, or the currency exchange rate, to be paid or received on a notional |
| principal amount at a future date. |
| Futures | An exchange traded contract in which the parties agree to buy or sell an asset in the future for a price agreed on the |
| transaction date, with a net settlement in cash paid on the future date without physical delivery of the asset. |
| Swaps | A contract in which two parties exchange one series of cash flows for another. |
| Options | A contract in which the buyer of the contract has the right - but not the obligation - to buy (known as a \u2018call option\u2019) |
| or to sell (known as a \u2018put option\u2019) an asset or instrument at a set price on a future date. The seller has the |
| corresponding obligation to fulfil the transaction to sell or buy the asset or instrument if the buyer exercises |
| the option. |
RISKS MANAGED
The Group offers and uses the instruments described above to manage fluctuations in the following market factors:
| Foreign Exchange | Currencies at current or determined rates of exchange. |
| Interest Rate | Fixed or variable interest rates applying to money lent, deposited or borrowed. |
| Commodity | Soft commodities (that is, agricultural products such as wheat, coffee, cocoa and sugar) and hard commodities (that |
| is, mined products such as gold, oil and gas). | |
| Credit | Risk of default by customers or third parties. |
The Group uses a number of central clearing counterparties and exchanges to settle derivative transactions. Different arrangements for posting of
collateral exist with these exchanges:
\u2022 some transactions are subject to clearing arrangements which result in separate recognition of collateral assets and liabilities, with the carrying
values of the associated derivative assets and liabilities held at their fair value.
\u2022 other transactions, are legally settled by the payment or receipt of collateral which reduces the carrying values of the related derivative instruments
by the amount paid or received.
DERIVATIVE FINANCIAL INSTRUMENTS \u2013 HELD FOR TRADING
The majority of the Group\u2019s derivative financial instruments are held for trading. The fair value of derivative financial instruments held for trading is:
| Consolidated | Assets | Liabilities | Assets | Liabilities |
| | 2023 | 2023 | 2022 | 2022 |
| Fair Value | $m | $m | $m | $m |
| Interest rate contracts | | | | |
| Forward rate agreements | - | - | - | (1) |
| Futures contracts | 294 | (37) | 336 | (123) |
| Swap agreements | 10,815 | (15,194) | 10,421 | (15,031) |
| Options | 1,805 | (2,023) | 1,698 | (1,954) |
| Total | 12,914 | (17,254) | 12,455 | (17,109) |
| Foreign exchange contracts | | | | |
| Spot and forward contracts | 21,399 | (19,580) | 42,221 | (37,426) |
| Swap agreements | 23,230 | (18,172) | 32,169 | (27,548) |
| Options | 690 | (1,120) | 926 | (1,343) |
| Total | 45,319 | (38,872) | 75,316 | (66,317) |
| Commodity and other contracts | 1,812 | (1,067) | 1,927 | (1,353) |
| Credit default swaps | 14 | (17) | 18 | (14) |
| Derivative financial instruments - held for trading1 | 60,059 | (57,210) | 89,716 | (84,793) |
1. Includes derivatives held for balance sheet management which are not designated into accounting hedge relationships.
The majority of the Company\u2019s derivative financial instruments are held for trading. The fair value of derivative financial instruments held for trading is:
| The Company | Assets | Liabilities | Assets | Liabilities |
| | 2023 | 2023 | 2022 | 2022 |
| Fair Value | $m | $m | $m | $m |
| Interest rate contracts | | | | |
| Forward rate agreements | 2 | (1) | 2 | (7) |
| Futures contracts | 259 | (30) | 240 | (116) |
| Swap agreements | 11,324 | (15,178) | 10,778 | (15,098) |
| Options | 1,807 | (2,016) | 1,684 | (1,947) |
| Total | 13,392 | (17,225) | 12,704 | (17,168) |
| Foreign exchange contracts | | | | |
| Spot and forward contracts | 19,229 | (17,595) | 36,576 | (33,376) |
| Swap agreements | 24,493 | (20,216) | 35,526 | (30,949) |
| Options | 684 | (1,110) | 895 | (1,331) |
| Total | 44,406 | (38,921) | 72,997 | (65,656) |
| Commodity and other contracts | 1,823 | (1,078) | 1,923 | (1,352) |
| Credit default swaps | 28 | (32) | 26 | (24) |
| Derivative financial instruments - held for trading1 | 59,649 | (57,256) | 87,650 | (84,200) |
1. Includes derivatives held for balance sheet management which are not designated into accounting hedge relationships.
DERIVATIVE FINANCIAL INSTRUMENTS \u2013 DESIGNATED IN HEDGING RELATIONSHIPS
As set out in Note 1, under the accounting policy choice provided by AASB 9, the Group has continued to apply the hedge accounting requirements
of AASB 139.
There are three types of hedge accounting relationships the Group utilises:
| | Fair value hedge | Cash flow hedge | Net investment hedge |
| Objective of this | | | |
| hedging | | | |
| arrangement | | | |
| To hedge our exposure to changes to | | |
| the fair value of a recognised asset or | | |
| liability or unrecognised firm | | |
| commitment caused by interest rate | | |
| or foreign currency movements. | | |
| | To hedge our exposure to variability in | |
| | cash flows of a recognised asset or | |
| | liability, a firm commitment or a highly | |
| | probable forecast transaction caused | |
| | by interest rate, foreign currency and | |
| | other price movements. | |
| | | To hedge our exposure to exchange |
| | | rate differences arising from the |
| | | translation of our foreign operations |
| | | from their functional currency to |
| | | Australian dollars. |
| Recognition of | | | |
| effective hedge | | | |
| portion | | | |
| | | | |
| | | | |
| The following are recognised in profit | | |
| or loss at the same time: | | |
| \u2022 all changes in the fair value of the | | |
| underlying item relating to the | | |
| hedged risk; and | | |
| \u2022 the change in the fair value of the | | |
| derivatives. | | |
| | We recognise the effective portion of | |
| | changes in the fair value of derivatives | |
| | designated as a cash flow hedge in | |
| | the cash flow hedge reserve. | |
| | | We recognise the effective portion of |
| | | changes in the fair value of the |
| | | hedging instrument in the foreign |
| | | currency translation reserve (FCTR). |
| Recognition of | | | |
| ineffective hedge | | | |
| portion | | | |
| Recognised immediately in Other operating income. | | |
| If a hedging | | | |
| instrument expires, | | | |
| or is sold, terminated, | | | |
| or exercised; or no | | | |
| longer qualifies for | | | |
| hedge accounting | | | |
| | When we recognise the hedged item | |
| | in profit or loss, we recognise the | |
| | related unamortised fair value | |
| | adjustment in profit or loss. This may | |
| | occur over time if the hedged item is | |
| | amortised to profit or loss as part of | |
| | the effective yield over the period | |
| | to maturity. | |
| | | Only when we recognise the hedged |
| | | item in profit or loss is the amount |
| | | previously deferred in the cash flow |
| | | hedge reserve transferred to profit |
| | | or loss. |
| | | The amount we defer in the foreign |
| | | currency translation reserve remains in |
| | | equity and is transferred to profit or |
| | | loss only when we dispose of, or |
| | | partially dispose of, the foreign |
| | | operation. |
| Hedged item sold or | | | |
| repaid | | | |
| We recognise the unamortised fair | | |
| value adjustment immediately in | | |
| profit or loss. | | |
| | Amounts accumulated in equity are | |
| | transferred immediately to profit | |
| | or loss. | |
| | | The gain or loss, or applicable |
| | | proportion, we have recognised in |
| | | equity is transferred to profit or loss on |
| | | disposal or partial disposal of a foreign |
| | | operation. |
The fair value of derivative financial instruments designated in hedging relationships is:
| | | 2023 | | | 2022 | |
| Consolidated | | | | | | |
| Nominal | | | | | |
| amount | Assets | Liabilities | | | |
| | | | Nominal | | |
| | | | | amount | Assets | Liabilities |
| | $m | $m | $m | $m | $m | $m |
| Fair value hedges | | | | | | |
| Foreign exchange spot and forward contracts | 607 | 5 | - | 604 | - | (37) |
| Interest rate swap agreements | 126,881 | 32 | (195) | 106,366 | 79 | (168) |
| Interest rate futures contracts | 11,778 | 243 | (9) | 17,361 | 264 | (3) |
| Cash flow hedges | | | | | | |
| Interest rate swap agreements | 122,704 | 17 | (48) | 125,063 | 33 | (53) |
| Foreign exchange swap agreements | 683 | 50 | (19) | 656 | 48 | (44) |
| Foreign exchange spot and forward contracts | - | - | - | 161 | - | (4) |
| Net investment hedges | | | | | | |
| Foreign exchange spot and forward contracts | 47 | - | (1) | 940 | 34 | (47) |
| Derivative financial instruments - designated in | | | | | | |
| hedging relationships | 262,700 | 347 | (272) | 251,151 | 458 | (356) |
| | | 2023 | | | 2022 | |
| The Company | | | | | | |
| Nominal | | | | | |
| amount | Assets | Liabilities | | | |
| | | | Nominal | | |
| | | | amount | Assets | Liabilities |
| | $m | $m | $m | $m | $m | $m |
| Fair value hedges | | | | | | |
| Foreign exchange spot and forward contracts | 607 | 5 | - | 604 | - | (37) |
| Interest rate swap agreements | 101,587 | 32 | (184) | 80,185 | 65 | (163) |
| Interest rate futures contracts | 11,778 | 243 | (9) | 17,361 | 264 | (3) |
| Cash flow hedges | | | | | | |
| Interest rate swap agreements | 89,173 | 10 | (42) | 94,928 | 28 | (49) |
| Foreign exchange swap agreements | 683 | 50 | (19) | 656 | 48 | (44) |
| Foreign exchange spot and forward contracts | - | - | - | 161 | - | (4) |
| Net investment hedges | | | | | | |
| Foreign exchange spot and forward contracts | 47 | - | (1) | 146 | 1 | - |
| Derivative financial instruments - designated in | | | | | | |
| hedging relationships | 203,875 | 340 | (255) | 194,041 | 406 | (300) |
The maturity profile of the nominal amounts of our hedging instruments held is:
| Consolidated | | | | | | | |
| | Average | | | | | |
| | Rate | | | | | |
| | | Less than 3 | | | | |
| | | months | | | | |
| | | $m | | | | |
| | | | 3 to 12 | | | |
| | | | months | | | |
| | | | $m | | | |
| | | | | 1 to 5 | | |
| | | | | years | | |
| | | | | $m | | |
| | | | | | After | |
| | | | | | 5 years | |
| | | | | | $m | |
| | | | | | | Total |
| Nominal Amount | | | | | | | $m |
| As at 30 September 2023 | | | | | | | |
| Fair value hedges | | | | | | | |
| Interest rate | Interest Rate | 2.38% | 2,314 | 10,533 | 79,350 | 46,462 | 138,659 |
| Foreign exchange | HKD/AUD FX Rate | 5.02 | 607 | - | - | - | 607 |
| Cash flow hedges | | | | | | | |
| Interest rate | Interest Rate | 2.27% | 7,573 | 37,630 | 76,359 | 1,142 | 122,704 |
| Foreign exchange1 | AUD/USD FX Rate | 0.74 | - | - | - | 683 | 683 |
| USD/EUR FX Rate | 0.91 | | | | | |
| Net investment hedges | | | | | | | |
| Foreign exchange | NZD/AUD FX Rate | 1.09 | - | 47 | - | - | 47 |
| | | | | | | | |
| As at 30 September 2022 | | | | | | | |
| Fair value hedges | | | | | | | |
| Interest rate | Interest Rate | 1.65% | 10,931 | 17,322 | 65,259 | 30,215 | 123,727 |
| Foreign exchange | HKD/AUD FX Rate | 5.43 | 604 | - | - | - | 604 |
| Cash flow hedges | | | | | | | |
| Interest rate | Interest Rate | 1.59% | 3,317 | 32,145 | 88,461 | 1,140 | 125,063 |
| Foreign exchange1 | AUD/USD FX Rate | 0.74 | 40 | 121 | - | 656 | 817 |
| USD/EUR FX Rate | 0.91 | | | | | |
| Net investment hedges | | | | | | | |
| Foreign exchange | TWD/AUD FX Rate | 20.68 | 794 | 146 | - | - | 940 |
| THB/AUD FX Rate | 25.05 | | | | | |
1. Hedges of foreign exchange risk cover multiple currency pairs. The table reflects the larger currency pairs only.
T | | | | | | | |
| he Company | | | | | | | |
| | Average | | | | | |
| | Rate | | | | | |
| | | Less than 3 | | | | |
| | | months | | | | |
| | | $m | | | | |
| | | | 3 to 12 | | | |
| | | | months | | | |
| | | | $m | | | |
| | | | | 1 to 5 | | |
| | | | | years | | |
| | | | | $m | | |
| | | | | | After | |
| | | | | | 5 years | |
| | | | | | $m | |
| | | | | | | Total |
| Nominal Amount | | | | | | | $m |
| As at 30 September 2023 | | | | | | | |
| Fair value hedges | | | | | | | |
| Interest rate | Interest Rate | 2.49% | 1,910 | 8,025 | 61,644 | 41,786 | 113,365 |
| Foreign exchange | HKD/AUD FX Rate | 5.02 | 607 | - | - | - | 607 |
| Cash flow hedges | | | | | | | |
| Interest rate | Interest Rate | 1.78% | 3,154 | 22,353 | 62,577 | 1,089 | 89,173 |
| Foreign exchange1 | AUD/USD FX Rate | 0.74 | - | - | - | 683 | 683 |
| USD/EUR FX Rate | 0.91 | | | | | |
| Net investment hedges | | | | | | | |
| Foreign exchange | NZD/AUD FX Rate | 1.09 | - | 47 | - | - | 47 |
| | | | | | | | |
| As at 30 September 2022 | | | | | | | |
| Fair value hedges | | | | | | | |
| Interest rate | Interest Rate | 1.75% | 10,931 | 13,466 | 48,011 | 25,138 | 97,546 |
| Foreign exchange | HKD/AUD FX Rate | 5.43 | 604 | - | - | - | 604 |
| Cash flow hedges | | | | | | | |
| Interest rate | Interest Rate | 1.37% | 1,708 | 22,611 | 69,600 | 1,009 | 94,928 |
| Foreign exchange1 | AUD/USD FX Rate | 0.74 | 40 | 121 | - | 656 | 817 |
| USD/EUR FX Rate | 0.91 | | | | | |
| Net investment hedges | | | | | | | |
| Foreign exchange | TWD/AUD FX Rate | 20.68 | - | 146 | - | - | 146 |
1. Hedges of foreign exchange risk cover multiple currency pairs. The table reflects the larger currency pairs only.
The impacts of ineffectiveness from our designated hedge relationships by type of hedge relationship and type of risk being hedged are:
| | | Ineffectiveness | | Amount reclassified |
| | | | from the cash flow |
| | | | hedge reserve or FCTR |
| | | | to profit or loss4 |
| Consolidated | | | | |
| Change in value | | | |
| of hedging | | | |
| instrument2 | | | |
| | Change in value | | |
| | of hedged item | | |
| | | Hedge ineffectiveness | |
| | | recognised in profit or | |
| | | loss3 | |
| As at 30 September 2023 | $m | $m | $m | $m |
| Fair value hedges1 | | | | |
| Interest rate | (846) | 870 | 24 | - |
| Foreign exchange | (4) | 4 | - | - |
| Cash flow hedges1 | | | | |
| Interest rate | 280 | (239) | 41 | (13) |
| Foreign exchange | - | - | - | 9 |
| Net investment hedges1 | | | | |
| Foreign exchange | (39) | 39 | - | 79 |
| As at 30 September 2022 | | | | |
| Fair value hedges1 | | | | |
| Interest rate | 697 | (719) | (22) | - |
| Foreign exchange | (55) | 55 | - | - |
| Cash flow hedges1 | | | | |
| Interest rate | (3,619) | 3,453 | (166) | (13) |
| Foreign exchange | (4) | 4 | - | 1 |
| Net investment hedges1 | | | | |
| Foreign exchange | 62 | (62) | - | - |
| | Ineffectiveness | | Amount reclassified |
| | | | from the cash flow |
| | | | hedge reserve or FCTR |
| | | | to profit or loss4 |
| The Company | | | | |
| Change in value | | | |
| of hedging | | | |
| instrument2 | | | |
| | Change in value | | |
| | of hedged item | | |
| | | Hedge ineffectiveness | |
| | | recognised in profit or | |
| | | loss3 | |
| As at 30 September 2023 | $m | $m | $m | $m |
| Fair value hedges1 | | | | |
| Interest rate | (797) | 814 | 17 | - |
| Foreign exchange | (4) | 4 | - | - |
| Cash flow hedges1 | | | | |
| Interest rate | 386 | (344) | 42 | (15) |
| Foreign exchange | - | - | - | 9 |
| Net investment hedges1 | | | | |
| Foreign exchange | (4) | 4 | - | - |
| As at 30 September 2022 | | | | |
| Fair value hedges1 | | | | |
| Interest rate | 1,570 | (1,586) | (16) | - |
| Foreign exchange | (55) | 55 | - | - |
| Cash flow hedges1 | | | | |
| Interest rate | (3,643) | 3,477 | (166) | (13) |
| Foreign exchange | (4) | 4 | - | 1 |
| Net investment hedges1 | | | | |
| Foreign exchange | 58 | (58) | - | - |
1. All hedging instruments are classified as derivative financial instruments.
2. Changes in value of hedging instruments is before any adjustments for Settle to Market clearing arrangements.
3. Recognised in Other operating income.
4. Recognised in Net interest income and Other operating income.
The hedged items in relation to the Group\u2019s fair value hedges are:
| | | Carrying amount | | | |
| | | | | Accumulated fair value | |
| | | | | hedge adjustments on | |
| | | | | | the hedged item | |
| Consolidated | | | | | | |
| Balance sheet | | | | | |
| presentation | Hedged risk | | | | |
| | | Assets | | | |
| | | $m | | | |
| | | | Liabilities | | |
| | | | $m | | |
| | | | | Assets | |
| | | | | $m | |
| | | | | | Liabilities |
| | | | | | $m |
| As at 30 September 2023 | | | | | | |
| Fixed rate loans and advances | Net loans and advances | Interest rate | 3,472 | - | (139) | - |
| Fixed rate debt issuance | Debt issuances | Interest rate | - | (66,190) | - | 4,163 |
| Fixed rate investment securities at FVOCI1 | Investment securities | Interest rate | 61,082 | - | (5,121) | - |
| Equity securities at FVOCI1 | Investment securities | Foreign exchange | 607 | - | 79 | - |
| Total | | | 65,161 | (66,190) | (5,181) | 4,163 |
| | | | | | | |
| As at 30 September 2022 | | | | | | |
| Fixed rate loans and advances | Net loans and advances | Interest rate | 10,252 | - | (369) | - |
| Fixed rate debt issuance | Debt issuances | Interest rate | - | (51,531) | - | 3,721 |
| Fixed rate investment securities at FVOCI1 | Investment securities | Interest rate | 53,915 | - | (5,349) | - |
| Equity securities at FVOCI1 | Investment securities | Foreign exchange | 604 | - | 75 | - |
| Total | | | 64,771 | (51,531) | (5,643) | 3,721 |
1. The carrying amount of debt and equity instruments at FVOCI does not include the fair value hedge adjustment. The fair value hedge adjustment is included in other comprehensive income.
The cumulative amount of fair value hedge adjustments relating to ceased hedge relationships remaining on the Balance Sheet is -$13 million
(2022: -$7 million).
The hedged items in relation to the Company\u2019s fair value hedges are:
| | | | Carrying amount | | |
| | | | | Accumulated fair value | |
| | | | | hedge adjustments on | |
| | | | | the hedged item | |
T | | | | | | |
| he Company | | | | | | |
| Balance sheet | | | | | |
| presentation | Hedged risk | | | | |
| | | Assets | | | |
| | | $m | | | |
| | | | Liabilities | | |
| | | | $m | | |
| | | | | Assets | |
| | | | | $m | |
| | | | | | Liabilities |
| | | | | | $m |
| As at 30 September 2023 | | | | | | |
| Fixed rate loans and advances | Net loans and advances | Interest rate | 3,472 | - | (139) | - |
| Fixed rate debt issuance | Debt issuances | Interest rate | - | (51,602) | - | 3,025 |
| Fixed rate investment securities at FVOCI1 | Investment securities | Interest rate | 52,336 | - | (4,342) | - |
| Equity securities at FVOCI1 | Investment securities | Foreign exchange | 607 | - | 79 | - |
| Total | | | 56,415 | (51,602) | (4,402) | 3,025 |
| | | | | | | |
| As at 30 September 2022 | | | | | | |
| | | | | | | |
| Fixed rate loans and advances | Net loans and advances | Interest rate | 10,252 | - | (369) | - |
| Fixed rate debt issuance | Debt issuances | Interest rate | - | (37,141) | - | 2,572 |
| Fixed rate investment securities at FVOCI1 | Investment securities | Interest rate | 44,038 | - | (4,489) | - |
| Equity securities at FVOCI1 | Investment securities | Foreign exchange | 604 | - | 75 | - |
| Total | | | 54,894 | (37,141) | (4,783) | 2,572 |
1. The carrying amount of debt and equity instruments at FVOCI does not include the fair value hedge adjustment. The fair value hedge adjustment is included in other comprehensive income.
The cumulative amount of fair value hedge adjustments relating to ceased hedge relationships remaining on the Balance Sheet is -$13 million
(2022: -$7 million).
The hedged items in relation to the Group\u2019s and the Company\u2019s cash flow and net investment hedges are:
| | | | Cash flow | | |
| | | hedge reserve | | |
| | | | | Foreign currency |
| | | | | translation reserve |
| | | | | | |
| | Continuing | | | |
| | hedges | | | |
| | | Discontinued | | |
| | | hedges | Continuing | |
| | | | hedges | |
| | | | | Discontinued |
| | | | | hedges |
| Consolidated | Hedged risk | $m | $m | $m | $m |
| As at 30 September 2023 | | | | | |
| Cash flow hedges | | | | | |
| Floating rate loans and advances | Interest rate | (3,482) | 11 | - | - |
| Floating rate customer deposits | Interest rate | 794 | (1) | - | - |
| Foreign currency debt issuances | Foreign exchange | - | - | - | - |
| Highly probable forecast transactions | Foreign exchange | - | - | - | - |
| Net investment hedges | | | | | |
| Foreign operations | Foreign exchange | - | - | 12 | 49 |
| | | | | | |
| As at 30 September 2022 | | | | | |
| Cash flow hedges | | | | | |
| Floating rate loans and advances | Interest rate | (4,286) | 19 | - | - |
| Floating rate customer deposits | Interest rate | 1,357 | 5 | - | - |
| Foreign currency debt issuances | Foreign exchange | (1) | (1) | - | - |
| Highly probable forecast transactions | Foreign exchange | (7) | - | - | - |
| Net investment hedges | | | | | |
| Foreign operations | Foreign exchange | - | - | 43 | (149) |
| | | | Cash flow | | |
| | | hedge reserve | | |
| | | | | Foreign currency |
| | | | | translation reserve |
| | | | | | |
| | Continuing | | | |
| | hedges | | | |
| | | Discontinued | | |
| | | hedges | Continuing | |
| | | | hedges | |
| | | | | Discontinued |
| | | | | hedges |
| The Company | Hedged risk | $m | $m | $m | $m |
| As at 30 September 2023 | | | | | |
| Cash flow hedges | | | | | |
| Floating rate loans and advances | Interest rate | (3,103) | 2 | - | - |
| Floating rate customer deposits | Interest rate | 495 | - | - | - |
| Foreign currency debt issuances | Foreign exchange | - | - | - | - |
| Highly probable forecast transactions | Foreign exchange | - | - | - | - |
| Net investment hedges | | | | | |
| Foreign operations | Foreign exchange | - | - | 12 | 49 |
| | | | | | |
| As at 30 September 2022 | | | | | |
| Cash flow hedges | | | | | |
| Floating rate loans and advances | Interest rate | (4,005) | 11 | - | - |
| Floating rate customer deposits | Interest rate | 1,053 | 6 | - | - |
| Foreign currency debt issuances | Foreign exchange | (1) | (1) | - | - |
| Highly probable forecast transactions | Foreign exchange | (7) | - | - | - |
| Net investment hedges | | | | | |
| Foreign operations | Foreign exchange | - | - | 88 | (149) |
The table below details the reconciliation of the Group\u2019s cash flow hedge reserve by risk type:
| | Interest rate | | |
| | Foreign | |
| | currency | |
| | | Total |
| | | |
| Consolidated | $m | $m | $m |
| Balance at 1 October 2021 | 398 | (5) | 393 |
| Fair value gains/(losses) | (3,453) | (4) | (3,457) |
| Transferred to profit or loss | (13) | 1 | (12) |
| Income taxes and others | 1,040 | - | 1,040 |
| Balance at 30 September 2022 | (2,028) | (8) | (2,036) |
| Fair value gains/(losses) | 239 | - | 239 |
| Transferred to profit or loss | (13) | 9 | (4) |
| Income taxes and others | (69) | (2) | (71) |
| Balance at 30 September 2023 | (1,871) | (1) | (1,872) |
Hedges of net investments in a foreign operation resulted in a $40 million increase in FCTR during the year (2022: $62 million increase).
The table below details the reconciliation of the Company\u2019s cash flow hedge reserve by risk type:
| | Interest rate | | |
| | Foreign | |
| | currency | |
| | | Total |
| | | |
| The Company | $m | $m | $m |
| Balance at 1 October 2021 | 389 | (5) | 384 |
| Fair value gains/(losses) | (3,477) | (4) | (3,481) |
| Transferred to profit or loss | (13) | 1 | (12) |
| Income taxes and others | 1,048 | - | 1,048 |
| Balance at 30 September 2022 | (2,053) | (8) | (2,061) |
| Fair value gains/(losses) | 344 | - | 344 |
| Transferred to profit or loss | (15) | 9 | (6) |
| Income taxes and others | (99) | (2) | (101) |
| Balance at 30 September 2023 | (1,823) | (1) | (1,824) |
Hedges of net investments in a foreign operation resulted in a $4 million decrease in FCTR during the year (2022: $58 million increase).
RECOGNITION AND MEASUREMENT
| Recognition | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| Initially and at each reporting date, we recognise all derivatives at fair value. If the fair value of a |
| derivative is positive, then we carry it as an asset, but if its value is negative, then we carry it as a |
| liability. |
| Valuation adjustments are integral in determining the fair value of derivatives. This includes: |
| \u2022 a credit valuation adjustment to reflect the counterparty risk and/or event of default; and |
| \u2022 a funding valuation adjustment to account for funding costs and benefits in the derivatives |
| portfolio. |
| Derecognition of | |
| assets and liabilities | |
| | |
| We remove derivative assets from our Balance Sheet when the contracts expire or we have transferred |
| substantially all the risks and rewards of ownership. We remove derivative liabilities from our Balance |
| Sheet when the Group\u2019s contractual obligations are discharged, cancelled or expired. |
| With respect to derivatives cleared through a central clearing counterparty or exchange, derivative |
| assets or liabilities may be derecognised in accordance with the principle above when collateral is |
| settled, depending on the legal arrangements in place for each instrument. |
| Impact on the | |
| Income Statement | |
| The recognition of gains or losses on derivative financial instruments depends on whether the |
| derivative is held for trading or is designated in a hedge accounting relationship. For derivative |
| financial instruments held for trading, gains or losses from changes in the fair value are recognised in |
| profit or loss. |
| For an instrument designated in a hedge accounting relationship, the recognition of gains or losses |
| depends on the nature of the item being hedged. Refer to the table on page 106 for details of the |
| recognition approach applied for each type of hedge accounting relationship. |
| Sources of hedge accounting ineffectiveness may arise from differences in the interest rate reference |
| rate, margins, or rate set differences and differences in discounting between the hedged items and the |
| hedging instruments. |
| Hedge effectiveness | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| To qualify for hedge accounting under AASB 139 |
| , |
| a hedge relationship is expected to be highly |
| effective. A hedge relationship is highly effective only if the following conditions are met: |
| \u2022 the hedge is expected to be highly effective in achieving offsetting changes in fair value or cash |
| flows attributable to the hedged risk during the period for which the hedge is designated |
| (prospective effectiveness); and |
| \u2022 the actual results of the hedge are within the range of 80-125% (retrospective effectiveness). |
| The Group monitors hedge effectiveness on a regular basis but at a minimum at each reporting date. |
KEY JUDGEMENTS AND ESTIMATES
Judgement is required when we select the valuation techniques used to determine the fair value of derivatives, particularly the selection of
valuation inputs that are not readily observable, and the application of valuation adjustments to certain derivatives. Refer to Note 18 Fair
Value of Financial Assets and Financial Liabilities for further details.
11. INVESTMENT SECURITIES
| | Consolidated | | The Company | |
| | 2023 | 2022 | 2023 | 2022 |
| | $m | $m | $m | $m |
| Investment securities measured at FVOCI | | | | |
| Debt securities | 88,271 | 76,817 | 76,320 | 65,257 |
| Equity securities | 946 | 1,353 | 945 | 1,027 |
| Investment securities measured at amortised cost | | | | |
| Debt securities | 7,752 | 7,943 | 5,936 | 6,115 |
| Investment Securities measured at FVTPL | | | | |
| Debt securities | - | 40 | - | - |
| Total | 96,969 | 86,153 | 83,201 | 72,399 |
During 2023, ANZBGL transferred its equity interests in the 1835i trusts, TIN and Pollination to ANZ NBH Pty Ltd as part of the Restructure.
The maturity profile of investment securities is as follows:
| Consolidated | Less than 3 | | | | | |
| months | | | | | |
| | 3 to 12 | | | | |
| | | months | 1 to 5 years | After 5 years | | |
| | | | | No | |
| | | | | maturity | |
| | | | | | Total |
| | | | | | |
| As at 30 September 2023 | $m | $m | $m | $m | $m | $m |
| Government securities | 8,807 | 10,233 | 29,482 | 36,081 | - | 84,603 |
| Corporate and financial institution securities | 358 | 1,205 | 5,973 | 58 | - | 7,594 |
| Other securities | 617 | 591 | 602 | 2,016 | - | 3,826 |
| Equity securities | - | - | - | - | 946 | 946 |
| Total | 9,782 | 12,029 | 36,057 | 38,155 | 946 | 96,969 |
| | | | | | | |
| As at 30 September 2022 | | | | | | |
| Government securities | 6,544 | 14,045 | 29,806 | 21,856 | - | 72,251 |
| Corporate and financial institution securities | 324 | 2,462 | 4,906 | 97 | 2 | 7,791 |
| Other securities | 429 | 423 | 543 | 3,363 | - | 4,758 |
| Equity securities | - | - | - | - | 1,353 | 1,353 |
| Total | 7,297 | 16,930 | 35,255 | 25,316 | 1,355 | 86,153 |
During the year, the Group recognised a net gain (before tax) of $9 million (2022: $28 million) in Other operating income from the recycling of
gains/losses previously recognised in Other comprehensive income in respect of debt securities at FVOCI.
2022
2023
72,251
4,758
7,791
Equity securities
Other securities
Government securities
Corporate and financial
institution securities
1,353
84,603
3,826
7,594
946
| The Company | Less than 3 | | | | | |
| months | | | | | |
| | 3 to 12 | | | | |
| | months | 1 to 5 years | After 5 years | | |
| | | | | No | |
| | | | | maturity | |
| | | | | | Total |
| As at 30 September 2023 | $m | $m | $m | $m | $m | $m |
| Government securities | 7,665 | 8,649 | 23,140 | 33,182 | - | 72,636 |
| Corporate and financial institution securities | 280 | 634 | 4,822 | 58 | - | 5,794 |
| Other securities | 617 | 591 | 602 | 2,016 | - | 3,826 |
| Equity securities | - | - | - | - | 945 | 945 |
| Total | 8,562 | 9,874 | 28,564 | 35,256 | 945 | 83,201 |
| | | | | | | |
| As at 30 September 2022 | | | | | | |
| Government securities | 5,715 | 11,647 | 23,100 | 19,853 | - | 60,315 |
| Corporate and financial institution securities | 276 | 1,972 | 3,993 | 58 | - | 6,299 |
| Other securities | 429 | 423 | 543 | 3,363 | - | 4,758 |
| Equity securities | - | - | - | - | 1,027 | 1,027 |
| Total | 6,420 | 14,042 | 27,636 | 23,274 | 1,027 | 72,399 |
During the year, the Company recognised a net loss (before tax) of $6 million (2022: $1 million gain) in Other operating income from the recycling of
gains/losses previously recognised in Other comprehensive income in respect of debt securities at FVOCI.
RECOGNITION AND MEASUREMENT
Investment securities are those financial assets in security form (that is, transferable debt or equity instruments) that are not held for trading
purposes. By way of exception, bills of exchange (a form of security/transferable instrument) which are used to facilitate the Group\u2019s
customer lending activities are classified as Loans and advances (rather than Investment securities) to better reflect the substance of the
arrangement.
Equity investments not held for trading purposes may be designated at FVOCI on an instrument by instrument basis. If this election is
made, gains or losses are not reclassified from Other comprehensive income to profit or loss on disposal of the investment. However, gains
or losses may be reclassified within equity.
Assets disclosed as Investment securities are subject to the general classification and measurement policy for Financial Assets outlined at
the commencement of the Group\u2019s financial asset disclosures on page 101. Additionally, expected credit losses associated with \u2018Investment
securities - debt securities at amortised cost\u2019 and \u2018Investment securities - debt securities at FVOCI\u2019 are recognised and measured in
accordance with the accounting policy outlined in Note 13 Allowance for Expected Credit Losses. For \u2018Investment securities - debt
securities at FVOCI\u2019, the allowance for Expected Credit Loss (ECL) is recognised in the FVOCI reserve in equity with a corresponding charge
to profit or loss.
KEY JUDGEMENTS AND ESTIMATES
Judgement is required when we select valuation techniques used to determine the fair value of assets not valued using quoted market
prices, particularly the selection of valuation inputs that are not readily observable. Refer to Note 18 Fair Value of Financial Assets and
Financial Liabilities for further details.
12. NET LOANS AND ADVANCES
The following table provides details of Net loans and advances:
| | Consolidated | | | |
| | | The Company | |
| | | | |
| | 2023 | 2022 | 2023 | 2022 |
| $m | $m | $m | $m |
| Overdrafts | 5,552 | 5,266 | 4,516 | 4,262 |
| Credit cards | 6,805 | 6,755 | 5,630 | 5,664 |
| Commercial bills | 4,682 | 5,214 | 4,682 | 5,214 |
| Term loans \u2013 housing | 404,491 | 374,625 | 304,772 | 282,965 |
| Term loans \u2013 non-housing | | | | |
| 1 | | | | |
| | 285,458 | 279,730 | 242,403 | 238,215 |
| Other | 1,292 | 2,035 | 1,244 | 1,929 |
| Subtotal | 708,280 | 673,625 | 563,247 | 538,249 |
| Unearned income | | | | |
| 2 | | | | |
| | (515) | (518) | (483) | (480) |
| Capitalised brokerage and other origination costs | | | | |
| 2 | | | | |
| | 3,475 | 2,882 | 3,048 | 2,501 |
| Gross loans and advances | 711,240 | 675,989 | 565,812 | 540,270 |
| Allowance for expected credit losses (refer to Note 13) | (3,546) | (3,582) | (2,795) | (2,925) |
| Net loans and advances | 707,694 | 672,407 | 563,017 | 537,345 |
| Residual contractual maturity: | | | | |
| Within one year | 152,318 | 146,142 | 128,045 | 121,513 |
| More than one year | 555,376 | 526,265 | 434,972 | 415,832 |
| Net loans and advances | 707,694 | 672,407 | 563,017 | 537,345 |
| Carried on Balance Sheet at: | | | | |
| Amortised cost | 685,806 | 667,732 | 541,777 | 533,082 |
| Fair value through profit or loss | | | | |
| 1 | | | | |
| | 21,888 | 4,675 | 21,240 | 4,263 |
| Net loans and advances | 707,694 | 672,407 | 563,017 | 537,345 |
1.
During 2023, the Group commenced the management of repurchase agreements and reverse repurchase agreements on a fair value basis within the trading book in its Markets business. This resulted in
the associated repurchase and reverse repurchase agreements being recognised and measured at FVTPL.
2.
Amortised over the expected life of the loan.
RECOGNITION AND MEASUREMENT
Loans and advances are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market and
are facilities the Group provides directly to customers or through third party channels.
Loans and advances are initially recognised at fair value plus transaction costs directly attributable to the issue of the loan or advance,
which are primarily brokerage and other origination costs which we amortise over the estimated life of the loan. Subsequently, we then
measure loans and advances at amortised cost using the effective interest rate method, net of any allowance for expected credit losses, or
at fair value when they are specifically designated on initial recognition as FVTPL, are classified as held for sale or when held for trading.
