More annual reports from Australia and New Zealand Banking Group:
2023 Report2020 ANNUAL REPORT
Overview
How we
create value
Performance
overview
Remuneration
report
Directors’
report
Financial
report
Shareholder
information
CUSTOMER STORY
ADAPTING
Growing business
during a crisis
Photo credit: Simon Schluter, The Age
CONTENTS
An ANZ customer for more than 50 years, fellahamilton has been
in the business of Australian women’s fashion since the early 1970s.
Today, the company is managed by David Hamilton (son of the
eponymous founder) and his wife, Sharon Hamilton, CEO.
When the COVID-19 pandemic first hit Australia in March,
times were challenging.
Within the first few weeks of lockdowns,
they had to let go of employees at their
Moorabbin factory and retail stores
nationally were shut.
However, shortly after, a doctor friend of
Sharon’s asked her to make a scrub set, as
there was a limited supply of Personal
Protective Equipment (PPE).
Sharon recalls the moment demand for
their washable, hospital-grade PPE started
snowballing and a new direction for the
business appeared in ‘fellahealthwear’.
“I’m a pharmacist by profession, with many
friends in the medical industry. After the
first request, I received another, and another,
and now we’re making and distributing
thousands of scrubs and gowns to GPs,
dentists and hospitals. We’ve hired back
all of our staff and have never been busier,”
says Sharon.
David credits the move into making PPE
to his wife’s optimistic nature and tendency
to ‘think outside the box’.
“Changing direction wasn’t easy,” says David.
“It needed us to have intestinal fortitude and
complete dedication to what we thought
was the right move for our business.”
“The road ahead is going to be tough.
While we’re doing well at the moment, we
are uncertain about what the future holds,
so we need to remain adaptable and agile
in response to what may come next from
the pandemic.”
Overview
2020 performance snapshot
Our 2020 reporting suite
What matters most
Chairman’s message
CEO’s message
COVID-19 – protecting our customers,
employees and the community
How we create value
About our business
Our vision and strategy
How we create value
Our operating environment
1
1
2
3
4
6
8
10
10
11
12
14
Our customers
Our divisions
Our people
Our community
18
25
28
32
Our approach to climate change 34
Governance
Risk management
Performance overview
Remuneration report
Directors’ report
Financial report
Shareholder information
38
49
54
74
109
111
234
243
Becoming a fairer and more responsible bank 16
Glossary
2020 performance snapshot
$9.08b
funded and facilitated
in sustainable solutions
since 2019
6.2%
Cash return
on equity1
11.3%
Common equity
Tier 1 Capital3
$139.5m
in community
investment4
>61,000
people have been
reached through our
financial wellbeing
programs, MoneyMinded
and Saver Plus7
60c
Dividend for
2020 per share
$3.8b
Cash profit1
$20.04
Net tangible
assets per share2
132.7c
Cash earnings
per share1
~1.8m
customer accounts
remediated5
33.4%
of women
in leadership6
1. On a cash profit (continuing operations) basis. Excludes non-core items included in statutory profit and discontinued operations included in cash profit. It is provided to assist readers in
understanding the result of the ongoing business activities of the Group. For further information on adjustments between statutory and cash profit refer to page 56. 2. Equals shareholders’
equity less preference share capital, goodwill, software and other intangible assets divided by the number of ordinary shares. 3. APRA Level 2. 4. Figure includes forgone revenue of
$105 million, being the cost of providing low or fee free accounts to a range of customers such as government benefit recipients, not-for-profit organisations and students. 5. Refers to
Australian customer accounts in the last 12 months. 6. Measures representation at the Senior Manager, Executive and Senior Executive levels. Includes all employees regardless of leave
status but not contractors (who are included in Full Time Equivalents (FTE)). 7. Includes individuals who have participated in more than one program or product (for example, people who
have participated in MoneyMinded as part of Saver Plus are counted twice as they are included in both the MoneyMinded and Saver Plus totals).
1
ANZ 2020 Annual Report Overview
How we
create value
Performance
overview
Remuneration
report
Directors’
report
Financial
report
Shareholder
information
Our 2020 reporting suite
Integrated reporting
This report includes information on our financial and non-financial
performance, providing readers with a holistic view of the Australia
and New Zealand Banking Group Limited’s1 performance. In
preparing pages 1 to 72, we have again drawn on aspects of the
International Integrated Reporting Framework to describe how
our business model, strategy, governance and risk management
processes help us manage risks and opportunities in our operating
environment and deliver value for our stakeholders. We outline our
response to external social and environmental challenges, including
how we are supporting our stakeholders through the COVID-19
pandemic, continuing to implement recommendations from the
Royal Commission and strengthening our approach to climate
change and human rights.
Annual Report structure
The required elements of the Directors Report, including the
Operating and Financial Review (OFR) as required by ASIC
Regulatory Guide 247, are covered on pages 1 to 70. Commentary
on our performance overview contained on pages 54 to 71
references information reported in the Financial Report
pages 111 to 233.
The Remuneration Report pages 74 to 108 and the Financial Report
pages 111 to 233 have been audited by KPMG. KPMG also provides
limited assurance over Environment, Social and Governance (ESG)
content2 within this Annual Report. A copy of KPMG’s limited
assurance report is contained in the ANZ 2020 ESG Supplement.
This report covers all ANZ operations worldwide over which, unless
otherwise stated, we have control for the financial year commencing
on 1 October 2019 and ending 30 September 2020. Monetary
amounts in this document are reported in Australian dollars,
unless otherwise stated.
Additional information
We produce a suite of reports to meet the needs and requirements
of a wide range of stakeholders, including shareholders, customers,
employees, regulators, non-government organisations and
the community. In 2021 we intend to review our disclosures to
ensure they are meeting the evolving needs of our stakeholders.
Specifically, we will consider whether there are additional
reporting frameworks or metrics we could use to enhance our
disclosures. In this respect we are closely watching work underway
by key sustainability disclosure bodies to develop a coherent and
comprehensive corporate reporting system in which existing
sustainability standards and frameworks complement financial
accounting principles.
Our 2020 Corporate Governance Statement discloses how we have
complied with the ASX Corporate Governance Council’s ‘Corporate
Governance Principles and Recommendations – 3rd edition’ and is
available at anz.com/corporategovernance.
Our ESG Supplement complements this Annual Report, providing
stakeholders with more detailed ESG disclosures, including:
performance against our ESG targets and approach to our priority
areas of fair and responsible banking, financial wellbeing,
environmental sustainability and housing. In response to stakeholder
feedback, for the first time, we are releasing our ESG Supplement
at the same time as this Annual Report.
The following documents are available at
anz.com/shareholder/centre:
• News Release
• Consolidated Financial Report, Dividend Announcement
& Appendix 4E
• Results Presentation and Investor Discussion Pack
• Annual Review3
• The Company Financial Report
• Principal Risks and Uncertainties Disclosure
• APS 330 Pillar III Disclosure
• Climate-related Financial Disclosures
We are continually seeking to improve our reporting suite and
welcome feedback on this report. Please address any questions,
comments or suggestions to investor.relations@anz.com.
2020 ANNUAL REVIEW
anz.com/annualreport
2020 ESG SUPPLEMENT
anz.com/cs
2020 CLIMATE-RELATED
FINANCIAL DISCLOSURES
anz.com/shareholder/centre
2020 CORPORATE
GOVERNANCE STATEMENT
anz.com/corporategovernance
1. Group: Australia and New Zealand Banking Group Limited (the Company) and the entities it controlled at the year end and from time to time during the financial year (together, the Group).
2. ESG content includes the following sections: 2020 performance snapshot, What matters most, COVID-19 – protecting our customers, employees and the community, Becoming a fairer and
more responsible bank, Our customers, Our people, Our community, Our approach to climate change and ESG metrics on page 72. 3. The 2020 Annual Review is comprised of pages 1 to 72
and 241 to 242 of this Annual Report and a Remuneration Overview.
2
What matters most
Through our annual materiality assessment we engage with internal and external stakeholders
to inform our identification of ESG risks and opportunities. We seek to identify those issues that
have the most potential to impact our ability to operate successfully and create value for
our shareholders and other stakeholders.
We use the assessment to inform our strategy, ESG targets and
external reporting.
In 2019 our materiality assessment was focused on issues arising
from the Royal Commission. This year we returned to a broader
focus, with an emphasis on the ‘social’ aspects of ESG, and
specifically our support for customers, employees and the
community in response to COVID-19.
The bank’s response was well regarded by external stakeholders,
with several commenting how the banking sector has responded to
the pandemic has helped to improve community trust lost during
the Royal Commission. They did note, however, that despite the
positive steps taken since the Royal Commission, trust should
remain a key focus and its recovery is fragile.
Both external and internal stakeholder groups identified fairness
and ethical conduct, financial wellbeing and customer experience
as priorities. Some external stakeholders also highlighted the
importance of continuing to act on climate change, while internal
stakeholders emphasised the importance of fraud and data security.
FAIRNESS AND ETHICAL CONDUCT: a strong
corporate culture, known for ethics, values, fairness and
transparency. Simple and understandable products
and communications (i.e. product disclosure, including
bank fees and charges) and appropriate hardship/
collections policies.
FINANCIAL WELLBEING: promoting and enabling
access to safe and affordable products and services,
particularly lower-income and vulnerable customers.
Work with cross-sector partners to help customers,
employees and the broader community meet current
financial commitments and needs, and improve their
financial resilience.
CUSTOMER EXPERIENCE: delivering value and
improved customer experience through appropriate
financial products and services for all customers, small
business and retail.
CLIMATE CHANGE: managing the business risks and
opportunities associated with climate change. Includes
the role we play in supporting our customers to
transition to a low carbon economy.
FRAUD AND DATA SECURITY: policies and processes in
place to prevent fraud and protect customer data and
privacy. Includes customer access to personal data.
WE ASKED EXTERNAL STAKEHOLDERS:
What is one action ANZ could take to enhance
its reputation as a fair and ethical organisation?
THEY SAID:
— 1
— 2
— 3
— 4
Support customers through times of hardship
Continue to resolve issues raised in the
Royal Commission
Link executive remuneration and performance
metrics to broader ESG considerations
Lead on sustainable finance
These insights were presented to the executive Ethics and
Responsible Business Committee and the Board Ethics, Environment,
Social and Governance Committee and helped to inform the
development of our ESG targets, as well as our continued response
to COVID-19, including our customer Statement of Intent
(see page 8).
Our material ESG issues are ‘mapped’ to the bank’s material risks
on pages 52-53.
Supplementary disclosures
The full list of our material ESG issues, as well as the key
steps in the materiality assessment process, is discussed
in our 2020 ESG Supplement available at anz.com/cs.
Detailed information on other ways in which we have
engaged with stakeholders is also included in the 2020
ESG Supplement.
3
ANZ 2020 Annual Report Overview
How we
create value
Performance
overview
Remuneration
report
Directors’
report
Financial
report
Shareholder
information
Chairman’s message
COVID-19 has had a profound impact on all our lives.
Whether it is the devastating loss of lives, the crippling
of some businesses and impact on livelihoods, limitations
placed on social activities and the way we are working –
2020 will be remembered for generations.
ANZ has of course not been spared from
the effects of the pandemic. Our full-year
statutory profit of $3.6 billion was down
40% – levels not seen since the height of
the Global Financial Crisis.
Looking through the immediate impact
of COVID-19, the fundamental drivers of
our business continued to perform well.
We are fortunate the actions taken by
our management team over many years
to simplify and improve our operations
have the bank well positioned to support
our customers as well as supporting
economic recovery.
Despite the challenges facing the broader
economy, the Board was pleased to declare
a final dividend of 35 cents. This is on top of
the interim dividend announced in August,
taking the total payout to 60 cents per share.
Given the uncertain environment, we put
aside $2.7 billion for possible future credit
losses. This takes ANZ’s total credit provision
reserves to $5.9 billion.
We also continued to simplify the
business through the year. On 31 January,
we completed the previously announced
sale of our OnePath Pensions and
Investments business to IOOF Holdings
Limited and in September we completed
the sale of UDC Finance in New Zealand
to Shinsei Bank Limited.
During the most recent quarter, we
announced the sale of 1,300 offsite
Australian ATMs to Armaguard. While
we will continue to operate our 900
ATMs at our branches around Australia,
this was another step in achieving our
overall goal to be simpler, more
efficient and better managed.
Supporting customers
For ANZ, 2020 will ultimately be defined
by how we stepped up to support our
customers and the community through
this devastating global pandemic.
Almost overnight businesses that were
once thriving enterprises were restricted
from operating, families lost their main
source of income and millions faced
economic uncertainty, and our thoughts
are with those who have been directly
impacted.
I’m proud of the way our bank, under the
leadership of our Chief Executive Shayne
Elliott, has risen to support our customers
and I can assure shareholders ANZ will
continue to play a crucial role in the
economic recovery of Australia and
New Zealand.
David Gonski, AC
4
Already we have provided loan payment
deferrals for more than 142,000 home loans
and business loans in Australia and New
Zealand. This approach has provided
customers with the time they need to
recover while also protecting the interests
of shareholders.
While it’s an impossible task to provide
an accurate outlook for the future, I remain
optimistic about our prospects given
the positive way governments in our
key markets, particularly in Australia and
New Zealand, have responded to the
challenges of COVID-19.
Fortunately, we already are seeing the early
signs of recovery, particularly in those parts
of our business less impacted by COVID-19.
In Western Australia, for instance, our card
data shows spending on ‘dining & takeaway’
was up around 18% on the previous year.
Clearly there are still more challenges ahead
but these early signs provide us with a level
of confidence about the actions taken so far.
Executive remuneration
We know how we reward our most senior
people is important for many shareholders.
The Chair of our Human Resources
Committee, Ilana Atlas, AO, has provided
more detail in the Remuneration Report.
However, I can guarantee shareholders the
Board spent a great deal of time evaluating
the performance of the management team
and deciding how to reward them
appropriately.
The Board was pleased with the
performance this year and was particularly
impressed with the way the bank responded
to the challenges presented by COVID-19.
However, given the impact the pandemic
has had on our shareholders, customers
and the broader community, the Board
exercised its discretion by applying a 50%
reduction to the variable remuneration
for our executive team, including our
Chief Executive.
The Board also determined there would be
no fixed remuneration increases for any of
its Disclosed Executives, including the Chief
Executive Officer, for the coming year.
Board succession
As you may know, my time at ANZ came to
an end at the finalisation of this year’s result
on 28 October. At that date I had been a
director for more than 11 years, originally
serving between 2002 and 2007, and then
returning as Chair in 2014.
Serving as ANZ’s Chairman will always be a
highlight of my corporate career. Reflecting
on my time here, I am most proud to have
played a role in choosing Shayne Elliott to
be our Chief Executive and to work with
him to establish his talented leadership
team. I know I am leaving ANZ in good
shape under this strong leadership and
I will be keenly monitoring ANZ’s progress.
I am also delighted Paul O’Sullivan has
succeeded me as Chairman. Paul is an
outstanding company director who has
already made a strong contribution to the
Board. He has my absolute confidence.
Finally, I would like to thank shareholders
for their support over the years and
acknowledge the efforts of our 39,000
people who have been working hard for
our customers, shareholders and the
broader community.
David Gonski, AC Chairman
Message from Paul O’Sullivan
I am honoured to succeed David Gonski as the new
Chairman of ANZ. The bank has a proud 185-year history
and I look forward to contributing to its continued success.
While there will be much to consider in the coming year as economies recover
from the COVID-19 pandemic, my focus as Chairman will be to continue the work
we have been doing over many years to improve our operations and simplify the
bank, particularly through digital and technological innovation.
The Board will also pay close attention to our business growth strategy in the
constantly changing landscape in which we operate. Looking at how we will
ensure success and improved financial performance in the long-term will be
of critical importance.
Finally, I’d like to take this opportunity to acknowledge the enormous contribution
David has made and thank him on behalf of all shareholders for his hard work and
leadership over the last seven years as Chair.
David steered the Board through some challenging times and helped build an
organisation with a strong focus on governance, accountability, improved culture
and enhanced customer outcomes.
His efforts to strengthen and champion the
bank’s work in the area of Environment, Social
and Governance (ESG), especially with respect
to social and economic inclusion and climate
change, is a legacy of which he should be
very proud.
Paul D O’Sullivan
5
ANZ 2020 Annual Report Overview
How we
create value
Performance
overview
Remuneration
report
Directors’
report
Financial
report
Shareholder
information
Shayne Elliott
As a bank, we entered 2020 in robust
condition. We have a strong balance sheet
with record levels of capital and liquidity.
The work done over several years to simplify
the bank means we now focus only on the
things that matter, our people are more
engaged than ever and we are able to quickly
adapt to the challenges the future holds.
While COVID-19 has impacted many parts of
our business, we have not sat idle. Times of
crisis are when the best companies build for
the future in a prudent and disciplined
manner. We invested record levels to build
a better bank for our customers and staff,
while continuing to closely manage costs.
In Australia, we achieved strong growth
in our targeted home loan segments with
above system growth in the owner-occupier
market, driven particularly by the refinancing
market. Deposits remained strong as
customers took a sensible approach to
managing their household balance sheet.
We also saw an accelerated shift away from
the use of cash due to the pandemic and
we introduced new processes to help
customers move to online banking.
CEO’s message
We could never have forecast 2020, a year that started with
devastating bushfires in Australia and was followed by waves
of a terrible, global pandemic that continues to spread. We
still cannot predict its course but we do remain confident
we can deal with its impacts.
Our thoughts are with those who have
suffered from these events. We need
only look at some of the country towns
impacted by bushfires or the empty city
streets to know these crises have struck
at the heart of our community.
We want our customers to know we will
continue to do all we can to support them
through the tough times. Fortunately we
have never been in better shape to support
all our stakeholders through what will be
one of history’s periods of great volatility.
While the Chairman’s message has provided
an overview of our financial performance,
I would reiterate we were pleased with
how the business performed in difficult
trading conditions.
6
Times of crisis are when the best companies build for
the future in a prudent and disciplined manner.
The work done over many years to simplify
and refocus the Institutional business
proved beneficial in a market defined by
high levels of liquidity, low interest rates and
geopolitical tensions. Increased volatility led
to strong activity in Global Markets which
again performed well and demonstrated
the benefits of a diversified business. As
Australia’s leading international bank, we
remain well positioned to assist domestic
companies doing business in Asia as the
global economy improves.
COVID-19 appears contained in New Zealand
and we remain well positioned to benefit
from its subsequent economic recovery.
While it was a tough revenue environment,
given low interest rates and a focus on
reducing or simplifying fees, we have
maintained market leadership in our
targeted segments: home loans, deposits
and KiwiSaver.
Given the critical role data, insights and
automation will play over the coming years,
particularly as we respond to the challenges
of COVID-19 and the daily uncertainty that
brings, we also made changes to the
executive team with the addition of Emma
Gray to the new role of Group Executive
Data and Automation. This will be a critical
role in the continued digital transformation
of ANZ.
One of the most pleasing aspects of 2020
has been how our people have responded
to the challenge. We were able to successfully
move 95 per cent of our non-branch
employees to working productively from
home where they were able to support our
customers at a time of significant stress.
Employee engagement is at record levels.
I’ve been amazed at their dedication and
I’m proud to call them my colleagues.
Climate change
This year we have released an updated
Climate Change Statement that outlines our
approach and strengthened commitments
in support of a global transition to net zero
carbon emissions.
We understand the impact – positive and
negative – our financing has on climate
change. We have been working hard on
making a meaningful difference while
supporting long-standing customers who
are making the transition to a low carbon
future. Over the last five years, we have
reduced our lending to thermal coal mining
by almost 70 per cent and increased our
direct lending to renewables by 63 per cent.
Our 2020 Climate Change Statement
focuses on three main areas.
First, we will help our customers by
encouraging them to identify climate risks
and opportunities, create transition plans
and report publicly on their progress.
Second, we will support the transition of
industries to a low carbon future so they
can help grow the economy. A key element
for ANZ is we will no longer directly finance
new assets across the thermal coal value
chain and will exit all directly financed
coal-fired power stations and thermal
coal mines by 2030.
Thirdly, we will reduce our own impact
by managing and reducing emissions
from our operations. We will do this by
accelerating our emission reductions by
sourcing 100 per cent of the electricity
needed for our business operations from
renewables by 2025.
Vale Will Bailey
I would also like to acknowledge
the passing of our former Chief
Executive Officer Will Bailey
in August this year.
Having started as a teller in the
Oakleigh branch of the old ES&A
bank in 1950, Will served as CEO
between 1984 and 1992. He was a
mentor to many future ANZ leaders
and made a significant contribution
in building the ANZ we all
know today.
One of Will’s major legacies was
modernising the bank, introducing
automation and computerisation –
and some technology still in
use today. In fact, ANZ opened
Australia’s first ‘electronic branch’
in 1985 under his stewardship. On
behalf of everyone at ANZ, I’d like to
pass on our condolences to his wife
Dorothy and his family and friends.
Finally, I would like to acknowledge
again the terrific work of our 39,000 people
across the world. From our service centres
in Bangalore and Manila through to our
contact centres in Australia and branches in
New Zealand, they have all done a great job
for customers in very difficult circumstances
despite competing priorities over this long,
arduous period.
Shayne Elliott, Chief Executive Officer
7
ANZ 2020 Annual Report Overview
How we
create value
Performance
overview
Remuneration
report
Directors’
report
Financial
report
Shareholder
information
COVID-19 – protecting our customers,
people and community
While our decisions in responding to the COVID-19 pandemic have had a short-term financial
impact – on earnings, profitability and shareholder value – our focus is on the long-term.
A healthy and sustainable community is in everyone’s best interests.