Refer to Note 18 Fair Value of Financial Assets and Financial Liabilities for further details.
We classify contracts to lease assets and hire purchase agreements as finance leases if they transfer substantially all the risks and rewards of
ownership of the asset to the customer or an unrelated third party. We include these facilities in \u2018Other\u2019 in the table above.
The Group enters into transactions in which it transfers financial assets that are recognised on its Balance Sheet. When the Group retains
substantially all of the risks and rewards of the transferred assets, the transferred assets remain on the Group\u2019s Balance Sheet, however if
substantially all the risks and rewards are transferred, the Group derecognises the asset. If the risks and rewards are partially retained and
control over the asset is lost, the Group derecognises the asset. If control over the asset is not lost, the Group continues to recognise the
asset to the extent of its continuing involvement.
We separately recognise the rights and obligations retained, or created, in the transfer of assets as appropriate.
Assets disclosed as Net loans and advances are subject to the general classification and measurement policy for financial assets outlined on
page 101. Additionally, expected credit losses associated with loans and advances at amortised cost are recognised and measured in
accordance with the accounting policy outlined in Note 13 Allowance for Expected Credit Losses.
13. ALLOWANCE FOR EXPECTED CREDIT LOSSES
| | 2023 | | | 2022 | | |
| Consolidated | | | | | | |
| Collectively | | | | | |
| assessed | | | | | |
| $m | | | | | |
| | Individually | | | | |
| | assessed | | | | |
| | $m | | | | |
| | | Total | | | |
| | | $m | | | |
| | | | Collectively | | |
| | | | assessed | | |
| | | | $m | | |
| | | | | Individually | |
| | | | | assessed | |
| | | | | $m | |
| | | | | | Total |
| | | | | | $m |
| Net loans and advances at amortised cost | 3,180 | 366 | 3,546 | 3,049 | 533 | 3,582 |
| Off-balance sheet commitments | 817 | 10 | 827 | 766 | 9 | 775 |
| Investment securities - debt securities at amortised cost | 35 | - | 35 | 38 | - | 38 |
| Total | 4,032 | 376 | 4,408 | 3,853 | 542 | 4,395 |
| Other comprehensive income | | | | | | |
| Investment securities - debt securities at FVOCI1 | 15 | - | 15 | 10 | - | 10 |
| | 2023 | | | 2022 | | |
T | | | | | | |
| he Company | | | | | | |
| Collectively | | | | | |
| assessed | | | | | |
| $m | | | | | |
| | Individually | | | | |
| | assessed | | | | |
| | $m | | | | |
| | | Total | | | |
| | | $m | | | |
| | | | Collectively | | |
| | | | assessed | | |
| | | | $m | | |
| | | | | Individually | |
| | | | | assessed | |
| | | | | $m | |
| | | | | | Total |
| | | | | | $m |
| Net loans and advances at amortised cost | 2,516 | 279 | 2,795 | 2,500 | 425 | 2,925 |
| Off-balance sheet commitments | 692 | 5 | 697 | 668 | 5 | 673 |
| Investment securities - debt securities at amortised cost | 1 | - | 1 | 1 | - | 1 |
| Total | 3,209 | 284 | 3,493 | 3,169 | 430 | 3,599 |
| Other comprehensive income | | | | | | |
| Investment securities - debt securities at FVOCI1 | 12 | - | 12 | 7 | - | 7 |
1. For FVOCI assets, the allowance for ECL does not alter the carrying amount which remains at fair value. Instead, the allowance for ECL is recognised in Other comprehensive income with a corresponding
charge to profit or loss.
The following tables present the movement in the allowance for ECL for the year.
Net loans and advances - at amortised cost
Allowance for ECL is included in Net loans and advances.
| | | | Stage 31 | | |
| Consolidated | | | | | |
| Stage 1 | | | | |
| $m | | | | |
| | Stage 2 | | | |
| | $m | | | |
| | | Collectively | | |
| | | assessed | | |
| | | $m | | |
| | | | Individually | |
| | | | assessed | |
| | | | $m | |
| | | | | Total |
| | | | | $m |
| As at 1 October 2021 | 968 | 1,994 | 417 | 666 | 4,045 |
| Transfer between stages | 219 | (224) | (95) | 100 | - |
| New and increased provisions (net of releases) | (48) | (202) | 42 | 420 | 212 |
| Write-backs | - | - | - | (222) | (222) |
| Bad debts written off (excluding recoveries) | - | - | - | (428) | (428) |
| Foreign currency translation and other movements2 | 2 | (20) | (4) | (3) | (25) |
| As at 30 September 2022 | 1,141 | 1,548 | 360 | 533 | 3,582 |
| Transfer between stages | 148 | (138) | (94) | 84 | - |
| New and increased provisions (net of releases) | (73) | 202 | 61 | 388 | 578 |
| Write-backs | - | - | - | (212) | (212) |
| Bad debts written off (excluding recoveries) | - | - | - | (409) | (409) |
| Foreign currency translation and other movements2 | 11 | 12 | 2 | (18) | 7 |
| As at 30 September 2023 | 1,227 | 1,624 | 329 | 366 | 3,546 |
1. The Group\u2019s credit exposures that are purchased or originated credit-impaired (POCI) are insignificant.
2. Other movements include the impacts of discount unwind on individually assessed allowance for ECL or the impact of divestments completed during the year.
| | | | Stage 31 | |
T | | | | | |
| he Company | | | | | |
| Stage 1 | | | | |
| $m | | | | |
| | Stage 2 | | | |
| | $m | | | |
| | | Collectively | | |
| | | assessed | | |
| | | $m | | |
| | | | Individually | |
| | | | assessed | |
| | | | $m | |
| | | | | Total |
| | | | | $m |
| As at 1 October 2021 | 797 | 1,679 | 348 | 563 | 3,387 |
| Transfer between stages | 192 | (201) | (84) | 93 | - |
| New and increased provisions (net of releases) | (59) | (220) | 31 | 354 | 106 |
| Write-backs | - | - | - | (193) | (193) |
| Bad debts written off (excluding recoveries) | - | - | - | (386) | (386) |
| Foreign currency translation and other movements2 | 16 | 1 | - | (6) | 11 |
| As at 30 September 2022 | 946 | 1,259 | 295 | 425 | 2,925 |
| Transfer between stages | 122 | (118) | (83) | 79 | - |
| New and increased provisions (net of releases) | (43) | 98 | 39 | 295 | 389 |
| Write-backs | - | - | - | (192) | (192) |
| Bad debts written off (excluding recoveries) | - | - | - | (310) | (310) |
| Foreign currency translation and other movements2 | 1 | - | - | (18) | (17) |
| As at 30 September 2023 | 1,026 | 1,239 | 251 | 279 | 2,795 |
1. The Company\u2019s credit exposures that are purchased or originated credit-impaired (POCI) are insignificant.
2. Other movements include the impact of discount unwind on individually assessed allowance for ECL.
Off-balance sheet commitments - undrawn and contingent facilities
Allowance for ECL is included in Other provisions.
| | | | Stage 31 | | |
| Consolidated | | | | | |
| Stage 1 | | | | |
| $m | | | | |
| | Stage 2 | | | |
| | $m | | | |
| | | Collectively | | |
| | | assessed | | |
| | | $m | | |
| | | | Individually | |
| | | | assessed | |
| | | | $m | |
| | | | | Total |
| | | | | $m |
| As at 1 October 2021 | 555 | 211 | 19 | 21 | 806 |
| Transfer between stages | 40 | (34) | (8) | 2 | - |
| New and increased provisions (net of releases) | 7 | (28) | 18 | (2) | (5) |
| Write-backs | - | - | - | (11) | (11) |
| Foreign currency translation and other movements2 | (9) | (5) | - | (1) | (15) |
| As at 30 September 2022 | 593 | 144 | 29 | 9 | 775 |
| Transfer between stages | 31 | (29) | (4) | 2 | - |
| New and increased provisions (net of releases) | - | 46 | (1) | 2 | 47 |
| Write-backs | - | - | - | (4) | (4) |
| Foreign currency translation and other movements2 | 6 | 1 | 1 | 1 | 9 |
| As at 30 September 2023 | 630 | 162 | 25 | 10 | 827 |
1. The Group\u2019s credit exposures that are POCI are insignificant.
2. Other movements include impact of divestments completed during the year.
| | | | Stage 31 | | |
T | | | | | |
| he Company | | | | | |
| Stage 1 | | | | |
| $m | | | | |
| | Stage 2 | | | |
| | $m | | | |
| | | Collectively | | |
| | | assessed | | |
| | | $m | | |
| | | | Individually | |
| | | | assessed | |
| | | | $m | |
| | | | | Total |
| | | | | $m |
| As at 1 October 2021 | 484 | 171 | 12 | 7 | 674 |
| Transfer between stages | 33 | (27) | (6) | - | - |
| New and increased provisions (net of releases) | 17 | (29) | 20 | - | 8 |
| Write-backs | - | - | - | (2) | (2) |
| Foreign currency translation and other movements2 | (4) | (3) | - | - | (7) |
| As at 30 September 2022 | 530 | 112 | 26 | 5 | 673 |
| Transfer between stages | 27 | (26) | (3) | 2 | - |
| New and increased provisions (net of releases) | (10) | 35 | (2) | - | 23 |
| Write-backs | - | - | - | (2) | (2) |
| Foreign currency translation | 3 | - | - | - | 3 |
| As at 30 September 2023 | 550 | 121 | 21 | 5 | 697 |
1. The Company\u2019s credit exposures that are purchased or originated credit-impaired (POCI) are insignificant.
2. Other movements include the impact of divestments completed during the year.
Investment securities - debt securities at amortised cost
Allowance for ECL is included in Investment securities.
| | | | Stage 3 | | |
| Consolidated | | | | | |
| Stage 1 | | | | |
| $m | | | | |
| | Stage 2 | | | |
| | $m | | | |
| | | Collectively | | |
| | | assessed | | |
| | | $m | | |
| | | | Individually | |
| | | | assessed | |
| | | | $m | |
| | | | | Total |
| | | | | $m |
| As at 30 September 2022 | 38 | - | - | - | 38 |
| As at 30 September 2023 | 35 | - | - | - | 35 |
| | | Stage 3 | |
| he Company | | | | | |
| Stage 1 | | | | |
| $m | | | | |
| | Stage 2 | | | |
| | $m | | | |
| | | Collectively | | |
| | | assessed | | |
| | | $m | | |
| | | | Individually | |
| | | | assessed | |
| | | | $m | |
| | | | | Total |
| | | | | $m |
| As at 30 September 2022 | 1 | - | - | - | 1 |
| As at 30 September 2023 | 1 | - | - | - | 1 |
Investment securities - debt securities at FVOCI
As FVOCI assets are measured at fair value, there is no separate allowance for ECL. Instead, the allowance for ECL is recognised in Other
comprehensive income with a corresponding charge to profit or loss.
| | | | Stage 3 | | |
| | | Consolidated | | |
| Stage 1 | | | | |
| $m | | | | |
| | Stage 2 | | | |
| | $m | | | |
| | | Collectively | | |
| | | assessed | | |
| | | $m | | |
| | | | Individually | |
| | | | assessed | |
| | | | $m | |
| | | | | Total |
| | | | | $m |
| As at 30 September 2022 | 10 | - | - | - | 10 |
| As at 30 September 2023 | 15 | - | - | - | 15 |
| | | | Stage 3 | | |
| The Company | | | | | |
| Stage 1 | | | | |
| $m | | | | |
| | Stage 2 | | | |
| | $m | | | |
| | | Collectively | | |
| | | assessed | | |
| | | $m | | |
| | | | Individually | |
| | | | assessed | |
| | | | $m | |
| | | | | Total |
| | | | | $m |
| As at 30 September 2022 | 7 | - | - | - | 7 |
| As at 30 September 2023 | 12 | - | - | - | 12 |
CREDIT IMPAIRMENT CHARGE - INCOME STATEMENT
Credit impairment charge/(release) analysis
| | Consolidated | | The Company | |
| | 2023 | 2022 | 2023 | 2022 |
| | $m | $m | $m | $m |
| New and increased provisions (net of releases)1,2 | | | | |
| - Collectively assessed | 152 | (311) | 41 | (333) |
| - Individually assessed | 476 | 520 | 376 | 447 |
| Write-backs3 | (216) | (233) | (194) | (195) |
| Recoveries of amounts previously written-off | (167) | (208) | (148) | (184) |
| Total credit impairment charge | 245 | (232) | 75 | (265) |
1. Includes the impact of transfers between collectively assessed and individually assessed.
2. New and increased provisions (net of releases) includes:
| Consolidated The | | | | Company | | | |
| 2023 | | 2022 | | 2023 | | 2022 | |
| Collectively | | | | | | | |
| assessed | | | | | | | |
| $m | | | | | | | |
| | Individually | | | | | | |
| | assessed | | | | | | |
| | $m | | | | | | |
| | | Collectively | | | | | |
| | | assessed | | | | | |
| | | $m | | | | | |
| | | | Individually | | | | |
| | | | assessed | | | | |
| | | | $m | | | | |
| | | | | Collectively | | | |
| | | | | assessed | | | |
| | | | | $m | | | |
| | | | | | Individually | | |
| | | | | | assessed | | |
| | | | | | $m | | |
| | | | | | | Collectively | |
| | | | | | | assessed | |
| | | | | | | $m | |
| | | | | | | | Individually |
| | | | | | | | assessed |
| | | | | | | | $m |
| Net loans and advances at amortised cost | 106 | 472 | (308) | 520 | 15 | 374 | (341) | 447 |
| Off-balance sheet commitments | 43 | 4 | (5) | - | 21 | 2 | 8 | - |
| Investment securities - debt securities at amortised cost | (1) | - | 3 | - | - | - | - | - |
| Investment securities - debt securities at FVOCI | 4 | - | (1) | - | 5 | - | - | - |
| Total | 152 | 476 | (311) | 520 | 41 | 376 | (333) | 447 |
3. Consists of write-backs in Net loans and advances at amortised cost of $212 million (2022: $222 million) for the Group and $192 million (2022: $193 million) for the Company, and Off-balance sheet
commitments of $4 million (2022: $11 million) for the Group and $2 million (2022: $2 million) for the Company.
The contractual amount outstanding on financial assets that were written off during the year and that are still subject to enforcement activity is
$147 million (2022: $143 million) for the Group, and $133 million (2022: $128 million) for the Company.
RECOGNITION AND MEASUREMENT
EXPECTED CREDIT LOSS MODEL
The measurement of expected credit losses reflects an unbiased, probability weighted prediction which evaluates a range of scenarios and
takes into account the time value of money, past events, current conditions and forecasts of future economic conditions.
Expected credit losses are either measured over 12 months or the expected lifetime of the financial asset, depending on credit
deterioration since origination, according to the following three-stage approach:
\u2022 Stage 1: At the origination of a financial asset, and where there has not been a Significant Increase in Credit Risk (SICR) since origination,
an allowance for ECL is recognised reflecting the expected credit losses resulting from default events that are possible within the next
12 months from the reporting date. For instruments with a remaining maturity of less than 12 months, expected credit losses are
estimated based on default events that are possible over the remaining time to maturity.
\u2022 Stage 2: Where there has been a SICR since origination, an allowance for ECL is recognised reflecting expected credit losses resulting
from all possible default events over the expected life of a financial instrument. If credit risk were to improve in a subsequent period
such that the increase in credit risk since origination is no longer considered significant, the exposure returns to a Stage 1 classification
with ECL measured accordingly.
\u2022 Stage 3: Where there is objective evidence of impairment, an allowance equivalent to lifetime ECL is recognised.
Expected credit losses are estimated on a collective basis for exposures in Stage 1 and Stage 2, and on either a collective or individual basis
when transferred to Stage 3.
MEASUREMENT OF EXPECTED CREDIT LOSS
ECL is calculated as the product of the following credit risk factors at a facility level, discounted to incorporate the time value of money:
\u2022 Probability of default (PD) - the estimate of the likelihood that a borrower will default over a given period;
\u2022 Exposure at default (EAD) - the expected balance sheet exposure at default taking into account repayments of principal and interest,
expected additional drawdowns and accrued interest; and
\u2022 Loss given default (LGD) - the expected loss in the event of the borrower defaulting, expressed as a percentage of the facility's EAD,
taking into account direct and indirect recovery costs.
These credit risk factors are adjusted for current and forward-looking information through the use of macroeconomic variables.
EXPECTED LIFE
When estimating ECL for exposures in Stage 2 and 3, the Group considers the expected lifetime over which it is exposed to credit risk.
For non-retail portfolios, the Group uses the maximum contractual period as the expected lifetime for non-revolving credit facilities. For
non-retail revolving credit facilities, such as corporate lines of credit, the expected life reflects the Group\u2019s contractual right to withdraw a
facility as part of a contractually agreed annual review, after taking into account the applicable notice period.
For retail portfolios, the expected lifetime is determined using a behavioural term, taking into account expected prepayment behaviour
and events that give rise to substantial modifications.
DEFINITION OF DEFAULT, CREDIT IMPAIRED AND WRITE-OFFS
The definition of default used in measuring ECL is aligned to the definition used for internal credit risk management purposes across all
portfolios. This definition is also in line with the regulatory definition of default. Default occurs when there are indicators that a debtor is
unlikely to fully satisfy contractual credit obligations to the Group, or the exposure is 90 days past due.
Financial assets, including those that are well secured, are considered credit impaired for financial reporting purposes when they default.
When there is no realistic probability of recovery, loans are written off against the related impairment allowance on completion of the
Group\u2019s internal processes and when all reasonably expected recoveries have been collected. In subsequent periods, any recoveries of
amounts previously written-off are recorded as a release to the credit impairment charge in the income statement.
MODIFIED FINANCIAL ASSETS
If the contractual terms of a financial asset are modified or an existing financial asset is replaced with a new one for either credit or
commercial reasons, an assessment is made to determine if the changes to the terms of the existing financial asset are considered
substantial. This assessment considers both changes in cash flows arising from the modified terms as well as changes in the overall
instrument risk profile; for example, changes in the principal (credit limit), term, or type of underlying collateral. Where a modification is
considered non-substantial, the existing financial asset is not derecognised and its date of origination continues to be used to determine
SICR. Where a modification is considered substantial, the existing financial asset is derecognised and a new financial asset is recognised at
its fair value on the modification date, which also becomes the date of origination used to determine SICR for this new asset.
SIGNIFICANT INCREASE IN CREDIT RISK (SICR)
Stage 2 assets are those that have experienced a SICR since origination. In determining what constitutes a SICR, the Group considers both
qualitative and quantitative information:
i. Internal credit rating grade
For the majority of portfolios, the primary indicator of a SICR is a significant deterioration in the internal credit rating grade of a facility
since origination and is measured by application of thresholds.
For non-retail portfolios, a SICR is determined by comparing the Customer Credit Rating (CCR) applicable to a facility at reporting date
to the CCR at origination of that facility. A CCR is assigned to each borrower which reflects the PD of the borrower and incorporates
both borrower and non-borrower specific information, including forward-looking information. CCRs are subject to review at least
annually or more frequently when an event occurs which could affect the credit risk of the customer.
For retail portfolios, a SICR is determined, depending on the type of facility, by either comparing the scenario weighted lifetime PD at
the reporting date to that at origination, or by reference to customer behavioural score thresholds. The scenario weighted lifetime
probability of default may increase significantly if:
\u2022 there has been a deterioration in the economic outlook, or an increase in economic uncertainty; or
\u2022 there has been a deterioration in the customer\u2019s overall credit position, or ability to manage their credit obligations.
ii. Backstop criteria
The Group uses 30 days past due arrears as a backstop criterion for both non-retail and retail portfolios. For retail portfolios only,
facilities are required to demonstrate three to six months of good payment behaviour prior to being allocated back to Stage 1.
FORWARD-LOOKING INFORMATION
Forward-looking information is incorporated into both our assessment of whether a financial asset has experienced a SICR since origination
and in our estimate of ECL. In applying forward-looking information for estimating ECL, the Group considers four probability-weighted
forecast economic scenarios as follows:
i. Base case scenario
The base case scenario is ANZ\u2019s view of future macroeconomic conditions. It reflects management\u2019s assumptions used for strategic
planning and budgeting, and also informs the Group Internal Capital Adequacy Assessment Process (ICAAP) which is the process the
Group applies in strategic and capital planning over a 3-year time horizon;
ii. Upside and iii. Downside scenarios
The upside and downside scenarios are fixed by reference to average economic cycle conditions (that is, they are not based on the
economic conditions prevailing at balance date) and are based on a combination of more optimistic (in the case of the upside) and
pessimistic (in the case of the downside) economic events and uncertainty over long term horizons; and
iv. Severe downside scenario
To better reflect the current economic conditions and geopolitical environment, the Group altered the severe downside scenario in
2022 from a scenario fixed by reference to average economic cycle conditions to one which aligns with the scenario used for Group-
wide stress testing.
The four scenarios are described in terms of macroeconomic variables used in the PD, LGD and EAD models (collectively the ECL models)
depending on the lending portfolio and country of the borrower. Examples of the macroeconomic variables include unemployment rates,
Gross Domestic Product (GDP) growth rates, residential property price indices, commercial property price indices and consumer price
indices.
Probability weighting of each scenario is determined by management considering the risks and uncertainties surrounding the base case
economic scenario, as well as specific portfolio considerations where required. The Group Asset and Liability Committee (GALCO) is
responsible for reviewing and approving the base case economic scenario and the Credit and Market Risk Committee (CMRC) approves the
probability weights applied to each scenario.
Where applicable, temporary adjustments may be made to account for situations where known or expected risks have not been adequately
addressed in the modelling process. CMRC is responsible for approving such adjustments.
KEY JUDGEMENTS AND ESTIMATES
Collectively assessed allowance for expected credit losses
In estimating collectively assessed ECL, the Group makes judgements and assumptions in relation to:
\u2022 the selection of an estimation technique or modelling methodology; and
\u2022 the selection of inputs for those models, and the interdependencies between those inputs.
The following table summarises the key judgements and assumptions in relation to the model inputs and the interdependencies between
those inputs, and highlights significant changes during the current period.
The judgements and associated assumptions have been made within the context of the uncertainty as to how various factors might
impact the global economy and reflect historical experience and other factors that are considered to be relevant, including expectations of
future events that are believed to be reasonable under the circumstances. The Group\u2019s ECL estimates are inherently uncertain and, as a
result, actual results may differ from these estimates.
| Judgement/Assumption | Description | Considerations for the year ended 30 September 2023 |
| Determining when a | | |
| Significant Increase in | | |
| Credit Risk has occurred | | |
| or reversed | | |
| | |
| In the measurement of ECL, judgement is | |
| involved in determining whether there has been | |
| a SICR since initial recognition of a loan, which | |
| would result in it moving from Stage 1 to Stage | |
| 2. This is a key area of judgement since transition | |
| from Stage 1 to Stage 2 increases the ECL from | |
| an allowance based on the probability of default | |
| (PD) in the next 12 months, to an allowance for | |
| lifetime expected credit losses. Subsequent | |
| decreases in credit risk resulting in transition | |
| from Stage 2 to Stage 1 may similarly result in | |
| significant changes in the ECL allowance. | |
| The setting of precise SICR trigger points | |
| requires judgement which may have a material | |
| impact upon the size of the ECL allowance. The | |
| Group monitors the effectiveness of SICR criteria | |
| on an ongoing basis. | |
| | |
| | The determination of SICR has been applied consistent |
| | with prior periods. |
KEY JUDGEMENTS AND ESTIMATES
(continued)
| Judgement/Assumption | Description | Considerations for the year ended 30 September 2023 |
| Measuring both 12- | | |
| month and lifetime | | |
| expected credit losses | | |
| The PD, LGD and EAD factors used in | |
| determining ECL are point-in-time measures | |
| reflecting the relevant forward-looking | |
| information determined by management. | |
| Judgement is involved in determining which | |
| forward-looking information is relevant for | |
| particular lending portfolios and for | |
| determining each portfolio\u2019s point-in-time | |
| sensitivity. | |
| In addition, judgement is required where | |
| behavioural characteristics are applied in | |
| estimating the lifetime of a facility which is used | |
| in measuring ECL. | |
| | The PD, LGD and EAD models are subject to the Group\u2019s |
| | model risk policy that stipulates periodic model |
| | monitoring and re-validation, and defines approval |
| | procedures and authorities according to model |
| | materiality. |
| | There were no material changes to the policy. |
| | | |
| Base case economic | | |
| forecast | | |
| The Group derives a forward-looking \u2018base case\u2019 | |
| economic scenario which reflects ANZ Research | |
| - Economics\u2019 (ANZ Economics) view of future | |
| macroeconomic conditions. | |
| | There have been no changes to the types of forward- |
| | looking variables (key economic drivers) used as model |
| | inputs. |
| | As at 30 September 2023, the base case assumptions |
| | have been updated to reflect slowing economies and |
| | reduced levels of household consumption in Australia |
| | and New Zealand associated with continuing high |
| | interest rates and elevated levels of inflation. |
| | The expected outcomes of key economic drivers for the |
| | base case scenario at 30 September 2023 are described |
| | below under the heading \u201cBase case economic forecast |
| | assumptions\u201d. |
| Probability weighting of | | |
| each economic scenario | | |
| (base case, upside, | | |
| downside and severe | | |
| downside scenarios) | | |
| 1 | | |
| |
| Probability weighting of each economic | |
| scenario is determined by management | |
| considering the risks and uncertainties | |
| surrounding the base case economic scenario | |
| at each measurement date. | |
| The assigned probability weightings in Australia, | |
| New Zealand and Rest of World are subject to a | |
| high degree of inherent uncertainty and | |
| therefore the actual outcomes may be | |
| significantly different to those projected. | |
| | Probability weightings in the current period have been |
| | adjusted to reflect our assessment of the downside risks |
| | from the impact of continued high interest rates and |
| | inflation on the economies in which the Group operates. |
| | Weightings for current and prior periods are as detailed in |
| | the section below under the heading on \u2018Probability |
| | weightings\u2019. |
| Management | | |
| temporary adjustments | | |
| Management temporary adjustments to the | |
| ECL allowance are used in circumstances where | |
| it is judged that our existing inputs, | |
| assumptions and model techniques do not | |
| capture all the risk factors relevant to our | |
| lending portfolios. Emerging local or global | |
| macroeconomic, microeconomic or political | |
| events, natural disasters, and natural hazards | |
| that are not incorporated into our current | |
| parameters, risk ratings, or forward-looking | |
| information are examples of such | |
| circumstances. | |
| | Management have continued to apply adjustments to |
| | accommodate uncertainty associated with higher |
| | inflation and interest rates. |
| | Management overlays have been made for risks particular |
| | to retail, including home loans, credit cards and small |
| | business in Australia, and for mortgages, commercial |
| | property and agri in New Zealand. |
| | Management has considered and concluded no |
| | temporary adjustment is required at 30 September 2023 |
| | to the ECL in relation to climate- or weather-related |
| | events during the year. |
1.
The upside and downside scenarios are fixed by reference to average economic cycle conditions (that is, they are not based on the economic conditions prevailing at balance date) and are
based on a combination of more optimistic (in the case of the upside) and pessimistic (in the case of the downside) economic conditions.
Base case economic forecast assumptions
Continuing uncertainties described above increase the risk of the economic forecast resulting in an understatement or overstatement of
the ECL balance.
The economic drivers of the base case economic forecasts, reflective of ANZ Economics\u2019 view of future macroeconomic conditions used at
30 September 2023 are set out below. For the years following the near term forecasts below, the ECL models apply simplified assumptions
for the economic conditions to calculate lifetime loss.
| | Forecast calendar year | |
| | | | |
| 2023 | 2024 | 2025 |
| Australia | | | |
| GDP (annual % change) | 1.5 | 1.3 | 2.2 |
| Unemployment rate (annual average) | 3.6 | 4.4 | 4.5 |
| Residential property prices (annual % change) | 5.9 | 2.8 | 4.3 |
| Consumer price index (annual average % change) | 5.6 | 3.5 | 2.9 |
| New Zealand | | | |
| GDP (annual % change) | 0.7 | 0.3 | 1.5 |
| Unemployment rate (annual average) | 3.8 | 4.8 | 5.1 |
| Residential property prices (annual % change) | -0.6 | 2.3 | 3.2 |
| Consumer price index (annual average % change) | 6.0 | 3.8 | 2.2 |
| Rest of world | | | |
| GDP (annual % change) | 1.8 | 0.9 | 2.0 |
| Consumer price index (annual average % change) | 3.9 | 2.9 | 2.2 |
The base case economic forecasts for Australia, New Zealand and Rest of World are for continuing slowdowns in economic activity.
Continued high inflation in Australia and New Zealand is expected to keep interest rates high and dampen growth over the forecast
period.
Probability weightings
Probability weightings for each scenario are determined by management considering the risks and uncertainties surrounding the base
case economic scenario including the uncertainties described above.
The average base case weighting has increased to 45.9% (Sep 22: 45%) as the downside and severe downside scenario weightings have
been revised. The average downside case weighting has increased to 41.2% (Sep 22: 40%), and the average severe downside case
weighting has decreased to 12.9% (Sep 22: 15%).
The assigned probability weightings in Australia, New Zealand and Rest of World are subject to a high degree of inherent uncertainty and
therefore the actual outcomes may be significantly different to those projected. The Group considers these weightings in each geography
to provide estimates of the possible loss outcomes and taking into account short and long term inter-relationships within the Group\u2019s
credit portfolios. The average weightings applied across the Group are set out below:
| | | Consolidated | | |
| | | | |
| | | The Company | |
| | | | | |
| 2023 | 2022 | 2023 | 2022 |
| Base | 45.9% | 45.0% | 45.0% | 45.0% |
| Upside | 0.0% | 0.0% | 0.0% | 0.0% |
| Downside | 41.2% | 40.0% | 42.1% | 40.0% |
| Severe downside | 12.9% | 15.0% | 12.9% | 15.0% |
ECL - Sensitivity analysis
Given current economic uncertainties and the judgement applied to factors used in determining the expected default of borrowers in
future periods, expected credit losses reported by the Group should be considered as a best estimate within a range of possible estimates.
The table below illustrates the sensitivity of collectively assessed ECL to key factors used in determining it as at 30 September 2023:
| | | Consolidated | | |
| | | The Company | |
| | | | | |
| | ECL | | | |
| $m | | | |
| | | Impact | | |
| | $m | | |
| | | ECL | |
| | | $m | |
| | | | | Impact |
| | | | $m |
| If 1% of Stage 1 facilities were included in Stage 2 | 4,116 | 84 | 3,283 | 73 |
| If 1% of Stage 2 facilities were included in Stage 1 | 4,027 | (5) | 3,206 | (4) |
| | | | | |
| 100% upside scenario | 1,274 | (2,758) | 1,050 | (2,160) |
| 100% base scenario | 1,790 | (2,242) | 1,406 | (1,804) |
| 100% downside scenario | 3,123 | (909) | 2,484 | (726) |
| 100% severe downside scenario | 9,251 | 5,219 | 7,457 | 4,247 |
Individually assessed allowance for expected credit losses
In estimating individually assessed ECL, the Group makes judgements and assumptions in relation to expected repayments, the realisable
value of collateral, business prospects for the customer, competing claims and the likely cost and duration of the work-out process.
Judgements and assumptions in respect of these matters have been updated to reflect amongst other things, the uncertainties described
above.
FINANCIAL LIABILITIES
Outlined below is a description of how we classify and measure financial liabilities relevant to the note disclosures that follow.
CLASSIFICATION AND MEASUREMENT
Financial liabilities
Financial liabilities are measured at amortised cost, or FVTPL when they are held for trading. Additionally, financial liabilities can be
designated at FVTPL where:
\u2022 the designation eliminates or significantly reduces an accounting mismatch which would otherwise arise;
\u2022 a group of financial liabilities are managed and their performance are evaluated on a fair value basis, in accordance with a documented
risk management strategy; or
\u2022 the financial liability contains one or more embedded derivatives unless:
a) the embedded derivative does not significantly modify the cash flows that otherwise would be required by the contract; or
b) the embedded derivative is closely related to the host financial liability.
Where financial liabilities are designated as measured at fair value, gains or losses relating to changes in the entity\u2019s own credit risk are
included in Other comprehensive income, except where doing so would create or enlarge an accounting mismatch in profit or loss.
14. DEPOSITS AND OTHER BORROWINGS
| | Consolidated | | The Company | |
| | | | | |
| 2023 | 2022 | 2023 | 2022 |
| $m | $m | $m | $m |
| Certificates of deposit | 41,919 | 34,049 | 39,426 | 32,411 |
| Term deposits | 247,893 | 200,064 | 196,309 | 157,479 |
| On demand and short term deposits | 356,601 | 369,460 | 297,195 | 310,857 |
| Deposits not bearing interest | 42,906 | 50,906 | 24,456 | 29,416 |
| Deposits from banks & securities sold under repurchase agreements | | | | |
| 1 | | | | |
| | 92,562 | 103,580 | 86,464 | 98,825 |
| Commercial paper and other borrowings | 33,322 | 39,222 | 31,225 | 36,619 |
| Deposits and other borrowings | 815,203 | 797,281 | 675,075 | 665,607 |
| Residual contractual maturity: | | | | |
| Within one year | 805,808 | 781,573 | 671,395 | 654,997 |
| More than one year | 9,395 | 15,708 | 3,680 | 10,610 |
| Deposits and other borrowings | 815,203 | 797,281 | 675,075 | 665,607 |
| Carried on Balance Sheet at: | | | | |
| Amortised cost | 781,314 | 794,621 | 643,868 | 665,567 |
| Fair value through profit or loss | | | | |
| 1 | | | | |
| | 33,889 | 2,660 | 31,207 | 40 |
| Deposits and other borrowings | 815,203 | 797,281 | 675,075 | 665,607 |
1.
During 2023, the Group commenced the management of repurchase agreements and reverse repurchase agreements on a fair value basis within the trading book in its Markets business. This resulted in
the associated repurchase and reverse repurchase agreements being recognised and measured at FVTPL.
RECOGNITION AND MEASUREMENT
For deposits and other borrowings that:
\u2022 are not designated at FVTPL on initial recognition, we measure them at amortised cost and recognise their interest expense using the
effective interest rate method; and
\u2022 are managed on a fair value basis, reduce or eliminate an accounting mismatch or contain an embedded derivative, we designate them
as measured at FVTPL.
Refer to Note 18 Fair Value of Financial Assets and Financial Liabilities for further details.
For deposits and other borrowings designated at fair value we recognise the amount of fair value gain or loss attributable to changes in
the Group\u2019s own credit risk in Other comprehensive income in retained earnings. Any remaining amount of fair value gain or loss we
recognise directly in profit or loss. Once we have recognised an amount in other comprehensive income, we do not later reclassify it to
profit or loss.
Securities sold under repurchase agreements represent a liability to repurchase the financial assets that remain on our balance sheet since
the risks and rewards of ownership remain with the Group. Over the life of the repurchase agreement, we recognise the difference
between the sale price and the repurchase price and charge it to interest expense in profit or loss.
20222023
Certificates of deposit
Term deposits
On demand and short
term deposits
Deposits not bearing interest
Deposits from banks &
securities sold under
repurchase agreements
200,064
369,460
50,906
39,222
103,580
Commercial paper and
other borrowings
34,049
247,893
356,601
42,906
33,322
92,562
41,919
15. PAYABLES AND OTHER LIABILITIES
Consolidated The Company
| | 2023 | 2022 | 2023 | 2022 |
| $m | $m | $m | $m |
| Payables and accruals | 5,811 | 2,896 | 4,582 | 2,189 |
| Liabilities at fair value | | | | |
| 1 | | | | |
| | 5,267 | 3,239 | 4,922 | 2,857 |
| Lease liabilities | 1,767 | 1,040 | 1,531 | 1,628 |
| Trail commission liabilities | 1,469 | 1,320 | 1,469 | 1,320 |
| Other liabilities | 1,618 | 1,340 | 775 | 568 |
| Payables and other liabilities | 15,932 | 9,835 | 13,279 | 8,562 |
1.
Relate to securities sold short classified as held for trading and measured at FVTPL.
RECOGNITION AND MEASUREMENT
The Group recognises liabilities when there is a present obligation to transfer economic resources as a result of past events.
Below is the measurement basis for each item classified as other liabilities:
\u2022 Payables, accruals and other liabilities are measured at the contractual amount payable or the best estimate of consideration required to
settle the payable.
\u2022 Liabilities at fair value relate to securities sold short, which we classify as held for trading and measure at FVTPL based on quoted prices
in active markets.