Throughout the pandemic we have sought to balance the needs of all stakeholders. Our approach has been guided by four key principles:
Protect what
matters
Adapt to
the changing
environment
Engage with
stakeholders
Prepare for
the future
These principles informed our ‘Statement of Intent’ (available on anz.com), which outlines support for customers impacted financially
by the pandemic and our commitment to work with them on a solution that is respectful, fair and appropriate.
Our customers
Our people
In March we announced our initial support package for retail
and business customers, offering the option of deferring loan
repayments for a period of six months on a range of products,
including home, personal and business loans.
We received over 137,000 applications for
hardship assistance in Australia alone.
In July we updated our support package for customers continuing
to experience financial difficulty due to COVID-19. Additional
assistance options (depending on the customer’s circumstances)
included loan restructuring (for example, an interest only period)
or an extension of the deferral period until 31 March 2021.
Customers with loan repayment deferrals have been proactively
contacted by phone, SMS and/or email/letter to ensure they
understand the impacts of their loan relief and identify if they
need further support.
From early March we moved employees to work-at-home
arrangements, split teams and introduced greater distance
between those employees performing essential functions in
the office. By late April approximately 95% of our non-branch
employees had adapted to working from home.
Any employee concerned about their safety while working
from home (for example, due to domestic and family violence),
could elect to work in the office.
We also introduced 10 days’ of paid coronavirus-related special
leave, and provided a one-off payment to junior and mid-level
employees as a contribution towards working from home
work expenses.
To protect our people still working in, or returning to the office, we
have put in place multiple controls to minimise the risk of exposure
to COVID-19 in the workplace, including thermal screening; physical
distancing markers; enhanced cleaning protocols; and robust
incident notification, response and management processes.
Across Australia and New Zealand we have over 1.5 million home loans.
Of our ~1 million home loans in Australia, ~95,000 have received deferrals on their loan
repayments since March 2020, with ~74,000 deferred loans active at 30 September.
Of our ~529,000 home loans in New Zealand, ~24,000 have received deferrals on their
loan repayments since March 2020, with ~16,000 deferred loans active at 30 September.
Of our ~236,000 business loans in Australia, ~23,000 have received deferrals on their
loan repayments since March 2020, with ~20,000 deferred loans active at 30 September.
8
To support the wellbeing of our people we are providing coaching
and digital resources through our employee intranet and new
‘HealthyMe’ app. Our Employee Assistance Program also remains
available to our people and their immediate family members.
Finally, we are providing enhanced support for employees displaced
from their roles due to redundancy. This has included putting in
place a program for impacted employees, which provides them
with unlimited coaching and workshops to help them find new
careers and support their financial and emotional wellbeing.
Our community
We have worked closely with our community partners throughout
the pandemic – from adapting the way we deliver our financial
literacy programs to our senior executives engaging weekly with
NGOs, consumer advocates and financial counsellors to ensure we
are acting responsibly and responsively to real world conditions.
In Australia, we donated $1.5m to the Brotherhood of St Laurence,
The Smith Family and the Financial Counselling Foundation – for
education, employment, aged care and financial counselling
programs targeted at disadvantaged people affected by COVID-19.
We donated a total of NZ$2 million to Women’s Refuge, Age
Concern New Zealand, the NZ Salvation Army, Red Cross and
other local charities in the Pacific to support those most affected
by the crisis.
We also directed $8.4 million of unclaimed remediation monies
to our key community partners to, among other things, help
expand their programs online. COVID-19 has highlighted the need
for diverse and sustainable ways to deliver services to vulnerable
families. One of our partners, The Smith Family, will use the funds
to further digitise their programs so they can continue to support
the education of around 58,000 students online.
Improving the lives of vulnerable Australians
during COVID-19
We have worked together with the Brotherhood of St Laurence
(BSL) to adapt shared community programs so participants
can continue receiving support during COVID-19.
In response to the pandemic, we transitioned Saver Plus, a
matched savings and financial education program developed
by ANZ and BSL, to digital delivery. This enabled over 2,000
participants to remain on the program by completing financial
education online instead of attending in person workshops.
Between March and September 2020, we provided over
$520,000 towards laptops and tablets, enabling digital
access for over 1,100 families and individuals to support
remote schooling and learning.
We were also one of the employers that continued to
provide employment opportunities for refugees and asylum
seekers through BSL’s Given the Chance work placement
program. “This has been very much appreciated by BSL, and
for the participants it has provided security and stability in a
time when many areas of their lives are out of control”, BSL’s
Executive Director Conny Lenneberg says.
When children moved to remote learning, many of the families
supported by The Smith Family through their Learning for Life
program struggled to help their children with schoolwork. This
was due to a range of factors including some having low education
levels themselves, limited technical confidence and skills, or having
English as a second language. In addition, digital inclusion issues
such as a lack of devices and internet access further affected some
students. The educational support and learning programs The Smith
Family provides, with our help, is now needed more than ever, as
children and young people from disadvantaged backgrounds are
at higher risk of falling behind due to the pandemic.
"We are incredibly grateful for the generosity
and ongoing support of ANZ, who enable us
to continue helping children and families in
need, not just through this challenging time
but into the future as well.”
Dr Lisa O’Brien, Chief Executive Officer, The Smith Family
Supporting women in a time of crisis
Established in the 1970s, Women’s Refuge is New Zealand’s
largest nation-wide organisation supporting women and
children experiencing domestic and family violence.
During the COVID-19 lockdowns many women have
needed help to get through the crisis, with the pandemic
exacerbating family violence in some households.
In March 2020, we donated NZ$500,000 to the Women’s
Refuge, a community organisation that ANZ New Zealand
has had a long-standing relationship with.
Dr Ang Jury, CEO of Women’s Refuge commented on the
impact the crisis was having, saying, “we’ve been overwhelmed
with need in recent weeks. Unfortunately for some, there is
not a safe place to self-isolate for long periods of time.”
The funds from ANZ have meant that women and children
can be provided with food, healthcare, communications
services and importantly, safe lodging in motels.
“We are incredibly grateful for this donation from ANZ and
these funds will help ease the financial pressure our refuges
are facing during this time. We are also pleased to be able to
direct a portion of the donation to future care and support
for women and children,” said Dr Jury.
Since 2017, ANZ has made it easier for women referred by
Women’s Refuge to set up their own bank account, even
though they may not have ID or a permanent address.
ANZ NZ CEO Antonia Watson said: “It’s important to look out
for the most vulnerable in our communities during this time,
to not lose sight of their needs, and make sure the people
and organisations who support them are well resourced
and supported.”
9
ANZ 2020 Annual Report About our business
We provide banking and financial products and services to over 8.5 million retail and business
customers, and operate across 33 markets.
Our purpose and values
Our expertise, products and services make us a bank. Our people, purpose, values and culture make us ANZ.
Our purpose is to help shape a world in which people and communities thrive. That is why we strive
to create a balanced, sustainable society in which everyone can take part and build a better life.
Our values are the foundation of how we work – living our values every day enables us to deliver on our strategy and purpose, strengthen
stakeholder relationships and earn the community’s trust. All employees and contractors must comply with our Code of Conduct, which
sets the expected standards of professional behaviour and guides us in applying our values.
I N TE GRITY
C OLLABORATION
A CCOUNTABILITY
R ESPECT
E XCELLE NCE
Bringing our purpose to life
Supporting sustainable development
We are committed to the United Nations Sustainable
Development Goals (SDGs) and believe that business has
an important role to play in their achievement. Our ESG
targets support 11 of the 17 SDGs.
In 2019 we became a founding signatory to the UN
Principles for Responsible Banking. Under the Principles we
are required to set at least two targets that address our most
significant (potential) positive and negative impacts, aligned
with the SDGs and the Paris Climate Agreement. Further
information on our progress towards implementing the
Principles, including targets we have set, is in our 2020
ESG Supplement available at anz.com/cs.
We are helping to respond to complex societal issues central to our
customers and our business strategy. In particular, we are focusing
our efforts on:
FINANCIAL WELLBEING – improving the financial wellbeing of our
customers, employees and the community by helping them make
the most of their money throughout their lives;
ENVIRONMENTAL SUSTAINABILITY – supporting household,
business and financial practices that improve environmental
sustainability; and
HOUSING – improving the availability of suitable and affordable
housing options for all Australians and New Zealanders.
We are contributing to these challenges by: developing innovative
and responsible financial products and services; working with our
customers; harnessing the skills of our people; and supporting the
communities in which we live and work.
Fundamental to our approach is a commitment to fair and
responsible banking – keeping pace with the expectations of our
customers, employees and the community, behaving fairly and
responsibly and maintaining high standards of conduct.
Throughout this report we illustrate how we have embedded purpose
into our business strategy, including through our Environment,
Social and Governance (ESG) targets and performance objectives.
10
Our values are:OverviewHow we create valuePerformance overviewRemuneration reportDirectors’ reportFinancial reportShareholder information Our vision and strategy
Our vision and strategy describe what we seek to achieve and how we will achieve it.
Our vision
Our strategy
Our vision is to build a bank of which
we can all be proud – whether you are
a customer, a shareholder or an
employee – known for:
• delivering value from innovative and
convenient banking services that help
customers get ahead in life – improving
their financial wellbeing
• building the best and most diverse
team of people, regardless of where
they ultimately work
• showing leadership on important issues,
and doing the right thing, even when it
comes at a cost
• delivering consistently strong financial
results for our shareholders, with a
balance between growth and return,
short-and long-term results
Our strategy is to help improve the financial wellbeing of our
customers, having the right people who listen, learn and adapt;
putting the best tools and insights into their hands and; focusing
on those few things that really add value to customers, and doing
them right the first time.
In particular, we want to help customers:
• save for, buy and own a liveable home
• start or buy and grow their business and adopt sustainable business practices
• move capital and goods around the region and adopt sustainable business practices.
In doing so, we seek to improve the financial wellbeing of our customers, people and
communities by helping them make the most of their money throughout their lives;
supporting household, business and financial practices that improve environmental
sustainability; and improving the availability of suitable and affordable housing options
for all Australians and New Zealanders.
Strategic Imperatives
Strategy
Create a simpler,
better capitalised,
better balanced bank
Build a superior
experience for our
people and customers
in order to compete in
the digital age
Focus our efforts
where we can carve out
a winning position
Drive a purpose
and values-led
transformation of
the bank
Improving the financial
wellbeing of customers...
...looking to
save for,
buy and
own a
home
...looking
to start,
buy and
grow a
business
...looking to
move capital
and goods
around the
region
...with people
who listen,
learn and adapt
...with the
best tools
and insights
...with flexible and resilient digital
infrastructure that supports great
customer experience at lower cost
Creating value for
our stakeholders
Decent returns
for shareholders
Great experience
for customers
Engaged, adaptable
and capable employees
Improved financial
wellbeing, housing
and environmental
sustainability outcomes
for customers and
communities
11
ANZ 2020 Annual Report
OUR VALUE
DRIVERS
CUSTOMERS
Trusted relationships with
over 8.5 million retail, business
and Institutional customers.
OUR OPERATING
ENVIRONMENT
The risks and opportunities in
our operating environment impact
our ability to create value.
Social and
economic impacts
of COVID-19
pandemic
How we
create value
Limited
credit growth
$
¢
FINANCE
Access to capital through customer
deposits, debt and equity investors and
wholesale markets enables us to run our
operations and execute our strategy.
By transforming our
business – embedding a
purpose and values-led
culture and simplifying our
products and services – we aim
to create long-term value for
all of our stakeholders.
Our value creation model
outlines how we create value
for our key stakeholders through
our business activities, and
identifies the inputs – or value
drivers – that we rely on to
enable us to deliver that
value and meet our
strategic objectives.
Increasing
importance
of ESG
Globalisation
PEOPLE
Employees and contractors with
the key competencies and right
behaviours to deliver our strategy.
!
RISK MANAGEMENT
Reducing the risk of doing business
for our customers and the bank, with
systems and processes that are less
complex, less prone to error and
more secure.
Regulatory
oversight and
stakeholder
scrutiny
Technological
changes
Demographic
changes
TECHNOLOGY AND DATA CAPABILITIES
Flexible, digital-ready infrastructure to provide great
customer experience, agility, scale and control.
COMMUNITY AND RELATIONSHIPS
Strong stakeholder relationships are
essential to our brand and reputation.
12
OverviewHow we create valuePerformance overviewRemuneration reportDirectors’ reportFinancial reportShareholder information OUR BUSINESS ACTIVITIES
SHAREHOLDER VALUE
Operating across 33 markets,
we provide banking and financial
products and services to individual
and business customers.
Through our business activities
we deliver the following outputs:
we provide transaction banking services
we hold deposits for our customers
we lend money to our retail, business
and institutional customers
we help customers mitigate
and manage financial risks
we support customers with
trade and capital flows
we provide wealth management
products
we provide advisory services
we invest in our people to build
a diverse and inclusive workforce
we collaborate with partners to build
capacity and improve financial wellbeing
we pay taxes in the countries within
which we operate
Deliver decent returns enabling shareholders
to meet goals
132.7 cents earnings per share1
6.2% cash return on equity1
60 cents dividend per share for 2020 with an interim
dividend of 25 cents and a final dividend of 35 cents,
both fully franked
$20.04 net tangible assets per share2
CUSTOMER VALUE
Improve the financial wellbeing of our customers
Provide funding for lending, helping customers
to own homes and start and grow businesses
and assist businesses to transact, trade and
invest across our region
Great customer experience through flexible
and resilient digital infrastructure
19,839 FTE supporting our retail and commercial
customers, providing $353 billion in home lending and
$91billion in business lending (Australia and New Zealand)
5,291 FTE supporting our Institutional customers, providing
$158 billion in lending
Custodians of $552 billion of customer deposits across the business
EMPLOYEE VALUE
Build a resilient, adaptable and inclusive workforce
with a strong sense of purpose and ethics
we pay dividends to our shareholders
86% employee engagement (up from 77% in 2019)
Employed 919 people from under-represented groups
(since 2016)
$4.9 billion in employee salaries and benefits
Increasing the skills and capabilities of our people
providing almost 970,000 hours of training
1. On a cash profit (continuing operations) basis. Excludes non-core
items included in statutory profit and discontinued operations
included in cash profit. It is provided to assist readers in understanding
the result of the ongoing business activities of the Group. For further
information on adjustments between statutory and cash profit refer to
page 56. 2. Equals shareholders’ equity less preference share capital,
goodwill, software and other intangible assets divided by the
number of ordinary shares. 3. Figure includes forgone revenue
of $105 million, being the cost of providing low or fee-free accounts
to a range of customers such as government benefit recipients,
not-for-profit organisations and students. 4. Total taxes borne by
the Group, includes unrecovered GST/VAT, employee related taxes
and other taxes. Inclusive of discontinued operations. 5. Includes
individuals who have participated in more than one program
or product (for example, people who have participated in
MoneyMinded as part of Saver Plus are counted twice as they
are included in both the MoneyMinded and Saver Plus totals).
COMMUNITY VALUE
Connect with, and invest in, the communities
in which we operate to support growth,
deliver services and develop opportunity
Invested $139.5 million in the community3
$2.3 billion in taxes paid to government4
> 61,000 people have been reached through our financial
wellbeing programs MoneyMinded and Saver Plus5
13
ANZ 2020 Annual Report Our operating environment
The COVID-19 pandemic has fundamentally changed the external environment in which we
operate, and we are adapting in response. A summary of the key external risks currently affecting
our business and our response to them is outlined below.
RISKS
OPPORTUNITIES
Social and economic impacts of COVID-19
• Many customers are financially impacted by the
pandemic, and need to adapt to a new environment
• Responding to customer circumstances,
by providing financial support and information
• Working cooperatively with government on
policies to see our customers through the
COVID-19 pandemic and into a period of growth
Limited credit growth
• An economic contraction, lower business confidence and
higher unemployment is limiting credit growth, and many
customer loans have been deferred
• Maintaining our focus on core banking services
to improve customer outcomes, together with
efficient allocation of capital and resources
Regulatory oversight and stakeholder scrutiny
• Challenges arising from regulatory expectations and
higher community standards and expectations
Technological changes
Increased competition from digitally enabled competitors
•
•
• Changed employment proposition due to stay-at-home
Increased cyber attacks and attempted fraud
restrictions
Demographic changes
• Rebuilding trust by ‘doing what we say’
• Working cooperatively with regulators,
government and NGOs
• Supporting our customers, employees and
the community through the COVID-19 pandemic
and ensuing recovery period
• Faster deployment of new and improved digital
services, products and processes will help meet
customer needs for safe and secure banking
• Providing staff with appropriate technology, tools
and equipment to work productively from home
during the pandemic and its aftermath
• Demand for new home lending and some other
• Delivering attractive housing products and
bank products may diminish, particularly as population
growth stalls as a result of the pandemic
• Growing need for more affordable and accessible
housing in the market
services to grow market share
• Partnering with business, government and
NGOs to provide innovative and practical models
for the development of affordable housing
Increasing importance of ESG
• Failure to meet our ESG commitments and related social
expectations could lead to customer and community
impacts and reduced shareholder value impacts
• Strengthening our ESG standards, policies,
processes, products and services and disclosures
• Growth of sustainable finance products and services
Globalisation
• The COVID-19 pandemic and changing geopolitical
• Continued strength of traditional exports, development
environment has hurt global prosperity and cooperation,
threatening flows of trade, investment and people. This
may challenge supply chains and productivity across
our geographies
of new markets and economic recovery provides
business opportunities in Australia and the region
14
OverviewHow we create valuePerformance overviewRemuneration reportDirectors’ reportFinancial reportShareholder information ANZ STORY
Banking through times
of change
Much about the world has changed since
ANZ started out as the Bank of Australasia in 1835.
In the 1800s and early 1900s, customers used only
their ‘home’ branch, with tellers recording account
details in a ledger book using a quill and inkwell.
By the 1920s, Burroughs ledger machines
– akin to typewriters or early adding
machines – were used for calculations,
replacing mental arithmetic.
our customers looking to digital solutions
– be it online or via their mobile phones –
to enable them to do their banking from
the safety of their home.
Then, in around the 1960s, passbook
accounts were designed with ‘black light’
signature panels giving customers the
freedom to bank outside of their
home branch.
Fast forward to 2020, and we have more
than three million customers using our
mobile banking app to check account
balances, view transactions, and send
and receive money.
The COVID-19 pandemic has accelerated
the shift to digital banking, with more of
Changing the way we do things to meet the
needs of our customers isn’t new for ANZ.
More than 100 years ago, the Spanish Flu
pandemic also led to the closure of state
borders, placing restrictions on banking
services.
Staff in ANZ’s Tweed Heads branch in NSW
came up with an innovative way to ensure
money and cheques were still able to
flow, using a cigar box and some rope to
transport the contents across the river to
the Queensland border at Coolangatta.
Image: Andrew Smith
Now in 2020, we continue to adapt the
ways in which we deliver products and
services to our customers.
With the majority of non-branch staff
working remotely from home for much
of the year, we had to implement digital
solutions for almost every aspect
of customer engagement – from
accepting electronic signatures on
bank documents, to holding virtual
customer meetings and events via
phone or video calls.
Over the years, despite the challenges
in our operating environment, serving
customers and providing essential
banking services has been our priority.
15
ADAPTINGANZ 2020 Annual Report Becoming a fairer and more responsible bank
We continue to act in response to the ‘spirit and letter’ of the Royal Commission into Misconduct
in the Banking, Superannuation and Financial Services Industry (the Royal Commission).
Last year we developed an integrated response (‘roadmap’)
to act on:
• the lessons we identified from our misconduct and failures
to meet community standards and expectations; and
• the themes raised in our 2018 APRA Self-Assessment report
across culture, governance and accountability.
While there has been significant focus this year on the impacts
of COVID-19, we recognise the importance of delivering on our
roadmap. Work on the roadmap has continued to deliver better
outcomes for our customers, our people and other stakeholders.
We remain committed to learn from our failures and build a bank
that is worthy of the trust and respect of our customers and the
community.
Integrated response to the Royal Commission
and the APRA Self-Assessment
Our Royal Commission and Self-Assessment Oversight Group
monitors the progress with our roadmap. The Oversight Group is
co-chaired by our Deputy CEO and Chief Risk Officer and provides
regular updates on our progress to the Executive Committee and
the Board.
Our roadmap has five focus areas: Culture; Governance and
Accountability; Management of Operational Risk; Remediation;
and Simplification. Executive Committee members have
‘ownership’ of each focus area.
Delivering on our roadmap will give us confidence that the
lessons of the Royal Commission and the themes raised in
our Self-Assessment report have been acted on.
Royal Commission
We made 16 commitments as part of our response to the Royal
Commission, to improve the treatment of retail customers, small
businesses and farmers in Australia.
• We have completed 11 commitments to date. We have taken
action on distressed agricultural loans; remuneration of front
line staff; the Retail Banking Remuneration Review (Sedgwick)
recommendations; culture and governance; and reporting on
remediation of existing failures.
• Of the remaining five commitments, four are dependent on
the finalisation of related legislation, and one is ongoing as we
continue to assess our culture and respond where changes
are required.
• We provide public updates on our progress to implement
the Royal Commission recommendations to the House of
Representatives Standing Committee on Economics. Our most
recent update as at 21 August 2020 is available on anz.com.
Many of the recommendations in the Royal Commission’s
final report require legislative change. We continue to engage
constructively with government, regulators and industry as
they respond to these.
APRA Self-Assessment
Our roadmap is a multi-year program with defined success measures
and targets in place for each of the five focus areas. These are
regularly reviewed and updated to ensure they remain relevant.
Governance and Accountability – The Board has committed to
maintain effective oversight of management’s implementation of
the roadmap and receives quarterly updates.
• Our Banking Executive Accountability Regime (BEAR) outputs
have assisted to clarify and strengthen accountability. BEAR
implementation is aligned with our three lines of defence and
embedded within our governance, control and risk management
arrangements.