\u2022 Lease liabilities are initially measured at the present value of the future lease payments using the Group\u2019s incremental borrowing rate at
the lease commencement date. The carrying amount is then subsequently adjusted to reflect the interest on the lease liability, lease
payments that have been made and any lease reassessments or modifications.
\u2022 Trail commission liabilities are measured based on the present value of expected future trail commission payments taking into
consideration average behavioural loan life and outstanding balances of broker originated loans.
16. DEBT ISSUANCES
The Group, primarily via ANZBGL or other banking subsidiaries, uses a variety of funding programmes to issue senior debt (including covered bonds
and securitisations) and subordinated debt. The difference between senior debt and subordinated debt is that holders of senior debt of a Group issuer
take priority over holders of subordinated debt owed by that issuer. In the winding up of a Group issuer, the subordinated debt will be repaid by the
relevant issuer only after the repayment of claims of its depositors, other creditors and the senior debt holders of that issuer.
| Consolidated | | The Company | |
| | | | | |
| 2023 | 2022 | 2023 | 2022 |
| $m | $m | $m | $m |
| Senior debt | 63,233 | 52,324 | 50,671 | 40,325 |
| Covered bonds | 18,223 | 12,967 | 15,084 | 9,371 |
| Securitisation | 880 | 1,115 | - | - |
| Total unsubordinated debt | 82,336 | 66,406 | 65,755 | 49,696 |
| Subordinated debt | | | | |
| - ANZBGL Additional Tier 1 capital | 8,232 | 7,705 | 8,287 | 7,763 |
| - ANZBGL Tier 2 capital | 23,707 | 17,907 | 23,707 | 17,907 |
| - Other subordinated debt securities | 1,739 | 1,716 | 464 | 462 |
| Total subordinated debt | 33,678 | 27,328 | 32,458 | 26,132 |
| Total debt issued | 116,014 | 93,734 | 98,213 | 75,828 |
| Residual contractual maturity 1: | | | | |
| | | | | |
| Within one year | 21,746 | 25,208 | 18,499 | 21,990 |
| More than one year | 92,856 | 66,660 | 78,245 | 51,929 |
| No maturity date (instruments in perpetuity) | 1,412 | 1,866 | 1,469 | 1,909 |
| Total debt issued | 116,014 | 93,734 | 98,213 | 75,828 |
| Carried on Balance Sheet at: | | | | |
| | | | | |
| Amortised cost | 114,678 | 92,623 | 95,881 | 72,757 |
| Fair value through profit or loss | 1,336 | 1,111 | 2,332 | 3,071 |
| Total debt issued | 116,014 | 93,734 | 98,213 | 75,828 |
1. Based on the final maturity date or, in the case of Additional Tier 1 capital securities, the mandatory conversion date (if any).
TOTAL DEBT ISSUED BY CURRENCY
The table below shows the Group\u2019s issued debt by currency of issue, which broadly represents the debt holders\u2019 base location.
Consolidated
he Company
| | | 2023 | 2022 | 2023 | 2022 |
| | | $m | $m | $m | $m |
| USD | United States dollars | 32,723 | 25,527 | 24,074 | 17,206 |
| EUR Euro | 26,990 | 19,923 | 21,356 | 14,049 | |
| AUD Australian | dollars | 47,043 | 36,398 | 46,123 | 35,259 |
| NZD | New Zealand dollars | 1,575 | 1,628 | 43 | 46 |
| JPY Japanese | yen | 1,993 | 2,159 | 1,993 | 2,159 |
| CHF Swiss | francs | 1,039 | 954 | - | - |
| GBP Pounds | sterling | 2,230 | 5,261 | 2,230 | 5,261 |
| HKD | Hong Kong dollars | 1,407 | 771 | 1,407 | 771 |
| Other | Chinese yuan and Singapore dollars | 1,014 | 1,113 | 987 | 1,077 |
| Total debt issued | | 116,014 | 93,734 | 98,213 | 75,828 |
SUBORDINATED DEBT
At 30 September 2023, all subordinated debt issued by ANZBGL (other than its USD 300 million perpetual subordinated notes) qualifies as regulatory
capital for the Group. Depending on their terms and conditions, the subordinated debt instruments issued by ANZBGL are classified as either
Additional Tier 1 (AT1) capital for the Group (in the case of the ANZ Capital Notes (ANZ CN) and ANZ Capital Securities (ANZ CS)) or Tier 2 capital for
the Group (in the case of the term subordinated notes) for APRA\u2019s capital adequacy purposes.
Subordinated debt issued externally by ANZ Bank New Zealand will constitute subordinated debt of both ANZ Bank New Zealand and the Group.
Whilst it will constitute tier 2 capital for ANZ Bank New Zealand for the purposes of the Reserve Bank of New Zealand\u2019s (RBNZ) capital requirements, it
will not constitute Tier 2 capital for the Group as the terms of the subordinated debt does not satisfy APRA\u2019s capital requirements.
AT1 Capital
All outstanding AT1 capital instruments issued by ANZBGL are Basel III fully compliant instruments (refer to Note 24 Capital Management for further
information about Basel III) for APRA\u2019s capital adequacy purposes. Each of the ANZ CN and ANZ CS rank equally with each other.
Distributions on the AT1 capital instruments are non-cumulative and subject to the issuer\u2019s absolute discretion and certain payment conditions
(including regulatory requirements). Distributions on ANZ CNs are franked in line with the franking applied to ANZGHL\u2019s ordinary shares.
Where specified, the AT1 capital instruments provide the issuer with an early redemption or conversion option on a specified date and in certain other
circumstances (such as a tax or regulatory event). This redemption option is subject to APRA\u2019s prior written approval.
Each of the AT1 capital instruments will immediately convert into a variable number of ANZGHL\u2019s ordinary shares (based on the average market price
of the shares immediately prior to conversion less a 1% discount, subject to a maximum conversion number of ANZGHL\u2019s ordinary shares) if:
\u2022 The Group\u2019s or ANZBGL\u2019s Common Equity Tier 1 capital ratio is equal to or less than 5.125% - known as a Common Equity Capital Trigger Event; or
\u2022 APRA notifies ANZBGL that, without the conversion or write-off of certain securities or a public sector injection of capital (or equivalent support), it
considers that ANZBGL would become non-viable \u2013 known as a Non-Viability Trigger Event.
Where specified, AT1 capital instruments mandatorily convert into a variable number of ANZGHL\u2019s ordinary shares (based on the average market price
of the shares immediately prior to conversion less a 1% discount):
\u2022 on a specified mandatory conversion date; or
\u2022 on an earlier date under certain circumstances as set out in the terms.
However, the mandatory conversion is deferred for a specified period if certain conversion tests are not met.
If the AT1 capital securities convert, and the holders receive ANZGHL ordinary shares, then:
\u2022 the AT1 capital securities are transferred to ANZGHL for their face value;
\u2022 ANZBGL shall redeem the securities and simultaneously issue ordinary shares to its parent ANZ BH Limited (based on ANZBGL\u2019s share price
calculated by reference to its consolidated net assets, subject to a maximum conversion number); and
\u2022 ANZ BH Limited will issue shares to ANZGHL (calculated on the same basis for ANZ BH Limited).
Preference shares issued externally by ANZ Bank New Zealand will constitute additional tier 1 capital for ANZ Bank New Zealand for the purposes of
the RBNZ\u2019s capital requirements, however they will not constitute Additional Tier 1 capital for the Group as the terms of the preference shares do not
satisfy APRA\u2019s capital requirements. The preference shares are included within non-controlling interests in Note 23 Shareholders\u2019 Equity.
The tables below show the key details of the ANZBGL\u2019s AT1 capital instruments on issue at 30 September in both the current and prior years:
| Consolidated | | | |
| | | The Company | |
| | 2023 | 2022 | 2023 | 2022 |
| | $m | $m | $m | $m |
| ANZBGL's Additional Tier 1 capital (perpetual subordinated securities)1 | | | | |
| ANZ Capital Notes (ANZ CN) | | | | |
| AUD 970m ANZ CN32 | - | 970 | - | 985 |
| AUD 1,622m ANZ CN4 | 1,621 | 1,619 | 1,621 | 1,619 |
| AUD 931m ANZ CN5 | 929 | 928 | 929 | 928 |
| AUD 1,500m ANZ CN6 | 1,489 | 1,487 | 1,489 | 1,487 |
| AUD 1,310m ANZ CN7 | 1,298 | 1,297 | 1,298 | 1,297 |
| AUD 1,500m ANZ CN8 | 1,483 | - | 1,481 | - |
| ANZ Capital Securities (ANZ CS) | | | | |
| USD 1,000m ANZ Capital Securities | 1,412 | 1,404 | 1,469 | 1,447 |
| Total ANZBGL Additional Tier 1 capital3 | 8,232 | 7,705 | 8,287 | 7,763 |
1. Carrying values are net of issuance costs.
2. All of the ANZ Capital Notes 3 were redeemed on 24 March 2023 with approximately $502 million of the proceeds from redemption reinvested into ANZ Capital Notes 8 on the same date.
3. This forms part of the Group\u2019s qualifying Additional Tier 1 capital. Refer to Note 24 Capital Management for further details.
ANZ Capital Notes (ANZ CN)
| CN3 | CN4 | CN5 |
| Issuer | | | |
| | ANZBGL, acting through its | | |
| New Zealand branch | ANZBGL | ANZBGL |
| Issue date | 5 March 2015 | 27 September 2016 | 28 September 2017 |
| Issue amount | $970 million | $1,622 million | $931 million |
| Face value | $100 | $100 | $100 |
| Distribution frequency | Semi-annually in arrears | Quarterly in arrears | Quarterly in arrears |
| Distribution rate | | | |
| | | | |
| | | | |
| | | | |
| Floating rate: (180 day Bank | | |
| Bill rate +3.6%)x(1-Australian | | |
| corporate tax rate) | | |
| | | | |
| | Floating rate: (90 day Bank | |
| | Bill rate +4.7%)x(1-Australian | |
| | corporate tax rate) | |
| | | | |
| | | Floating rate: (90 day Bank |
| | | Bill rate +3.8%)x(1-Australian |
| | | corporate tax rate) |
| | | | |
| Issuer\u2019s early redemption or conversion option | 24 March 20231 | 20 March 2024 | 20 March 2025 |
| Mandatory conversion date | 24 March 20252 | 20 March 2026 | 20 March 2027 |
| Common equity capital trigger event | Yes | Yes | Yes |
| Non-viability trigger event | Yes | Yes | Yes |
| Carrying value (net of issue costs) | | | |
| | | | |
| nil | $1,621 million | $929 million |
| | (2022: $970 million) | (2022: $1,619 million) | (2022: $928 million) |
| CN6 | CN7 | CN8 |
| Issuer | ANZBGL | ANZBGL | ANZBGL |
| Issue date | 8 July 2021 | 24 March 2022 | 24 March 2023 |
| Issue amount | $1,500 million | $1,310 million | $1,500 million |
| Face value | $100 | $100 | $100 |
| Distribution frequency | Quarterly in arrears | Quarterly in arrears | Quarterly in arrears |
| Distribution rate | | | |
| | | | |
| | | | |
| | | | |
| Floating rate: (90 day Bank | | |
| Bill rate +3.0%)x(1-Australian | | |
| corporate tax rate) | | |
| | | |
| | Floating rate: (90 day Bank | |
| | Bill rate +2.7%)x(1-Australian | |
| | corporate tax rate) | |
| | | |
| | | Floating rate: (90 day Bank Bill |
| | | rate +2.75%)x(1-Australian |
| | | corporate tax rate) |
| | | |
| Issuer\u2019s early redemption or conversion option | 20 March 2028 | 20 March 2029 | 20 March 2030 |
| Mandatory conversion date | 20 September 2030 | 20 September 2031 | 20 September 2032 |
| Common equity capital trigger event | Yes | Yes | Yes |
| Non-viability trigger event | Yes | Yes | Yes |
| Carrying value (net of issue costs) | | | |
| | | | |
| $1,489 million | $1,298 million | $1,483 million |
| | (2022: $1,487 million) | (2022: $1,297 million) | (2022: nil) |
1. All of the ANZ Capital Notes 3 were redeemed on 24 March 2023 with approximately $502 million of the proceeds from redemption reinvested into ANZ Capital Notes 8 on the same date.
2. The mandatory conversion date is no longer applicable as all of CN3 have been redeemed.
ANZ Capital Securities (ANZ CS)
| Issuer | ANZBGL, acting through its London branch |
| Issue date | 15 June 2016 |
| Issue amount | USD 1,000 million |
| Face value | Minimum denomination of USD 200,000 and an integral multiple of USD 1,000 above that |
| Interest frequency | Semi-annually in arrears |
| Interest rate | |
| |
| Fixed at 6.75% p.a. until 15 June 2026. Reset on 15 June 2026 and each 5 year anniversary |
| to a floating rate: 5 year USD mid-market swap rate + 5.168% |
| Issuer\u2019s early redemption option | 15 June 2026 and each 5 year anniversary |
| Common equity capital trigger event | Yes |
| Non-viability trigger event | Yes |
| Carrying value (net of issue costs) | $1,412 million (2022: $1,404 million) |
TIER 2 CAPITAL
Convertible term subordinated notes issued by ANZBGL are Basel III fully compliant instruments for APRA\u2019s capital adequacy purposes. If a Non-
Viability Trigger Event occurs, each of the convertible term subordinated notes will immediately convert into ANZGHL ordinary shares (based on the
average market price of the ANZGHL shares immediately prior to conversion less a 1% discount, subject to a maximum conversion number).
If the Tier 2 capital securities convert, and the holders receive ANZGHL ordinary shares, then ANZBGL shall issue ordinary shares to its parent ANZ BH
Limited (based on ANZBGL\u2019s share price calculated by reference to its consolidated net assets, subject to a maximum conversion number) and ANZ
BH Limited will issue shares to ANZGHL (calculated on the same basis).
The table below shows the Tier 2 capital subordinated debt issued by ANZBGL at 30 September in both the current and prior year:
| | | | | Consolidated | | The Company | |
| | | | Next optional call date \u2013 | Interest | 2023 | 2022 | 2023 | 2022 |
| Currency | Face value | Maturity | subject to APRA\u2019s prior approval | rate | $m | $m | $m | $m |
| ANZBGL Tier 2 capital (term subordinated notes) | | | | | | | | |
| USD | 800m | 2024 | N/A | Fixed | 1,220 | 1,189 | 1,220 | 1,189 |
| JPY | 20,000m | 2026 | N/A | Fixed | 207 | 213 | 207 | 213 |
| USD | 1,500m | 2026 | N/A | Fixed | 2,125 | 2,113 | 2,125 | 2,113 |
| JPY | 10,000m | 2028 | 2023 | Fixed | - | 106 | - | 106 |
| AUD | 225m | 2032 | 2027 | Fixed | 225 | 225 | 225 | 225 |
| AUD | 1,750m | 2029 | 2024 | Floating | 1,750 | 1,750 | 1,750 | 1,750 |
| EUR | 1,000m | 2029 | 2024 | Fixed | 1,555 | 1,410 | 1,555 | 1,410 |
| AUD | 265m | 2039 | N/A | Fixed | 170 | 179 | 170 | 179 |
| USD | 1,250m | 2030 | 2025 | Fixed | 1,808 | 1,785 | 1,808 | 1,785 |
| AUD | 1,250m | 2031 | 2026 | Floating | 1,250 | 1,250 | 1,250 | 1,250 |
| USD | 1,500m | 2035 | 2030 | Fixed | 1,786 | 1,830 | 1,786 | 1,830 |
| AUD | 330m | 2040 | N/A | Fixed | 202 | 214 | 202 | 214 |
| AUD | 195m | 2040 | N/A | Fixed | 117 | 124 | 117 | 124 |
| EUR | 750m | 2031 | 2026 | Fixed | 1,104 | 1,003 | 1,104 | 1,003 |
| GBP | 500m | 2031 | 2026 | Fixed | 830 | 714 | 830 | 714 |
| AUD | 1,450m | 2032 | 2027 | Fixed | 1,400 | 1,390 | 1,400 | 1,390 |
| AUD | 300m | 2032 | 2027 | Floating | 300 | 300 | 300 | 300 |
| JPY | 59,400m | 2032 | 2027 | Fixed | 606 | 627 | 606 | 627 |
| SGD | 600m | 2032 | 2027 | Fixed | 659 | 618 | 659 | 618 |
| AUD | 900m | 2034 | 2029 | Fixed | 871 | 867 | 871 | 867 |
| USD | 1,250m | 2032 | N/A | Fixed | 1,803 | - | 1,803 | - |
| EUR | 1,000m | 2033 | 2028 | Fixed | 1,594 | - | 1,594 | - |
| AUD | 1,000m | 2038 | 2033 | Fixed | 975 | - | 975 | - |
| AUD | 275m | 2033 | 2028 | Fixed | 275 | - | 275 | - |
| AUD | 875m | 2033 | 2028 | Floating | 875 | - | 875 | - |
| Total ANZBGL Tier 2 capital1,2 | | | | | 23,707 | 17,907 | 23,707 | 17,907 |
1. Carrying values are net of issuance costs, and, where applicable, include fair value hedge accounting adjustments.
2. This forms part of the Group\u2019s qualifying Tier 2 capital. Refer to Note 24 Capital Management for further details.
OTHER SUBORDINATED DEBT SECURITIES
The term subordinated notes issued by ANZ Bank New Zealand constitute tier 2 capital under RBNZ requirements. However, they do not (among
other things) contain a Non-Viability Trigger Event and therefore do not meet APRA\u2019s requirements for Tier 2 capital instruments in order to qualify as
regulatory capital for the Group.
| | | | | Consolidated | | The Company | |
| | | | Interest | 2023 | 2022 | 2023 | 2022 |
| | | | rate | $m | $m | $m | $m |
| Currency | Face value | Maturity | Next optional call date | | | | | |
| | | 1 | | | | | |
| Non-Basel III compliant perpetual subordinated notes issued by ANZBGL | | | | | | | | |
| 2 | | | | | | | | |
| | | | | | | | | |
| USD | 300m | Perpetual | | | | | | |
| | | Each semi-annual interest payment | | | | | |
| | | date | Floating | 464 | 462 | 464 | 462 |
| Term subordinated notes issued | by ANZ Bank New Zealand Limited |
| NZD | 600m | 2031 | 2026 | Fixed | 555 | 524 | - | - |
| USD | 500m | 2032 | 2027 | Fixed | 720 | 730 | - | - |
| Other subordinated debt | | | | | 1,739 | 1,716 | 464 | 462 |
1.
Subject to APRA\u2019s or RBNZ\u2019s prior approval (as applicable).
2.
The USD 300 million perpetual subordinated notes were redeemed by ANZBGL on 31 October 2023.
RECOGNITION AND MEASUREMENT
Debt issuances are initially recognised at fair value and are subsequently measured at amortised cost, except where designated at FVTPL.
Interest expense on debt issuances is recognised using the effective interest rate method. Where the Group enters into a fair value hedge
accounting relationship, the fair value attributable to the hedged risk is reflected in adjustments to the carrying value of the debt.
Subordinated debt with capital-based conversion features (i.e. Common Equity Capital Trigger Events or Non-Viability Trigger Events) are
considered to contain embedded derivatives that we account for separately at FVTPL. The embedded derivatives arise because the
amount of shares issued on conversion following any of those trigger events is subject to the maximum conversion number, however they
have no significant value as of the reporting date given the remote nature of those trigger events.
19. ASSETS CHARGED AS SECURITY FOR LIABILITIES AND COLLATERAL ACCEPTED AS
SECURITY FOR ASSETS
The following disclosure excludes the amounts presented as collateral paid and received in the Balance Sheet that relate to derivative liabilities and
derivative assets respectively. The terms and conditions of those collateral agreements are included in the standard Credit Support Annex that forms
part of the International Swaps and Derivatives Association Master Agreement under which most of our derivatives are executed.
ASSETS CHARGED AS SECURITY FOR LIABILITIES
Assets charged as security for liabilities include the following types of instruments:
\u2022 securities provided as collateral for repurchase transactions. These transactions are governed by standard industry agreements;
\u2022 specified residential mortgages provided as security for notes and bonds issued to investors as part of ANZ\u2019s covered bond programs;
\u2022 collateral provided to central banks; and
\u2022 collateral provided to clearing houses.
The carrying amount of assets pledged as security are as follows:
| | Consolidated | | The Company | |
| | 2023 | 2022 | 2023 | 2022 |
| $m | $m | $m | $m |
| Securities sold under arrangements to repurchase1 | 47,552 | 52,757 | 42,002 | 47,846 |
| Residential mortgages provided as security for covered bonds | 31,188 | 27,575 | 21,017 | 17,953 |
| Other | 6,152 | 5,601 | 6,077 | 5,527 |
1. The amounts disclosed as securities sold under arrangements to repurchase include both:
\u2022 assets pledged as security which continue to be recognised on the Group's balance sheet; and
\u2022 assets repledged, which are included in the disclosure below.
COLLATERAL ACCEPTED AS SECURITY FOR ASSETS
ANZ has received collateral associated with various financial transactions. Under certain arrangements ANZ has the right to sell, or to repledge, the
collateral received. These arrangements are governed by standard industry agreements.
The fair value of collateral we have received and that which we have sold or repledged is as follows:
| | Consolidated | | | |
| | | | |
| | | The Company | |
| | 2023 | 2022 | 2023 | 2022 |
| $m | $m | $m | $m |
| Fair value of assets which can be sold or repledged | 52,184 | 32,389 | 51,519 | 30,647 |
| Fair value of assets sold or repledged | 33,493 | 21,269 | 33,218 | 20,359 |
17. FINANCIAL RISK MANAGEMENT
RISK MANAGEMENT FRAMEWORK AND MODEL
INTRODUCTION
The use of financial instruments is fundamental to the Group\u2019s businesses of providing banking and other financial services to our customers. The
associated financial risks (primarily credit, market, and liquidity risks) are a significant portion of the Group\u2019s key material risks.
We disclose details of all key material risks impacting the Group, and further information on the Group\u2019s risk management activities, in the Governance
and Risk Management sections of this Annual Report.
This note details the Group\u2019s financial risk management policies, processes and quantitative disclosures in relation to the key financial risks.
| Key material financial risks | Key sections applicable to this risk |
| Credit risk | |
| The risk of financial loss resulting from: | |
| \u2022 a counterparty failing to fulfil its obligations; or | |
| \u2022 a decrease in credit quality of a counterparty resulting in a | |
| financial loss. | |
| Credit risk incorporates the risks associated with us lending to | |
| customers who could be impacted by climate change, changes to | |
| laws, regulations, or other policies adopted by governments or | |
| regulatory authorities. Climate change impacts include both | |
| physical risks (climate- or weather-related events) and transition | |
| risks resulting from the adjustment to a low emissions | |
| economy. Transition risks include resultant changes to laws, | |
| regulations and policies noted above. | |
| \u2022 Credit risk overview, management and control responsibilities |
| \u2022 Maximum exposure to credit risk |
| \u2022 Credit quality |
| \u2022 Concentrations of credit risk |
| \u2022 Collateral management |
| Market risk | |
| The risk to the Group\u2019s earnings arising from: | |
| \u2022 changes in interest rates, foreign exchange rates, credit spreads, | |
| volatility and correlations; or | |
| \u2022 | |
| fluctuations in bond, commodity or equity prices. | |
| | |
| | |
| \u2022 Market risk overview, management and control responsibilities |
| \u2022 Measurement of market risk |
| \u2022 Traded and non-traded market risk |
| \u2022 Equity securities designated at FVOCI |
| \u2022 Foreign currency risk \u2013 structural exposure |
| Liquidity and funding risk | |
| The risk that the Group is unable to meet payment obligations as | |
| they fall due, including: | |
| \u2022 repaying depositors or maturing wholesale debt; or | |
| \u2022 the Group having insufficient capacity to fund increases in | |
| assets. | |
| \u2022 Liquidity risk overview, management and control responsibilities |
| \u2022 Key areas of measurement for liquidity risk |
| \u2022 Liquidity risk outcomes |
| \u2022 Residual contractual maturity analysis of the Group\u2019s liabilities |
OVERVIEW
AN OVERVIEW OF OUR RISK MANAGEMENT FRAMEWORK
This overview is provided to aid the users of the financial statements in understanding the context of the financial disclosures required under AASB 7
Financial Instruments: Disclosures.
It should be read in conjunction with the Governance and Risk Management sections of this Annual Report.
The Board is responsible for establishing and overseeing the Group\u2019s Risk Management Framework (RMF). The Board has delegated authority to the
Board Risk Committee (BRC) to develop and monitor compliance with the Group\u2019s risk management policies. The BRC reports regularly to the Board
on its activities.
The Board approves the strategic objectives of the Group including:
\u2022 the Risk Appetite Statement (RAS), which sets out the Board\u2019s expectations regarding the degree of risk that the Group is prepared to accept in
pursuit of its strategic objectives and business plan; and
\u2022 the Risk Management Strategy (RMS), which describes the Group\u2019s strategy for managing risks and the key elements of the RMF that give effect to
this strategy. This includes a description of each material risk, and an overview of how the RMF addresses each risk, with reference to the relevant
policies, standards and procedures. It also includes information on how the Group identifies, measures, evaluates, monitors, reports and controls or
mitigates material risks.
The Group, through its training and management standards and procedures, aims to maintain a disciplined and robust control environment in which
all employees understand their roles and obligations. At ANZ, risk is everyone\u2019s responsibility.
The Group has an independent risk management function, headed by the Chief Risk Officer who:
\u2022 is responsible for overseeing the risk profile and the risk management framework;
\u2022 can effectively challenge activities and decisions that materially affect the Group\u2019s risk profile; and
\u2022 has an independent reporting line to the BRC to enable the appropriate escalation of issues of concern.
The Internal Audit Function reports directly to the Board Audit Committee (BAC). Internal Audit provides:
\u2022 an independent evaluation of the Group\u2019s RMF annually that seeks to ensure compliance with, and the effectiveness of, the risk management
framework;
\u2022 facilitation of a comprehensive review every three years that seeks to ensure the appropriateness, effectiveness and adequacy of the risk
management framework; and
\u2022 recommendations to improve the framework and/or work practices to strengthen the effectiveness of day-to-day operations.
CREDIT RISK
CREDIT RISK OVERVIEW, MANAGEMENT AND CONTROL RESPONSIBILITIES
Granting credit facilities to customers is one of the Group\u2019s major sources of income. As this activity is also a principal risk, the Group dedicates
considerable resources to its management. The Group assumes credit risk in a wide range of lending and other activities in diverse markets and in
many jurisdictions. Credit risks arise from traditional lending to customers as well as from interbank, treasury, trade finance and capital markets
activities around the world.
Our credit risk management framework ensures we apply a consistent approach across the Group when we measure, monitor and manage the credit
risk appetite set by the Board. The Board is assisted and advised by the BRC in discharging its duty to oversee credit risk. The BRC:
\u2022 sets the credit risk appetite and credit strategies; and
\u2022 approves credit transactions beyond the discretion of executive management.
We quantify credit risk through an internal credit rating system (masterscales) to ensure consistency across exposure types and to provide a consistent
framework for reporting and analysis. The system uses models and other tools to measure the following for customer exposures:
| Probability of Default (PD) | Expressed by a Customer Credit Rating (CCR), reflecting the Group\u2019s assessment of a customer\u2019s ability |
| to service and repay debt. |
| Exposure at Default (EAD) | The expected balance sheet exposure at default taking into account repayments of principal and |
| interest, expected additional drawdowns and accrued interest at the time of default. |
| Loss Given Default (LGD) | Expressed by a Security Indicator (SI) ranging from A to G. The SI is calculated by reference to the |
| percentage of loan covered by security which the Group can realise if a customer defaults. The A-G |
| scale is supplemented by a range of other SIs which cover factors such as cash cover and sovereign |
| backing. For retail and some small business lending, we group exposures into large homogenous pools |
| \u2013 and the LGD is assigned at the pool level. |
Our specialist credit risk teams develop and validate the Group\u2019s PD and LGD rating models. The outputs from these models drive our day-to-day
credit risk management decisions including origination, pricing, approval levels, regulatory capital adequacy, economic capital allocation, and credit
provisioning.
All customers with whom the Group has a credit relationship are assigned a CCR at origination via either of the following assessment approaches:
| Large and more complex lending | Retail and some small business lending |
| Rating models provide a consistent and structured assessment, with | |
| judgement required around the use of out-of-model factors. We | |
| handle credit approval on a dual approval basis, jointly with the | |
| business writer and an independent credit officer. | |
| Automated assessment of credit applications using a combination of |
| scoring (application and behavioural), policy rules and external credit |
| reporting information. If the application does not meet the automated |
| assessment criteria, then it is subject to manual assessment. |
We use the Group\u2019s internal CCRs to manage the credit quality of financial assets. To enable wider comparisons, the Group\u2019s CCRs are mapped to
external rating agency scales as follows:
| Credit Quality | | | | |
| Description | Internal CCR | ANZ Customer Requirements | | |
| | | Moody\u2019s | |
| | | Rating | |
| | | | S&P Global |
| | | | Ratings |
| Strong | CCR 0+ to 4- | Demonstrated superior stability in their operating and financial | | |
| | performance over the long-term, and whose earnings capacity | | |
| | is not significantly vulnerable to foreseeable events. | | |
| | | Aaa \u2013 Baa3 | AAA \u2013 BBB- |
| Satisfactory | CCR 5+ to 6- | 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. | | |
| | | Ba1 \u2013 B1 | BB |
| | | | + |
| | | | \u2013 B+ |
| Weak | CCR 7+ to 8= | Demonstrated some operational and financial instability, with | | |
| | variability and uncertainty in profitability and liquidity | | |
| | projected to continue over the short and possibly medium | | |
| | term. | | |
| | | B2 - Caa | B |
| | | | - CCC |
| Defaulted | CCR 8- to 10 | When doubt arises as to the collectability of a credit facility, the | | |
| | financial instrument (or \u2018the facility\u2019) is classified as defaulted. | | |
| | | N/A | N/A |
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 instruments which are primarily subject to
market risk, or bank notes and coins.
For undrawn facilities, this maximum exposure to credit risk is the full amount of the committed facilities. 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.
The table below shows our maximum exposure to credit risk of on-balance sheet and off-balance sheet positions before taking account of any
collateral held or other credit enhancements.
| | Reported | | Excluded1 | | | |
| | | | | Maximum exposure | |
| | | | | to credit risk | |
| | 2023 | 2022 | 2023 | 2022 | 2023 | 2022 |
| Consolidated | $m | $m | $m | $m | $m | $m |
| On-balance sheet positions | | | | | | |
| Net loans and advances | 707,694 | 672,407 | - | - | 707,694 | 672,407 |
| | | | | | | |
| Other financial assets: | | | | | | |
| Cash and cash equivalents | 168,154 | 168,132 | 1,070 | 1,147 | 167,084 | 166,985 |
| Settlement balances owed to ANZ | 9,349 | 4,762 | 9,349 | 4,762 | - | - |
| Collateral paid | 8,558 | 12,700 | - | - | 8,558 | 12,700 |
| Trading assets | 37,004 | 35,237 | 4,881 | 3,860 | 32,123 | 31,377 |
| Derivative financial instruments | 60,406 | 90,174 | - | - | 60,406 | 90,174 |
| Investment securities | | | | | | |
| - debt securities at amortised cost | 7,752 | 7,943 | - | - | 7,752 | 7,943 |
| - debt securities at FVOCI | 88,271 | 76,817 | - | - | 88,271 | 76,817 |
| - equity securities at FVOCI | 946 | 1,353 | 946 | 1,353 | - | - |
| - debt securities at FVTPL | - | 40 | - | - | - | 40 |
| Regulatory deposits | 646 | 632 | - | - | 646 | 632 |
| Other financial assets2 | 4,378 | 2,943 | - | - | 4,378 | 2,943 |
| Total other financial assets | 385,464 | 400,733 | 16,246 | 11,122 | 369,218 | 389,611 |
| Subtotal | 1,093,158 | 1,073,140 | 16,246 | 11,122 | 1,076,912 | 1,062,018 |
| Off-balance sheet positions | | | | | | |
| Undrawn and contingent facilities3 | 290,055 | 285,041 | - | - | 290,055 | 285,041 |
| Total | 1,383,213 | 1,358,181 | 16,246 | 11,122 | 1,366,967 | 1,347,059 |
1. Coins, notes and cash at bank within Cash and cash equivalents; Trade dated assets within Settlement balances owed to ANZ; precious metal exposures and carbon credits within Trading assets; and Equity
securities within Investment securities were excluded as they do not have credit risk exposure.
2. Other financial assets mainly comprise accrued interest and acceptances.
3. Undrawn and contingent facilities include guarantees, letters of credit and performance related contingencies, net of collectively assessed and individually assessed allowance for expected credit losses.
| | Reported | | Excluded1 | | | |
| | | | | Maximum exposure | |
| | | | | to credit risk | |
| | 2023 | 2022 | 2023 | 2022 | 2023 | 2022 |
| The Company | $m | $m | $m | $m | $m | $m |
| On-balance sheet positions | | | | | | |
| Net loans and advances | 563,017 | 537,345 | - | - | 563,017 | 537,345 |
| | | | | | | |
| Other financial assets: | | | | | | |
| Cash and cash equivalents | 154,408 | 155,483 | 667 | 787 | 153,741 | 154,696 |
| Settlement balances owed to ANZ | 8,935 | 4,024 | 8,935 | 4,024 | - | - |
| Collateral paid | 7,717 | 11,368 | - | - | 7,717 | 11,368 |
| Trading assets | 30,693 | 28,073 | 4,472 | 3,348 | 26,221 | 24,725 |
| Derivative financial instruments | 59,989 | 88,056 | - | - | 59,989 | 88,056 |
| Investment securities | | | | | | |
| - debt securities at amortised cost | 5,936 | 6,115 | - | - | 5,936 | 6,115 |
| - debt securities at FVOCI | 76,320 | 65,257 | - | - | 76,320 | 65,257 |
| - equity securities at FVOCI | 945 | 1,027 | 945 | 1,027 | - | - |
| Regulatory deposits | 284 | 249 | - | - | 284 | 249 |
| Due from controlled entities | 26,067 | 22,860 | - | - | 26,067 | 22,860 |
| Other financial assets2 | 3,024 | 1,882 | - | - | 3,024 | 1,882 |
| Total other financial assets | 374,318 | 384,394 | 15,019 | 9,186 | 359,299 | 375,208 |
| Subtotal | 937,335 | 921,739 | 15,019 | 9,186 | 922,316 | 912,553 |
| Off-balance sheet positions | | | | | | |
| Undrawn and contingent facilities3 | 252,415 | 246,722 | - | - | 252,415 | 246,722 |
| Total | 1,189,750 | 1,168,461 | 15,019 | 9,186 | 1,174,731 | 1,159,275 |
1. Coins, notes and cash at bank within Cash and cash equivalents; Trade dated assets within Settlement balances owed to ANZ; precious metal exposures, and carbon credits within Trading assets; and Equity
securities within Investment securities were excluded as they do not have credit risk exposure.
2. Other financial assets mainly comprise accrued interest and acceptances.
3. Undrawn and contingent facilities include guarantees, letters of credit and performance related contingencies, net of collectively assessed and individually assessed allowance for expected credit losses.