• We introduced a strengthened Accountability and Consequence
Framework in June 2019, with expanded public disclosure of
senior management consequences. The first annual effectiveness
review of the Framework was completed in February 2020, with
enhancements implemented.
Culture – We are working towards our aspirational culture and
creating an environment where employees are motivated and
'speak up', when they see something wrong. Our Board and the
executive Enterprise Culture Steering Group provide oversight.
• We promote a strong ‘speak up’ culture. Our most recent
internal employee engagement survey showed an uplift of
5% (from 69% to 74%) in response to the question ‘I can raise
issues and concerns in ANZ without fear of reprisals or negative
consequences’.
• We changed how we financially reward, recognise and manage
the performance of our people to reduce the risk of outcomes
that are not in our customers' best interests, and to support
collaboration, team performance and encourage long-term
thinking. Variable remuneration is now a smaller part of
take-home pay.
16
OverviewHow we create valuePerformance overviewRemuneration reportDirectors’ reportFinancial reportShareholder information • We are building leadership capability to have regular and better
quality performance and coaching conversations, focusing on
outcomes and behaviours.
• We care about our customers. Our Royal Commission
commitments improve the treatment of retail customers,
small businesses and farmers in Australia.
• Our Dispute Resolution Principles aim to help us be more
accountable and transparent. We reviewed and updated our
principles in November 2019. The principles apply to our people
and our representatives when managing individual retail and
small business customer complaints, disputes and litigation in
Australia. The principles are available on anz.com.
– The dedicated Indigenous telephone service we established
in May 2019 has answered 6,641calls since inception, with
an average speed to answer of 62 seconds as at
30 September 2020.
– We committed to the Australian Financial Complaints
Authority’s (AFCA) ‘look back’ under its new limits, and to
fully cooperate with AFCA as it resolves disputes. We
established a dedicated team responsible for investigating
legacy complaints, which could be lodged with AFCA until
30 June 2020. 179 legacy complaints were lodged, of which
134 have been closed. The remaining 45 cases are at various
stages of the AFCA process and we remain committed to
resolving these where possible.
Management of Operational Risk – We continue to invest in
a simplified operating environment, improved strength of systems
and processes, improved control effectiveness, and improved
risk capability.
Strengthening our approach to human rights
We recognise our business activities can have human
rights impacts. To manage these impacts we embed our
expectations across our business activities and relationships
via group-wide policies, training programs, and customer
and supplier screening tools and policies.
This year we commenced a review to strengthen our human
rights policies and processes, aligning our approach more
closely with the UN Guiding Principles on Business and
Human Rights. This has included a review of our minimum
standards for business customer grievance mechanisms and
community engagement, which we expect to complete in
2021. Our approach is being informed by a working group
of external stakeholders, including NGOs, academics, trade
unions, customers, industry associations and human
rights consultants.1
Modern slavery
We are preparing our first statement in response to the
Australian Modern Slavery Act.
Modern slavery is serious exploitation of people which
undermines or deprives them of their freedom including
forced labour, deceptive recruiting and child labour.
The Australian legislation requires us to identify, assess and
manage risks in our business operations and supply chain.
We have identified three key areas in which to improve
our practices:
Remediation – Our customer remediation program continues.
An update on our progress is included on page 21 of this report.
• building awareness of modern slavery through
training and education;
Simplification – We have taken strategic action to simplify our
business, products and processes. For example, we completed
the sale of our New Zealand asset finance business, UDC Finance,
in September 2020; and we completed the sale of our Pensions and
Investments business to IOOF Holdings Limited on 31 January 2020.
• policy and process improvements; and
• enhancing our due diligence.
Further detail on our approach to human rights is in
our 2020 ESG Supplement available at anz.com/cs.
1. Their involvement does not infer endorsement of the outcomes of this review or other work carried out by ANZ.
17
ANZ 2020 Annual Report Our customers
Supporting our customers through the Australian bushfires and COVID-19 pandemic has been
our primary focus this year, but we have not lost sight of our longer-term priorities – to help
improve the financial wellbeing of our customers and to increase access to more affordable
and sustainable homes.
We are seeking to ensure our products are suited to our customers’
needs and meeting expectations. We are implementing digital
banking solutions designed to improve financial wellbeing, and
protecting customers from those seeking to take criminal advantage
of the shift to digital banking. We are listening to customers and
managing complaints, taking steps to remediate when necessary
and learning from our mistakes. And we are supporting innovative
housing delivery models across the private, public and not-for-profit
sectors to increase the availability and affordability of homes
in Australia and New Zealand.
Supporting customers during difficult times
Financial relief packages were implemented quickly to support
customers affected by the bushfires that devastated parts of
Australia over the summer months. This included the ability to
suspend loan and credit card repayments, temporary interest rate
relief, and early access to term deposit funds without incurring fees.
Specialised ATMs were deployed to impacted centres, and hardship
support was provided through referrals and funding to community
counselling services. Proactive contact was made with small
business customers in affected areas and through our insurance
partner QBE, prioritisation was given to claims, including emergency
payments and temporary accommodation costs.
See page 8 for information on how we are supporting our
customers during the COVID-19 pandemic. For discussion on the
specific supports available to customers experiencing vulnerability
see our 2020 ESG Supplement available at anz.com/cs.
Product suitability
We are helping our customers better understand how to get more
value from their products – such as by showing them how to adjust
their use of a particular product, or identifying when there may be
an alternative product better suited to their needs. Our Product
Suitability team develops and manages a number of customer
contact programs to support improved customer outcomes and
enhance customers’ financial wellbeing. Program results are
reported quarterly to the Board.
Improving customer experience through
digital innovation
We need to ensure our customers can rely on us to provide them
with secure remote access to banking products and services.
Digital platforms such as mobile and internet banking make it
possible for customers to serve themselves, anywhere, anytime and
we are adapting the way we operate to respond to our customers'
changing banking habits.
The COVID-19 pandemic has accelerated the shift to digital banking,
with mobile phone banking our fastest growing channel. We have
provided additional education and support for customers using
digital channels for the first time this year, with 300 extra staff
retrained and deployed to assist.
2–4A.M.
PM
PEAK
PM
PM
PEAK
PM
PEAK
2–4A.M.
51,000 LOGINS
2–3A.M.
10,000 CUSTOMERS
PEAK
2–3A.M.
Over the last 12 months we have rolled out several new self-service features to the
ANZ App, including the ability to open new accounts, activate a card, set or change
a card PIN and temporarily block and unblock a card to protect an account from
theft and fraud. To date, more than 22,000 new accounts have been opened, 760,000
debit and credit cards have been activated, 807,700 card pins have been set or
changed, and 45,300 temporarily block and unblock card requests have been
processed through the ANZ App.
The ANZ App won
Money Magazine’s
Mobile Banking App
of the Year 2020
18
In Australia, the ANZ App is helping 3.2 million customers stay on top of their day-to-day banking. Peak usage on the ANZ App is between 4–6pm, and even during our quietest time between 2–4am, we see an average of 51,000 logins Peak usage for internet banking is between 1–2pm, and during our quietest time between 2–3am, we serve almost 10,000 customers.OverviewHow we create valuePerformance overviewRemuneration reportDirectors’ reportFinancial reportShareholder information HIGHLIGHT
INCREASING THE VALUE CUSTOMERS RECEIVE FROM OUR PRODUCTS
Our Concession Account Suitability program contacts customers in receipt of eligible Centrelink or Veterans’ Affairs benefits with
an offer to move to a low-cost basic bank account. To date we have contacted more than 335,000 customers (210,000 this year) with
more than 14,600 taking up the offer to move to a basic account. From 19 March to 22 July the program was paused as we shifted
our focus to supporting customers impacted by COVID-19.
Our Persistent Credit Card Debt program identifies and contacts credit card customers who are carrying persistent debt1 on their
card to help them pay their debt faster. Customers are offered financial education, and the opportunity to close their card and repay
the remaining debt at a lower interest rate. To date, we have contacted 18,195 customers with 1,450 customers taking up the offer.
This program was also paused while we focused on supporting customers impacted by COVID-19.
We are implementing digital solutions designed to make banking
easier and improve the financial wellbeing of our customers.
In Australia, we launched the ‘set a savings goal’ feature in the ANZ
App to help customers better manage their money and develop
savings habits. Customers receive personalised in-app notifications,
encouraging them to set a goal, stay on track and celebrate
milestones along the way. One in 10 active App users has set a goal
this year. There are now more than 240,800 active or achieved goals
in the App, with 24% of these saving for a house, followed by a
holiday (17%).
In New Zealand, we introduced several new self-service features to
ANZ goMoney and internet banking, including fixed-rate rollovers.
Customers with an existing fixed-term home loan or flexi home
loan, who want to fix their rate, can now request a personalised rate
for their loan facility and term (based on current market rates)
without needing to call us or visit a branch. One third of all home
loan fixed-rate requests are now completed digitally.
We also implemented customer alerts to mobile phones, letting
customers know when they receive a deposit or have a low balance,
assisting them to manage their finances.
Protecting our customers in a digital world
We have seen a significant increase in malicious emails
seeking to take advantage of our customers, with
cyber criminals capitalising on more internet traffic
during the COVID-19 pandemic. Malicious email
tactics include those that claim to have links to maps
of virus outbreaks and related information, tricking people into
downloading malicious software.
The threat landscape is changing at a rapid pace, and we have
responded in kind, moving to leverage automation, machine
learning and advanced analytics. We invest heavily in our cyber
security capability, and remain in a strong position to keep our
systems, data and customers safe from the increasing pace, scale
and sophistication of cyber attacks.
Our threat intelligence and 24/7 Security Operations Centre analyses
millions of data events every day to help keep customers, employees
and the bank safe online. As malicious campaigns are identified, we
implement targeted, automated capability to block them.
During a 30 day period near the start of the pandemic we blocked
around 550,000 COVID-19-themed emails, and during July 2020 we
blocked over 12 million malicious emails alone, an increase of more
than 8 million emails compared to October 2019.
In the context of the changing threat landscape, ANZ did report a
major security event to the Reserve Bank of New Zealand and the
Australian Prudential Regulation Authority in the financial year 2020,
as a result of a distributed denial of service2 attack in New Zealand.
While this attack was similar to what was experienced by other
organisations, we were able to proactively detect the activity and
mitigate the risks through preventative security controls, resulting in
minimal disruption to our operations and customer services, and no
impact to customer data.
HIGHLIGHT
MAKING SMALL BUSINESS LENDING EASIER
This year we launched ANZ Online Business Lending. The
platform provides conditional approval for up to $200,000 in
unsecured lending in as little as 20 minutes and access to
funds within four days. Customers using ANZ Online
Business Lending have access to fixed-and variable-term
loans as well as overdraft facilities.
As the economy recovers from the impacts of COVID-19,
helping small businesses to access capital in a fast and
convenient way is critical.
According to Mark Hand, ANZ’s Group Executive, Australia
Retail and Commercial Banking, “While the current
economic crisis will be devastating for some businesses,
there has also been a great deal of resilience and some will
be able to come out the other side even stronger. We’re also
starting to see new businesses being created to meet
emerging customer needs.