CREDIT QUALITY
An analysis of the Group\u2019s credit risk exposure is presented in the following tables based on the Group\u2019s internal credit quality rating by stage without
taking account of the effects of any collateral or other credit enhancements:
Net loans and advances
| | | | Stage 3 | | |
| | Stage 1 | Stage 2 | | | |
| | | Collectively | | |
| | | assessed | | |
| | | | Individually | |
| | | | assessed | |
| | | | | Total |
| | | | | |
| Consolidated | $m | $m | $m | $m | $m |
| As at 30 September 2023 | | | | | |
| Strong | 411,583 | 17,063 | - | - | 428,646 |
| Satisfactory | 193,170 | 37,977 | - | - | 231,147 |
| Weak | 11,306 | 10,398 | - | - | 21,704 |
| Defaulted | - | - | 3,858 | 1,037 | 4,895 |
| Gross loans and advances at amortised cost | 616,059 | 65,438 | 3,858 | 1,037 | 686,392 |
| Allowance for ECL | (1,227) | (1,624) | (329) | (366) | (3,546) |
| Net loans and advances at amortised cost | 614,832 | 63,814 | 3,529 | 671 | 682,846 |
| Coverage ratio | 0.20% | 2.48% | 8.53% | 35.29% | 0.52% |
| Loans and advances at FVTPL | | | | | 21,888 |
| Unearned income | | | | | (515) |
| Capitalised brokerage and other origination costs | | | | | 3,475 |
| Net carrying amount | | | | | 707,694 |
| | | | | | |
| As at 30 September 2022 | | | | | |
| Strong | 443,571 | 15,880 | - | - | 459,451 |
| Satisfactory | 154,823 | 31,864 | - | - | 186,687 |
| Weak | 9,197 | 9,244 | - | - | 18,441 |
| Defaulted | - | - | 3,328 | 1,043 | 4,371 |
| Gross loans and advances at amortised cost | 607,591 56,988 | 3,328 | 1,043 | | 668,950 |
| Allowance for ECL | (1,141) | (1,548) | (360) | (533) | (3,582) |
| Net loans and advances at amortised cost | 606,450 55,440 | | 2,968 | 510 | 665,368 |
| Coverage ratio | 0.19% | 2.72% | 10.82% | 51.10% | 0.54% |
| Loans and advances at FVTPL | | | | | 4,675 |
| Unearned income | | | | | (518) |
| Capitalised brokerage and other origination costs | | | | | 2,882 |
| Net carrying amount | | | | | 672,407 |
Net loans and advances
| | | | Stage 3 | | |
| | Stage 1 | Stage 2 | | | |
| | | Collectively | | |
| | | assessed | | |
| | | | Individually | |
| | | | assessed | |
| | | | | Total |
| | | | | |
| The Company | $m | $m | $m | $m | $m |
| As at 30 September 2023 | | | | | |
| Strong | 315,206 | 11,682 | - | - | 326,888 |
| Satisfactory | 160,357 | 31,769 | - | - | 192,126 |
| Weak | 10,906 | 8,362 | - | - | 19,268 |
| Defaulted | - | - | 2,994 | 731 | 3,725 |
| Gross loans and advances at amortised cost | 486,469 | 51,813 | 2,994 | 731 | 542,007 |
| Allowance for ECL | (1,026) | (1,239) | (251) | (279) | (2,795) |
| Net loans and advances at amortised cost | 485,443 | 50,574 | 2,743 | 452 | 539,212 |
| Coverage ratio | 0.21% | 2.39% | 8.38% | 38.17% | 0.52% |
| Loans and advances at FVTPL | | | | | 21,240 |
| Unearned income | | | | | (483) |
| Capitalised brokerage and other origination costs | | | | | 3,048 |
| Net carrying amount | | | | | 563,017 |
| | | | | | |
| As at 30 September 2022 | | | | | |
| Strong | 334,850 | 9,641 | - | - | 344,491 |
| Satisfactory | 142,772 | 26,186 | - | - | 168,958 |
| Weak | 9,181 | 7,759 | - | - | 16,940 |
| Defaulted | - | - | 2,744 | 853 | 3,597 |
| Gross loans and advances at amortised cost | 486,803 43,586 | 2,744 | 853 | | 533,986 |
| Allowance for ECL | (946) | (1,259) | (295) | (425) | (2,925) |
| Net loans and advances at amortised cost | 485,857 42,327 | | 2,449 | 428 | 531,061 |
| Coverage ratio | 0.19% | 2.89% | 10.75% | 49.82% | 0.55% |
| Loans and advances at FVTPL | | | | | 4,263 |
| Unearned income | | | | | (480) |
| Capitalised brokerage and other origination costs | | | | | 2,501 |
| Net carrying amount | | | | | 537,345 |
Of
-balance sheet commitments - undrawn and contingent facilities
| | | | Stage 3 | | |
| | Stage 1 | Stage 2 | | | |
| | | Collectively | | |
| | | assessed | | |
| | | | Individually | |
| | | | assessed | Total |
| Consolidated | $m | $m | $m | $m | $m |
| As at 30 September 2023 | | | | | |
| Strong | 189,980 | 1,234 | - | - | 191,214 |
| Satisfactory | 30,007 | 4,276 | - | - | 34,283 |
| Weak | 975 | 746 | - | - | 1,721 |
| Defaulted | - | - | 79 | 47 | 126 |
| Gross undrawn and contingent facilities subject to ECL | 220,962 | 6,256 | 79 | 47 | 227,344 |
| Allowance for ECL included in Other provisions (refer to Note 22) | (630) | (162) | (25) | (10) | (827) |
| Net undrawn and contingent facilities subject to ECL | 220,332 | 6,094 | 54 | 37 | 226,517 |
| Coverage ratio | 0.29% | 2.59% | 31.65% | 21.28% | 0.36% |
| Undrawn and contingent facilities not subject to ECL1 | | | | | 63,538 |
| Net undrawn and contingent facilities | | | | | 290,055 |
| | | | | | |
| As at 30 September 2022 | | | | | |
| Strong | 191,363 | 1,703 | - | - | 193,066 |
| Satisfactory | 18,583 | 3,078 | - | - | 21,661 |
| Weak | 774 | 706 | - | - | 1,480 |
| Defaulted | - | - | 113 | 19 | 132 |
| Gross undrawn and contingent facilities subject to ECL | 210,720 | 5,487 | 113 | 19 | 216,339 |
| Allowance for ECL included in Other provisions (refer to Note 22) | (593) | (144) | (29) | (9) | (775) |
| Net undrawn and contingent facilities subject to ECL | 210,127 | 5,343 | 84 | 10 | 215,564 |
| Coverage ratio | 0.28% | 2.62% | 25.66% | 47.37% | 0.36% |
| Undrawn and contingent facilities not subject to ECL1 | | | | | 69,477 |
| Net undrawn and contingent facilities | | | | | 285,041 |
1. Commitments that can be unconditionally cancelled at any time without notice.
Of
-balance sheet commitments - undrawn and contingent facilities
| | | | Stage 3 | | |
| | Stage 1 | Stage 2 | | | |
| | | Collectively | | |
| | | assessed | | |
| | | | Individually | |
| | | | assessed | |
| | | | | Total |
| | | | | |
| The Company | $m | $m | $m | $m | $m |
| As at 30 September 2023 | | | | | |
| Strong | 167,251 | 1,065 | - | - | 168,316 |
| Satisfactory | 25,966 | 3,554 | - | - | 29,520 |
| Weak | 753 | 466 | - | - | 1,219 |
| Defaulted | - | - | 64 | 35 | 99 |
| Gross undrawn and contingent facilities subject to ECL | 193,970 | 5,085 | 64 | 35 | 199,154 |
| Allowance for ECL included in Other provisions (refer to Note 22) | (550) | (121) | (21) | (5) | (697) |
| Net undrawn and contingent facilities subject to ECL | 193,420 | 4,964 | 43 | 30 | 198,457 |
| Coverage ratio | 0.28% | 2.38% | 32.81% | 14.29% | 0.35% |
| Undrawn and contingent facilities not subject to ECL1 | | | | | 53,958 |
| Net undrawn and contingent facilities | | | | | 252,415 |
| | | | | | |
| As at 30 September 2022 | | | | | |
| Strong | 185,979 | 1,725 | - | - | 187,704 |
| Satisfactory | 15,496 | 2,306 | - | - | 17,802 |
| Weak | 711 | 463 | - | - | 1,174 |
| Defaulted | - | - | 97 | 13 | 110 |
| Gross undrawn and contingent facilities subject to ECL | 202,186 4,494 | 97 | 13 | 206,790 | |
| Allowance for ECL included in Other provisions (refer to Note 22) | (530) | (112) | (26) | (5) | (673) |
| Net undrawn and contingent facilities subject to ECL | 201,656 | 4,382 | 71 | 8 | 206,117 |
| Coverage ratio | 0.26% | 2.49% | 26.80% | 38.46% | 0.33% |
| Undrawn and contingent facilities not subject to ECL1 | | | | | 40,605 |
| Net undrawn and contingent facilities | | | | | 246,722 |
1. Commitments that can be unconditionally cancelled at any time without notice.
Investment securities - debt securities at amortised cost
| | | | Stage 3 | | |
| | Stage 1 | Stage 2 | | | |
| | | Collectively | | |
| | | assessed | | |
| | | | Individually | |
| | | | assessed | |
| | | | | Total |
| | | | | |
| Consolidated | $m | $m | $m | $m | $m |
| As at 30 September 2023 | | | | | |
| Strong | 6,117 | - | - | - | 6,117 |
| Satisfactory | 112 | - | - | - | 112 |
| Weak | 1,558 | - | - | - | 1,558 |
| Gross investment securities - debt securities at amortised cost | 7,787 | - | - | - | 7,787 |
| Allowance for ECL | (35) | - | - | - | (35) |
| Net investment securities - debt securities at amortised cost | 7,752 | - | - | - | 7,752 |
| Coverage ratio | 0.45% | - | - | - | 0.45% |
| | | | | | |
| As at 30 September 2022 | | | | | |
| Strong | 6,279 | - | - | - | 6,279 |
| Satisfactory | 113 | - | - | - | 113 |
| Weak | 1,589 | - | - | - | 1589 |
| Gross investment securities - debt securities at amortised cost | 7,981 | - | - | - | 7,981 |
| Allowance for ECL | (38) | - | - | - | (38) |
| Net investment securities - debt securities at amortised cost | 7,943 | - | - | - | 7,943 |
| Coverage ratio | 0.48% | - | - | - | 0.48% |
| | | | Stage 3 | | |
| | Stage 1 | Stage 2 | | | |
| | | Collectively | | |
| | | assessed | | |
| | | | Individually | |
| | | | assessed | |
| | | | | Total |
| | | | | |
| The Company | $m | $m | $m | $m | $m |
| As at 30 September 2023 | | | | | |
| Strong | 5,796 | - | - | - | 5,796 |
| Satisfactory | 97 | - | - | - | 97 |
| Weak | 44 | - | - | - | 44 |
| Gross investment securities - debt securities at amortised cost | 5,937 | - | - | - | 5,937 |
| Allowance for ECL | (1) | - | - | - | (1) |
| Net investment securities - debt securities at amortised cost | 5,936 | - | - | - | 5,936 |
| Coverage ratio | 0.02% | - | - | - | 0.02% |
| | | | | | |
| As at 30 September 2022 | | | | | |
| Strong | 6,032 | - | - | - | 6,032 |
| Satisfactory | 84 | - | - | - | 84 |
| Gross investment securities - debt securities at amortised cost | 6,116 | - | - | - | 6,116 |
| Allowance for ECL | (1) | - | - | - | (1) |
| Net investment securities - debt securities at amortised cost | 6,115 | - | - | - | 6,115 |
| Coverage ratio | 0.02% | - | - | - | 0.02% |
Investment securities - debt securities at FVOCI
| | | | Stage 3 | | |
| | Stage 1 | Stage 2 | | | |
| | | Collectively | | |
| | | assessed | | |
| | | | Individually | |
| | | | assessed | |
| | | | | Total |
| | | | | |
| Consolidated | $m | $m | $m | $m | $m |
| As at 30 September 2023 | | | | | |
| Strong | 88,271 | - | - | - | 88,271 |
| Satisfactory | - | - | - | | - |
| Investment securities - debt securities at FVOCI | 88,271 | - | - | - | 88,271 |
| Allowance for ECL recognised in Other comprehensive income | (15) | - | - | - | (15) |
| Coverage ratio | 0.02% | - | - | - | 0.02% |
| | | | | | |
| As at 30 September 2022 | | | | | |
| Strong | 76,668 | - | - | - | 76,668 |
| Satisfactory | 149 | - | - | - | 149 |
| Investment securities - debt securities at FVOCI | 76,817 | - | - | - | 76,817 |
| Allowance for ECL recognised in Other comprehensive income | (10) | - | - | - | (10) |
| Coverage ratio | 0.01% | - | - | - | 0.01% |
| | | | Stage 3 | | |
| | Stage 1 | Stage 2 | | | |
| | | Collectively | | |
| | | assessed | | |
| | | | Individually | |
| | | | assessed | |
| | | | | Total |
| | | | | |
| The Company | $m | $m | $m | $m | $m |
| As at 30 September 2023 | | | | | |
| Strong | 76,320 | - | - | - | 76,320 |
| Satisfactory | - | - | - | - | - |
| Investment securities - debt securities at FVOCI | 76,320 | - | - | - | 76,320 |
| Allowance for ECL recognised in Other comprehensive income | (12) | - | - | - | (12) |
| Coverage ratio | 0.02% | - | - | - | 0.02% |
| | | | | | |
| As at 30 September 2022 | | | | | |
| Strong | 65,257 | - | - | - | 65,257 |
| Satisfactory | - | - | - | - | - |
| Investment securities - debt securities at FVOCI | 65,257 | - | - | - | 65,257 |
| Allowance for ECL recognised in Other comprehensive income | (7) | - | - | - | (7) |
| Coverage ratio | 0.01% | - | - | - | 0.01% |
Other financial assets
| | Consolidated | | | |
| | | The Company | |
| | | | |
| | 2023 | 2022 | 2023 | 2022 |
| | $m | $m | $m | $m |
| Strong | | | | |
| 270,012 | 301,735 | 274,741 | 301,771 |
| Satisfactory1 | 2,579 | 2,164 | 2,022 | 1,707 |
| Weak | 604 | 945 | 280 | 351 |
| Defaulted | - | 7 | - | 7 |
| Total carrying amount | 273,195 | 304,851 | 277,043 | 303,836 |
1. Includes Investment Securities - debt securities at FVTPL of $nil (2022: $40 million) for the Group and $nil (2022: $nil) for the Company..
CONCENTRATIONS OF CREDIT RISK
Credit risk becomes concentrated when a number of customers are engaged in similar activities, have similar economic characteristics, or have similar
activities within the same geographic region \u2013 therefore, they may be similarly affected by changes in economic or other conditions. The Group
monitors its credit portfolio to manage risk concentration and rebalance the portfolio. The Group also applies single customer counterparty limits to
protect against unacceptably large exposures to one single customer.
Composition of financial instruments that give rise to credit risk by industry group are presented below:
| | Loans | | Other financial | | | | | |
| | | | | Off-balance sheet | | | |
| | | | | credit related | | | |
| | and advances | | assets | | commitments | | Total | |
| Consolidated | | | | | | | | |
| 2023 | 2022 | 2023 | 2022 | 2023 | 2022 | 2023 | 2022 |
| $m | $m | $m | $m | $m | $m | $m | $m |
| Agriculture, forestry, fishing and mining | 35,797 | 33,668 | 612 | 781 | 16,707 | 17,694 | 53,116 | 52,143 |
| Business services | 8,138 | 9,252 | 207 | 242 | 7,003 | 6,245 | 15,348 | 15,739 |
| Construction | 5,506 | 6,155 | 36 | 48 | 7,212 | 6,594 | 12,754 | 12,797 |
| Electricity, gas and water supply | 8,626 | 9,650 | 463 | 790 | 11,837 | 9,865 | 20,926 | 20,305 |
| Entertainment, leisure and tourism | 13,486 | 12,886 | 78 | 89 | 3,889 | 3,691 | 17,453 | 16,666 |
| Financial, investment and insurance | 77,454 | 75,118 | 278,218 | 305,148 | 62,409 | 58,075 | 418,081 | 438,341 |
| Government and official institutions | 8,300 | 7,280 | 80,544 | 71,139 | 1,075 | 1,592 | 89,919 | 80,011 |
| Manufacturing | 30,261 | 28,072 | 1,287 | 1,279 | 47,302 | 46,701 | 78,850 | 76,052 |
| Personal lending | 392,702 | 363,539 | 1,394 | 955 | 59,185 | 57,989 | 453,281 | 422,483 |
| Property services | 58,064 | 55,203 | 439 | 606 | 17,503 | 17,862 | 76,006 | 73,671 |
| Retail trade | 12,900 | 11,648 | 113 | 98 | 8,131 | 7,076 | 21,144 | 18,822 |
| Transport and storage | 12,110 | 12,311 | 369 | 327 | 9,215 | 8,423 | 21,694 | 21,061 |
| Wholesale trade | 12,538 | 15,215 | 660 | 1,235 | 25,783 | 28,042 | 38,981 | 44,492 |
| Other | 32,398 | 33,628 | 4,833 | 6,912 | 13,631 | 15,967 | 50,862 | 56,507 |
| Gross total | 708,280 | 673,625 | 369,253 | 389,649 | 290,882 | 285,816 | 1,368,415 | 1,349,090 |
| Allowance for ECL | (3,546) | (3,582) | (35) | (38) | (827) | (775) | (4,408) | (4,395) |
| Subtotal | 704,734 | 670,043 | 369,218 | 389,611 | 290,055 | 285,041 | 1,364,007 | 1,344,695 |
| Unearned income | (515) | (518) | - | - | - | - | (515) | (518) |
| Capitalised brokerage and other origination costs | 3,475 | 2,882 | - | - | - | - | 3,475 | 2,882 |
| Maximum exposure to credit risk | 707,694 | 672,407 | 369,218 | 389,611 | 290,055 | 285,041 | 1,366,967 | 1,347,059 |
Composition of financial instruments that give rise to credit risk by industry group are presented below:
| | Loans | | Other financial | | | | | |
| | | | | Off-balance sheet | | | |
| | | | | credit related | | | |
| | and advances | | assets | | commitments | | Total | |
T | | | | | | | | |
| he Company | | | | | | | | |
| 2023 | 2022 | 2023 | 2022 | 2023 | 2022 | 2023 | 2022 |
| $m | $m | $m | $m | $m | $m | $m | $m |
| Agriculture, forestry, fishing and mining | 20,622 | 19,065 | 586 | 751 | 15,198 | 16,304 | 36,406 | 36,120 |
| Business services | 7,165 | 8,382 | 183 | 202 | 6,237 | 5,517 | 13,585 | 14,101 |
| Construction | 4,545 | 5,004 | 30 | 42 | 6,038 | 5,376 | 10,613 | 10,422 |
| Electricity, gas and water supply | 7,956 | 8,820 | 302 | 533 | 10,409 | 8,526 | 18,667 | 17,879 |
| Entertainment, leisure and tourism | 11,721 | 11,267 | 67 | 58 | 3,390 | 3,192 | 15,178 | 14,517 |
| Financial, investment and insurance | 74,836 | 71,889 | 282,701 | 306,318 | 58,806 | 53,970 | 416,343 | 432,177 |
| Government and official institutions | 8,294 | 7,272 | 68,361 | 58,342 | 384 | 910 | 77,039 | 66,524 |
| Manufacturing | 26,394 | 24,645 | 935 | 664 | 40,027 | 39,279 | 67,356 | 64,588 |
| Personal lending | 303,801 | 282,095 | 1,347 | 912 | 47,961 | 47,596 | 353,109 | 330,603 |
| Property services | 44,903 | 42,592 | 368 | 531 | 15,794 | 15,640 | 61,065 | 58,763 |
| Retail trade | 11,099 | 10,048 | 85 | 74 | 7,342 | 6,279 | 18,526 | 16,401 |
| Transport and storage | 10,968 | 11,231 | 288 | 270 | 8,331 | 7,252 | 19,587 | 18,753 |
| Wholesale trade | 10,320 | 13,055 | 480 | 791 | 22,385 | 24,185 | 33,185 | 38,031 |
| Other | 20,623 | 22,884 | 3,567 | 5,721 | 10,810 | 13,369 | 35,000 | 41,974 |
| Gross total | 563,247 | 538,249 | 359,300 | 375,209 | 253,112 | 247,395 | 1,175,659 | 1,160,853 |
| Allowance for ECL | (2,795) | (2,925) | (1) | (1) | (697) | (673) | (3,493) | (3,599) |
| Subtotal | 560,452 | 535,324 | 359,299 | 375,208 | 252,415 | 246,722 | 1,172,166 | 1,157,254 |
| Unearned income | (483) | (480) | - | - | - | - | (483) | (480) |
| Capitalised brokerage and other origination | | | | | | | | |
| costs | 3,048 | 2,501 | - | - | - | - | 3,048 | 2,501 |
| Maximum exposure to credit risk | 563,017 | 537,345 | 359,299 | 375,208 | 252,415 | 246,722 | 1,174,731 | 1,159,275 |
COLLATERAL MANAGEMENT
We use collateral for on and off-balance sheet exposures to mitigate credit risk if a counterparty cannot meet its repayment obligations. Where there is
sufficient collateral, an expected credit loss is not recognised. This is largely the case for certain lending products, such as margin loans and reverse
repurchase agreements that are secured by the securities purchased using the lending. For some products, the collateral provided by customers is
fundamental to the product\u2019s structuring, so it is not strictly the secondary source of repayment - for example, lending secured by trade receivables is
typically repaid by the collection of those receivables. During the period there was no change in our collateral policies.
The nature of collateral or security held for the relevant classes of financial assets is as follows:
| Net loans and advances | |
| Loans - housing and | |
| personal | |
| Housing loans are secured by mortgage(s) over property and additional security may take the form of |
| guarantees and deposits. |
| Personal lending (including credit cards and overdrafts) is predominantly unsecured. If we take security, then |
| it is restricted to eligible vehicles, motor homes and other assets. |
| Loans - business | Business loans may be secured, partially secured or unsecured. Typically, we take security by way of a |
| mortgage over property and/or a charge over the business or other assets. |
| If appropriate, we may take other security to mitigate the credit risk, such as guarantees, standby letters of |
| credit or derivative protection. |
| Other financial assets |
| Trading assets, Investment |
| securities, Derivatives and |
| Other financial assets |
| For trading assets, we do not seek collateral directly from the issuer or counterparty. However, the collateral |
| may be implicit in the terms of the instrument (for example, with an asset-backed security). The terms of |
| debt securities may include collateralisation. |
| For derivatives, we typically terminate all contracts with the counterparty and settle on a net basis at market |
| levels current at the time of a counterparty default under International Swaps and Derivatives Association |
| (ISDA) Master Agreements. |
| Our preferred practice is to use a Credit Support Annex (CSA) to the ISDA so that open derivative positions |
| with the counterparty are aggregated and cash collateral (or other forms of eligible collateral) is exchanged |
| daily. The collateral is provided by the counterparty when their position is out of the money (or provided to |
| the counterparty by ANZ when our position is out of the money). |
| Off-balance sheet positions | |
| Undrawn and contingent | |
| facilities | |
| Collateral for off-balance sheet positions is mainly held against undrawn facilities, and they are typically |
| performance bonds or guarantees. Undrawn facilities that are secured include housing loans secured by |
| mortgages over residential property and business lending secured by commercial real estate and/or charges |
| over business assets. |
The table below shows the estimated value of collateral we hold and the net unsecured portion of credit exposures:
| | Maximum exposure to credit risk | | Total value of collateral | | | |
| | | | | Unsecured portion of | |
| | | | | credit exposure | |
| | 2023 | 2022 | 2023 | 2022 | 2023 | 2022 |
| Consolidated | $m | $m | $m | $m | $m | $m |
| Net loans and advances | 707,694 | 672,407 | 569,283 | 531,815 | 138,411 | 140,592 |
| Other financial assets | 369,218 | 389,611 | 38,612 | 24,758 | 330,606 | 364,853 |
| Off-balance sheet positions | 290,055 | 285,041 | 65,723 | 60,544 | 224,332 | 224,497 |
| Total | 1,366,967 | 1,347,059 | 673,618 | 617,117 | 693,349 | 729,942 |
| | Maximum exposure to credit risk |
| | | Total value of collateral |
| | | |
| | | | | Unsecured portion of | |
| | | | | | credit exposure | |
| | 2023 | 2022 | 2023 | 2022 | 2023 | 2022 |
| The Company | $m | $m | $m | $m | $m | $m |
| Net loans and advances | 563,017 | 537,345 | 436,544 | 407,610 | 126,473 | 129,735 |
| Other financial assets | 359,299 | 375,208 | 35,542 | 19,492 | 323,757 | 355,716 |
| Off-balance sheet positions | 252,415 | 246,722 | 50,880 | 38,618 | 201,535 | 208,104 |
| Total | 1,174,731 | 1,159,275 | 522,966 | 465,720 | 651,765 | 693,555 |
MARKET RISK
MARKET RISK OVERVIEW, MANAGEMENT AND CONTROL RESPONSIBILITIES
Market risk stems from the Group\u2019s trading and balance sheet management activities and the impact of changes and correlations between interest
rates, foreign exchange rates, credit spreads, commodities, equities and the volatility within these asset classes.
The BRC delegates responsibility for day-to-day management of both market risks and compliance with market risk policies to the Credit and Market
Risk Committee (CMRC) and the Group Asset and Liability Committee (GALCO).
Within overall strategies and policies established by the BRC, business units and risk management have joint responsibility for the control of market
risk at the Group level. The Market Risk team (a specialist risk management unit independent of the business) allocates market risk limits at various
levels and monitors and reports on them daily. This detailed framework allocates individual limits to manage and control exposures using risk factors
and profit and loss limits.
Management, measurement and reporting of market risk is undertaken in two broad categories:
| Traded Market Risk | Non-Traded Market Risk |
| | Risk of loss from changes in the value of financial instruments due |
| to movements in price factors for both physical and derivative |
| trading positions. Principal risk categories monitored are: |
| 1. | Currency risk \u2013 potential loss arising from changes in foreign |
| exchange rates or their implied volatilities. | |
| 2. | Interest rate risk \u2013 potential loss from changes in market interest |
| rates or their implied volatilities. | |
| 3. | Credit spread risk \u2013 potential loss arising from a movement in |
| margin or spread relative to a benchmark. | |
| 4. | Commodity risk \u2013 potential loss arising from changes in |
| commodity prices or their implied volatilities. | |
| 5. | Equity risk \u2013 potential loss arising from changes in equity prices. |
| Risk of loss associated with the management of non-traded interest rate risk, | |
| liquidity risk and foreign exchange exposures. This includes interest rate risk | |
| in the banking book. This risk of loss arises from adverse changes in the | |
| overall and relative level of interest rates for different tenors, differences in | |
| the actual versus expected net interest margin, and the potential valuation | |
| risk associated with embedded options in financial instruments and bank | |
| products. | |
MEASUREMENT OF MARKET RISK
We primarily manage and control market risk using Value at Risk (VaR), sensitivity analysis and stress testing.
VaR measures the Group\u2019s possible daily loss based on historical market movements. The Group\u2019s VaR approach for both traded and non-traded risk is
historical simulation. We use historical changes in market rates, prices and volatilities over a 500 business day window using a one-day holding period.
Back testing is used to ensure our VaR models remain accurate.
ANZ measures VaR at a 99% confidence interval which means there is a 99% chance that a loss will not exceed the VaR for the relevant holding period.
TRADED AND NON-TRADED MARKET RISK
Traded market risk
The table below shows the traded market risk VaR on a diversified basis by risk categories:
| | 2022 | | | | 2023 | | | |
| Consolidated | | | | | | | | |
| As at | | | | | | | |
| | High for | | | | | | |
| | | year | | | | | | |
| | | Low for | | | | | |
| | | | year | | | | | |
| | | | Average | | | | |
| | | | for year | As at | | | |
| | | | | | High for | | |
| | | | | | year | | |
| | | | | | | Low for | |
| | | | | | | year | |
| | | | | | | | Average |
| | | | | | | | | for year |
| $m | $m | $m | $m | $m | $m | $m | $m |
| Traded value at risk 99% confidence | | | | | | | | |
| Foreign exchange | 2.8 | 6.2 | 1.6 | 3.0 | 1.8 | 4.8 | 1.1 | 2.4 |
| Interest rate | 6.7 | 18.3 | 5.1 | 8.5 | 7.9 | 22.7 | 5.0 | 9.5 |
| Credit | 5.9 | 7.7 | 2.5 | 4.5 | 2.6 | 11.8 | 1.6 | 4.9 |
| Commodities | 4.0 | 6.6 | 1.8 | 3.0 | 4.3 | 7.0 | 1.4 | 2.9 |
| Equity | - | - | - | - | - | - | - | - |
| Diversification benefit1 | (9.7) | n/a | n/a | (8.1) | (7.2) | n/a | n/a | (7.1) |
| Total VaR | 9.7 | 18.2 | 7.2 | 10.9 | 9.4 | 26.9 | 5.6 | 12.6 |
| | 2023 | | | | 2022 | | | |
| The Company | | | | | | | | |
| As at | | | | | | | |
| | High for | | | | | | |
| | year | | | | | | |
| | | Low for | | | | | |
| | | year | | | | | |
| | | | Average | | | | |
| | | | for year | As at | | | |
| | | | | | High for | | |
| | | | | | year | | |
| | | | | | | Low for | |
| | | | | | | year | |
| | | | | | | | Average |
| | | | | | | | for year |
| $m | $m | $m | $m | $m | $m | $m | $m |
| Traded value at risk 99% confidence | | | | | | | | |
| Foreign exchange | 2.6 | 6.0 | 1.5 | 2.8 | 2.0 | 5.1 | 0.9 | 2.4 |
| Interest rate | 6.3 | 15.5 | 4.8 | 8.0 | 6.7 | 18.6 | 4.9 | 8.8 |
| Credit | 5.6 | 7.1 | 1.9 | 4.3 | 2.0 | 11.9 | 1.3 | 4.7 |
| Commodity | 2.1 | 4.5 | 1.1 | 2.7 | 1.4 | 7.2 | 0.9 | 2.8 |
| Equity | - | - | - | - | - | - | - | - |
| Diversification benefit1 | (8.6) | n/a | n/a | (7.8) | (4.2) | n/a | n/a | (7.4) |
| Total VaR | 8.0 | 16.2 | 6.7 | 10.0 | 7.9 | 23.4 | 5.4 | 11.3 |
1. The diversification benefit reflects risks that offset across categories. The high and low VaR figures reported for each factor did not necessarily occur on the same day as the high and low VaR reported for the
Group as a whole. Consequently, a diversification benefit for high and low would not be meaningful and is therefore omitted from the table.
Non-traded market risk
Balance sheet risk management
The principal objectives of balance sheet risk management are to maintain acceptable levels of interest rate and liquidity risk to mitigate the negative
impact of movements in interest rates on the earnings and market value of the Group\u2019s banking book, while ensuring the Group maintains sufficient
liquidity to meet its obligations as they fall due.
Interest rate risk management
Non-traded interest rate risk relates to the potential adverse impact of changes in market interest rates on the Group\u2019s future Net interest income. This
risk arises from two principal sources, namely mismatches between the repricing dates of interest bearing assets and liabilities; and the investment of
capital and other non-interest bearing liabilities and assets. Interest rate risk is reported using VaR and scenario analysis (based on the impact of a 1%
rate shock). The table below shows VaR figures for non-traded interest rate risk for the combined Group as well as Australia, New Zealand and Rest of
World geographies which are calculated separately.
| | 2023 | | | | 2022 | | | |
| Consolidated | | | | | | | | |
| As at | | | | | | | |
| | High for | | | | | | |
| | year | | | | | | |
| | | Low for | | | | | |
| | | year | | | | | |
| | | | Average | | | | |
| | | | for year | As at | | | |
| | | | | | High for | | |
| | | | | | year | | |
| | | | | | | Low for | |
| | | | | | | year | |
| | | | | | | | Average |
| | | | | | | | for year |
| $m | $m | $m | $m | $m | $m | $m | $m |
| Non-traded value at risk 99% confidence | | | | | | | | |
| Australia | 81.2 | 93.2 | 72.0 | 82.2 | 78.5 | 93.4 | 63.0 | 76.1 |
| New Zealand | 35.3 | 35.3 | 26.1 | 31.1 | 25.4 | 27.1 | 20.2 | 23.9 |
| Rest of World | 32.2 | 32.8 | 23.2 | 27.9 | 21.7 | 38.0 | 16.8 | 25.8 |
| Diversification benefit1 | (52.6) | n/a | n/a | (45.6) | (38.1) | n/a | n/a | (33.7) |
| Total VaR | 96.1 | 101.5 | 86.4 | 95.6 | 87.5 | 104.9 | 66.8 | 92.1 |
| | 2023 | | | | 2022 | | | |
T | | | | | | | | |
| he Company | | | | | | | | |
| As at | | | | | | | |
| | High for | | | | | | |
| | year | | | | | | |
| | | Low for | | | | | |
| | | year | | | | | |
| | | | Average | | | | |
| | | | for year | As at | | | |
| | | | | | High for | | |
| | | | | | year | | |
| | | | | | | Low for | |
| | | | | | | year | |
| | | | | | | | Average |
| | | | | | | | for year |
| $m | $m | $m | $m | $m | $m | $m | $m |
| Non-traded value at risk 99% confidence | | | | | | | | |
| Australia | 81.2 | 93.2 | 72.0 | 82.2 | 78.5 | 93.4 | 63.0 | 76.1 |
| New Zealand | - | 0.1 | - | - | 0.0 | 0.1 | 0.0 | 0.0 |
| Rest of World | 34.0 | 34.5 | 23.7 | 28.4 | 22.1 | 37.7 | 16.7 | 25.6 |
| Diversification benefit1 | (30.5) | n/a | n/a | (26.6) | (17.1) | n/a | n/a | (20.2) |
| Total VaR | 84.7 | 92.4 | 76.4 | 84.0 | 83.5 | 94.5 | 62.9 | 81.5 |
1. The diversification benefit reflects risks that offset across categories. The high and low VaR figures reported for each factor did not necessarily occur on the same day as the high and low VaR reported for the
Group as a whole. Consequently, a diversification benefit for high and low would not be meaningful and is therefore omitted from the table.
We undertake scenario analysis to stress test the impact of extreme events on the Group\u2019s market risk exposures. We model a 1% overnight parallel
positive shift in the yield curve to determine the potential impact on our Net interest income over the next 12 months. This is a standard risk measure
which assumes the parallel shift is reflected in all wholesale and customer rates.
The table below shows the outcome of this risk measure for the current and previous financial years, expressed as a percentage of reported Net
interest income.
| | Consolidated | | | The Company |
| | 2023 | 2022 | 2023 | 2022 |
| Impact of 1% rate shock on the next 12 months' net interest income | | | | |
| As at period end | 0.96% | 1.29% | 0.73% | 0.90% |
| Maximum exposure | 1.17% | 2.08% | 0.90% | 1.65% |
| Minimum exposure | 0.38% | 1.15% | 0.02% | 0.71% |
| Average exposure (in absolute terms) | 0.80% | 1.56% | 0.56% | 1.11% |
EQUITY SECURITIES DESIGNATED AT FVOCI
Our investment securities contain equity investment holdings which predominantly comprises Bank of Tianjin. The market risk impact on these equity
investments is not captured by the Group\u2019s VaR processes for traded and non-traded market risks. Therefore, the Group regularly reviews the
valuations of the investments within the portfolio and assesses whether the investments are appropriately measured based on the recognition and
measurement policies set out in Note 11 Investment Securities.
FOREIGN CURRENCY RISK \u2013 STRUCTURAL EXPOSURES
Our investment of capital in foreign operations - for example, branches, subsidiaries or associates with functional currencies other than the Australian
Dollar - exposes the Group to the risk of changes in foreign exchange rates. Variations in the value of these foreign operations arising as a result of
exchange differences are reflected in the foreign currency translation reserve in equity. Where considered appropriate, the Group enters into hedges
of the foreign exchange exposures from its foreign operations.
Similarly, the Group may enter into economic hedges against larger foreign exchange denominated revenue streams (primarily New Zealand Dollar,
US Dollar and US Dollar correlated). The primary objective of hedging is to ensure that, if practical, the effect of changes in foreign exchange rates on
the consolidated capital ratios are minimised.
LIQUIDITY AND FUNDING RISK
LIQUIDITY RISK OVERVIEW, MANAGEMENT AND CONTROL RESPONSIBILITIES
Liquidity risk is the risk that the Group is either:
\u2022 unable to meet its payment obligations (including repaying depositors or maturing wholesale debt) when they fall due; or
\u2022 does not have the appropriate amount, tenor and composition of funding and liquidity to fund increases in its assets.
Management of liquidity and funding risks are overseen by GALCO. The Group\u2019s liquidity and funding risks are governed by a set of principles
approved by the BRC and include:
\u2022 maintaining the ability to meet all payment obligations in the immediate term;
\u2022 ensuring that the Group has the ability to meet \u2018survival horizons\u2019 under a range of ANZ specific, and general market, liquidity stress scenarios, at a
country and Group-wide level, to meet cash flow obligations over the short to medium term;
\u2022 maintaining strength in the Group\u2019s balance sheet structure to ensure long term resilience in the liquidity and funding risk profile;
\u2022 ensuring the liquidity management framework is compatible with local regulatory requirements;
\u2022 preparing daily liquidity reports and scenario analysis to quantify the Group\u2019s positions;
\u2022 targeting a diversified funding base to avoid undue concentrations by investor type, maturity, market source and currency;
\u2022 holding a portfolio of high quality liquid assets to protect against adverse funding conditions and to support day-to-day operations; and
\u2022 establishing detailed contingency plans to cover different liquidity crisis events.
Following the Restructure on 3 January 2023, the Group has operated under a non-operating holding company structure whereby:
\u2022 ANZBGL\u2019s liquidity risk management framework remains unchanged and continues to operate its own liquidity and funding program, governance
frameworks and reporting regime reflecting its authorised deposit-taking institution (ADI) operations;
\u2022 ANZGHL (parent entity) has no material liquidity risk given the structure and nature of the balance sheet; and
\u2022 ANZ Non-Bank Group is not expected to have separate funding arrangements and will rely on ANZGHL for funding.
A separate liquidity policy has been established for ANZGHL and ANZ Bank Group to reflect the differing nature of liquidity risk inherent in each
business model. ANZGHL will ensure that the parent entity and ANZ Non-Bank Group holds sufficient cash reserves to meet operating and financing
requirements.
KEY AREAS OF MEASUREMENT FOR LIQUIDITY RISK
Scenario modelling of funding sources
Group\u2019s liquidity risk appetite is defined by a range of regulatory and internal liquidity metrics mandated by the ANZBGL Board. The metrics cover a
range of scenarios of varying duration and level of severity.
The objective of this framework is to:
\u2022 Provide protection against shorter term extreme market dislocation and stress.
\u2022 Maintain structural strength in the balance sheet by ensuring that an appropriate amount of longer-term assets are funded with longer-term
funding.
\u2022 Ensure that no undue timing concentrations exist in the Group\u2019s funding profile.
Key components of this framework are the Liquidity Coverage Ratio (LCR), which is a severe short term liquidity stress scenario and Net Stable Funding
Ratio (NSFR) a longer term structural liquidity measure, both of which are mandated by banking regulators including APRA.
Liquid assets
Group holds a portfolio of high quality (unencumbered) liquid assets to protect Group\u2019s liquidity position in a severely stressed environment and to
meet regulatory requirements. High quality liquid assets comprise three categories consistent with Basel III LCR requirements:
\u2022 Highest-quality liquid assets - cash and highest credit quality government, central bank or public sector securities eligible for repurchase with
central banks to provide same-day liquidity.
\u2022 High-quality liquid assets - 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.
\u2022 Alternative liquid assets (ALA) - eligible securities that the RBNZ will accept in its domestic market operations and asset qualifying as collateral for
the CLF.
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 ANZBGL Board.
LIQUIDITY RISK OUTCOMES1
Liquidity Coverage Ratio - ANZBGL\u2019s Liquidity Coverage Ratio (LCR) averaged 130% for 2023, (2022: 131%) and above the regulatory minimum of
100%.
Net Stable Funding Ratio - ANZBGL\u2019s Net Stable Funding Ratio (NSFR) as at 30 September 2023 was 116% (2022: 119%), above the regulatory
minimum of 100%.
1. This information is not within the scope of the external audit of the Group Financial Report by the Group\u2019s external auditor, KPMG. The Liquidity Coverage Ratio and Net Stable Funding Ratio are non-IFRS
disclosures and are disclosed as part of the Group's
APS 330 Public Disclosure
which is subject to specific review procedures in accordance with the
Australian Standard on Related Services (ASRS) 4400
Agreed upon Procedures Engagements to Report Factual Findings.
Liquidity crisis contingency planning
Group maintains APRA-endorsed liquidity crisis contingency plans for analysing and responding to a liquidity threatening event at a country and
Group-wide level. Key liquidity contingency crisis planning requirements and guidelines include:
| Ongoing business management | Early signs/ mild stress | Severe stress |
| \u2022 establish crisis/severity levels | | |
| \u2022 liquidity limits | | |
| \u2022 early warning indicators | | |
| \u2022 monitoring and review | |
| \u2022 management actions not requiring | |
| business rationalisation | |
| | \u2022 activate contingency funding plans |
| | \u2022 management actions for altering asset and liability |
| | behaviour |
| Assigned responsibility for internal and external communications and the appropriate timing to communicate | | |
Since the precise nature of any stress event cannot be known in advance, we design the plans to be flexible to the nature and severity of the stress
event with multiple variables able to be accommodated in any plan.
Group funding
Group monitors the composition and stability of its funding so that it remains within the Group\u2019s funding risk appetite. This approach ensures that an
appropriate proportion of the Group\u2019s assets are funded by stable funding sources, including customer deposits; longer-dated wholesale funding
(with a remaining term exceeding one year); and equity.
| Funding plans prepared | Considerations in preparing funding plans |
| \u2022 3 year strategic plan prepared annually | |
| \u2022 annual funding plan as part of the Group\u2019s planning | |
| process | |
| \u2022 forecasting in light of actual results as a calibration to the | |
| annual plan | |
| \u2022 customer balance sheet growth |
| \u2022 changes in wholesale funding including: targeted funding volumes; markets; |
| investors; tenors; and currencies for senior, secured, subordinated, hybrid |
| transactions and market conditions |
RBA Term Funding Facility
As an additional source of funding, in March 2020, the RBA announced a Term Funding Facility (TFF) for the banking system to support lending to
Australian businesses. The TFF is a three-year secured funding facility to ADIs at a fixed rate of 0.25% for drawdowns up to 4 November 2020, and
reduced to 0.10% for new drawdowns from 4 November 2020 onwards. The TFF was closed to drawdowns on 30 June 2021.
As at 30 September 2023, $8.1 billion remains drawn under the RBA\u2019s TFF (2022: $20.1 billion).
RBNZ Funding for Lending Programme and Term Lending Facility
Between May 2020 and July 2021, the RBNZ made funds available under a Term Lending Facility (TLF) to promote lending to businesses. The TLF is a
five-year secured funding facility for New Zealand banks at a fixed rate of 0.25%.
In November 2020 the RBNZ announced a Funding for Lending Programme (FLP) which aimed to lower the cost of borrowing for New Zealand
businesses and households. The FLP is a three-year secured funding facility for New Zealand banks at a floating rate of the New Zealand Official Cash
Rate (OCR). New Zealand banks were able to obtain initial funding of up to 4% of their lending to New Zealand resident households, non-financial
businesses and non-profit institutions serving households as at 31 October 2020 (eligible loans). The initial allocation closed on 6 June 2022. An
additional allocation of up to 2% of eligible loans was available, subject to certain conditions until 6 December 2022.
As at 30 September 2023, ANZ Bank New Zealand had drawn $0.3 billion under the TLF (2022: $0.3 billion) and $3.2 billion under the FLP (2022: $2.3
billion).
RESIDUAL CONTRACTUAL MATURITY ANALYSIS OF THE GROUP\u2019S LIABILITIES
The tables below provide residual contractual maturity analysis of financial liabilities as at 30 September within relevant maturity groupings. All
outstanding debt issuance and subordinated debt is profiled on the earliest date on which the Group may be required to pay. All at-call liabilities are
reported in the \u2018Less than 3 months\u2019 category unless there is a longer minimum notice period. The amounts represent principal and interest cash flows
and therefore may differ from equivalent amounts reported on balance sheet.
It should be noted that this is not how the Group manages its liquidity risk. The management of this risk is detailed on page 155.
| Less than | | | | |
| 3 months | | | | |
| | 3 to 12 | | | |
| | months | | | |
| | | | 1 to 5 | | |
| | | years | | |
| | | | After | |
| | | | 5 years | |
| | | | | Total |
| | | | | |
| | $m | $m | $m | $m | $m |
| As at 30 September 2023 | | | | | |
| Settlement balances owed by ANZ | 19,267 | - | - | - | 19,267 |
| Collateral received | 10,382 | - | - | - | 10,382 |
| Deposits and other borrowings | 674,762 | 137,488 | 9,762 | 241 | 822,253 |
| Liability for acceptances | 646 | - | - | - | 646 |
| Debt issuances1 | 4,738 | 23,908 | 88,270 | 16,017 | 132,933 |
| Derivative liabilities (excluding those held for balance sheet management)2 | 48,150 | - | - | - | 48,150 |
| Lease liabilities | 100 | 264 | 872 | 743 | 1,979 |
| Derivative assets and liabilities (balance sheet management)3 | | | | | |
| - Funding: | | | | | |
| Receive leg | (29,459) | (40,907) | (90,906) | (14,001) | (175,273) |
| Pay leg | 28,852 | 41,385 | 90,230 | 13,986 | 174,453 |
| - Other balance sheet management: | | | | | |
| Receive leg | (142,289) | (44,586) | (35,720) | (19,866) | (242,461) |
| Pay leg | 138,899 | 42,867 | 34,198 | 19,872 | 235,836 |
| As at 30 September 2022 | | | | | |
| Settlement balances owed by ANZ | 13,766 | - | - | - | 13,766 |
| Collateral received | 16,230 | - | - | - | 16,230 |
| Deposits and other borrowings | 667,568 | 117,166 | 15,960 | 160 | 800,854 |
| Liability for acceptances | 352 | - | - | - | 352 |
| Debt issuances1 | 7,591 | 22,315 | 60,716 | 13,667 | 104,289 |
| Derivative liabilities (excluding those held for balance sheet management) | 2 71,073 - - - 71,073 | | | | |
| Lease liabilities | 81 210 654 168 1,113 | | | | |
| Derivative assets and liabilities (balance sheet management)3 | | | | | |
| - Funding: | | | | | |
| Receive leg | (33,155) | (49,030) | (66,661) | (12,851) | (161,697) |
| Pay leg | 30,845 | 49,191 | 68,211 | 12,913 | 161,160 |
| - Other balance sheet management: | | | | | |
| Receive leg | (125,122) | (44,835) | (29,188) | (10,063) | (209,208) |
| Pay leg | 120,959 | 44,126 | 31,026 | 15,170 | 211,281 |
1. Callable wholesale debt instruments have been included at their next call date. Balance includes subordinated debt instruments that may be settled in cash or in equity, at the option of the Group and
subordinated debt issued by ANZ New Zealand which constitutes Tier 2 capital under RBNZ requirements but does not qualify as the APRA Tier 2 requirements.
2. The full mark-to-market after any adjustments for Settle to Market of derivative liabilities (excluding those held for balance sheet management) is included in the \u2018Less than 3 months\u2019 category.
3. Includes derivatives designated into hedging relationships of $272 million (2022: $356 million) and $9,060 million (2022: $13,720 million) categorised as held for trading but form part of the Group\u2019s balance
sheet managed activities.
At 30 September 2023, $240,711 million (2022: $236,051 million) of the Group\u2019s undrawn facilities and $50,171 million (2022: $49,765 million) of its
issued guarantees mature in less than 1 year, based on the earliest date on which the Group may be required to pay.
| Less than | | | | |
| 3 months | | | | |
| | 3 to 12 | | | |
| | months | | | |
| | | 1 to 5 | | |
| | | years | | |
| | | | After | |
| | | | 5 years | Total |
| The Company | $m | $m | $m | $m | $m |
| As at 30 September 2023 | | | | | |
| Settlement balances owed by ANZ | 16,574 | - | - | - | 16,574 |
| Collateral received | 9,452 | - | - | - | 9,452 |
| Deposits and other borrowings | 567,239 | 109,010 | 3,718 | 232 | 680,199 |
| Liability for acceptances | 391 | - | - | - | 391 |
| Debt issuances1 | 4,321 | 20,669 | 75,192 | 13,297 | 113,479 |
| Derivative liabilities (excluding those held for balance sheet management)2 | 53,111 | - | - | - | 53,111 |
| Lease liabilities | 80 | 207 | 715 | 725 | 1,727 |
| Derivative assets and liabilities (balance sheet management)3 | | | | | |
| - Funding: | | | | | |
| Receive leg | (26,321) | (31,549) | (70,627) | (10,871) | (139,368) |
| Pay leg | 25,602 | 31,952 | 69,816 | 10,860 | 138,230 |
| - Other balance sheet management: | | | | | |
| Receive leg | (136,668) | (38,700) | (27,047) | (18,876) | (221,291) |
| Pay leg | 133,496 | 37,540 | 26,247 | 18,914 | 216,197 |
| As at 30 September 2022 | | | | | |
| Settlement balances owed by ANZ | 10,224 | - | - | - | 10,224 |
| Collateral received | 14,425 | - | - | - | 14,425 |
| Deposits and other borrowings | 564,147 | 93,197 | 10,639 | 157 | 668,140 |
| Liability for acceptances | 144 | - | - | - | 144 |
| Debt issuances1 | 7,648 | 18,951 | 48,323 | 9,970 | 84,892 |
| Derivative liabilities (excluding those held for balance sheet management)2 | 75,810 | - | - | - | 75,810 |
| Lease liabilities | 76 | 202 | 744 | 826 | 1,848 |
| Derivative assets and liabilities (balance sheet management)3 | | | | | |
| - Funding: | | | | | |
| Receive leg | (29,397) | (39,350) | (46,997) | (8,857) | (124,601) |
| Pay leg | 27,413 | 40,237 | 48,281 | 9,064 | 124,995 |
| - Other balance sheet management: | | | | | |
| Receive leg | (121,112) | (40,061) | (21,417) | (9,498) | (192,088) |
| Pay leg | 116,992 | 39,921 | 24,081 | 14,666 | 195,660 |
1. Callable wholesale debt instruments have been included at their next call date. Balance includes subordinated debt instruments that may be settled in cash or in equity, at the option of the Company.
2. The full mark-to-market after any adjustments for Settle to Market of derivative liabilities (excluding those held for balance sheet management) is included in the \u2018Less than 3 months\u2019 category.
3. Includes derivatives designated into hedging relationships of $255 million (2022: $300 million) and $4,145 million (2022: $8,390 million) categorised as held for trading but form part of the Company\u2019s
balance sheet managed activities.
At 30 September 2023, $206,405 million (2022: $201,204 million) of the Company\u2019s undrawn facilities and $46,707 million (2022: $46,191 million) of its
issued guarantees mature in less than 1 year, based on the earliest date on which the Company may be required to pay.
18. FAIR VALUE OF FINANCIAL ASSETS AND FINANCIAL LIABILITIES
CLASSIFICATION OF FINANCIAL ASSETS AND FINANCIAL LIABILITIES
The Group recognises and measures financial instruments at either fair value or amortised cost, with a significant number of financial instruments on
the balance sheet at fair value.
Fair value is the best estimate of the price that would be received to sell an asset, or paid to transfer a liability, in an orderly transaction between
market participants at the measurement date.
The following tables set out the classification of financial asset and liabilities according to their measurement bases together with their carrying
amounts as recognised on the balance sheet.
| | 2023 | | | 2022 | | |
| | | | | | | | |
| | At | | | | | |
| | amortised | | | | | |
| | cost | | | | | |
| | | At | | | | |
| | | fair | | | | |
| | | value | | | | |
| | | | Total | | | |
| | | | | At | | |
| | | | | amortised | | |
| | | | | cost | | |
| | | | | | At | |
| | | | | | fair | |
| | | | | | value | |
| | | | | | | Total |
| Consolidated | Note | $m | $m | $m | $m | $m | $m |
| Financial assets | | | | | | | |
| Cash and cash equivalents1 | 8 | | | | | | |
| | 140,588 | 27,566 | 168,154 | 168,132 | - | 168,132 |
| Settlement balances owed to ANZ | | 9,349 | - | 9,349 | 4,762 | - | 4,762 |
| Collateral paid | | 8,558 | - | 8,558 | 12,700 | - | 12,700 |
| Trading assets | 9 | - | 37,004 | 37,004 | - | 35,237 | 35,237 |
| Derivative financial instruments | 10 | - | 60,406 | 60,406 | - | 90,174 | 90,174 |
| Investment securities | 11 | 7,752 | 89,217 | 96,969 | 7,943 | 78,210 | 86,153 |
| Net loans and advances1 | 12 | | | | | | |
| | 685,806 | | 21,888 | 707,694 | 667,732 4,675 | 672,407 |
| Regulatory deposits | | 646 | - | 646 | 632 | - | 632 |
| Other financial assets | | 4,378 | - | 4,378 | 2,943 | - | 2,943 |
| Total | | 857,077 | 236,081 | 1,093,158 | 864,844 | 208,296 | 1,073,140 |
| Financial liabilities | | | | | | | |
| Settlement balances owed by ANZ | | 19,267 | - | 19,267 | 13,766 | - | 13,766 |
| Collateral received | | 10,382 | - | 10,382 | 16,230 | - | 16,230 |
| Deposits and other borrowings1 | 14 | | | | | | |
| | 781,314 | 33,889 | 815,203 | 794,621 | 2,660 | 797,281 |
| Derivative financial instruments | 10 | - | 57,482 | 57,482 | - | 85,149 | 85,149 |
| Payables and other liabilities | 15 | 10,665 | 5,267 | 15,932 | 6,596 | 3,239 | 9,835 |
| Debt issuances | 16 | 114,678 | 1,336 | 116,014 | 92,623 | 1,111 | 93,734 |
| Total | | 936,306 | 97,974 | 1,034,280 | 923,836 | 92,159 | 1,015,995 |
1. During 2023, the Group commenced the management of repurchase agreements and reverse repurchase agreements on a fair value basis within the trading book in its Markets business. This resulted in the
associated repurchase and reverse repurchase agreements being recognised and measured at FVTPL.
18. FAIR VALUE OF FINANCIAL ASSETS AND FINANCIAL LIABILITIES
(continued)
CLASSIFICATION OF FINANCIAL ASSETS AND FINANCIAL LIABILITIES (continued)
| | | 2023 | | | 2022 | |
| | | | | | | | |
| | At | | | | | |
| | amortised | | | | | |
| | cost | | | | | |
| | | At | | | | |
| | | fair | | | | |
| | | value | | | | |
| | | | Total | | | |
| | | | | At | | |
| | | | | amortised | | |
| | | | | cost | | |
| | | | | | At | |
| | | | | | fair | |
| | | | | | value | |
| | | | | | | Total |
| The Company | Note | $m | $m | $m | $m | $m | $m |
| Financial assets | | | | | | | |
| Cash and cash equivalents1 | 8 | | | | | | |
| | 127,309 | 27,099 | 154,408 | 155,483 | - | 155,483 |
| Settlement balances owed to ANZ | | 8,935 | - | 8,935 | 4,024 | - | 4,024 |
| Collateral paid | | 7,717 | - | 7,717 | 11,368 | - | 11,368 |
| Trading assets | 9 | - | 30,693 | 30,693 | - | 28,073 | 28,073 |
| Derivative financial instruments | 10 | - | 59,989 | 59,989 | - | 88,056 | 88,056 |
| Investment securities | 11 | 5,936 | 77,265 | 83,201 | 6,115 | 66,284 | 72,399 |
| Net loans and advances1 | 12 | | | | | | |
| | 541,777 | 21,240 | 563,017 | 533,082 | 4,263 | 537,345 |
| Regulatory deposits | | 284 | - | 284 | 249 | - | 249 |
| Due from controlled entities | | 24,173 | 1,894 | 26,067 | 20,360 | 2,500 | 22,860 |
| Other financial assets | | 3,024 | - | 3,024 | 1,882 | - | 1,882 |
| Total | | 719,155 | 218,180 | 937,335 | 732,563 | 189,176 | 921,739 |
| Financial liabilities | | | | | | | |
| Settlement balances owed by ANZ | | 16,574 | - | 16,574 | 10,224 | - | 10,224 |
| Collateral received | | 9,452 | - | 9,452 | 14,425 | - | 14,425 |
| Deposits and other borrowings1 | 14 | | | | | | |
| | 643,868 | 31,207 | 675,075 | 665,567 | 40 | 665,607 |
| Derivative financial instruments | 10 | - | 57,511 | 57,511 | - | 84,500 | 84,500 |
| Due to controlled entities | | 26,737 | 157 | 26,894 | 25,305 | - | 25,305 |
| Payables and other liabilities | 15 | 8,357 | 4,922 | 13,279 | 5,705 | 2,857 | 8,562 |
| Debt issuances | 16 | 95,881 | 2,332 | 98,213 | 72,757 | 3,071 | 75,828 |
| Total | | 800,869 | 96,129 | 896,998 | 793,983 | 90,468 | 884,451 |
1. During 2023, within the trading book in its Markets business, the Company commenced the management of repurchase agreements and associated reverse repurchase agreements on a fair value basis. This
resulted in repurchase and associated reverse repurchase agreements being recognised and measured at FVTPL.
160 Australia and New Zealand Banking Group Limited 2023 Annual Report Notes to the \ue002nancial statements (continued)
FINANCIAL ASSETS AND FINANCIAL LIABILITIES MEASURED AT FAIR VALUE
The fair valuation of financial assets and financial liabilities is generally determined at the individual instrument level.
If the Group holds offsetting risk positions, then we use the portfolio exception in AASB 13
Fair Value Measurement
(AASB 13) to measure the fair value
of such groups of financial assets and financial liabilities. The Group measure the portfolio based on the price that would be received to sell a net long
position (an asset) for a particular risk exposure, or to transfer a net short position (a liability) for a particular risk exposure.
Fair value designation
The Group designate certain loans and advances and certain deposits and other borrowings and debt issuances as fair value through profit or loss:
\u2022 where they contain a separable embedded derivative which significantly modifies the instruments\u2019 cash flow ensuring we recognise the fair value
movements on the assets or liabilities in profit or loss in the same period as the movement on the associated hedging instruments; or
\u2022 in order to eliminate an accounting mismatch which would arise if the asset or liabilities were otherwise carried at amortised cost. This mismatch
arises due to measuring the derivative financial instruments (which we use to mitigate interest rate risk of these assets or liabilities) at fair value
through profit or loss.
Our approach ensures that we recognise the fair value movements on the assets or liabilities in profit or loss in the same period as the movement on
the associated derivatives.
The Group may also designate certain loans and advances, certain deposits and other borrowings and debt issuances as fair value through profit or
loss where they are managed on a fair value basis to align the measurement with how the instruments are managed.
FAIR VALUE APPROACH AND VALUATION TECHNIQUES
We use valuation techniques to estimate the fair value of assets and liabilities for recognition, measurement and disclosure purposes where no quoted
price in an active market exists for that asset or liability. This includes the following:
| Asset or Liability | Fair Value Approach |
| Financial instruments classified as: | |
| - Derivative financial assets and financial liabilities | |
| (including trading and non-trading) | |
| - Repurchase agreements < 90 days | |
| - Net loans and advances | |
| - Deposits and other borrowings | |
| - Debt issuances | |
| Discounted cash flow techniques are used whereby contractual future cash flows of |
| the instrument are discounted using wholesale market interest rates, or market |
| borrowing rates for debt or loans with similar maturities or yield curve appropriate for |
| the remaining term to maturity. |
| Other financial instruments held for trading: | |
| - Securities sold short | |
| - Debt and equity securities | |
| Valuation techniques are used that incorporate observable market inputs for financial |
| instruments with similar credit risk, maturity and yield characteristics. |
| Equity securities where an active market does not exist are measured using |
| comparable company valuation multiples (such as price-to-book ratios). |
| Financial instruments classified as: | |
| - Investment securities \u2013 debt or equity | |
| Valuation techniques use comparable multiples (such as price-to-book ratios) or |
| discounted cashflow (DCF) techniques incorporating, to the extent possible, |
| observable inputs from instruments with similar characteristics. |
There were no significant changes to valuation approaches during the current or prior periods.
FAIR VALUE HIERARCHY
The Group categorises assets and liabilities carried at fair value into a fair value hierarchy in accordance with AASB 13 based on the observability of
inputs used to measure the fair value:
\u2022 Level 1 - valuations based on quoted prices (unadjusted) in active markets for identical assets or liabilities;
\u2022 Level 2 - valuations using inputs other than quoted prices included within Level 1 that are observable for a similar asset or liability, either directly or
indirectly; and
\u2022 Level 3 - valuations where significant unobservable inputs are used to measure the fair value of the asset or liability.
The following table presents assets and liabilities carried at fair value in accordance with the fair value hierarchy:
| | | | Fair value measurements | | | | | |
| Quoted price in | | | | | | | |
| active markets | | | | | | | |
| (Level 1) | | | | | | | |
| | | Using observable | | | | | |
| | | inputs (Level 2) | | | | | |
| | | | | Using unobservable | | | |
| | | | | inputs (Level 3) | | | |
| | | | | | | Total | |
| | | | | | | | |
| | 2023 | 2022 | 2023 | 2022 | 2023 | 2022 | 2023 | 2022 |
| Consolidated | $m | $m | $m | $m | $m | $m | $m | $m |
| Assets | | | | | | | | |
| Cash and cash equivalents (measured at fair value)1 | - | - | 27,566 | - | - | - | 27,566 | - |
| Trading assets2 | 26,388 | 28,455 | 10,614 | 6,782 | 2 | - | 37,004 | 35,237 |
| Derivative financial instruments | 935 | 944 | 59,448 | 89,185 | 23 | 45 | 60,406 | 90,174 |
| Investment securities2,3 | 71,355 | 68,211 | 16,924 | 8,614 | 938 | 1,385 | 89,217 | 78,210 |
| Net loans and advances1 | - | - | 21,159 | 4,272 | 729 | 403 | 21,888 | 4,675 |
| Total | 98,678 | 97,610 | 135,711 | 108,853 | 1,692 | 1,833 | 236,081 | 208,296 |
| Liabilities | | | | | | | | |
| Deposits and other borrowings (designated at fair value)1 | - | - | 33,889 | 2,660 | - | - | 33,889 | 2,660 |
| Derivative financial instruments | 218 | 309 | 57,241 | 84,809 | 23 | 31 | 57,482 | 85,149 |
| Payables and other liabilities | 4,841 | 2,842 | 426 | 397 | - | - | 5,267 | 3,239 |
| Debt issuances (designated at fair value) | - | - | 1,336 | 1,111 | - | - | 1,336 | 1,111 |
| Total | 5,059 | 3,151 | 92,892 | 88,977 | 23 | 31 | 97,974 | 92,159 |
1. During 2023, the Group commenced the management of repurchase agreements and reverse repurchase agreements on a fair value basis within the trading book in its Markets business. This resulted in the
associated repurchase and reverse repurchase agreements being recognised and measured at FVTPL.
2. During 2023, $3,624 million of assets were transferred from Level 1 to Level 2 (2022: $1,043 million transferred from Level 1 to Level 2), and $1,452 million of assets were transferred from Level 2 to Level 1
(2022: $1,677 million transferred from Level 2 to Level 1) due to a change of the observability of valuation inputs. There were no other material transfers between Level 1 and Level 2 during the year.
Transfers into and out of levels are measured at the beginning of the reporting period in which the transfer occurred.
3. During 2023, ANZBGL sold its equity interests in the 1835i trusts, TIN and Pollination to ANZ NBH Pty Ltd as part of the Restructure. These investments were classified as Level 3 assets in the fair value
hierarchy in September 2022, with a fair valuation of $402 million.
| | | Fair value measurements | | | | | | |
| Quoted price in | | | | | | | |
| active markets | | | | | | | |
| (Level 1) | | | | | | | |
| | | Using observable | | | | | |
| | | inputs (Level 2) | | | | | |
| | | | | Using unobservable | | | |
| | | | | inputs (Level 3) | | | |
| | | | | | | Total | |
| | | | | | | | |
| | | | | | | | | |
| | 2023 | 2022 | 2023 | 2022 | 2023 | 2022 | 2023 | 2022 |
| The Company | $m | $m | $m | $m | $m | $m | $m | $m |
| Assets | | | | | | | | |
| Cash and cash equivalents (measured at fair value)1 | - | - | 27,099 | - | - | - | 27,099 | - |
| Trading assets2 | 22,264 | 23,037 | 8,427 | 5,036 | 2 | - | 30,693 | 28,073 |
| Derivative financial instruments | 900 | 848 | 59,066 | 87,181 | 23 | 27 | 59,989 | 88,056 |
| Investment securities2,3 | 63,879 | 58,259 | 12,449 | 7,006 | 937 | 1,019 | 77,265 | 66,284 |
| Net loans and advances1 | - | - | 20,511 | 3,860 | 729 | 403 | 21,240 | 4,263 |
| Due from controlled entities | - | - | 1,894 | 2,500 | - | - | 1,894 | 2,500 |
| Total | 87,043 | 82,144 | 129,446 | 105,583 | 1,691 | 1,449 | 218,180 | 189,176 |
| Liabilities | | | | | | | | |
| Deposits and other borrowings (designated at fair value)1 | - | - | 31,207 | 40 | - | - | 31,207 | 40 |
| Derivative financial instruments | 210 | 301 | 57,287 | 84,179 | 14 | 20 | 57,511 | 84,500 |
| Payables and other liabilities | 4,500 | 2,510 | 422 | 347 | - | - | 4,922 | 2,857 |
| Debt issuances (designated at fair value) | - | 985 | 2,332 | 2,086 | - | - | 2,332 | 3,071 |
| Due to controlled entities | - | - | 157 | - | - | - | 157 | - |
| Total | 4,710 | 3,796 | 91,405 | 86,652 | 14 | 20 | 96,129 | 90,468 |
1. During 2023, within the trading book in its Markets business, the Company commenced the management of repurchase agreements and associated reverse repurchase agreements on a fair value basis. This
resulted in repurchase and associated reverse repurchase agreements being recognized and measured at FVTPL.
2. During 2023, $2,139 million of assets were transferred from Level 1 to Level 2 (2022: $1,043 million transferred from Level 1 to Level 2), and $1,155 million of assets were transferred from Level 2 to Level 1
(2022: $1,677 million transferred from Level 2 to Level 1) due to a change of the observability of valuation inputs. There were no other material transfers during the year. Transfers into and out of levels are
measured at the beginning of the reporting period in which the transfer occurred.
3. During 2023, ANZBGL sold its equity interests in the 1835i trusts, TIN and Pollination to ANZ NBH Pty Ltd as part of the Restructure. These investments were classified as Level 3 assets in the fair value
hierarchy in September 2022, with a fair valuation of $402 million.
FAIR VALUE MEASUREMENT INCORPORATING UNOBSERVABLE MARKET DATA
Level 3 fair value measurements
Level 3 financial instruments are a net asset of $1,669 million (2022: $1,802 million) for the Group and $1,676 million (2022: $1,429 million) for the
Company.
The assets and liabilities which incorporate significant unobservable inputs are:
\u2022 equity and debt securities for which there is no active market or traded prices cannot be observed;
\u2022 loans and advances measured at fair value for which there is no observable market data; and
\u2022 derivatives referencing market rates that cannot be observed primarily due to lack of market activity.
Level 3 Transfers
During the year, the Group and the Company transferred $218 million (2022: $312 million) of Loan and advances measured at fair value from Level 2
to Level 3, as a result of valuation parameters becoming unobservable during the year. There were no other material transfers into or out of Level 3
during the period.
The material Level 3 financial instruments as at 30 September 2023 are listed as below:
i)
Investment Securities - equity holdings classified as FVOCI
Bank of Tianjin (BoT)
The Group holds an investment in the Bank of Tianjin. The investment is valued based on comparative price-to-book (P/B) multiples (a P/B multiple is
the ratio of the market value of equity to the book value of equity). The extent of judgement applied in determining the appropriate multiple and
comparator group from which the multiple is derived resulted in the Level 3 classification. As at September 2023, the BoT equity holding balance was
$849 million (2022: $854 million). The decrease in the BoT fair valuation was due to a decrease in the P/B multiple used in the valuation.
Other equity investments
The Group holds $89 million (2022: $491 million) and the Company holds $87 million (2022: $165 million) of unlisted equities classified as FVOCI for
which there are no active markets or traded prices available, resulting in Level 3 classification. The decrease in unlisted equity holdings balance was
due to the sale of equity securities to the ANZ Non-Bank Group as part of the establishment of the new Group organisational structure.
ii)
Net loans and advances - classified as FVTPL
Syndication Loans
The Group holds $729 million (2022: $403 million) of syndication loans for sale which are measured at FVTPL for which there is no observable market
data available for the valuation. The increase in the Level 3 loan balances during the financial year was mainly due to increased syndication loans for
sale as at reporting date, and loans and advances transferred from Level 2 to Level 3.
Sensitivity to Level 3 data inputs
When we make assumptions due to significant inputs to a valuation not being directly observable (Level 3 inputs), then changing these assumptions
changes the Group\u2019s estimate of the instrument\u2019s fair value. Favourable and unfavourable changes are determined by changing the primary
unobservable parameters used to derive the fair valuation.
Investment Securities - equity holdings
The valuation of the equity investments are sensitive to variations in select unobservable inputs, with valuation techniques used including P/B
multiples and discounted cashflow techniques. If for example, a 10% increase or decrease to the primary input into the valuations were to occur (such
as the P/B multiple), it would result in a $94 million increase or decrease in the fair value of the portfolio, which would be recognised in shareholders\u2019
equity in the Group ($93 million for the Company), with no impact to net profit or loss.
Net Loans and Advances
Syndicated loan valuations are sensitive to credit spreads in determining their fair valuation. However as these are primarily investment-grade loans,
an increase or decrease in credit spreads and or interest yield would have an immaterial impact on net profit or net assets of the Group.
Other
The remaining Level 3 balance is immaterial and changes in inputs have a minimal impact on net profit and net assets of the Group.
Deferred fair value gains and losses
Where fair values are determined using unobservable inputs significant to the fair value of a financial instrument, the Group does not immediately
recognise the difference between the transaction price and the amount we determine based on the valuation technique (day one gain or loss) in
profit or loss. After initial recognition, we recognise the deferred amount in profit or loss on a straight-line basis over the life of the transaction or until
all inputs become observable. Day one gains and losses which have been deferred are not material.
FINANCIAL ASSETS AND FINANCIAL LIABILITIES NOT MEASURED AT FAIR VALUE
The financial assets and financial liabilities listed below are carried at amortised cost on the Group\u2019s Balance Sheet. While this is the value at which we
expect the assets will be realised and the liabilities settled, the Group provides an estimate of the fair value of the financial assets and financial liabilities
at balance date in the tables below.
Fair values of financial assets and liabilities carried at amortised cost not included in the table below approximate their carrying values. These financial
assets and liabilities are either short term in nature or are floating rate instruments that are re-priced to market interest rates on or near the end of the
reporting period.
| | | | Categorised into fair value hierarchy | | | | | | | |
| | | | | | | | | | | |
| | | Quoted price | | | | | | | |
| | | active markets | | Using observable | | | | | |
| | | | | | | With significant non- | | | |
| | | | | | | observable inputs | | | |
| | At amortised cost | | (Level 1) | | inputs (Level 2) | | (Level 3) | | Total fair value | |
| | 2023 | 2022 | 2023 | 2022 | 2023 | 2022 | 2023 | 2022 | 2023 | 2022 |
| Consolidated | $m | $m | $m | $m | $m | $m | $m | $m | $m | $m |
| Financial assets | | | | | | | | | | |
| Investment securities1 | 7,752 | 7,943 | - | - | 7,712 | 7,918 | - | - | 7,712 | 7,918 |
| Net loans and advances | 685,806 | 667,732 | - | - | 19,619 | 29,460 | 664,120 | 634,272 | 683,739 | 663,732 |
| Total | 693,558 | 675,675 | - | - | 27,331 | 37,378 | 664,120 | 634,272 | 691,451 | 671,650 |
| Financial liabilities | | | | | | | | | | |
| Deposits and other borrowings | 781,314 | 794,621 | - | - | 781,106 | 794,124 | - | - | 781,106 | 794,124 |
| Debt issuances | 114,678 | 92,623 | 30,786 | 22,982 | 83,867 | 69,028 | - | - | 114,653 | 92,010 |
| Total | 895,992 | 887,244 | 30,786 | 22,982 | 864,973 | 863,152 | - | - | 895,759 | 886,134 |
| | | Categorised into fair value hierarchy | | | | | | | | |
| | | | | | | | | | | |
| | Quoted price | | | | | | | | |
| | active markets | Using observable | | | | | | | |
| | | | | | | With significant non- | | | |
| | | | | | | observable inputs | | | |
| | At amortised cost | | (Level 1) | | inputs (Level 2) | (Level 3) | | | Total fair value | |
| | 2023 | 2022 | 2023 | 2022 | 2023 | 2022 | 2023 | 2022 | | 2023 2022 | | |
| The Company | $m | $m | $m | $m | $m | $m | $m | $m | $m | $m |
| Financial assets | | | | | | | | | | |
| Investment securities1 | 5,936 | 6,115 | - | - | 5,896 | 6,092 | - | - | 5,896 | 6,092 |
| Net loans and advances | 541,777 | 533,082 | - | - | 19,224 | 28,708 | 521,474 | 501,795 | 540,698 | 530,503 |
| Total | 547,713 | 539,197 | - | - | 25,120 | 34,800 | 521,474 | 501,795 | 546,594 | 536,595 |
| Financial liabilities | | | | | | | | | | |
| Deposits and other borrowings | 643,868 | 665,567 | - | - | 643,755 | 665,242 | - | - | 643,755 | 665,242 |
| Debt issuances | 95,881 | 72,757 | 28,496 | 19,741 | 67,309 | 52,453 | - | - | 95,805 | 72,194 |
| Total | 739,749 | 738,324 | 28,496 | 19,741 | 711,064 | 717,695 | - | - | 739,560 | 737,436 |
1. Investment securities at amortised cost includes $4,558 million of assets that are part of the Group\u2019s liquidity portfolio for the Group (2022: $3,976 million) and $2,917 million of assets for the Company (2022:
$2,304 million) that are part of the Group\u2019s and Company\u2019s liquidity portfolio. These are all short tenor (<1 year) instruments primarily in the Group\u2019s Rest of World geography and represent <2% of the
Group\u2019s total liquid assets at 30 September 2023.