“This sophisticated new technology is deeply integrated
with ANZ’s existing platforms to provide our customers with
a quick, simple and secure lending experience so they can
spend more time running and growing their business.”
1. Where for at least the last 12 months a credit card has over 80% of the credit utilised and the customer has been paying 2–3% of the outstanding balance on average each month.
2. A distributed denial of service (DDoS) attack is an attempt to make an online service unavailable by overwhelming it with traffic.
19
ANZ 2020 Annual Report CHALLENGE
SCAM ASSIST
Measuring customer experience
During the COVID-19 pandemic we have seen an increase
in customers falling victim to scams, particularly remote
access and investment scams. Digital fraud attempts have
also increased.
In addition, we have seen a number of customers trying to
supplement lost earnings through investments purported
to be high-yield options, such as crypto-currencies.
In 2020, our Australian Scam Assist team investigated
over 5,000 individual scams impacting our Australian Retail
and Commercial customers and recovered approximately
$25 million on behalf of some of those impacted.
As an industry, we face significant challenges in helping
our customers not fall victim to scams. We work with law
enforcement agencies, collaborating on a number of
operations to identify and disrupt Australian based actors,
particularly via the Fintel Alliance. Efforts to break-up criminal
syndicates are focused on three key actions: customer and
employee education; improved detection capabilities; and
ongoing support of law enforcement disruption activities.
NET PROMOTER SCORE
AUSTRALIA
NEW ZEALAND
Retail: ranked 3rd1
(up from 4th at end of 2019)
Commercial: ranked 4th2
(down from equal 3rd at end of 2019)
Institutional: ranked 1st3
(no change from 2019)
Retail: ranked 4th4
(no change from 2019)
Commercial and agricultural:
ranked 5th5
(no change from 2019)
Institutional: ranked 1st6
(no change from 2019)
One of the ways we measure the experience of our customers is
through our strategic Net Promoter Score (NPS). NPS enables us to
gauge whether we are meeting customer needs and expectations
and how we are performing relative to peers. It is measured by
asking customers how likely they are to recommend ANZ (on a 0–10
scale) and is calculated by subtracting the percentage of detractors
(those who give a score of 0–6) from the percentage of promoters
(those who give a 9 or 10).
While our performance relative to peers improved for our Australian
Retail customers, we failed to improve relative to peers for our
Australian Commercial and New Zealand Retail and Commercial
customers. Our Institutional ranking remains at number one in both
Australia and New Zealand.
Managing customer complaints
Internal Dispute Resolution (IDR) plays a vital role in protecting
customers. Fair and robust IDR assists with recognising and fixing
problems that arise, both at an individual customer level and across
the business. It allows us to ‘hear’ where changes need to be made
and serves to inform us when we are not meeting customer or
community expectations.
In 2019 we commenced a program to review and improve our IDR
policies, systems and practices, with program updates provided to
the Board and ASIC. Capability and quality improvement initiatives
support our objectives of fair, consistent and well communicated
complaint outcomes to our customers.
A foundational element of the IDR program was the establishment
of a Customer Resolution portfolio in early 2020, which is dedicated
to working with our customers when they have a problem:
• senior executive leadership and complaint management
expertise has been introduced to drive IDR uplift, along with
supporting governance, data, analytics and transformation
capabilities.
• the portfolio has been focused on improving the way we handle
our customers' complaints in order to solve complaints earlier and
improve the overall complaint resolution timeframes. Additional
complaint handling staff have been also recruited to support
timely complaint resolution.
• we appointed a Vulnerable Customer Lead to continue the
development of the Divisional vulnerable customer strategy and
provide an important link as we support our customers during
the COVID-19 pandemic and other life changing events.
1. Roy Morgan Single Source, Australian population aged 14+, Main Financial Institution, six-month rolling average to September 2020. Ranking based on the four major Australian banks.
2. DBM Business Atlas. Base: Commercial Banking (<$100 million annual turnover) Main Financial Institution customers. Six-month average to September 2020. Ranking based on the four major
Australian banks. 3. Peter Lee Associates, 2020 Large Corporate and Institutional Relationship Banking surveys, Australia. 4. Retail Market Monitor, Camorra Research, six-month rolling average
to September 2020. Ranking based on the five major New Zealand banks. 5. Business Finance Monitor, TNS Kantar Research. Base: Commercial ($3 million – $150 million annual turnover) and
Agricultural (>$500,000 annual turnover) customers. Four-quarter rolling average to Q3 2020. 6. Peter Lee Associates, Large Corporate and Institutional Relationship Banking surveys, New
Zealand 2020, ranked against the Top 4 competitors.
20
OverviewHow we create valuePerformance overviewRemuneration reportDirectors’ reportFinancial reportShareholder information Assisting potentially vulnerable customers
to access their money
At the start of the COVID-19 pandemic around 7,000 of our
customers only held a passbook account at ANZ. These
accounts do not have the option of an ATM card or access to
internet or phone banking. Customers with these accounts
are typically over 70 years old with their pension income paid
into this account.
We recognised that our customers may have had difficulty
accessing their money in the event of a temporary branch
closure, or if they wanted to self-isolate. Our bankers were
able to reach over 5,000 of these customers to check in on
them considering their specific vulnerability during the
COVID-19 pandemic. We also sent letters with information
on everyday accounts with a Visa debit card that can be
used for online/phone shopping, and ATM/store withdrawals.
It also includes access to internet banking and no monthly
account service fees.
We developed a new process enabling customers to open
an everyday account from their home entirely over the
phone. We also implemented a technology change to
enable passbook customers to establish a recurring transfer
by phone to automatically transfer regular income, such
as pension payments, from their passbook account
to their new everyday account.
More than 500 of these
7,000 customers chose to
open an everyday account.
Over 100 of our passbook customers
set up a recurring transfer to move
their pension income into their
everyday account.
Improving our IDR practices
We are continually trying to find ways in which we can
encourage feedback in order to provide better experiences
and fair outcomes for customers. Some of the improvements
we are working on include:
• development of a new and improved complaints recording
and management system
• establishment of a Systemic Issues Management function
with a focus on using complaint data and advanced
techniques such as machine learning and artificial intelligence
to identify issues early
• continued investment in the capability of our people and the
efficiency of our processes to help customers resolve their
complaints as quickly as possible.
Further information on customer complaint management
is in our 2020 ESG Supplement available at anz.com/cs.
Customer remediation
We are delivering on our commitment to fair, responsible and
efficient customer remediation.
In an effort to fix our past mistakes as quickly as possible, we have
increased remediation staffing levels significantly since 2018. Across
the Group there are now over 1,200 staff working on customer
remediation, with approximately half in dedicated remediation teams.
Our Australian Responsible Banking team is resolving identified
fee or interest discrepancies with over 5.2 million Retail and
Commercial customer accounts. Since April 2018, we have
refunded approximately $223 million across approximately
2.9 million customer accounts7.
Our pace of remediation has been steadily increasing and over
the last 12 months we have remediated approximately 1.8 million
customer accounts, compared to approximately 1.1 million over
the 18 months to September 2019.8
In Australia, we have an education program to share ‘lessons learnt’
and to highlight to staff the impacts on customers when we fail to
get it right. The program is aimed at raising awareness and fostering
a culture where employees are clear on the role they play in
delivering quality customer outcomes and safeguarding our
customers’ interests.
The Group’s customer remediation activities are regularly reviewed
by the Board. Directors are provided an overview of the status of
remediation matters; regulator engagement; repayments and
provisioning; and reviews underway to identify new matters.
7. In certain instances:
•
•
•
•
we make a payment to one of our community partners in lieu of a payment to a customer account. As at 30 September 2020 payments were made to ~238k accounts totalling $744k
we pay the customer via cheque. As at 30 September 2020 cheques had been issued for ~521k accounts totalling ~$59m. A portion of the cheques remain unpresented
we offer certain customers access to payment via a payment portal. As at 30 September 2020 offers to access payment via payment portal have been issued for ~10k accounts totalling ~$379k
we transfer payments through a process for unclaimed monies (includes payments for de-registered companies). As at 30 September 2020 payments transferred via this process have been
made for ~2k accounts totalling ~$1m.
8. The matter is considered complete when all customer payments have been processed. In some cases, remediation teams may continue to close out non-customer payments,
documentation and governance requirements beyond this point.
21
ANZ 2020 Annual Report Improving the availability of suitable and affordable housing
Housing-related lending is a key activity of
the bank. We lend to home owners and
investors, and for property development
and infrastructure. We believe we can play a
role in helping improve the availability and
affordability of housing, including support
for innovative housing delivery models across
the private, public and not-for-profit sectors.
At the end of 2018 we committed to fund
and facilitate $1 billion of investment
by 2023 to deliver around 3,200 more
affordable, secure and sustainable homes
to buy and rent in Australia. We have
exceeded this target.1
In addition to the $1.02 billion of investment in
Australia, we have also funded and facilitated
around NZ$1.35 billion to support the delivery
of social and sustainable housing across
New Zealand.
We have continued to build our housing
supply pipeline through direct engagement
with our clients (new and existing),
supporting innovative models to finance
new supply.
This year we have:
• jointly arranged two additional bond
issuances for the Commonwealth’s
National Housing Finance and Investment
Corporation (NHFIC), including the largest
social bond for housing in Australia
($562 million)
• arranged bonds for Kāinga Ora (Housing
New Zealand Corporation) to support the
delivery of more social and sustainable
housing (jointly NZ$1 billion; solely
NZ$300 million)
• supported the first Assemble Model,
designed to bridge the gap between
renting and owning a home to market2
• invested in the development of a
Specialist Disability Accommodation
(SDA) pipeline
• helped build the case for institutional
investment in long-term rental housing
through the backing of a range of
‘build-to-hold’ projects.
We have committed to increase our
target to fund and facilitate $10 billion
of investment by 2030 to deliver more
affordable, accessible and sustainable
homes to buy and rent in Australia
and New Zealand.
HOUSING
DELIVERING ACCESSIBLE HOUSING OPTIONS TO MARKET
As part of the roll-out of the National
Disability Insurance Scheme (NDIS) in
Australia the government has contributed
funding to Specialist Disability
Accommodation (SDA) to encourage
investment in the development of new
high-quality housing for eligible people.
Our Corporate and Institutional Health
team is developing its expertise and
capacity to ensure our ability to support
this much needed housing supply to
market. The benefits to help deliver better
connection and opportunity for people
in SDA are key drivers of our interest in
investing in this emerging asset class.
Over the course of this year, ANZ has
provided credit approved commitments
in excess of $100 million to the SDA sector
and closed its first transactions, partnering
with our clients to deliver SDA housing
and to aid them to grow a pipeline of
new homes across the country.
We have also worked with our existing
property clients to facilitate the inclusion
of SDA as a pre-sale element in their
property developments. This has allowed
them to partner with developer, Summer
Housing, to include disability housing in
mixed developments, providing residents
with access to services and supports.
Our support is broader than debt capital,
with the Summer Foundation receiving
a 2019/20 ANZ Community Grant to
support the roll-out of their Tenancy
Matching service.
“I am thrilled to be assisting people to
navigate their own housing journey,
courtesy of the ANZ Community
Foundation, which funded a Summer
Foundation project to deliver housing
workshops in Tasmania for people with
disability and their families,” said Liz Ellis,
Summer Foundation convenor.
The workshops helped participants to
identify where they wanted to live and
to consider their specific housing needs
and preferences. They also provided
guidance on the different housing
models available – including SDA
(through the NDIS) and affordable housing.
Summer Housing project
1. Due to the lag between financing and commencement of development, number of homes will be audited and disclosed once projects have been delivered. 2. The Assemble Model is a
new ‘build-to-rent-to-own’ hybrid model that bridges the gap between renting and owning a home. It offers residents a five-year lease with the option to purchase their home at the end of
the lease. The purchase price is fixed from the start of the lease, giving residents a set goal to save towards and mitigating the risk of being priced out of the market during the rental period.
22
OverviewHow we create valuePerformance overviewRemuneration reportDirectors’ reportFinancial reportShareholder information HOUSING
INVESTING IN SOCIAL AND AFFORDABLE HOUSING IN NEW ZEALAND
Following the wellbeing bonds we arranged for Housing New Zealand Corporation in 2019, this year we jointly led NZ$1 billion
of bond issuances and a sole placement of NZ$300 million for Kāinga Ora – Homes and Communities, to deliver an additional 8,000
new public housing and transitional housing places. All new homes will be built to 6 Homestar, meaning they will far exceed
Building Code (NZ) standards for warmth, dryness and health.
As part of Kāinga Ora’s ongoing build program, already more than 3,000 public housing homes have been built with this rating
around New Zealand. Not only are these new homes warm and dry, they also contribute to improved financial wellbeing of tenants,
with energy savings estimated to be NZ$570 per household every year.
Kāinga Ora brings together the KiwiBuild Unit, Housing New Zealand and its development subsidiary HLC, and is designed to enable
a more cohesive approach to delivering the government’s priorities for housing and urban development in New Zealand.
In the last 12 months,
we have lent over
$60b, helping
more than 170,000
customers in Australia
buy a home.
In the last 12 months,
we have lent over
NZ$18b, helping
more than 55,000
customers in New
Zealand buy a home.
LINKS TO 2020 GROUP PERFORMANCE FRAMEWORK
Despite the serious challenges faced by the banking sector and community this year, our actions over previous years to simplify
and strengthen the bank provided us with the capacity to support our customers at a time of need and strengthen our long-term
relationships. While the focus has been on assisting customers in need, there has also been opportunity to build new customer
relationships and enable more digital services that have been especially valued in a restricted COVID-19 environment. Institutional
performance in key customer satisfaction/relationship strength surveys continued to be a highlight, and a new online payments
experience has been processing ~1 million payments daily and providing digital self-service for Institutional customers.
See section 4.5.3 of the Remuneration report for more details.
23
ANZ 2020 Annual Report CUSTOMER STORY
Opportunities arise in
challenging times
Mount Zero Olives is a small,
family-owned and operated
business in the Grampians in
regional Victoria, producing
and processing certified
organic olives, olive oil
and table fruit.
They also partner with
local growers to produce a
range of pulses and grains.
Supplying predominantly
to restaurants throughout
Australia, the business
has been hit hard by the
COVID-19 pandemic.
General Manager, Richard Seymour recalls
the moment he first realised they were in
for tough times.
“I have a really vivid memory of when the
pin was pulled on the Melbourne Grand
Prix in March and I knew we were in for a
world of change.”
An ANZ customer for almost two decades,
Richard found himself drawing on his
strong relationship with the bank,
developing a roadmap to guide the
business through the pandemic.
“With the help of ANZ and our business
advisor, we put together a vision which saw
us quickly pivot to engaging directly with
customers through an online platform. In a
matter of months, we’ve been able to grow
what was around 5% of direct sales to
customers, to around 35%.”
Mount Zero’s customers have always valued
its sense of brand, the foundation of which,
according to Richard, is its proud heritage
as a family business that values
sustainability and supports ‘local’.
“This has really resonated with our
customers during the pandemic, as they’ve
been able to reach out to a business
directly that was already quite tangible to
them, and not just a paper wrapper on a
product on a supermarket shelf. They know
who we are, where we are from and what
we stand for, and they’ve supported us for
these reasons.”
“As horrible as the outlook is for many small
businesses due to the pandemic, it has
presented an opportunity to drive change
and come out stronger on the other side, and
for that, we’re really grateful,” says Richard.
24
ADAPTINGOverviewHow we create valuePerformance overviewRemuneration reportDirectors’ reportFinancial reportShareholder information Our divisions
Australia Retail and Commercial
"This year has been an extremely tough time
for our customers. We know not every business
will survive but we also know there is opportunity
for others. We will be working closely with
our customers – no matter their situation –
to understand their need and to find solutions
that will help them succeed in the future."
Mark Hand, Group Executive Australia
Retail and Commercial Banking
Operating environment
Between drought, bushfires and COVID-19 it
has been a tough year for the economy and
many of our customers.
Unprecedented levels of fiscal stimulus
have so far sheltered Australia from the
worst economic impacts and some areas of
the economy are seeing opportunity, such
as online retail, home exercise equipment
and pet supplies.
Retail customers are accelerating their
shift to online and mobile banking, limiting
branch visits and moving away from cash,
credit cards and personal loans. Instead
they’ve been saving more, reducing debt
and refinancing their mortgages.
Although Australia is yet to return to normal
activity, businesses are increasingly adapting
to the new environment. Many of our
commercial customers have proactively
managed costs, been conservative with
capital, and innovated during this crisis.
While we face headwinds from the
economic contraction, lower business
confidence and higher unemployment, we
are focused on supporting our customers,
adapting to the changing environment,
and preparing for a more digital future.
Strategy and focus
Our goal is to be a simpler, more efficient,
well-managed business, that is the bank
of choice for Australian home owners and
business owners. Our priorities are to
continue to fix our past mistakes, grow
strategically and sustainably, reshape our
business for a post-COVID world and
prepare for a digitally-enabled and highly
automated future. We are investing in the
business through the economic cycle while
continuing to reduce costs to a more
sustainable level.
Fixing past mistakes and returning money
owed to customers quickly remains an
important focus. Since April 2018 we have
remediated approximately 2.9 million
customer accounts and issued refunds
of approximately $223 million.
We further simplified the business,
including by introducing a more targeted
approach in the Financial Advice business
to focus on affluent and high net worth
clients, and announced the sale of 1,300
offsite ATMs to Armaguard.
Across our branch network, we invested
heavily to open digital branches providing
customers with new self-service options,
including smart (deposit taking) ATMs and
business cash deposit machines. We also
restored momentum in the home loan
book growing it by ~$10 billion in the
year to $275 billion.
We launched our new Online Business
Lending platform providing small businesses
with conditional approval for up to $200,000
in unsecured lending in as little as 20 minutes,
and access to funds within four days.
Performance highlights
Our response to the shifting environment
has had a very real short-term financial
impact – on revenue, profitability and returns.
Cash profit declined by 27% in 2020
compared to the prior year. Through
continued discipline, costs remain
well managed, flat year on year.
Mortgage sales volumes are back to 2017
levels, and Retail and Commercial deposits
are up by $12.7 billion and $13.9 billion
respectively. With lower levels of demand
for credit, commercial lending was flat.
In response to the pandemic we have
provided assistance to our retail and
commercial customers, including deferrals
on home loans, personal loans, credit cards,
business loans and asset finance as well as
temporary overdraft increases. Around
95,000 home loans and 23,000 business
loans received repayment deferrals. We also
increased the size of our hardship team and,
diverted branch staff to support the 65%
increase in customer calls for support.
We contributed to communities through
our bushfire financial relief package for
customers, donated more than $1 million
to support customers and communities
impacted by the fires, and extended our
special paid leave for employees who
volunteer in emergency services.
We received a number of awards, including
Money Magazine’s Mobile Banking App of
the Year, ANZ Canstar’s Small Business Bank
of the Year Award for the third consecutive
year and Agribusiness Bank of the Year
Award. ANZ Private Bank won a number
of awards, notably ranking #1 in four
categories in Euromoney’s peer-voted
Private Banking and Wealth Management
2020 Survey, including Best Overall.
25
ANZ 2020 Annual Report Institutional
“In Institutional, our global network positioned us
well to move quickly to respond to the pandemic
and support our valued, long-term customers.
We also mobilised our digital channels to manage
a sharp rise in transaction volumes, while working
closely with our customers to keep them cyber-safe.”
Mark Whelan,
Group Executive Institutional
Operating conditions
The external environment was challenging
in 2020, particularly in the second half as
COVID-19 impacted the global economy
and supply chains. The pandemic led to
sharply lower levels of activity in every
geography and many sectors, and introduced
significant uncertainty about the future for
our Institutional customers. These immediate
challenges were also conflated with disruptive
structural change and geopolitical issues.
At the same time, these disruptions resulted
in strong activity in our markets and lending
businesses, which responded swiftly to market
volatility and unprecedented demand for
liquidity. With a presence in 33 markets
globally, our diverse business was prepared
to support our customers and staff in our
home markets and internationally.
The pandemic has increased competition, and
record low interest rates continue to narrow
margins and place pressure on revenue.
Slower global demand and competition
led to lower trade finance volumes and
revenues. In the face of these conditions,
Institutional continues to sharpen its focus
on the right customers in priority sectors
and further invest in digital, data and
automation to strengthen the business.
Strategy and focus
markets, valued our network and were in
industries where ANZ had strong expertise.
Four years on, this strategy is well
progressed. We have reshaped the business,
diversified our revenue streams with greater
emphasis on lower capital-intensive products,
consistently reduced operating costs, and
strengthened our culture, while clearly
establishing our position as the leading
relationship bank in the region.
In the early days of the pandemic we were
able to move quickly to support our key
customers, and in the 6 months to end-
March provided $16 billion1 in additional
lending globally. We maintained a
disciplined approach to pricing for risk
and capital management, and undertook
rigorous stress testing to manage credit risk.
Lending volumes declined in the second
half as global capital market conditions
improved, enabling customers to access
debt and equity markets and repay bank
debt. Credit Risk Weighted Assets ended
the year broadly flat.
Through the pandemic, our digital channels
came to the fore, and payment volumes
increased 9.4% year on year. We supported
hundreds of customers working from home
by providing secure remote access via web
and mobile, and helped reduce customer
net losses from fraud by 62%.
In 2016, Institutional laid out a strategy to
build the best bank for clients moving goods
and capital across the region. Our aim was to
be simpler for our customers and employees,
resilient through the cycle and increase return
on equity. We became more targeted and
focused on customers who would benefit
from regional growth, had a link to our home
We were recognised for supporting our
customers, and we maintained our leading
market positions across key geographies
(#1 in Australia and New Zealand2, #5 in
Asia3 for market penetration). This included
#1 for overall relationship quality in Asia3
and #1 for Net Promoter Score in
Australia and New Zealand2.