The following table sets out the Group\u2019s basis of estimating the fair values of financial assets and liabilities carried at amortised cost where the carrying
value is not typically a reasonable approximation of fair value.
| Financial Asset and Liability | Fair Value Approach |
| Investment securities - debt securities at amortised cost | Calculated based on quoted market prices or observable inputs as applicable. If |
| quoted market prices are not available, we use a discounted cash flow model using a |
| yield curve appropriate for the remaining term to maturity of the debt instrument. |
| T |
| he fair value reflects adjustments to credit spreads applicable for that instrument. |
| Net loans and advances to banks | Discounted cash flows using prevailing market rates for loans with similar |
| credit quality. |
| Net loans and advances to customers | Present value of future cash flows, discounted using a curve that incorporates |
| changes in wholesale market rates, the Group\u2019s cost of wholesale funding and the |
| customer margin, as appropriate. |
| Deposit liability without a specified maturity or at call | |
| T |
| he amount payable on demand at the reporting date. We do not adjust the fair |
| value for any value we expect the Group to derive from retaining the deposit for a |
| future period. |
| Interest bearing fixed maturity deposits and other |
| borrowings and acceptances with quoted market rates |
| Market borrowing rates of interest for debt with a similar maturity are used to |
| discount contractual cash flows to derive the fair value. |
| Debt issuances | Calculated based on quoted market prices or observable inputs as applicable. If |
| quoted market prices are not available, we use a discounted cash flow model using a |
| yield curve appropriate for the remaining term to maturity of the debt instrument. |
| T |
| he fair value reflects adjustments to credit spreads applicable to ANZ for that |
| instrument. |
KEY JUDGEMENTS AND ESTIMATES
A significant portion of financial instruments are carried on the balance sheet at fair value. The Group therefore regularly evaluates the key
valuation assumptions used in the determination of the fair valuation of financial instruments incorporated within the financial statements,
as this can involve a high degree of judgement and estimation in determining the carrying values at the balance date.
In determining the fair valuation of financial instruments, the Group has considered the impact of related economic and market conditions
on fair value measurement assumptions and the appropriateness of valuation inputs in these estimates, notably valuation adjustments, as
well as the impact of these matters on the classification of financial instruments in the fair value hierarchy.
Most of the valuation models the Group uses employ only observable market data as inputs. For certain financial instruments, we may use
data that is not readily observable in current markets. If we use unobservable market data, then we need to exercise more judgement to
determine fair value depending on the significance of the unobservable input to the overall valuation. Generally, we derive unobservable
inputs from other relevant market data and compare them to observed transaction prices where available. When establishing the fair value
of a financial instrument using a valuation technique, the Group also considers any required valuation adjustments in determining the fair
value. We may apply adjustments (such as credit valuation adjustments and funding valuation adjustments \u2013 refer to Note 10 Derivative
Financial Instruments) to reflect the Group\u2019s assessment of factors that market participants would consider in determining fair value of a
particular financial instrument.
20. OFFSETTING
We offset financial assets and financial liabilities on the balance sheet (in accordance with AASB 132
Financial Instruments: Presentation
) when there is:
\u2022 a current legally enforceable right to set off the recognised amounts in all circumstances; and
\u2022 an intention to settle the asset and liability on a net basis, or to realise the asset and settle the liability simultaneously.
The following table identifies financial assets and financial liabilities which have not been offset but are subject to enforceable master netting
agreements (or similar arrangements) and the related amounts not offset in the balance sheet. We have not taken into account the effect of over-
collateralisation.
| | | | Amount subject to master netting agreement or similar | | | |
| | | | | | | |
| Total amounts | | | | | |
| recognised | | | | | |
| in the | | | | | |
| Balance Sheet | | | | | |
| | Amounts not | | | | |
| | subject to | | | | |
| | master netting | | | | |
| | agreement or | | | | |
| | similar | Total | | | |
| | | | Financial | | |
| | | | instruments5 | | |
| | | | | Financial | |
| | | | | collateral | |
| | | | | (received)/ | |
| | | | | pledged5 | Net amount |
| Consolidated | $m | $m | $m | $m | $m | $m |
| As at 30 September 2023 | | | | | | |
| Derivative financial assets1 | 60,406 | (3,290) | 57,116 | (38,070) | (13,049) | 5,997 |
| Reverse repurchase, securities borrowing and | | | | | | |
| similar agreements2 | | | | | | |
| - at amortised cost | 4,145 | (124) | 4,021 | - | (4,021) | - |
| - at fair value through profit or loss3 | 44,088 | (10,505) | 33,583 | (2,401) | (31,182) | - |
| Total financial assets | 108,639 | (13,919) | 94,720 | (40,471) | (48,252) | 5,997 |
| Derivative financial liabilities1 | (57,482) | 5,096 | (52,386) | 38,070 | 6,547 | (7,769) |
| Repurchase, securities lending and similar | | | | | | |
| agreements4 | | | | | |
| - at amortised cost | (12,744) | 1,117 | (11,627) | - | 11,627 | - |
| - at fair value through profit or loss3 | (31,710) | 13,304 | (18,406) | 2,401 | 16,005 | - |
| Total financial liabilities | (101,936) | 19,517 | (82,419) | 40,471 | 34,179 | (7,769) |
| |
| As at 30 September 2022 |
| Derivative financial assets | 1 | | 90,174 | (6,983) | 83,191 (56,491) (16,951) | | 9,749 |
| Reverse repurchase, securities borrowing and |
| similar agreements | 2 |
| - at amortised cost | 29,776 | | (6,697) | 23,079 | (1,985) | (21,094) | - |
| Total financial assets | 119,950 (13,680) | 106,270 (58,476) (38,045) | 9,749 | |
| Derivative financial liabilities | 1 | | (85,149) 9,936 | | (75,213) | 56,491 9,964 | (8,758) |
| Repurchase, securities lending and similar |
| agreements | 4 |
| - at amortised cost | (47,229) | 12,497 | | (34,732) | | 1,985 | | 32,747 | - |
| Total financial liabilities | (132,378) | 22,433 | (109,945) 58,476 42,711 (8,758) |
1. Derivative assets and liabilities recognised in the Balance Sheet reflect the impact of certain central clearing collateral arrangements, whereby collateral that qualifies as legal settlement has reduced the
carrying value of those associated derivative balances.
2. Reverse repurchase agreements:
\u2022 with less than 90 days to maturity are presented in the Balance Sheet within Cash and cash equivalents; or
\u2022 with 90 days or more to maturity are presented in the Balance Sheet within Net loans and advances.
3. During 2023, the Group commenced the management of repurchase agreements and reverse repurchase agreements on a fair value basis within the trading book in its Markets business. This resulted in
the associated repurchase and reverse repurchase agreements being recognised and measured at FVTPL.
4. Repurchase agreements are presented on the Balance Sheet within Deposits and other borrowings.
5. The amount of financial instruments and financial collateral disclosed is limited to the net balance sheet exposure of the relevant financial assets or liabilities, and any over-collateralisation is excluded from
the tables.
| | | | Amount subject to master netting agreement or similar | | | |
| | Total amounts | | | | | |
| recognised | | | | | |
| in the | | | | | |
| Balance Sheet | | | | | |
| | Amounts not | | | | |
| | subject to | | | | |
| | master netting | | | | |
| | agreement or | | | | |
| | similar | | | | |
| | | Total | | | |
| | | | | | |
| | | | Financial | | |
| | | | instruments5 | | |
| | | | | Financial | |
| | | | | collateral | |
| | | | | (received)/ | |
| | | | | pledged5 | Net amount |
| The Company | $m | $m | $m | $m | $m | $m |
| As at 30 September 2023 | | | | | | |
| Derivative financial assets1 | 59,989 | (1,096) | 58,893 | (41,574) | (11,716) | 5,603 |
| Reverse repurchase, securities borrowing and | | | | | | |
| similar agreements2 | | | | | | |
| - at amortised cost | 4,021 | - | 4,021 | - | (4,021) | - |
| - at fair value through profit or loss3 | 43,553 | (10,143) | 33,410 | (2,248) | (31,162) | - |
| Total financial assets | 107,563 | (11,239) | 96,324 | (43,822) | (46,899) | 5,603 |
| Derivative financial liabilities1 | (57,511) | 2,760 | (54,751) | 41,574 | 6,356 | (6,821) |
| Repurchase, securities lending and similar | | | | | | |
| agreements4 | | | | | | |
| - at amortised cost | (8,955) | 865 | (8,090) | - | 8,090 | - |
| - at fair value through profit or loss3 | (31,125) | 12,872 | (18,253) | 2,248 | 16,005 | - |
| Total financial liabilities | (97,591) | 16,497 | (81,094) | 43,822 | 30,451 | (6,821) |
| | | | | | | |
| As at 30 September 2022 | | | | | | |
| Derivative financial assets1 | 88,056 | (4,242) | 83,814 | (61,038) | (14,876) | 7,900 |
| Reverse repurchase, securities borrowing and | | | | | | |
| similar agreements2 | | | | | | |
| - at amortised cost | 28,045 | (5,323) | 22,722 | (1,629) | (21,093) | - |
| Total financial assets | 116,101 | (9,565) | 106,536 | (62,667) | (35,969) | 7,900 |
| Derivative financial liabilities1 | (84,500) | 6,839 | (77,661) | 61,038 | 8,548 | (8,075) |
| Repurchase, securities lending and similar | | | | | | |
| agreements4 | | | | | | |
| - at amortised cost | (42,940) | 11,021 | (31,919) | 1,629 | 30,290 | - |
| Total financial liabilities | (127,440) | 17,860 | (109,580) | 62,667 | 38,838 | (8,075) |
1. Derivative assets and liabilities recognised in the Balance Sheet reflect the impact of certain central clearing collateral arrangements, whereby collateral that qualifies as legal settlement has reduced the
carrying value of those associated derivative balances.
2. Reverse repurchase agreements:
\u2022 with less than 90 days to maturity are presented in the Balance Sheet within Cash and cash equivalents; or
\u2022 with 90 days or more to maturity are presented in the Balance Sheet within Net loans and advances.
3. During 2023, the Group commenced the management of repurchase agreements and reverse repurchase agreements on a fair value basis within the trading book in its Markets business. This resulted in the
associated repurchase and reverse repurchase agreements being recognised and measured at FVTPL.
4. Repurchase agreements are presented on the Balance Sheet within Deposits and other borrowings.
5. The amount of financial instruments and financial collateral disclosed is limited to the net balance sheet exposure of the relevant financial assets or liabilities, and any over-collateralisation is excluded from
the tables.
21. GOODWILL AND OTHER INTANGIBLE ASSETS
| | Goodwill1 | | Software | | Other Intangibles | | Total | |
| Consolidated | | | | | | | | |
| 2023 | 2022 | 2023 | 2022 | 2023 | 2022 | 2023 | 2022 |
| $m | $m | $m | $m | $m | $m | $m | $m |
| Balance at start of year | 2,906 | 3,089 | 896 | 960 | 75 | 75 | 3,877 | 4,124 |
| Additions2 | - | 78 | 332 | 315 | - | 10 | 332 | 403 |
| Amortisation expense | - | - | (316) | (375) | (2) | (4) | (318) | (379) |
| Impairment expense | - | - | - | (3) | - | - | - | (3) |
| Written-off on disposal/exit3 | (78) | (40) | - | - | (7) | - | (85) | (40) |
| Foreign currency exchange difference | 150 | (221) | 1 | (1) | 4 | (6) | 155 | (228) |
| Balance at end of year | 2,978 | 2,906 | 913 | 896 | 70 | 75 | 3,961 | 3,877 |
| Cost4 | 2,978 | 2,906 | 8,127 | 7,843 | 78 | 83 | 11,183 | 10,832 |
| Accumulated amortisation | n/a | n/a | (7,214) | (6,947) | (8) | (8) | (7,222) | (6,955) |
| Carrying amount | 2,978 | 2,906 | 913 | 896 | 70 | 75 | 3,961 | 3,877 |
| | Goodwill1 | | Software | | Other Intangibles | | | Total |
T | | | | | | | | |
| he Company | | | | | | | | |
| 2023 | 2022 | 2023 | 2022 | 2023 | 2022 | 2023 | 2022 |
| $m | $m | $m | $m | $m | $m | $m | $m |
| Balance at start of year | 62 | 62 | 872 | 952 | 1 | 3 | 935 | 1,017 |
| Additions | - | - | 310 | 287 | - | - | 310 | 287 |
| Amortisation expense | - | - | (310) | (363) | (1) | (3) | (311) | (366) |
| Impairment expense | - | - | - | (3) | - | - | - | (3) |
| Foreign currency exchange difference | - | - | 1 | (1) | - | 1 | 1 | - |
| Balance at end of year | 62 | 62 | 873 | 872 | - | 1 | 935 | 935 |
| | | | | | | | | |
| Cost4 | 62 | 62 | 7,800 | 7,544 | 7 | 7 | 7,869 | 7,613 |
| Accumulated amortisation | n/a | n/a | (6,927) | (6,672) | (7) | (6) | (6,934) | (6,678) |
| Carrying amount | 62 | 62 | 873 | 872 | - | 1 | 935 | 935 |
1. Goodwill excludes notional goodwill in equity accounted investments.
2. 2022 goodwill addition relates to acquisition of Cashrewards.
3. 2023 goodwill written-off on disposal/exit relates to the disposal of Cashrewards to ANZ NBH Pty Ltd. 2022 goodwill written-off on disposal/exit relates to the exit of the financial planning and advice
business.
4. Includes impact of foreign currency translation differences.
IMPAIRMENT TESTING FOR CASH GENERATING UNITS CONTAINING GOODWILL
Goodwill acquired in a business combination is tested for impairment annually and whenever there are indicators of potential impairment. Goodwill is
allocated at the date of acquisition to the cash generating unit (CGU) or group of CGUs that are expected to benefit from the synergies of the related
business combination.
Goodwill is considered to be impaired if the carrying amount of the relevant CGU exceeds its recoverable amount. We estimate the recoverable
amount of each CGU to which goodwill is allocated using a fair value less costs of disposal (FVLCOD) approach, with a value-in-use (VIU) assessment
performed where the FVLCOD is less than the carrying amount.
Goodwill is allocated to the following CGUs based on the lowest level at which goodwill is monitored.
Cash generating units:
| 2023 | |
| $m | |
| | 2022 |
| | $m |
| Australia Retail | | |
| 100 | 178 |
| New Zealand | | |
| 1,617 | 1,530 |
| Institutional | | |
| 1,261 | 1,198 |
We estimate the FVLCOD of each CGU to which goodwill is allocated by applying observable price earnings multiples of comparable companies to
the estimated future maintainable earnings of each CGU. A deduction is then made for estimated costs of disposal. The valuation is considered to be
level 3 in the fair value hierarchy due to unobservable inputs used in the valuation.
Management\u2019s approach and the key assumptions used in determining FVLCOD are as follows:
| Key assumption | Approach to determining the value (or values) for each key assumption |
| Future maintainable earnings | Future maintainable earnings for each CGU is estimated as the sum of: |
| \u2022 The Group\u2019s 2024 financial plan for each CGU; and |
| \u2022 An allocation of the central costs recorded outside of the CGUs to which goodwill is allocated. |
| Where relevant, adjustments are made to the Group\u2019s financial plan to reflect the long-term expectations for |
| items such as expected credit losses and investment spend. |
| Price/Earnings (P/E) multiple | P/E multiples applicable to each CGU have been derived from a comparator group of publicly traded |
| companies, and include a 30% control premium, discussed below. |
| In the case of the New Zealand and Institutional CGUs, management has made downwards adjustments to |
| P/E multiples to address specific factors relevant to those CGUs. |
| A control premium has been applied which recognises the increased consideration a potential acquirer |
| would be willing to pay in order to gain sufficient ownership to achieve control over the relevant activities of |
| the CGU. For each CGU, the control premium has been estimated as 30% of the comparator group P/E |
| multiple based on historical transactions. |
| Costs of disposal | Costs of disposal have been estimated as 2% of the fair value of the CGU based on those observed from |
| historical and recent transactions. |
As noted above, our impairment testing did not result in the identification of any material impairment of goodwill as at 30 September 2023.
The FVLCOD estimates for each CGU are sensitive to assumptions about P/E multiples, future maintainable earnings and control premium (30%).
However, each CGU would continue to show a surplus in recoverable amount over carrying amount even where other reasonably possible alternative
estimates were used.
RECOGNITION AND MEASUREMENT
The table below details how we recognise and measure different intangible assets:
| Goodwill | Software | Other Intangibles |
| Definition | | | |
| | | | |
| | | | |
| | | | |
| | | | |
| Excess amount the Group has paid | | |
| in acquiring a business over the fair | | |
| value of the identifiable assets and | | |
| liabilities acquired. | | |
| | Purchased software owned by the Group | |
| | is capitalised. | |
| | Internal and external costs incurred in | |
| | building software and computer systems | |
| | costing greater than $20 million are | |
| | capitalised as assets. Those less than $20 | |
| | million are expensed in the year in which | |
| | the costs are incurred. | |
| | Costs incurred in planning or evaluating | |
| | software proposals or in maintaining | |
| | systems after implementation are | |
| | not capitalised. | |
| | | Management fee rights arising |
| | | from acquisition of funds |
| | | management business and |
| | | other intangible assets arising |
| | | from contractual rights. |
| Carrying value | | | |
| | | | |
| | | | |
| | | | |
| | | | |
| Cost less any accumulated | | |
| impairment losses. | | |
| Allocated to the cash generating | | |
| unit to which the | | |
| acquisition relates. | | |
| | | | |
| | Initially, measured at cost. | |
| | Subsequently, carried at cost less | |
| | accumulated amortisation and | |
| | impairment losses. | |
| | | Initially, measured at fair value at |
| | | acquisition. |
| | | Subsequently, carried at cost |
| | | less accumulated amortisation |
| | | and impairment losses. |
| Useful life | | | |
| | | | |
| | | | |
| | | | |
| | | | |
| Indefinite. | | |
| Goodwill is reviewed for | | |
| impairment at least annually or | | |
| when there is an indication of | | |
| impairment. | | |
| | Except for major core infrastructure, | |
| | amortised over periods between | |
| | 2-5 years; however major core | |
| | infrastructure may be amortised over 7 | |
| | years subject to approval by the Audit | |
| | Committee. | |
| | Purchased software is amortised over 2 | |
| | years unless it is considered integral to | |
| | other assets with a longer useful life. | |
| | | Management fee rights with an |
| | | indefinite life are reviewed for |
| | | impairment at least annually or |
| | | when there is an indication of |
| | | impairment. Other intangible |
| | | assets are amortised over 3 |
| | | years. |
| Depreciation | | | |
| method | | | |
| Not applicable. | Straight-line method. | Not applicable to indefinite life |
| | | intangible assets. Straight-line |
| | | method for assets with a finite |
| | | life. |
KEY JUDGEMENTS AND ESTIMATES
Management judgement is used to assess the recoverable value of goodwill and other intangible assets, and the useful economic life of an
asset, or whether an asset has an indefinite life. We reassess the recoverability of the carrying value at each reporting date.
Goodwill
A number of key judgements are required in the determination of whether or not a goodwill balance is impaired including:
\u2022 the level at which goodwill is allocated \u2013 consistent with prior periods the CGUs to which goodwill is allocated are the Group\u2019s revenue
generating segments that benefit from relevant historical business combinations generating goodwill.
\u2022 determination of the carrying amount of each CGU which includes an allocation, on a reasonable and consistent basis, of corporate
assets and liabilities that are not directly attributable to the CGUs to which goodwill is allocated.
\u2022 assessment of the recoverable amount of each CGU including:
o selection of the model used to determine the fair value \u2013 the Group has used the market multiple approach to estimate the fair
value; and
o selection of the key assumptions in respect of future maintainable earnings, the P/E multiple applied, including selection of an
appropriate comparator group and determination of an appropriate control premium, and costs of disposal as described above.
Software and other intangible assets
At each reporting date, software and other intangible assets are assessed for indicators of impairment and, where such indicators are
identified, an impairment assessment is performed. In the event that an asset\u2019s carrying amount is determined to be greater than its
recoverable amount, the carrying amount of the asset is written down immediately. Those assets not yet ready for use are tested for
impairment annually.
In addition, the expected useful lives of intangible assets are assessed at each reporting date. The assessment requires management
judgement, and in relation to our software assets, a number of factors can influence the expected useful lives. These factors include
changes to business strategy, significant divestments and the pace of technological change.
22. OTHER PROVISIONS
| | Consolidated | | The Company | |
| | 2023 | 2022 | 2023 | 2022 |
| | $m | $m | $m | $m |
| ECL allowance on undrawn and contingent facilities1 | 827 | 775 | 697 | 673 |
| Customer remediation | 459 | 662 | 425 | 600 |
| Restructuring costs | 98 | 68 | 83 | 47 |
| Non-lending losses, frauds and forgeries | 73 | 105 | 62 | 93 |
| Other | 257 | 262 | 232 | 235 |
| Total other provisions | 1,714 | 1,872 | 1,499 | 1,648 |
| | Customer | | | |
| remediation | | | |
| | Restructuring | | |
| | costs | | |
| | | Non-lending | |
| | | losses, frauds | |
| | | and forgeries | Other |
| Consolidated | $m | $m | $m | $m |
| Balance at 1 October 2022 | 662 | 68 | 105 | 262 |
| New and increased provisions made during the year | 147 | 91 | 11 | 66 |
| Provisions used during the year | (321) | (40) | (32) | (61) |
| Unused amounts reversed during the year | (29) | (21) | (11) | (10) |
| Balance at 30 September 2023 | 459 | 98 | 73 | 257 |
| | Customer | | | |
| remediation | | | |
| | Restructuring | | |
| | costs | | |
| | | Non-lending | |
| | | losses, frauds | |
| | | and forgeries | Other |
| The Company | $m | $m | $m | $m |
| Balance at 1 October 2022 | 600 | 47 | 93 | 235 |
| New and increased provisions made during the year | 146 | 83 | 9 | 63 |
| Provisions used during the year | (295) | (27) | (29) | (59) |
| Unused amounts reversed during the year | (26) | (20) | (11) | (7) |
| Balance at 30 September 2023 | 425 | 83 | 62 | 232 |
1. Refer to Note 13 Allowance for Expected Credit Losses for movement analysis.
Customer remediation
Customer remediation includes provisions for expected refunds to customers, remediation project costs and related customer and regulatory claims,
penalties and litigation costs and outcomes.
Restructuring costs
Provisions for restructuring costs arise from activities related to material changes in the scope of business undertaken by the Group or the manner in
which that business is undertaken and include employee termination benefits. Costs relating to on-going activities are not provided for and are
expensed as incurred.
Non-lending losses, frauds and forgeries
Non-lending losses include losses arising from certain legal actions not directly related to amounts of principal outstanding for loans and advances
and losses arising from forgeries, frauds and the correction of operational issues. The amounts recognised are the best estimate of the consideration
required to settle the present obligation at the reporting date, taking into account the risks and uncertainties that surround the events and
circumstances that affect the provision.
Other
Other provisions comprise various other provisions including workers compensation, make-good provisions associated with leased premises,
warranties and indemnities provided in connection with various disposals of businesses and assets, and contingent liabilities recognised as part of a
business combination.
RECOGNITION AND MEASUREMENT
The Group recognises provisions when there is a present obligation arising from a past event, an outflow of economic resources is
probable, and the amount of the provision can be measured reliably.
The amount recognised is the best estimate of the consideration required to settle the present obligation at the reporting date, taking into
account the risks and uncertainties surrounding the timing and amount of the obligation. Where a provision is measured using the
estimated cash flows required to settle the present obligation, its carrying amount is the present value of those cash flows.
KEY JUDGEMENTS AND ESTIMATES
The Group holds provisions for various obligations including customer remediation, restructuring costs, non-lending losses, frauds and
forgeries and litigation related claims. These provisions involve judgements regarding the timing and outcome of future events, including
estimates of expenditure required to satisfy such obligations. Where relevant, expert legal advice has been obtained and, in light of such
advice, provisions and/or disclosures as deemed appropriate have been made.
In relation to customer remediation, determining the amount of the provisions, which represent management\u2019s best estimate of the cost
of settling the identified matters, requires the exercise of significant judgement. It will often be necessary to form a view on a number of
different assumptions, including the number of impacted customers, the average refund per customer, the associated remediation project
costs, and the implications of regulatory exposures and customer claims having regard to their specific facts and circumstances. There is a
heightened level of estimation uncertainty where the customer remediation provision relates to a legal proceeding or matter. The
appropriateness of the underlying assumptions is reviewed on a regular basis against actual experience and other relevant evidence
including expert legal advice, and adjustments are made to the provisions where appropriate.
23. SHAREHOLDERS\u2019 EQUITY
SHAREHOLDERS' EQUITY
| Consolidated | | The Company | |
| | 2023 | 2022 | 2023 | 2022 |
| $m | $m | $m | $m |
| Ordinary share capital | 29,082 | 28,797 | 29,005 | 28,720 |
| Reserves | | | | |
| Foreign currency translation reserve1 | 570 | (148) | 58 | (6) |
| Share option reserve | 82 | 78 | 82 | 78 |
| FVOCI reserve | (554) | (478) | (538) | (557) |
| Cash flow hedge reserve | (1,872) | (2,036) | (1,824) | (2,061) |
| Transactions with non-controlling interests reserve | (22) | (22) | - | - |
| Total reserves | (1,796) | (2,606) | (2,222) | (2,546) |
| Retained earnings | 41,306 | 39,716 | 34,195 | 32,859 |
| Share capital and reserves attributable to shareholders of the Company | 68,592 | 65,907 | 60,978 | 59,033 |
| Non-controlling interests2 | 522 | 494 | - | - |
| Total shareholders\u2019 equity | 69,114 | 66,401 | 60,978 | 59,033 |
1. As a result of the closure of ANZ (Thai) Public Company Limited, ANZ International (Hong Kong) Limited and ANZ Singapore Limited, the associated foreign currency translation reserve was recycled from
Other comprehensive income to profit or loss, resulting in a $43 million gain recognised in Other operating income in 2023 (2022: $65 million loss from the dissolution of Minerva Holdings Limited and ANZ
Asia Limited).
2. ANZ Bank New Zealand issued $484 million of perpetual preference shares in 2022 that are considered non-controlling interests to the Group.
ORDINARY SHARE CAPITAL
The table below details the movement in ordinary shares and share capital for the year.
| | 2023 | 2022 | | |
| Number of | | | |
| shares | | | |
| | | Number of | |
| | | shares | |
| Consolidated | | $m | | $m |
| Balance at start of the year | 2,989,923,751 | 28,797 | 2,823,563,652 | 25,984 |
| Dividend reinvestment plan issuances | 8,406,978 | 206 | 7,195,108 | 183 |
| Bonus option plan | 1,657,422 | - | 2,890,268 | - |
| Employee share and option plans | 3,378,631 | 79 | - | (21) |
| Share buy-back1 | - | - | (30,831,227) | (846) |
| Share entitlement issue2 | - | - | 187,105,950 | 3,497 |
| Balance at end of year | 3,003,366,782 | 29,082 | 2,989,923,751 | 28,797 |
| Less: Treasury Shares | - | - | (4,209,150) | - |
| Balance at end of year | 3,003,366,782 | 29,082 | 2,985,714,601 | 28,797 |
| | 2023 | | 2022 | |
| Number of | | | |
| shares | | | |
| | | Number of | |
| | | shares | |
T | | | | |
| he Company | | $m | | $m |
| Balance at start of the year | 2,989,923,751 | 28,720 | 2,823,563,652 | 25,907 |
| Dividend reinvestment plan issuances | 8,406,978 | 206 | 7,195,108 | 183 |
| Bonus option plan | 1,657,422 | - | 2,890,268 | - |
| Employee share and option plans | 3,378,631 | 79 | - | (21) |
| Share buy-back1 | - | - | (30,831,227) | (846) |
| Share entitlement issue2 | - | - | 187,105,950 | 3,497 |
| Balance at end of year | 3,003,366,782 | 29,005 | 2,989,923,751 | 28,720 |
1. The Group completed its $1.5 billion on-market share buy-back of ANZ ordinary shares in 2022, purchasing $846 million worth of shares resulting in 31 million shares being cancelled in 2022.
2. On 18 July 2022, the Group announced a fully underwritten pro rata accelerated renounceable entitlement offer of new ANZ ordinary shares to help fund the Group\u2019s anticipated acquisition of Suncorp
Bank. All eligible shareholders were invited to purchase one new ordinary share for every 15 existing ordinary shares held on 21 July 2022 at an issue price of $18.90 per share. The Group issued a total of
187.1 million ordinary shares under the offer, raising $3,497 million of new share capital (net of issue costs).
NON-CONTROLLING INTERESTS
| Profit attributable to | | | | | |
| non-controlling interests | | | | | |
| | | Equity attributable to | | | |
| | | non-controlling interests | | | |
| | | | | Dividend paid to | |
| | | | | non-controlling interests | |
| | 2023 | 2022 | 2023 | 2022 | 2023 | 2022 |
| Consolidated | $m | $m | $m | $m | $m | $m |
| ANZ Bank New Zealand PPS | 26 | - | 512 | 484 | 26 | - |
| Other | 2 | 1 | 10 | 10 | 1 | 2 |
| Total | 28 | 1 | 522 | 494 | 27 | 2 |
ANZ Bank New Zealand Preference Shares
ANZ Bank New Zealand Limited (ANZ Bank New Zealand), a member of the Group, issued $484 million (NZD 550 million) of Perpetual Preference
Shares (PPS) on 18 July 2022. These are considered non-controlling interests of the Group.
The key terms of the PPS are as follows:
PPS dividends
PPS dividends are payable at the discretion of the Directors of ANZ Bank New Zealand and are non-cumulative. ANZ Bank New Zealand must not
authorise or pay a dividend on its ordinary shares, acquire its ordinary shares or otherwise undertake a capital reduction in respect of its ordinary
shares until the next PPS dividend payment date if a PPS dividend is not paid.
Should ANZ Bank New Zealand elect to pay a PPS dividend, the PPS dividend is 6.95% per annum until 18 July 2028, and a floating rate equal to the
aggregate of the New Zealand 3 month bank bill rate plus 3.25%, multiplied by one minus the New Zealand company tax rate (where the PPS
dividend is fully imputed) thereafter, with PPS dividend payments scheduled to be paid on 18 January, 18 April, 18 July and 18 October each year.
Redemption features
Holders of PPS have no right to require that the PPS be redeemed. ANZ Bank New Zealand may at its option redeem all of the PPS on an optional
redemption date (each PPS dividend date from 18 July 2028); or at any time following the occurrence of a tax event or regulatory event, in each case
subject to prior written approval of RBNZ and other conditions being met.
RECOGNITION AND MEASUREMENT
| Ordinary shares | |
| | |
| | |
| | |
| Ordinary shares have no par value. They entitle holders to receive dividends, or proceeds |
| available on winding up of the Company, in proportion to the number of fully paid ordinary |
| shares held. They are recognised at the amount paid per ordinary share net of directly |
| attributable costs. Every holder of fully paid ordinary shares present at a meeting of the |
| Company in person, or by proxy, is entitled to: |
| \u2022 on a show of hands, one vote; and |
| \u2022 on a poll, one vote, for each share held. |
| Treasury shares | |
| | |
| | |
| | |
| | |
| | |
| Treasury shares are shares in the Company which: |
| \u2022 the ANZ Employee Share Acquisition Plan purchases on market and have not yet |
| distributed, or |
| \u2022 the Company issues to the ANZ Employee Share Acquisition Plan and have not yet been |
| distributed. |
| Treasury shares are deducted from share capital and excluded from the weighted average |
| number of ordinary shares used in the earnings per share calculations. |
| Reserves: | |
| Foreign currency translation reserve | |
| | |
| | |
| Includes differences arising on translation of assets and liabilities into Australian dollars when |
| the functional currency of a foreign operation (including subsidiaries and branches) is not |
| Australian dollars. In this reserve, we reflect any offsetting gains or losses on hedging these |
| exposures, together with any tax effect. |
| Cash flow hedge reserve | Includes fair value gains and losses associated with the effective portion of designated cash |
| flow hedging instruments together with any tax effect. |
| FVOCI reserve | Includes changes in the fair value of certain debt securities and equity securities included |
| within Investment Securities together with any tax effect. |
| In respect of debt securities classified as measured at FVOCI, the FVOCI reserve records |
| accumulated changes in fair value arising subsequent to initial recognition, except for those |
| relating to allowance for expected credit losses, interest income and foreign currency |
| exchange gains and losses which are recognised in profit or loss. As debt securities at FVOCI |
| are recorded at fair value, the balance of the FVOCI reserve is net of the ECL allowance |
| associated with such assets. When a debt security measured at FVOCI is derecognised, the |
| cumulative gain or loss recognised in the FVOCI reserve in respect of that security is |
| reclassified to profit or loss and presented in other operating income. |
| In respect of the equity securities classified as measured at FVOCI, the FVOCI reserve records |
| accumulated changes in fair value arising subsequent to initial recognition (including any |
| related foreign exchange gains or losses). When an equity security measured at FVOCI is |
| derecognised, the cumulative gain or loss recognised in the FVOCI reserve in respect of that |
| security is not recycled to profit or loss. |
| Share option reserve | Includes amounts which arise on the recognition of share-based compensation expense. |
| Transactions with non-controlling | |
| interests reserve | |
| Includes the impact of transactions with non-controlling shareholders in their capacity as |
| shareholders. |
| Non-controlling interests | |
| | |
| Share in the net assets of controlled entities attributable to equity interests which the Group |
| does not own directly or indirectly. |
24. CAPITAL MANAGEMENT
CAPITAL MANAGEMENT FRAMEWORK
ANZ\u2019s capital management framework includes managing capital at Level 1 and Level 2.
ANZ\u2019s framework includes managing to Board approved risk appetite settings and maintaining all regulatory requirements. APRA requirements at
Level 1 and Level 2 include ANZ operating at or above APRAs expectation for Domestic Systematically Important Banks (D-SIBs) following the
implementation of APRA\u2019s Capital Reform which was effective January 2023.
All requirements were satisfied at 30 September 2023.
CAPITAL MANAGEMENT STRATEGY
ANZ\u2019s capital management strategy aims to protect the interests of depositors, creditors and shareholders. We achieve this through an Internal
Capital Adequacy Assessment Process (ICAAP) whereby ANZ conducts detailed strategic and capital planning over a 3 year time horizon.
The process involves:
\u2022 forecasting economic variables, financial performance of ANZ\u2019s divisions and the financial impact of new strategic initiatives to be implemented
during the planning period;
\u2022 performing stress tests under different economic scenarios to determine the level of additional capital (stress capital buffer) needed to absorb
losses that may be experienced under an economic downturn;
\u2022 reviewing capital ratios and targets across various classes of capital against ANZ\u2019s risk profile; and
\u2022 developing a capital plan, taking into account capital ratio targets, current and future capital issuances requirements and options around capital
products, timing and markets to execute the capital plan under differing market and economic conditions.
The capital plan is approved by the Board and updated as required. The Board and senior management are provided with regular updates of ANZ\u2019s
capital position. Any material actions required to ensure ongoing prudent capital management are submitted to the Board for approval. Throughout
the year, the Group maintained compliance with all the regulatory requirements related to Capital Adequacy in the jurisdictions in which it operates.
REGULATORY ENVIRONMENT
Australia
As the ANZ Bank Group is an Authorised Deposit-taking Institution (ADI) in Australia, it is primarily regulated by APRA under the
Banking Act 1959
(Cth)
. ANZ Bank Group must comply with the minimum regulatory capital requirements, prudential capital ratios and specific reporting levels that
APRA sets and which are consistent with the global Basel III capital framework. This is the common framework for determining the appropriate level of
bank regulatory capital as set by the Basel Committee on Banking Supervision. APRA minimum requirements are summarised below:
| Regulatory Capital Definition | | | |
| Common Equity Tier 1 (CET1) Capital | Tier 1 Capital | Tier 2 Capital | Total Capital |
| Shareholders\u2019 equity adjusted for | | | |
| specific items. | | | |
| CET1 Capital plus certain | | |
| securities with complying loss | | |
| absorbing characteristics known | | |
| as Additional Tier 1 Capital. | | |
| | Subordinated debt instruments | |
| | which have a minimum term of 5 | |
| | years at issue date. | |
| | | Tier 1 plus Tier 2 Capital. |
| Minimum Prudential Capital Ratios (PCRs) | | |
| CET1 Ratio | Tier 1 Ratio | Total Capital Ratio |
| CET1 Capital divided by total risk | | |
| weighted assets must be at least 4.5%. | | |
| Tier 1 Capital divided by total risk | |
| weighted assets must be at least | |
| 6.0%. | |
| | Total Capital divided by total risk |
| | weighted assets must be at least |
| | 8.0%. For D-SIBs, Total Capital |
| | Ratio must be of at least 11% from |
| | 1st Jan 2024. Refer below for |
| | details. |
| Reporting Levels | | |
| Level 1 | Level 2 | Level 3 |
| The ADI on a stand-alone basis (that is | | |
| ANZBGL and specified subsidiaries | | |
| which are consolidated to form the | | |
| ADI\u2019s Extended Licensed Entity). | | |
| The consolidated Group less | |
| certain subsidiaries and associates | |
| that are excluded under | |
| prudential standards. | |
| | A conglomerate ANZGHL Group at the widest level. |
As at 30 September 2023, APRA also requires the ADI to hold additional CET1 buffers as follows:
\u2022 a capital conservation buffer (CCB) of 4.75% which is inclusive of the additional 1% surcharge for domestically systemically important banks (D-SIBs).
APRA has determined that ANZ is a D-SIB.
\u2022 a countercyclical capital buffer which is set on a jurisdictional basis. The requirement is currently set at 1% for Australia.
Additionally in December 2021, APRA announced that it requires all D-SIBs including ANZ to increase its minimum total capital ratio requirement by
3% of RWA by January 2024, and a further 1.5% of RWA by January 2026 (total increase of 4.5%). APRA expects this to be predominantly met by Tier 2
Capital, with an equivalent decrease in other senior funding. ANZ is on track to meet these requirements at reporting date.
Insurance and Funds Management
As required by APRA\u2019s Prudential Standards, insurance and funds management activities are:
\u2022 de-consolidated for the purposes of calculating capital adequacy; and
\u2022 excluded from the risk-based capital adequacy framework.
We deduct the investment in these controlled entities 100% from CET1 capital, and if we include any profits from these activities in the ANZ Bank
Group\u2019s results, then we exclude them from the determination of CET1 capital to the extent they have not been remitted.
Outside Australia
In addition to APRA, ANZ\u2019s branch operations and major banking subsidiary operations are also overseen by local regulators such as the Reserve Bank
of New Zealand, the US Federal Reserve, the UK Prudential Regulation Authority, the Monetary Authority of Singapore, the Hong Kong Monetary
Authority and the China Banking and Insurance Regulatory Commission. They may impose minimum capital levels on operations in their individual
jurisdictions.
APRA Capital Reform
APRA released new bank capital adequacy requirements applying to Australian incorporated registered banks, which are set out in APRA\u2019s Banking
Prudential Standard documents. ANZ implemented these new requirements from 1 January 2023.
The new capital adequacy key requirements include changes to APS 110
Capital Adequacy
(APS 110), APS 112
Capital Adequacy: Standardised
Approach to Credit Risk
(APS 112) and APS 113
Capital Adequacy: Internal Ratings-based Approach to Credit Risk
(APS 113) with key features of the
reforms including:
\u2022 improving the flexibility of the capital framework through larger capital buffers that can be used by banks to support lending during periods of
stress;
\u2022 changes to risk weighted assets (RWA) through more risk-sensitive risk weights increasing capital requirements for higher risk lending and
decreasing it for lower risks;
\u2022 changes to loss given default rates (LGD) including approved use of an internal ratings-based (IRB) approved LGD model for mortgage portfolios;
\u2022 an increase in the IRB scaling factor (from 1.06x to 1.1x);
\u2022 requirement that IRB ADIs calculate and disclose RWA under the standardised approach and the introduction of a capital floor at 72.5% of
standardised RWA; and
\u2022 use of prescribed New Zealand authority\u2019s equivalent prudential rules for the purpose of calculating the Level 2 regulatory capital requirement.
In addition, operational RWA is now calculated under APS 115
Capital Adequacy: Standardised Measurement Approach to Operational Risk (APS 115)
which replaced the previous advanced methodology from December 2022.
The application of APRA Capital Reform in January 2023 reduced RWA by $34.5 billion, equivalent to a 100 bps CET1 ratio benefit. This was partially
offset by APRA\u2019s expectations that ADIs operate a higher capital ratio to maintain an unquestionably strong level.
ANZ BANK GROUP1
The following table provides details of ANZ Bank Group\u2019s capital adequacy ratios at 30 September:
| | Consolidated | |
| | 2023 | 2022 |
| | $m | $m |
| Qualifying capital | | |
| Tier 1 | | |
| Shareholders' equity and non-controlling interests | 69,114 | 66,401 |
| Prudential adjustments to shareholders' equity | (425) | (175) |
| Gross Common Equity Tier 1 capital | 68,689 | 66,226 |
| Deductions | (10,895) | (10,354) |
| Common Equity Tier 1 capital | 57,794 | 55,872 |
| Additional Tier 1 capital2 | | |
| 8,232 | 7,686 | |
| Tier 1 capital | 66,026 | 63,558 |
| Tier 2 capital3 | 24,959 | 19,277 |
| Total qualifying capital | 90,985 | 82,835 |
| Capital adequacy ratios (Level 2) | | |
| Common Equity Tier 1 | 13.3% | 12.3% |
| Tier 1 | 15.2% | 14.0% |
| Tier 2 | 5.8% | 4.2% |
| Total capital ratio | 21.0% | 18.2% |
| Risk weighted assets | 433,327 | 454,718 |
1. This information is not within the scope of the external audit of the Group Financial Report by the Group\u2019s external auditor, KPMG. The information presented in this table is a regulatory requirement
disclosed in Part A of the
APRA Reporting Form (ARF) 110 Capital Adequacy
which will be subject to audit in accordance with
Prudential Standard APS 310 Audit and Related Matters
.
2. This includes Additional Tier 1 capital of $8,232 million (2022: $7,705 million) (refer to Note 16 Debt Issuances), regulatory adjustments and deductions of nil (2022: -$19 million).
3. This includes Tier 2 capital of $23,707 million (2022: $17,907 million) (refer to Note 16 Debt Issuances), general reserve for impairment of financial assets of $1,776 million (2022: $1,233 million) and regulatory
adjustments and deductions of -$525 million (2022: $137 million).
25. CONTROLLED ENTITIES
| The ultimate parent of the Group is ANZ Group Holdings Limited | | |
| Incorporated in | |
| Australia | |
| | Nature of Business |
| | Banking |
| The Group holds 100% of the voting interests in all controlled entities, unless noted otherwise. | | |
| | | |
| The material controlled entities of the Group are: | | |
| ANZ Bank (Vietnam) Limited1 | Vietnam | Banking |
| ANZ Funds Pty. Ltd. | Australia | Holding Company |
| ANZ Bank (Kiribati) Limited1 (75% ownership) | Kiribati | Banking |
| ANZ Bank (Samoa) Limited1 | Samoa | Banking |
| ANZ Bank (Vanuatu) Limited2 | Vanuatu | Banking |
| ANZ Holdings (New Zealand) Limited1 | New Zealand | Holding Company |
| ANZ Bank New Zealand Limited1 | New Zealand | Banking |
| ANZ Investment Services (New Zealand) Limited1 | New Zealand | Funds Management |
| ANZ New Zealand (Int\u2019l) Limited1 | New Zealand | Finance |
| ANZ New Zealand Investments Holdings Limited1 | New Zealand | Holding Company |
| ANZ New Zealand Investments Limited1 | New Zealand | Funds Management |
| ANZNZ Covered Bond Trust1,4 | New Zealand | Finance |
| ANZ International Private Limited1 | Singapore | Holding Company |
| ANZcover Insurance Private Ltd1 | Singapore | Captive-Insurance |
| ANZ Lenders Mortgage Insurance Pty. Limited | Australia Mortgage | Insurance |
| ANZ Residential Covered Bond Trust4 | Australia | Finance |
| Australia and New Zealand Bank (China) Company Limited1 | China | Banking |
| Australia and New Zealand Banking Group (PNG) Limited1 | Papua New Guinea | Banking |
| Citizens Bancorp3 | Guam Holding | Company |
| ANZ Guam Inc3 | Guam | Banking |
| Institutional Securitisation Services Limited | Australia | Securitisation Manager |
| PT Bank ANZ Indonesia1 (99% ownership) | Indonesia | Banking |
1. Audited by overseas KPMG firms \u2014 either as part of the Group audit, or for standalone financial statements as required.
2. Audited by Law Partners.
3. Audited by Deloitte Guam.
4. Not owned by the Group. Control exists as the Group retains substantially all the risks and rewards of the operations.
CHANGES TO MATERIAL CONTROLLED ENTITIES
ANZ Singapore Limited was deregistered on 18 August 2023. ANZ International (Hong Kong) Limited, ANZ (Thai) Public Company Limited (formerly
ANZ Bank (Thai) Public Company Limited), and Chongqing Liangping ANZ Rural Bank Company Limited are in liquidation as at 30 September 2023.
SIGNIFICANT RESTRICTIONS
Controlled entities that are subject to prudential regulation may be required to maintain minimum capital or other regulatory requirements which
may, from time to time, limit the entity\u2019s ability to transfer assets, pay dividends or make other capital distributions to the parent entity or to other
entities in the Group. The Group manages such restrictions within our risk management framework, as outlined in Note 17 Financial Risk Management
and our capital management strategy, as outlined in Note 24 Capital Management.
As at 30 September 2023, restrictions on the ability of an entity within the Group to transfer assets, pay dividends or make other capital distributions to
other entities in the Group were not material to the liquidity or capital management of the Group.
RECOGNITION AND MEASUREMENT
The Group\u2019s subsidiaries are those entities it controls through:
\u2022 being exposed to, or having rights to, variable returns from the entity; and
\u2022 being able to affect those returns through its power over the entity.
The Group assesses whether it has power over those entities by examining the Group\u2019s existing rights to direct the relevant activities of the
entity.
If the Group sells or acquires subsidiaries during the year, it includes their operating results in the Group results to the date of disposal or
from the date of acquisition. When the Group\u2019s control ceases, it derecognises the assets and liabilities of the subsidiary, any related non-
controlling interest and other components of equity.
If the Group\u2019s ownership interest in a subsidiary changes in a way that does not result in a loss of control, then the Group accounts for that
as a transaction with equity holders in their capacity as equity holders.
All transactions between Group entities are eliminated on consolidation.
26. INVESTMENTS IN ASSOCIATES
Significant associates of the Group are:
| | Ordinary share | | | |
| | interest | | Carrying amount $m | |
| Name of entity | Principal activity | 2023 | 2022 | 2023 | 2022 |
| AMMB Holdings Berhad (AmBank) | Banking and insurance | 22% | 22% | 881 | 790 |
| PT Bank Pan Indonesia (PT Panin) | Consumer and business bank | 39% | 39% | 1,440 | 1,318 |
| Worldline Australia Pty Ltd (Worldline)1 | Payment and transactional services | - | 49% | - | 47 |
| Aggregate other individually immaterial associates | | - | n/a | - | 26 |
| Total carrying value of associates2 | | | | 2,321 | 2,181 |
1. As part of the Restructure, ANZBGL\u2019s investment in Worldline Australia Pty Ltd was transferred to ANZ NBH Pty Ltd.
2. Includes the impact of foreign currency translation recognised in the foreign currency translation reserve.
FINANCIAL INFORMATION ON SIGNIFICANT ASSOCIATES
Set out below is the summarised financial information of each associate that is significant to the Group. The summarised financial information is based
on the associates\u2019 IFRS financial information and may require the use of unaudited financial information as each associate has a different financial year
to the Group (PT Panin 31 December, AmBank 31 March, Worldline 31 December).
| AMMB Holdings Berhad | | PT Bank Pan Indonesia | | | |
| | | | | Worldline Australia | |
| | | | | Pty Ltd1 | |
| Principal place of business and country of incorporation | Malaysia | | Indonesia | | Australia | |
| | 2023 | 2022 | 2023 | 2022 | 2023 | 2022 |
| | $m | $m | $m | $m | $m | $m |
| Summarised results | | | | | | |
| Operating income | 1,517 | 1,511 | 1,273 | 1,206 | - | 57 |
| Profit/(Loss) for the year | 545 | 529 | 372 | 198 | - | (21) |
| Other comprehensive income/(loss) | 87 | (128) | 24 | 6 | - | - |
| Total comprehensive income/(loss) | 632 | 401 | 396 | 204 | - | (21) |
| Less: Total comprehensive (income)/loss attributable to non\u2013 | | | | | | |
| controlling interests | (8) | (18) | (69) | 25 | - | - |
| Total comprehensive income/(loss) attributable to owners of | | | | | | |
| associate | 624 | 383 | 327 | 229 | - | (21) |
| Summarised financial position | | | | | | |
| Total assets2 | 62,057 | 57,220 | 20,498 | 20,537 | - | 203 |
| Total liabilities2 | 58,015 | 53,234 | 16,928 | 17,234 | - | 90 |
| Total net assets2 | 4,042 | 3,986 | 3,570 | 3,303 | - | 113 |
| Less: Non-controlling interests of associate | (301) | (402) | (348) | (315) | - | - |
| Net assets attributable to owners of associate | 3,741 | 3,584 | 3,222 | 2,988 | - | 113 |
| Reconciliation to carrying amount of Group's interest in associate | | | | | | |
| Carrying amount at the beginning of the year | 790 | 719 | 1,318 | 1,210 | - | - |
| Acquired | - | - | | - | | 57 |
| Group's share of total comprehensive income/(loss) | 138 | 81 | 138 | 71 | - | (10) |
| Dividends received from associate | (42) | (12) | - | (18) | - | - |
| Foreign currency translation reserve adjustments | (5) | 2 | (16) | 55 | - | - |
| Carrying amount at the end of the year | 881 | 790 | 1,440 | 1,318 | - | 47 |
| Market value of Group's investment in associate3 | 875 | 929 | 1,167 | 2,016 | n/a | n/a |
1. As part of the Restructure, ANZBGL\u2019s investment in Worldline Australia Pty Ltd was transferred to ANZ NBH Pty Ltd.
2. Includes market value adjustments (including goodwill) the Group made at the time of acquisition (and adjustments for any differences in accounting policies).
IMPAIRMENT ASSESSMENT
The Group assesses the carrying value of its associates investments for impairment indicators.
At 30 September 2023, the impairment assessment of non-lending assets identified that one of the Group\u2019s associated investments PT Panin had
indicators of impairment. No impairment was recognised as its carrying value is supported by its VIU calculations.
RECOGNITION AND MEASUREMENT
An associate is an entity over which the Group has significant influence over its operating and financial policies but does not control. The
Group accounts for associates using the equity method. Its investments in associates are carried at cost plus the post-acquisition share of
changes in the associate\u2019s net assets less accumulated impairments. Dividends the Group receives from associates are recognised as a
reduction in the carrying amount of the investment. The Group includes goodwill recognised by the associate in the carrying amount of
the investment. It does not individually test the goodwill incorporated in the associates carrying amount for impairment.
At least at each reporting date, the Group reviews investments in associates for any indication of impairment. If an indication of impairment
exists, then the Group determines the recoverable amount of the associate using the higher of:
\u2022 the associate\u2019s fair value less cost of disposal; and
\u2022 its value-in-use.
We use a discounted cash flow methodology, and when applicable, other methodologies (such as capitalisation of earnings methodology),
to determine the recoverable amount when determining a VIU.
KEY JUDGEMENTS AND ESTIMATES
Investments in associates and joint ventures are assessed at each reporting date and tested for impairment when there is an indication that
the investment may be impaired. In addition, the Group is required to assess at each reporting date whether the recoverable amount of
the Group\u2019s investment has increased to such a level as to support the reversal of prior period impairments.
Significant management judgment is required to determine the key assumptions underpinning the VIU calculation. Factors that may
change in subsequent periods and lead to potential future impairments include lower than forecast earnings levels in the near term and/or
a decrease in the long term growth forecasts, increases to required levels of regulatory capital and an increase in the post-tax discount rate
arising from an increase in the risk premium or risk-free rates.
The key assumptions used in the VIU calculation are outlined below:
| | As at 30 September 2023 | PT Panin |
| | Post-tax discount rate | 12.2% |
| | Terminal growth rate | 5.0% |
| | Expected earnings growth (compound annual growth rate \u2013 5 years) | 5.4% |
| | Common Equity Tier 1 ratio (5 year average) | 12.8% |
The VIU calculations are sensitive to changes in the underlying assumptions with reasonably possible changes in key assumptions having a
positive or negative impact on the VIU outcome, and as such the recoverable amount of the investment.
\u2022 A change in the September 2023 post-tax discount rate by +/- 50bps would impact the VIU outcome for PT Panin by $(91 million)/
$105 million.
\u2022 A change in the September 2023 terminal growth rate by +/- 25bps would impact the VIU outcome for PT Panin by $55 million/
($51 million).
The investment would not be impaired if the discount rate were increased or the terminal growth rate reduced by the reasonably possible
changes above.
27. STRUCTURED ENTITIES
A Structured Entity (SE) is an entity that has been designed such that voting or similar rights are not the dominant factor in determining who controls
the entity. SEs are generally established with restrictions on their ongoing activities in order to achieve narrow and well defined objectives.
SEs are classified as subsidiaries and consolidated when control exists. If the Group does not control a SE, then it is not consolidated. This note
provides information on both consolidated and unconsolidated SEs.
The Group\u2019s involvement with SEs is as follows:
| Type | Details |
| Securitisation | The Group establishes SEs to securitise customer loans and advances that it has originated, in order to diversify |
| sources of funding for liquidity management. Securitisation programs include customer loans and advances |
| assigned to bankruptcy remote SEs to provide either security for obligations payable on notes issued by the SEs |
| to external investors or create assets held by the Group eligible for repurchase agreements with applicable |
| central banks. |
| The Group retains control over these SEs and therefore they are consolidated. Refer to Note 28 Transfers of |
| Financial Assets for further details. |
| The Group also establishes SEs on behalf of customers to securitise their loans or receivables. The Group may |
| manage these securitisation vehicles or provide liquidity or other support. Additionally, the Group may acquire |
| interests in securitisation vehicles set up by third parties through holding securities issued by such entities. In |
| limited circumstances where control exists, the Group consolidates the SE. |
| Covered bond issuances | Certain loans and advances have been assigned to bankruptcy remote SEs to provide security for issuances of |
| debt securities by the Group. The Group retains control over these SEs and therefore they are consolidated. Refer |
| to Note 28 Transfers of Financial Assets for further details. |
| Structured finance | |
| arrangements | |
| The Group is involved with SEs established: |
| \u2022 in connection with structured lending transactions to facilitate debt syndication and/or to ring-fence |
| collateral; and |
| \u2022 to own assets that are leased to customers in structured leasing transactions. |
| The Group may manage the SE, hold minor amounts of the SE\u2019s capital, or provide risk management products |
| (derivatives) to the SE. In most instances, the Group does not control these SEs. In limited circumstances where |
| control exists, the Group consolidates the SE. |
| Funds management activities | The Group is the scheme manager for a number of Managed Investment Schemes (MIS) in New Zealand. These |
| MIS are financed through the issue of units to investors and the Group considers them to be SEs. The Group\u2019s |
| interests in these MIS are limited to receiving fees for services or providing risk management products |
| (derivatives). These interests do not create significant exposures that would allow the Group to control the funds. |
| Therefore, these MIS are not consolidated. |
CONSOLIDATED STRUCTURED ENTITIES
FINANCIAL OR OTHER SUPPORT PROVIDED TO CONSOLIDATED STRUCTURED ENTITIES
The Group provides financial support to consolidated SEs as outlined below.
| Securitisation and covered | |
| bond issuances | |
| The Group provides lending facilities, derivatives and commitments to these SEs and/or holds debt instruments |
| they have issued. |
| Structured finance | |
| arrangements | |
| The assets held by these SEs are normally pledged as collateral for financing provided. Certain consolidated SEs |
| are financed entirely by the Group while others are financed by syndicated loan facilities in which the Group is a |
| participant. The financing provided by the Group includes lending facilities where the Group\u2019s exposure is limited |
| to the amount of the loan and any undrawn amount. Additionally, the Group has provided Letters of Support to |
| these consolidated SEs confirming that the Group will not demand repayment of the financing provided for the |
| ensuing 12 month period. |
The Group did not provide any non-contractual support to consolidated SEs during the year (2022: nil). Other than as disclosed above, the Group does
not have any current intention to provide financial or other support to consolidated SEs.
UNCONSOLIDATED STRUCTURED ENTITIES
GROUP\u2019S INTEREST IN UNCONSOLIDATED STRUCTURED ENTITIES
An \u2018interest\u2019 in an unconsolidated SE is any form of contractual or non-contractual involvement with a SE that exposes the Group to variability of
returns from the performance of that SE. These interests include, but are not limited to: holdings of debt or equity securities; derivatives that pass-on
risks specific to the performance of the SE, lending, loan commitments, financial guarantees, and fees from funds management activities.
For the purpose of disclosing interests in unconsolidated SEs:
\u2022 no disclosure is made if the Group\u2019s involvement is not more than a passive interest - for example: when the Group\u2019s involvement constitutes a
typical customer-supplier relationship. On this basis, exposures to unconsolidated SEs that arise from lending, trading and investing activities are
not considered disclosable interests - unless the design of the structured entity allows the Group to participate in decisions about the relevant
activities (being those that significantly affect the entity\u2019s returns).
\u2022 \u2018interests\u2019 do not include derivatives intended to expose the Group to market-risk (rather than performance risk specific to the SE) or derivatives
through which the Group creates, rather than absorbs, variability of the unconsolidated SE (such as purchase of credit protection under a credit
default swap).
The table below sets out the Group\u2019s interests in unconsolidated SEs together with the maximum exposure to loss that could arise from
those interests:
| | Securitisation | | Structured finance | | Total | |
| | 2023 | 2022 | 2023 | 2022 | 2023 | 2022 |
| | $m | $m | $m | $m | $m | $m |
| On-balance sheet interests | | | | | | |
| Investment securities | 2,070 | 3,352 | - | - | 2,070 | 3,352 |
| Gross loans and advances | 10,367 | 9,433 | 24 | 43 | 10,391 | 9,476 |
| Total on-balance sheet | 12,437 | 12,785 | 24 | 43 | 12,461 | 12,828 |
| Off-balance sheet interests | | | | | | |
| Commitments (facilities undrawn) | 3,270 | 2,078 | - | - | 3,270 | 2,078 |
| Guarantees | 50 | 50 | - | - | 50 | 50 |
| Total off-balance sheet | 3,320 | 2,128 | - | - | 3,320 | 2,128 |
| Maximum exposure to loss | 15,757 | 14,913 | 24 | 43 | 15,781 | 14,956 |
In addition to the interests above, the Group earned funds management fees from unconsolidated investment funds of $177 million
(2022: $181 million) during the year.
The Group\u2019s maximum exposure to loss represents the maximum amount of loss that the Group could incur as a result of its involvement with
unconsolidated SEs if loss events were to take place - regardless of the probability of occurrence. This does not in any way represent the actual losses
expected to be incurred. Furthermore, the maximum exposure to loss is stated gross of the effects of hedging and collateral arrangements entered
into to mitigate ANZ\u2019s exposure to loss.
The maximum exposure to loss has been determined as:
\u2022 the carrying amount of Investment securities measured at amortised cost; and
\u2022 the carrying amount plus the undrawn amount of any committed loans and advances.
The size of unconsolidated SEs is indicated by total assets which vary by SE with the largest single SE having a value of approximately $4.3 billion.
The Group did not provide any non-contractual support to unconsolidated SEs during the year (2022: nil) nor does it have any current intention to
provide financial or other support to unconsolidated SEs.
SPONSORED UNCONSOLIDATED STRUCTURED ENTITIES
The Group may also sponsor unconsolidated SEs in which it has no disclosable interest.
For the purposes of this disclosure, the Group considers itself the \u2018sponsor\u2019 of an unconsolidated SE if it is the primary party involved in the design and
establishment of that SE and:
\u2022 the Group is the major user of that SE; or
\u2022 the Group\u2019s name appears in the name of that SE, or on its products; or
\u2022 the Group provides implicit or explicit guarantees of that SE\u2019s performance.
The Group has sponsored the ANZ PIE Fund in New Zealand, which invests only in deposits with ANZ Bank New Zealand. The Group does not provide
any implicit or explicit guarantees of the capital value or performance of investments in the ANZ PIE Fund. There was no income received from, nor
assets transferred to, this entity during the year.
KEY JUDGEMENTS AND ESTIMATES
Significant judgement is required in assessing whether the Group has control over Structured Entities. Judgement is required to determine
the existence of:
\u2022 power over the relevant activities (being those that significantly affect the entity\u2019s returns); and
\u2022 exposure to variable returns of the entity.
",
"dimensions": {
"concept": "anz:DisclosureOfStructuredEntitiesExplanatory",
"language": "en",
"entity": "scheme:JHE42UYNWWTJB8YTTU19",
"period": "2022-10-01T00:00:00/2023-10-01T00:00:00"
}
},
"fact_ifrs-full_DisclosureOfTransfersOfFinancialAssetsExplanatory_D443223419_CY": {
"value": "28. TRANSFERS OF FINANCIAL ASSETS
In the normal course of business the Group enters into transactions where it transfers financial assets directly to third parties or to SEs. These transfers
may result in the Group fully, or partially, derecognising those financial assets - depending on the Group\u2019s exposure to the risks and rewards or control
over the transferred assets. If the Group retains substantially all of the risk and rewards of a transferred asset, the transfer does not qualify for
derecognition and the asset remains on the Group\u2019s balance sheet in its entirety.
SECURITISATIONS
Net loans and advances include residential mortgages securitised under the Group\u2019s securitisation programs which are assigned to bankruptcy
remote SEs to provide security for obligations payable on the notes issued by the SEs. The holders of the issued notes have full recourse to the pool of
residential mortgages which have been securitised and the Group cannot otherwise pledge or dispose of the transferred assets.
In some instances, the Group is also the holder of the securitised notes issued by the SEs. In addition, the Group is entitled to any residual income of
the SEs and sometimes enters into derivatives with the SEs. The Group retains the risks and rewards of the residential mortgages and continues to
recognise the mortgages as financial assets.
The Group is exposed to variable returns from its involvement with these securitisation SEs and has the ability to affect those returns through its
power over the SEs activities. The SEs are therefore consolidated by the Group.
COVERED BONDS
The Group operates various global covered bond programs to raise funding in its primary markets. Net loans and advances include residential
mortgages assigned to bankruptcy remote SEs associated with these covered bond programs. In respect of each program, a covered bond guarantor
has guaranteed payments of interest and principal pursuant to a guarantee which is secured over its assets, including these residential mortgages.
Substantially all of the assets of each covered bond guarantor consist of that covered bond guarantor\u2019s equitable interests in mortgage loans secured
by residential real estate.
The covered bond holders have dual recourse to the issuer and the cover pool of assets. The issuer cannot otherwise pledge or dispose of the
transferred assets, however, subject to legal arrangements it may repurchase and substitute assets as long as the required cover is maintained.
The Group is required to maintain the cover pool at a level sufficient to cover the bond obligations. In addition, the Group is entitled to any residual
income of the covered bond SEs (after all payments to the covered bond holders and external parties) and enters into derivatives with the SEs. The
Group retains the majority of the risks and rewards of the residential mortgages and continues to recognise the mortgages as financial assets.
The Group is exposed to variable returns from its involvement with the covered bond SEs and has the ability to affect those returns through its power
over the SEs activities. The SEs are therefore consolidated by the Group. The covered bonds issued externally are included within debt issuances.
REPURCHASE AGREEMENTS
When the Group sells securities subject to repurchase agreements under which we retain substantially all the risks and rewards of ownership, then
those assets do not qualify for derecognition. An associated liability is recognised for the consideration received from the counterparty.
STRUCTURED FINANCE ARRANGEMENTS
The Group arranges funding for certain customer transactions through structured leasing. These transactions are recognised on Group\u2019s balance sheet
as lease receivables or loans. At times, other financial institutions participate in the funding of these arrangements. This participation involves a
proportionate transfer of the rights to the assets recognised by the Group. The participating banks have limited recourse to the leased assets and
related proceeds. Where the Group continues to be exposed to some of the risks of the transferred assets through a derivative or other continuing
involvement, the Group does not derecognise the lease receivable or loan. Instead, the Group recognises an associated liability representing its
obligations to the participating financial institutions.
The tables below set out the balance of assets transferred that do not qualify for derecognition, along with the associated liabilities.
| Securitisations1,2 | | Covered bonds | | | | | |
| | | | | Repurchase | | | |
| | | | | agreements | | | |
| | | | | | | Structured finance | |
| | | | | | | arrangements | |
| | 2023 | 2022 | 2023 | 2022 | 2023 | 2022 | 2023 | 2022 |
| Consolidated | $m | $m | $m | $m | $m | $m | $m | $m |
| Current carrying amount of assets transferred | 886 | 1,121 | 31,188 | 27,575 | 47,552 | 52,757 | 27 | 36 |
| Carrying amount of associated liabilities | 880 | 1,115 | 18,223 | 12,967 | 44,454 | 47,229 | 27 | 36 |
| | Securitisations1,2 | | Covered bonds | | | | | |
| | | | | Repurchase | | | |
| | | | | agreements | | | |
| | | | | | | Structured finance | |
| | | | | | | arrangements | |
| | 2023 | 2022 | 2023 | 2022 | 2023 | 2022 | 2023 | 2022 |
| The Company | $m | $m | $m | $m | $m | $m | $m | $m |
| Current carrying amount of assets transferred | 886 | 1,121 | 21,017 | 17,953 | 42,002 | 47,846 | - | - |
| Carrying amount of associated liabilities | 886 | 1,121 | 21,017 | 17,953 | 40,080 | 42,940 | - | - |
1. Does not include transfers to internal structured entities where there are no external investors.
2. The securitisation noteholders have recourse only to the pool of residential mortgages which have been securitised. The carrying value of securitised assets and the associated liabilities approximates their
fair value.
29. SUPERANNUATION AND POST EMPLOYMENT BENEFIT OBLIGATIONS
Set out below is a summary of amounts recognised in the Balance Sheet in respect of the defined benefit superannuation schemes:
| | Consolidated | | The Company | |
| | 2023 | 2022 | 2023 | 2022 |
| $m | $m | $m | $m |
| Defined benefit obligation and scheme assets | | | | |
| Present value of funded defined benefit obligation | (959) | (930) | (839) | (809) |
| Fair value of scheme assets | 1,131 | 1,123 | 991 | 988 |
| Net defined benefit asset | 172 | 193 | 152 | 179 |
| As represented in the Balance Sheet | | | | |
| Net liabilities arising from defined benefit obligations included in Payables | | | | |
| and other liabilities | (4) | (6) | (4) | (6) |
| Net assets arising from defined benefit obligations included in Other assets | 176 | 199 | 156 | 185 |
| Net defined benefit asset | 172 | 193 | 152 | 179 |
| Weighted average duration of the benefit payments reflected in the defined | | | | |
| benefit obligation (years) | 11.4 | 14.8 | 10.9 | 14.9 |
As at the most recent reporting dates of the schemes, the aggregate surplus of net market value of assets over the value of accrued benefits on a
funding basis was $53 million (2022: $69 million surplus). In 2023, the Group made defined benefit contributions totalling $2 million
(2022: $2 million). It expects to make contributions of approximately $2 million next financial year.
GOVERNANCE OF THE SCHEMES AND FUNDING OF THE DEFINED BENEFIT SECTIONS
The main defined benefit superannuation schemes in which the Group participates operate under trust law and are managed and administered on
behalf of the members in accordance with the terms of the relevant trust deed and rules and all relevant legislation. These schemes have corporate
trustees, which are wholly owned subsidiaries of the Group. The trustees are the legal owners of the assets, which are held separately from the assets
of the Group, and are responsible for setting investment policy and agreeing funding requirements with the employer through the triennial actuarial
valuation process.
The Group has defined benefit arrangements in Australia, Japan, New Zealand, Philippines, Taiwan and United Kingdom. The defined benefit section
of the ANZ Australian Staff Superannuation Scheme, the ANZ UK Staff Pension Scheme and the ANZ National Retirement Scheme in New Zealand are
the three largest plans. They have been closed to new members since 1987, 2004 and 1991 respectively. None of the schemes had a material deficit,
or surplus, at the last funding valuation. The Group has no present liability under any of the schemes\u2019 trust deeds to fund a deficit (measured on a
funding basis). A contingent liability of the Group may arise if any of the schemes were wound up.
RECOGNITION AND MEASUREMENT
Defined benefit superannuation schemes
The Group operates a small number of defined benefit schemes. Independent actuaries calculate the liability and expenses related to
providing benefits to employees under each defined benefit scheme. They use the Projected Unit Credit Method to value the liabilities. The
balance sheet includes:
\u2022 a defined benefit liability if the obligation is greater than the fair value of the schemes assets; and
\u2022 an asset (capped to its recoverable amount) if the fair value of the assets is greater than the obligation.
In each reporting period, the movements in the net defined benefit liability are recognised as follows:
\u2022 the net movement relating to the current period\u2019s service cost, net interest on the defined benefit liability, past service costs and other
costs (such as the effects of any curtailments and settlements) as operating expenses;
\u2022 remeasurements of the net defined benefit liability (which comprise actuarial gains and losses and return on scheme assets, excluding
interest income included in net interest) directly in retained earnings through other comprehensive income; and
\u2022 contributions of the Group directly against the net defined benefit position.
Defined contribution superannuation schemes
The Group operates a number of defined contribution schemes. It also contributes (according to local law, in the various countries in which
it operates) to Government and other plans that have the characteristics of defined contribution plans. The Group\u2019s contributions to these
schemes are recognised as personnel expenses when they are incurred.
KEY JUDGEMENTS AND ESTIMATES
The main assumptions we use in valuing defined benefit obligations are listed in the table below. A change to any assumptions, or
applying different assumptions, could have an effect on the Statement of Other Comprehensive Income and Balance Sheet.
| | | | Sensitivity analysis | | |
| | | change in significant | | |
| | | assumptions | | |
| | | | Increase/(decrease) in | |
| | | | defined benefit | |
| | | | obligation | |
| | | | | 2023 | |
| | | | $m | |
| | | | | 2022 |
| | | | | $m |
| Consolidated | 2023 | 2022 | | | |
| Discount rate (% p.a.) | 1.15-5.6 | 1.35-5.45 | 0.5% increase | (43) | (49) |
| Future salary increases (% p.a.) | 2.0-3.5 | 1.5-3.8 | | | |
| Future pension indexation | | | | | |
| In payment (% p.a.)/In deferment (% p.a.) | 2.9-3.4 | 3.1-3.5/3.0 | 0.5% increase | 34 | 32 |
| Life expectancy at age 60 for current pensioners | | | 1 year increase | 33 | 40 |
| \u2013 Males (years) | 26.3-28.3 | 26.2-28.3 | | | |
| \u2013 Females (years) | 29.2-30.2 | 29.1-30.2 | | | |
| | | | Sensitivity analysis | | |
| | | change in significant | | |
| | | assumptions | | |
| | | | Increase/(decrease) in | |
| | | | defined benefit | |
| | | | obligation | |
| | | | | 2023 | |
| | | | $m | |
| | | | | 2022 |
| | | | | $m |
| | | | | | |
T | | | | | |
| he Company | 2023 | 2022 | | | |
| Discount rate (% p.a.) | 5.5-5.6 | 5.1-5.45 | 0.5% increase | (38) | (43) |
| Future salary increases (% p.a.) | 3.5 | 3.8 | | | |
| Future pension indexation | | | | | |
| In payment (% p.a.)/In deferment (% p.a.) | 2.9-3.3/2.8 | 3.1-3.5/3.0 | 0.5% increase | 29 | 26 |
| Life expectancy at age 60 for current pensioners | | | 1 year increase | 29 | 35 |
| \u2013 Males (years) | 26.3-28.3 | 26.2-28.3 | | | |
| \u2013 Females (years) | 29.2-30.2 | 29.1-30.2 | | | |
30. EMPLOYEE SHARE AND OPTION PLANS
On 3 January 2023, ANZBGL established, by a scheme of arrangement, a non-operating holding company, ANZGHL, as the new listed parent holding
company of the ANZ Group. There is no impact to employee equity (deferred shares, deferred share rights, restricted rights and performance rights) as
a result of the Restructure.
ANZ operates a number of employee share and option schemes under the ANZ Employee Share Acquisition Plan and the ANZ Share Option Plan
which are operated by the Company\u2019s ultimate parent, ANZGHL. These are Group share based payment arrangements under which shares in ANZGHL
(ANZ shares) are allocated or granted to employees of the Group.
ANZ EMPLOYEE SHARE ACQUISITION PLAN
ANZ Employee Share Acquisition Plan schemes that operated during 2023 and 2022 were the Deferred Share Plan and the Variable Pay to Shares (VPS)
Offer. The ANZ Incentive Plan (ANZIP) (the variable remuneration plan operating across ANZ) has Short Term Variable Remuneration or Variable
Remuneration delivered under the Deferred Share Plan or ANZ Share Option Plan for eligible employees.
Deferred Share Plan
i) ANZ Incentive Plan (ANZIP) \u2013 Short term Variable Remuneration (STVR) and Variable Remuneration (VR) \u2013 deferred shares
| Award Type | STVR (deferred shares) | STVR/VR historical (deferred shares) | VR (deferred shares) |
| Eligibility | Chief Executive Officer (CEO), Group Executive Committee (ExCo) and Group | | |
| General Manager Internal Audit (GGM IA)1. | | |
| | | All other employees (excluding |
| | | select roles in the United Kingdom |
| | | (UK)/China2) |
| Financial Year (FY) of | | | |
| grant | | | |
| 2022 Performance and | | |
| Remuneration Review (PRR): granted | | |
| in FY23 | | |
| | 2021 PRR: granted in FY22 | |
| | Historical grants: on foot during FY23 | |
| | & FY22 | |
| | | 2022 and 2021 PRR: granted in FY23 |
| | | & FY22 |
| | | Historical grants: on foot during FY23 |
| | | & FY22 |
| Grant approach | 50% of the CEO, ExCo and GGM IA\u2019s | | |
| Short Term Variable Remuneration | | |
| (STVR) deferred as shares. | | |
| | 50% of the CEO\u2019s STVR, 25% of ExCo\u2019s | |
| | Variable Remuneration (VR) (except | |
| | for the Chief Risk Officer (CRO)), and | |
| | 33% of the CRO and GGM IA\u2019s VR, | |
| | deferred as shares. | |
| | | If VR is at or exceeds AUD 100,000, |
| | | then 60% of total VR amount is |
| | | deferred as shares. |
| Conditions | Deferred over years two and three, where year 1 includes the performance | | |
| period (i.e., 1 October to 30 September). Granted in late November. | | |
| | | Deferred over years two, three and |
| | | four, where year 1 includes the |
| | | performance period. Granted in late |
| | | November. |
| Allocation value | Deferred shares granted based on | | |
| the Volume Weighted Average Price | | |
| (VWAP) of ANZ shares traded on the | | |
| ASX in the five trading days leading | | |
| up to and including 1 October. | | |
| | Deferred shares granted based on the VWAP of ANZ shares traded on the | |
| | ASX in the five trading days leading up to and including the date of grant. | |
1. All Banking Executive Accountability Regime (BEAR) Accountable Executives.
2. Specific deferral arrangements also exist under ANZIP for roles defined as UK Material Risk Takers (MRTs) and China MRTs, in line with local regulatory requirements.
ii) Exceptional circumstances
Remuneration
foregone
In exceptional circumstances, we grant deferred shares to certain employees when they start with ANZ to
compensate them for remuneration they have forgone from their previous employer. The vesting period generally
aligns with the remaining vesting period of the remuneration they have forgone, and therefore varies between
grants.
Retention We may grant deferred shares to high performing employees who are regarded as a significant retention risk to ANZ.
iii) Further information
| Cessation | Unless the Board1 decides otherwise, employees forfeit their unvested deferred shares if they resign, are terminated |
| on notice, or are dismissed for serious misconduct. The deferred shares may be held in trust beyond the deferral |
| period. |
| Dividends | Dividends are reinvested in the Dividend Reinvestment Plan. |
| Instrument | Deferred share rights may be granted instead of deferred shares in some countries as locally appropriate (see |
| deferred share rights section). |
| Expensing value (fair | |
| value) | |
| We expense the fair value of deferred shares on a straight-line basis over the relevant vesting period and we |
| recognise the expense as a share-based compensation expense with a corresponding increase in equity. Deferred |
| shares are expensed based on the one-day VWAP at the date of grant. |
| 2023 and 2022 grants | During the 2023 year, we granted 2,244,181 deferred shares (2022: 1,971,715) with a weighted average allocation |
| value of $24.37 (2022: $27.52). |
| Downward adjustment | Deferred shares remain at risk and the Board has the discretion to adjust the number of deferred shares downwards, |
| including to zero at any time before the vesting date (malus), and limited to select employees2, recovery post vesting |
| (i.e., clawback). ANZ\u2019s downward adjustment provisions are detailed in section 7.3 of the 2023 Remuneration Report. |
| Board discretion was not exercised to apply malus or clawback to any deferred shares in 2023 (2022: nil). |
1. References to \u2018the Board\u2019 throughout this note means the Boards of ANZGHL and ANZBGL.
2. Clawback applies to the CEO, ExCo and GGM IA (for awards granted in 2023 financial year), and to select senior employees in jurisdictions where clawback regulations apply.
Variable Pay to Shares (VPS) Offer
| Eligibility, grant | |
| approach and | |
| conditions | |
| VPS provides employees in Australia the opportunity to receive up to $1,000 worth of ANZ shares with concessional |
| tax treatment (where criteria are met). All ANZ shares are held by a custodian or nominee appointed by the Trustee |
| on the Trustee\u2019s behalf and are restricted for 3 years. During this time employees benefit from dividend payments |
| which are reinvested through the Dividend Reinvestment Plan (DRP) and have voting entitlements. After the |
| restriction period has been reached the shares can sold or transferred. |
| Allocation value | Granted based on the VWAP of ANZ shares traded on the ASX in the five trading days leading up to and including the |
| date of grant. | |
| Expensing value | |
| (fair value) | |
| Expensed based on the one-day VWAP at the date of grant. |
| 2023 grants | During the 2023 year, we granted 55,600 shares on 22 November 2022 at an issue price of $24.46 (no grants were |
| made in relation to the VPS Offer in the 2022 year). |
Expensing of the ANZ Employee Share Acquisition Plan
| Expensing value | |
| (fair value) | |
| The fair value of shares we granted during 2023 under the Deferred Share Plan and VPS Offer, measured as at the date |
| of grant of the shares, is $56.5 million (2022: $52.6 million Deferred Share Plan only) based on 2,299,781 shares |
| (2022: 1,971,715 Deferred Share Plan only) at VWAP of $24.57 (2022: $26.69). | |
ANZ SHARE OPTION PLAN
| Allocation | We may grant selected employees options/rights which entitle them to acquire fully paid ordinary ANZ shares at a |
| fixed price at the time the options/rights vest. Voting and dividend rights will be attached to the ordinary shares |
| allocated on exercise of the options/rights. |
| Each option/right entitles the holder to one ordinary share subject to the terms and conditions imposed on grant. |
| Exercise price of options, determined in accordance with the rules of the plan, is generally based on the VWAP of the |
| shares traded on the ASX in the week leading up to and including the date of grant. For rights, the exercise price is nil. |
| Rules | Prior to the exercise of the option/right if ANZ changes its share capital due to a bonus share issue, pro-rata new share |
| issue or reorganisation the following adjustments are required: |
| \u2022Issue of bonus shares - When the holder exercises their option, they are also entitled to be issued the number of |
| bonus shares they would have been entitled to had they held the underlying shares at the time of the bonus issue; |
| \u2022Pro-rata share offer - We will adjust the exercise price of the option in the manner set out in the ASX Listing Rules; |
| and |
| \u2022Reorganisation - In respect of rights, if there is a bonus issue or reorganisation of ANZ\u2019s share capital, then the |
| Board may adjust the number of rights or the number of underlying shares so that there is no advantage or |
| disadvantage to the holder. |
| Holders otherwise have no other entitlements to participate: |
| \u2022in any new issue of ANZ securities before they exercise their options/rights; or |
| \u2022in a share issue of a body corporate other than ANZ (such as a subsidiary). |
| Any portion of the award which vests may, at the Boards discretion, be satisfied by a cash equivalent payment rather |
| than shares. |
| Expensing value | |
| (fair value) | |
| We expense the fair value of options/rights on a straight-line basis over the relevant vesting period and we recognise |
| the expense as a share-based compensation expense with a corresponding increase in equity. Factors considered in |
| determining the fair value include: the market performance conditions, share price volatility, life of the instrument, |
| dividend yield, and share price at grant date. |
| Satisfying vesting | Any portion of the award of options/rights (that have met the applicable time and performance conditions) may be |
| satisfied by a cash equivalent payment rather than shares at Board discretion. |
| In financial year 2023, all deferred share rights were satisfied through a share allocation, other than 70,231 deferred |
| share rights (2022: 55,977) for which a cash payment was made. |
| There were no performance rights (PR) due to vest in financial year 2023, as a result of a change in the performance |
| period from three years to four years. In financial year 2022, the PR that vested (previously granted in |
| November/December 2018) were satisfied through a share allocation, other than 24,011 PR for which a cash payment |
| was made. |
| Cessation | The provisions that apply if the employee\u2019s employment ends are in section 10.2.3 of the 2023 Remuneration Report. |
| Downward adjustment | As per Deferred Share Plan. |
Option Plans that operated during 2023 and 2022
i) Long Term Variable Remuneration (LTVR) and Variable Remuneration (VR) - restricted rights (RR), performance rights (PR), and deferred
share rights (DSR)
| Award Type | LTVR (RR & PR) | LTVR / VR historical (PR) | ANZIP VR (DSR) |
| Eligibility | CEO, ExCo and GGM IA1 | CEO and ExCo1 | All other employees (excluding |
| | | select roles in the UK/China2) in |
| | | countries where DSR may be |
| | | granted instead of deferred shares |
| FY of grant | 2022 PRR: granted in FY23 | 2021 PRR: granted in FY22 | |
| | Historical grants: on foot during FY23 | |
| | & FY22 | |
| | | 2022 and 2021 PRR: granted in FY23 |
| | | & FY22 |
| | | Historical grants: on foot during FY23 |
| | | & FY22 |
| Grant approach | 50% of the CEO and ExCo\u2019s (except | | |
| for the CRO) LTVR was received as RR | | |
| and 50% as PR. 100% of the CRO and | | |
| GGM IA\u2019s LTVR was received as RR. | | |
| | 100% of the CEO\u2019s LTVR and 50% of | |
| | ExCo\u2019s VR (except for the CRO who | |
| | received 50% VR as DSR instead) was | |
| | received as PR. | |
| | | If VR is at or exceeds AUD 100,000, |
| | | then 60% of total VR amount is |
| | | deferred. |
| Conditions | RR and PR provide a right to acquire | | |
| one ordinary ANZ share at nil cost \u2013 | | |
| subject to time and performance | | |
| conditions. | | |
| Awarded subject to: | | |
| \u2022RR: pre-grant assessment (risk- | | |
| based measures) | | |
| \u2022RR and PR: shareholder approval | | |
| at Annual General Meeting (AGM) | | |
| for CEO award | | |
| Performance condition tested at end | | |
| of four-year performance period: | | |
| \u2022RR: pre-vest assessment (risk- | | |
| based measures) | | |
| \u2022PR: relative and absolute Total | | |
| Shareholder Return (TSR) hurdles | | |
| Deferral period3 = four-year | | |
| performance period (commencing 1 | | |
| October) + holding period (which | | |
| commences the day after end of | | |
| performance period and finishes on | | |
| the 4th, 5th or 6th anniversary of grants | | |
| (CEO only for year 6)). | | |
| Further details provided in section | | |
| 7.2 of the 2023 Remuneration Report. | | |
| | Awarded at the end of the year | |
| | subject to shareholder approval at | |
| | AGM for CEO award. | |
| | PR performance condition tested | |
| | (relative and absolute TSR hurdles) at | |
| | the end of four-year performance | |
| | period. | |
| | The four-year performance period | |
| | commenced on 22 November to 21 | |
| | November four years later. | |
| | The deferral period is four years. | |
| | Further details are provided in section | |
| | 5.2.3a of the 2021 Remuneration | |
| | Report. | |
| | | DSR provide a right to acquire one |
| | | ordinary ANZ share at nil cost after a |
| | | specified vesting period. |
| | | Deferred over years two, three and |
| | | four, where year 1 includes the |
| | | performance period. |
| Allocation value | Face value of ANZ shares traded on the ASX in the five trading days leading up | | |
| to and including 1 October (beginning of the financial year). | | |
| | | The fair value at the date of grant is |
| | | used to determine the number of |
| | | DSR to be allocated and is also used |
| | | for expensing purposes. The fair |
| | | value is adjusted for the absence of |
| | | dividends during the vesting period. |
1. All BEAR Accountable Executives.
2. Specific deferral arrangements also exist under ANZIP for roles defined as UK MRTs and China MRTs, in line with local regulatory requirements.
3. A dividend equivalent payment (DEP) is paid in cash at the end of the relevant deferral period, but is only made to the extent that all or part of the underlying rights meet the relevant performance
condition and vest to the individual. Dividend equivalents accrue over the full deferral period for RR, and only during the holding period for PR.
| Award Type | LTVR (RR & PR) | LTVR / VR historical (PR) | ANZIP VR (DSR) |
| Allocation timing | LTVR awarded around late November/December (subject to shareholder | | |
| approval for CEO). | | |
| | | Granted in late November. |
| Start of FY | End of FY | |
| 2023 grants | During 2023, we granted 393,419 RR | | |
| and 325,880 PR (2022: 542,747 PR). | | |
| | | During 2023, we granted 2,386,278 |
| | | DSR (no performance hurdles) |
| | | (2022: 2,576,907). |
| Downward adjustment | Board discretion was not exercised to apply malus or clawback to any RR or PR | | |
| in 2023 (2022: nil PR). | | |
| | | Board discretion was not exercised |
| | | to apply malus or clawback to any |
| | | deferred share rights in 2023 |
| | | (2022: nil). |
i
ii) Exceptional circumstances
| Remuneration forgone | As per Deferred Share Plan in countries where DSR may be granted instead of deferred shares. |
| Retention | |
Options, Deferred Share Rights, Restricted Rights and Performance Rights on Issue
As at 10 November 2023, there were 396 holders of 4,839,042 DSR on issue, 10 holders of 362,991 RR on issue and 10 holders of 1,510,080 PR on issue.
Options/Rights Movements
This table shows the options/rights over unissued ANZ shares and their related weighted average (WA) exercise prices as at the beginning and end of
2023 and the movements during 2023:
| Opening | | | | | |
| balance | | | | | |
| 1 Oct 2022 | Granted | Forfeited1 | Expired | Exercised | |
| | | | | | Closing |
| | | | | | balance |
| | | | | | 30 Sep 2023 |
| Number of options/rights | 6,209,040 | 3,105,577 | (428,483) | 0 | (2,166,618) | 6,719,516 |
| WA exercise price | $0.00 | $0.00 | $0.00 | $0.00 | $0.00 | $0.00 |
| WA closing share price | | | | | | $24.30 |
| WA remaining contractual life | | | | | | 1.9 years |
| WA exercise price of all exercisable | | | | | | |
| options/rights outstanding | | | | | | $0.00 |
| Outstanding exercisable options/rights | | | | | | 124,377 |
This table shows the options/rights over unissued ANZ shares and their related weighted average exercise prices as at the beginning and end of 2022
and the movements during 2022:
| Opening | | | | | |
| balance | | | | | |
| 1 Oct 2021 | Granted | Forfeited1 | Expired | Exercised | |
| | | | | | Closing |
| | | | | | balance |
| | | | | | 30 Sep 2022 |
| Number of options/rights | 6,307,778 | 3,119,654 | (747,744) | 0 | (2,470,648) | 6,209,040 |
| WA exercise price | $0.00 | $0.00 | $0.00 | $0.00 | $0.00 | $0.00 |
| WA closing share price | | | | | | $25.56 |
| WA remaining contractual life | | | | | | 1.9 years |
| WA exercise price of all exercisable | | | | | | |
| options/rights outstanding | | | | | | $0.00 |
| Outstanding exercisable options/rights | | | | | | 141,633 |
1. Refers to any circumstance where equity can be forfeited (for example on cessation, downward adjustment or performance conditions not met).
All of the shares issued as a result of the exercise of options/rights during 2023 and 2022, were issued at a nil exercise price.
As at the date of the signing of the Directors\u2019 Report on 10 November 2023:
\u2022no options/rights over ordinary shares have been granted since the end of 2023; and
\u2022no shares issued as a result of the exercise of options/rights since the end of 2023.
Fair Value Assumptions
When determining the fair value, we apply the standard market techniques for valuation, including Monte Carlo and/or Black Scholes pricing models.
We do so in accordance with the requirements of AASB 2
Share-based Payments
. The models take into account early exercise of vested equity, non-
transferability and internal/external performance hurdles (if any).
The table below shows the significant assumptions we used as inputs into our fair value calculation of instruments granted during the period. We
present the values as weighted averages, but the specific values we use for each allocation are the ones we use for the fair value calculation.
| 2023 | | | 2022 | |
| Deferred | | | | |
| share | | | | |
| rights | | | | |
| | Restricted | | | |
| | rights | | | |
| | | Performance | | |
| | | rights | | |
| | | | Deferred | |
| | | | share | |
| | | | rights | |
| | | | | Performance |
| | | | | rights |
| Exercise price ($) | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 |
| Share closing price at grant date ($) | 24.67 | 24.54 | 24.51 | 26.62 | 26.92 |
| Expected volatility of ANZ share price (%)1 | 20.0 | 20.0 | 20.0 | 20.0 | 20.0 |
| Equity term (years) | 2.1 | 6.6 | 6.6 | 2.2 | 6.0 |
| Vesting period (years) | 2.0 | 4.6 | 4.6 | 2.1 | 4.0 |
| Expected life (years) | 2.0 | 4.6 | 4.6 | 2.1 | 4.0 |
| Expected dividend yield (%) | 6.25 | 6.25 | 6.25 | 5.50 | 5.50 |
| Risk free interest rate (%) | 3.20 | 3.36 | 3.36 | 0.80 | 1.25 |
| Fair value ($) | 21.81 | 18.61 | 9.85 | 23.71 | 10.38 |
1. Expected volatility represents a measure of the amount by which ANZ\u2019s share price is expected to fluctuate over the life of the rights. The measure of volatility used in the model is the annualised standard
deviation of the continuously compounded rates of return on the historical share price over a defined period of time preceding the date of grant. This historical average annualised volatility is then used to
estimate a reasonable expected volatility over the expected life of the rights.
SATISFYING EQUITY AWARDS
All shares underpinning equity awards may be purchased on market, reallocated or be newly issued shares, or a combination.
The equity we purchased on market during the 2023 financial year (either under the ANZ Employee Share Acquisition Plan and the ANZ Share Option
Plan, or to satisfy options or rights) for all employees amounted to 816,023 shares at an average price of $24.35 per share (2022: 4,230,962 shares at an
average price of $27.57 per share).
31. RELATED PARTY DISCLOSURES
KEY MANAGEMENT PERSONNEL COMPENSATION
Key Management Personnel (KMP) are Directors of ANZBGL (whether executive directors or otherwise), and those personnel with a key responsibility
for the strategic direction and management of the Group (i.e., members of the Group Executive Committee (ExCo)) who have Banking Executive
Accountability Regime (BEAR) accountability and who report to the Chief Executive Officer (CEO). KMP compensation included within total personnel
expenses in Note 4 Operating Expenses is as follows:
| Consolidated | |
| 20231 | 2022 |
| $'000 | $'000 |
| Short-term benefits | 21,072 | 18,294 |
| Post-employment benefits | 483 | 394 |
| Other long-term benefits | 212 | 160 |
| Termination benefits | 31 | - |
| Share-based payments | 8,303 | 7,368 |
| Total | 30,101 | 26,216 |
1. Includes former disclosed KMP until the end of their employment.
KEY MANAGEMENT PERSONNEL LOAN TRANSACTIONS
Loans made to KMP are made in the ordinary course of business and on normal commercial terms and conditions that are no more favourable than
those given to other employees or customers, including the term of the loan, security required and the interest rate. No amounts have been written
off during the period, or individual provisions raised in respect of these balances. Details of the terms and conditions of lending products can be
found on anz.com. The aggregate balance of loans (including credit card balances) made, guaranteed or secured, and undrawn facilities to KMP
including their related parties, were as follows:
| Consolidated | | The | |
| | | Company | |
| 2023 | 2022 | 2023 | 2022 |
| $'000 | $'000 | $'000 | $'000 |
| Loans advanced1 | 31,068 | 30,679 | 21,824 | 17,610 |
| Undrawn facilities1 | 1,582 | 2,020 | 1,373 | 1,822 |
| Interest charged2 | 1,346 | 790 | 523 | 293 |
1. Balances are as at the balance date (for KMP in office at balance date) or at the date of cessation of former KMP. Comparatives have been amended to include opening balances (at date of commencement)
for new KMP in the current period.
2. Interest charged is for all KMP\u2019s during the period.
KEY MANAGEMENT PERSONNEL HOLDINGS OF ANZ SECURITIES
KMP, including their related parties, held the Company\u2019s subordinated debt and following the Restructure, shares, share rights and options over shares
in the ultimate controlling entity, ANZ Group Holdings Limited directly, indirectly or beneficially as shown below:
| Consolidated | |
| 2023 | 2022 |
| Number | Number |
| Shares, options and rights1 | 3,478,840 | 2,842,789 |
| Subordinated debt1 | 26,140 | 26,140 |
1. Balances are as at the balance sheet date (for KMP in office at balance sheet date) or at the date of cessation of former KMP. Comparatives have been amended to include opening balances (at date of
commencement) for new KMP in the current period.
OTHER TRANSACTIONS OF KEY MANAGEMENT PERSONNEL AND THEIR RELATED PARTIES
The aggregate of deposits of KMP and their related parties with the Group were $41 million (2022: $30 million) and with the Company were $27
million (2022: $21 million).
Other transactions with KMP and their related parties included amounts paid to the Group in respect of investment management service fees,
brokerage and bank fees and charges. The Group has reimbursed KMP for the costs incurred for security and secretarial services associated with the
performance of their duties. These transactions are conducted on normal commercial terms and conditions no more favourable than those given to
other employees or customers. Gifts were provided to KMP on retirement amounting to $2,476 during the year (2022: $4,944).
ASSOCIATES
We disclose significant associates in Note 26 Investments in Associates. During the course of the financial year, transactions conducted with all
associates were on terms equivalent to those made on an arm\u2019s length basis.
| Consolidated | | The | |
| | | Company | |
| 2023 | 2022 | 2023 | 2022 |
| $'000 | $'000 | $'000 | $'000 |
| Amounts receivable from associates | 13 | 86,469 | - | 18,572 |
| Amounts payable to associates | 990 | 102,042 | - | 101,198 |
| Interest revenue from associates | 9,391 | 5,570 | 7,860 | 4,477 |
| Interest expense to associates | 353 | 34 | 307 | 26 |
| Other revenue from associates | 5,816 | 14,296 | 5,816 | 14,296 |
| Other expenses paid to associates | 3,088 | 11,159 | 704 | 8,592 |
| Guarantees given to associates | - | 72 | - | 72 |
| Dividend income from associates | 42,316 | 38,692 | - | - |
| Undrawn facilities | - | 94,097 | - | 94,097 |
There have been no material guarantees given or received. No amounts receivable from the associates have been written-off during the period, or
individual provisions raised in respect of these balances.
SUBSIDIARIES
We disclose material controlled entities in Note 25 Controlled Entities. During the financial year, subsidiaries conducted transactions with each other
and with associates on terms equivalent to those on an arm\u2019s length basis. As at 30 September 2023, we consider all outstanding amounts on these
transactions to be fully collectible.
Other intragroup transactions include providing management and administrative services, staff training, data processing facilities, transfer of tax losses,
and the leasing of premises and equipment. The Company also issued letters of comfort and guarantees in respect of certain subsidiaries in the
normal course of business.
RELATED ENTITIES
Following the Restructure of the Group on 3 January 2023, ANZ Group Holdings Limited became the ultimate controlling entity of the Group and ANZ
Bank HoldCo became the immediate parent entity of ANZBGL. Since the Restructure, a number of transactions have occurred between the Group and
related parties within the ANZ Group. These transactions include leasing arrangements, funding activities, deposits and tax funding arrangements.
Additionally, as part of the Restructure, certain associate entities of the Group were transferred to ANZ NBH Pty Ltd. Following the transfer, these
investments ceased being associates of the Group and became other related parties of the Group.
These transactions are conducted on terms equivalent to those on an arm\u2019s length basis. As at 30 September 2023, we consider all outstanding
amounts on these transactions to be fully recoverable.
The following balances with related ANZ Group entities were outstanding at 30 September 2023:
| 2023 |
| $m |
| Amounts due from ultimate controlling entity | 85 |
| Amounts due from other related entities | 696 |
| Amounts due to ultimate controlling entity | 1 |
| Amounts due to other related entities | 270 |
| Deposits from ultimate controlling entity | 183 |
| Deposits from other related entities | 111 |
| Undrawn facilities for other related entities | 31 |
During 2023, the following transactions occurred with related ANZ Group entities:
| 2023 |
| $m |
| Dividend paid to parent entity | 4,387 |
| Interest paid to ultimate controlling entity | 6 |
| Interest paid to other related entities | 26 |
| Interest received from other related entities | 42 |
| Other revenue received from other related entities | 18 |
In addition, ANZBGL has right-of-use assets of $689 million and lease liabilities of $815 million with ANZ Group Services Pty Ltd at 30 September 2023.
For the year ended 30 September 2023, the associated depreciation on the right-of-use assets was $36 million and interest paid on the lease liabilities
was $15 million (the interest paid on lease liabilities has been included in the table above within interest paid to other related entities).
32. COMMITMENTS, CONTINGENT LIABILITIES AND CONTINGENT ASSETS
CREDIT RELATED COMMITMENTS AND CONTINGENCIES
| | Consolidated | | The Company | |
| | 2023 | 2022 | 2023 | 2022 |
| | $m | $m | $m | $m |
| Contract amount of: | | | | |
| Undrawn facilities | 240,711 | 236,051 | 206,405 | 201,204 |
| Guarantees and letters of credit | 23,556 | 23,729 | 20,816 | 21,557 |
| Performance related contingencies | 26,615 | 26,036 | 25,891 | 24,634 |
| Total | 290,882 | 285,816 | 253,112 | 247,395 |
UNDRAWN FACILITIES
The majority of undrawn facilities are subject to customers maintaining specific credit and other requirements or conditions. Many of these facilities
are expected to be only partially used, and others may never be used at all. As such, the total of the nominal principal amounts is not necessarily
representative of future liquidity risks or future cash requirements. Based on the earliest date on which the Group or the Company may be required to
pay, the full amount of undrawn facilities for the Group and the Company mature within 12 months.
GUARANTEES, LETTERS OF CREDIT AND PERFORMANCE RELATED CONTINGENCIES
Guarantees, letters of credit and performance related contingencies relate to transactions that the Group has entered into as principal \u2013 including
guarantees, standby letters of credit and documentary letters of credit.
Documentary letters of credit involve the Group issuing letters of credit guaranteeing payment in favour of an exporter. They are secured against an
underlying shipment of goods or backed by a confirmatory letter of credit from another bank.
Performance-related contingencies are liabilities that oblige the Group to make payments to a third party if the customer fails to fulfil its non-
monetary obligations under the contract.
To reflect the risk associated with these transactions, we apply the same credit origination, portfolio management and collateral requirements that we
apply to loans. The contract amount represents the maximum potential amount that we could lose if the counterparty fails to meet its financial
obligations. As the facilities may expire without being drawn upon, the notional amounts do not necessarily reflect future cash requirements. Based
on the earliest date on which the Group or the Company may be required to pay, the full amount of guarantees and letters of credit and performance-
related contingencies for the Group and the Company mature within 12 months.
OTHER CONTINGENT LIABILITIES
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 (refer to Note 22 Other 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.
A description of contingent liabilities and contingent assets as at 30 September 2023 is set out below.
REGULATORY AND CUSTOMER EXPOSURES
The Group regularly engages with its regulators in relation to regulatory investigations, surveillance and reviews, reportable situations, civil
enforcement actions (whether by court action or otherwise), formal and informal inquiries and regulatory supervisory activities in Australia and
globally. The Group has received various notices and requests for information from its regulators as part of both industry-wide and Group-specific
reviews and has also made disclosures to its regulators at its own instigation. The nature of these interactions can be wide ranging and, for example,
include or have included in recent years a range of matters including responsible lending practices, regulated lending requirements, product
suitability and distribution, interest and fees and the entitlement to charge them, customer remediation, wealth advice, insurance distribution, pricing,
competition, conduct in financial markets and financial transactions, capital market transactions, anti-money laundering and counter-terrorism
financing obligations, privacy obligations and information security, business continuity management, reporting and disclosure obligations and
product disclosure documentation. 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.
SOUTH AFRICAN RATE ACTION
In February 2017, the South African Competition Commission commenced proceedings against local and international banks including the Company
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.
CAPITAL RAISING ACTION
In September 2018, the Australian Securities and Investments Commission (ASIC) commenced civil penalty proceedings against the Company alleging
failure to comply with continuous disclosure obligations in connection with the Company\u2019s August 2015 underwritten institutional share placement.
In October 2023, the Federal Court of Australia found that the Company should have notified the ASX of the joint lead managers\u2019 take-up of
placement shares. No order has yet been made in respect of payment of legal costs or the amount of a civil penalty. The maximum penalty is $1
million.
ESANDA DEALER CAR LOAN LITIGATION
In August 2020, a class action was brought against the Company alleging unfair conduct, misleading or deceptive conduct and equitable mistake in
relation to the use of flex commissions in dealer arranged Esanda car loans. The Company is defending the allegations.
ONEPATH SUPERANNUATION LITIGATION
In December 2020, a class action was brought against OnePath Custodians, OnePath Life and the Company alleging that OnePath Custodians
breached its obligations under superannuation legislation, and its duties as trustee, in respect of superannuation investments and fees. The claim also
alleges that the Company was involved in some of OnePath Custodians\u2019 investment breaches. The Company is defending the allegations.
NEW ZEALAND LOAN INFORMATION LITIGATION
In September 2021, a representative proceeding was brought against ANZ Bank New Zealand Limited, alleging breaches of disclosure requirements
under consumer credit legislation in respect of variation letters sent to certain loan customers. ANZ Bank New Zealand Limited is defending the
allegations.
CREDIT CARDS LITIGATION
In November 2021, a class action was brought against the Company alleging that certain interest terms in credit card contracts were unfair contract
terms and that it was unconscionable for the Company to rely on them. The Company is defending the allegations.
ROYAL COMMISSION
The Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry released its final report on 4 February 2019.
Following the Royal Commission there have been, and continue to be, additional costs and further exposures, including exposures associated with
further regulator activity or potential customer exposures such as class actions, individual claims or customer remediation or compensation activities.
The outcomes and total costs associated with these 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. These claims will be
defended.
WARRANTIES, INDEMNITIES AND PERFORMANCE MANAGEMENT FEES
The Group has provided warranties, indemnities and other commitments in favour of the purchaser and other persons in connection with various
disposals of businesses and assets and other transactions, covering a range of matters and risks. It is exposed to claims under those warranties,
indemnities and commitments, some of which are currently active. The outcomes and total costs associated with these exposures remain uncertain.
The Group has entered an arrangement to pay performance management fees to external fund managers in the event predetermined performance
criteria are satisfied in relation to certain Group investments. The satisfaction of the performance criteria and associated performance management fee
remains uncertain.
CLEARING AND SETTLEMENT OBLIGATIONS
Certain group companies have a commitment to comply with rules governing various clearing and settlement arrangements which could result in a
credit risk exposure and loss if another member institution fails to settle its payment clearing activities. The Group\u2019s potential exposure arising from
these arrangements is unquantifiable in advance.
Certain group companies hold memberships of central clearing houses, including ASX Clear (Futures), London Clearing House (LCH), SwapClear and
RepoClear, Korea Exchange (KRX), Hong Kong Exchange (HKEX), Clearing Corporation of India and the Shanghai Clearing House. These memberships
allow the relevant group company to centrally clear derivative instruments in line with cross-border regulatory requirements. Common to all of these
memberships is the requirement for the relevant group company to make default fund contributions. In the event of a default by another member,
the relevant group company could potentially be required to commit additional default fund contributions which are unquantifiable in advance.
PARENT ENTITY GUARANTEES
Certain group companies have issued letters of comfort and guarantees in respect of certain subsidiaries in the normal course of business. Under
these letters and guarantees, the issuing entity undertakes to ensure that those subsidiaries continue to meet their financial obligations, subject to
certain conditions including that the subsidiary remains a controlled entity.
SALE OF GRINDLAYS BUSINESS
On 31 July 2000, the Company completed the sale to Standard Chartered Bank (SCB) of ANZ Grindlays Bank Limited (Grindlays) and certain other
businesses. The Company provided warranties and indemnities relating to those businesses.
The indemnified matters include civil penalty proceedings and criminal prosecutions brought by Indian authorities against Grindlays and certain of its
officers, in relation to certain transactions conducted in 1991 that are alleged to have breached the
Foreign Exchange Regulation Act, 1973
. Civil
penalties were imposed in 2007 which are the subject of appeals. The criminal prosecutions are being defended.
CONTINGENT ASSETS
NATIONAL HOUSING BANK
The Company is pursuing recovery of the proceeds of certain disputed cheques which were credited to the account of a former Grindlays customer in
the early 1990s.
The disputed cheques were drawn on the National Housing Bank (NHB) in India. Proceedings between Grindlays and NHB concerning the proceeds of
the cheques were resolved in early 2002.
Recovery is now being pursued from the estate of the Grindlays customer who received the cheque proceeds. Any amounts recovered are to be
shared between the Company and NHB.
33. AUDITOR FEES
| | Consolidated | | The Company | |
| | 2023 | 2022 | 2023 | 2022 |
| $\u2019000 | $\u2019000 | $\u2019000 | $\u2019000 |
| KPMG Australia | | | | |
| Audit or review of financial reports1 | 9,567 | 8,217 | 9,134 | 7,726 |
| Audit-related services2 | 3,882 | 6,037 | 3,808 | 5,956 |
| Non-audit services3 | 10 | 8 | 10 | 8 |
| Total4 | 13,459 | 14,262 | 12,952 | 13,690 |
| | | | | |
| Overseas related practices of KPMG Australia | | | | |
| Audit or review of financial reports | 6,157 | 5,808 | 1,994 | 2,033 |
| Audit-related services2 | 1,933 | 1,459 | 911 | 831 |
| Non-audit services3 | 95 | - | - | - |
| Total | 8,185 | 7,267 | 2,905 | 2,864 |
| Total auditor fees | 21,644 | 21,529 | 15,857 | 16,554 |
1. Includes audit fees paid on behalf of other entities outside the Group.
2. Group audit-related services comprise prudential and regulatory services of $4.11 million (2022: $6.26 million), comfort letters $0.57 million (2022: $0.52 million) and other services $1.14 million (2022: $0. 71
million). Company audit-related services comprise prudential and regulatory services of $3.69 million (2022: $5.90 million), comfort letters $0.53 million (2022: $0.48 million) and other services $0.50 million
(2022: $0.41 million).
3. The nature of non-audit services for the Group and the Company includes methodology, procedural and administrative reviews. Further details are provided in the Directors\u2019 Report.
4. Inclusive of goods and services tax.
The Group\u2019s Policy allows KPMG Australia or any of its related practices to provide assurance and other audit-related services that, while outside the
scope of the statutory audit, are consistent with the role of an external auditor. These include regulatory and prudential reviews requested by
regulators such as APRA. Any other services that are not audit or audit-related services are non-audit services. The Policy allows certain non-audit
services to be provided where the service would not contravene auditor independence requirements. KPMG Australia or any of its related practices
may not provide services that are perceived to be in conflict with the role of the external auditor or breach auditor independence. These include
consulting advice and subcontracting of operational activities normally undertaken by management, and engagements where the external auditor
may ultimately be required to express an opinion on its own work.
34. PENDING ORGANISATIONAL CHANGES IMPACTING FUTURE REPORTING PERIODS
Suncorp Bank Acquisition
On 18 July 2022, the ANZ Group announced an agreement to purchase 100% of the shares in SBGH Limited, the immediate non-operating holding
company of Suncorp Bank. The acquisition was subject to Australian Competition and Consumer Commission (ACCC) authorisation or approval. The
ACCC declined to grant authorisation for this acquisition in August 2023 and this decision is currently subject to review by the Australian Competition
Tribunal. In addition, the acquisition remains subject to satisfaction of certain conditions, including Federal Treasurer approval and certain
amendments to the
State Financial Institutions and Metway Merger Act 1996 (QLD)
. ANZBGL will also have a termination right under the Suncorp
Bank Sale Agreement if APRA issues a written communication to ANZBGL under or in connection with APS 222
Associations with Related Entities
to
the effect that ANZBGL must not proceed with completion of the acquisition. Assuming these conditions are satisfied, and merger approval is granted,
it is expected to occur in mid-calendar year 2024.
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