Performance highlights
Institutional continued to deliver the benefits
of a simpler, more disciplined and resilient
business in 2020, delivering 1% cash profit
growth compared to the prior year despite
tougher economic conditions. Net loans and
advances declined 4% after peaking in the
middle of the year, while customer deposits
grew 3%.
The results demonstrated the value
of customer, product and geographic
diversification within the business. In a
low interest rate environment, Transaction
Banking and Corporate Finance revenue
declined in 2020, down 15% and 1%
respectively. Markets revenue increased by
49%, as customers sought to manage their
financial risks amidst heightened volatility
in Global Markets.
Geographically, lower profit in Australia was
offset in Asia Pacific, Europe & America and
New Zealand, mainly due to higher markets
revenue as customers managed foreign
exchange, interest rate, credit and
commodity price risks.
The Division’s focus on productivity
contributed to another year of cost reduction,
with lower full time equivalent staff, property
efficiencies and reduced discretionary spend.
Credit charges increased with tougher
economic conditions and lower forecast
economic growth, however, the credit
quality of the book remains strong.
Through 2020, ANZ Institutional helped
arrange the largest social bond by an
Australian issuer for the National Housing
Finance and Investment Corporation, as well
as $72 billion in funding for the Australian
Government’s COVID-19 support package.
1. Institutional Gross Loans and Advances excluding FX and Markets 2. Peter Lee Associates 2020 Large Corporate and Institutional Relationship Banking surveys, Australia & New Zealand.
3. Greenwich Associates 2019 Asian Large Corporate Banking study
26
OverviewHow we create valuePerformance overviewRemuneration reportDirectors’ reportFinancial reportShareholder information New Zealand
“ As New Zealand’s largest bank, we’ve been in a unique
position to assist thousands of businesses and many more
individuals through what has been a tough year for many.
Despite a challenging year, I’m proud that we’ve been able
to continue to support our customers, our communities
and our people.”
Antonia Watson, Chief Executive Officer New Zealand
Operating conditions
Throughout the COVID-19 pandemic New
Zealand’s economy remained in an enviable
position relative to many others.
The housing market responded to record
low home loan rates, while being shielded
from the economic slowdown by the
mortgage payment deferral scheme and
the government’s wage subsidy scheme.
Surveyed business activity indicators
have increased since February 2020, now at
similar levels to pre-pandemic, brightening
the outlook for near-term growth.
However, uncertainty, rising unemployment
and winding down of income support
measures will cause some discomfort,
and the impact of the closed border will
play a role in the economy for some time.
Helpfully, and providing some offset,
New Zealand’s export prices are holding
up, indicated by ongoing resilience in
export prices relative to other commodities
and strong operational models in our
core industries.
The Reserve Bank of New Zealand has
taken a medium-term outlook with a
current focus on quantitative easing.
They confirmed increased capital
requirements, originally due to start taking
effect from July 2020, have been delayed
by at least one year.
Business focus
We remain committed to delivering great
customer experiences and outcomes.
ANZ New Zealand implemented key
government-led initiatives in response to
COVID-19 and a major program of reduced
fees, charges and interest rates.
1. Adjusting for the sale of UDC
ANZ led the waiving of Merchant Service
Fees on existing customers’ contactless
debit capability for a limited time and
permanently reduced them after the
COVID-19 lockdown.
Since the pandemic we have provided
financial help to around 43,000 personal,
home and business loan customers through
repayment deferrals, restructures or
adjustments, covering lending of around
NZ$27 billion.
Data and digital initiatives included the
launch of our electronic verification and
use of data to identify customers who
may be experiencing hardship.
We continued refining our physical
presence to fewer, improved branches
and reduced hours for selected regional
branches, enabling an efficient and
simplified operating model. ANZ New
Zealand is part of an industry-led trial
for banking hubs in regional areas.
We completed the sale of UDC Finance
Limited to Shinsei Bank in line with our
simplification strategy.
We announced the Bonus Bonds Business
would close to new investment and that
we intend to start winding up the scheme
by the end of October 2020.
In the environmental space, ANZ provided
public submissions to government, completed
New Zealand’s first sustainability-linked loan
and arranged the country’s first inflation-
linked sustainability bond.
We aided farmers’ decision-making through
proprietary digital tools including our dairy
and red meat dashboards and a geospatial
tool that analyses weather, soil and
contour data.
Performance highlights
Despite difficult conditions, we maintained
a leading position in core banking products
with ~31% share of mortgages and ~33%
share of households deposits (August 2020)
and ~22% share of KiwiSaver (June 2020).
Net loan and advances were flat for the year,
underlying1 net loans and advances grew
by 3%, driven by home lending growth of
6%, and the housing market has remained
reasonably resilient.
Customer deposits grew 9% aided by
inflows from the government’s wage subsidy
scheme and increased system liquidity
following quantitative easing measures
from the RBNZ.
Revenue was impacted by interest-margin
pressure from record low interest rates,
simplifying and reducing fees, and a range of
fee waivers initiated to support customers.
Higher credit impairment charges had a
material impact on our results with a
substantial increase in collective provisions,
recognising the possible impacts of future
economic and operating conditions.
Despite a trying year, our staff continued
to play a role in their communities. Many
helped to plant more than 25,000 trees
across New Zealand as part of our
partnership with Sustainable Coastlines,
and volunteered over 6,000 hours.
Our payroll giving scheme allocated over
NZ $650,000 to 60 charities, and staff
donating to the ANZ New Zealand Staff
Foundation grew from 24.5% to 25.9%.
ANZ donated a total of NZ$2m to Women’s
Refuge, Age Concern New Zealand and the
Salvation Army’s foodbank network to
support people through COVID-19, and
NZ$1m to grassroots cricket and netball
clubs and initiatives nation wide.
27
ANZ 2020 Annual Report EMPLOYEE STORY
LIFE BEYOND THE BRANCH
The ‘Beyond the Branch’ program was launched earlier this year and assists
branch employees to move to business areas requiring additional resources
to meet increased customer demand as a result of COVID-19.
We benefit from transferring our
branch employees’ customer focus
and experience to the areas of greatest
customer need – including our Customer
Contact Centre, Customer Service
Operations and Customer Resolution
– and employees benefit from the
opportunity to diversify their skillset
and broaden their career.
The program involves:
• identifying the in-demand roles
that are a match for branch
employees;
• distributing these roles across
Australia, rather than having them
based in our Melbourne head office;
• actively promoting and providing
visibility of the opportunities; and
• soliciting the support of senior
branch staff to advocate for the
program and actively support
people moving into these roles.
Many branch employees have moved
into the Collections and Hardship team
as part of the program. We have also
set up ‘hubs’ in Western Australia, with
Queensland and New South Wales soon
to follow, so as to ‘tap into’ the capability
of branch staff outside of Victoria.
Solarah Jupp has recently moved
from a branch into the Collections
and Hardship team.
“I originally applied for 'Beyond the
Branch' as I believed the roles suited
my skillset and I was really looking for
a new challenge. Going through this
experience has meant the world to me
– it has broadened my career horizons
far beyond what I could have thought
possible in branch. I feel excited for the
future and I’m looking forward to the
next challenge.”
As at 30 September, 197 'Beyond the
Branch' roles have been filled, with roles
available in every state in Australia.
Our people
Much of our focus this
year has been on mobilising
resources to support the
changing needs of our
customers and business
during the COVID-19
pandemic.
While we have continued to develop the
culture, capabilities and behaviours needed
to deliver our strategy, our top priority has
been to protect our people, keeping them
safe and well. As discussed on pages 8–9,
our Group-wide COVID-19 response plan
includes supports for vulnerable employees,
employees working from home and those
on the frontline supporting our customers.
Mobilising our resources
to meet demand
During March we began to experience a
dramatic increase in calls to our dedicated
hardship team in Australia. We received
around four years worth of hardship
applications in the space of only three
months as almost 94,0001 customers
impacted by COVID-19 sought assistance.
In response, we developed COVID-19 ‘Talent
Mobility Principles’, the purpose of which
was to ensure we had ‘the right people, in
the right locations, at the right time’, to
meet customer and community needs
during the pandemic.
A campaign was run across Australia,
New Zealand and India to help employees
self-identify their skills and desire to move
into critical areas of the business, such as
our Customer Contact Centre. Over 1,000
hours of customised virtual training was
delivered to over 700 staff across our
Customer Service Operations team and
branches to assist them to move temporarily
to in-demand roles. We have also recruited
approximately 185 new hardship consultants
and provided over 23,000 hours of training
to our Customer Connect (Hardship) team
to ensure ongoing support for our customers
on a COVID-19 assistance package.
1. Requests for COVID-19 assistance received between 1 March 2020 and 31 May 2020.
28
OverviewHow we create valuePerformance overviewRemuneration reportDirectors’ reportFinancial reportShareholder information Employee engagement
Culture
In April, our engagement
result increased to 86%
(up from the 77% in 2019),
with increases across all
areas of the bank. This is a
testament to the resilience
of our people and their
ability to adapt to the
new pressures
and challenges
presented by
COVID-19.
up 9
points
94% of employees said
ANZ is supporting them
during the pandemic, and
95% said senior leaders
have been
communicating
effectively.
In response to COVID-19
we launched the ‘Team
Health Check’, a new
team wellbeing survey,
and we continue to run
regular pulse surveys to
measure engagement
– results have remained
relatively stable
since April.
The success of our strategy is dependent
on embedding a culture focused on
delivering great customer outcomes,
making things simpler and always learning.
This work is underpinned by our purpose
and values.
We are taking steps to improve our culture
and are enhancing how we track and
measure our progress. Our Enterprise
Culture Steering Group (ECSG), chaired by
the CEO and whose membership includes
other members of the Executive Committee,
plays a critical role in guiding our efforts
by helping us to understand our cultural
strengths and development areas.
This year the ECSG has considered the
way our organisational culture has changed
during COVID-19, including the opportunities
and risks created by the pandemic – for
example, cross-team collaboration and a
focus on execution were identified as
strengths that have enabled us to deliver
positive customer outcomes.
ownership of outcomes. There are
some reoccurring themes with respect
to challenges, and we are seeking to
tackle these through initiatives focused
on leadership engagement and change
programs; networking sessions to improve
collaboration and role clarity across functions;
and career development opportunities
such as secondments and ‘job shadowing’.
Accountability and
Consequence Framework
In 2020, we continued to strengthen
and embed the Accountability and
Consequence Framework (A&CF). The
Consequence Review Group (CRG), which
is chaired by the CEO, supports the Board
in monitoring the implementation and
ongoing effectiveness of ANZ’s A&CF, being
cognisant of its impact on the culture of
ANZ. The CRG reviews material events,
accountability and the application of
suitable consequences where appropriate.
See section 6 of the Remuneration
report for more details.
Culture assessments
Changes to remuneration
Our Internal Audit group has continued
to conduct culture reviews throughout the
year, supporting businesses and functions
to understand their culture and impact
on ANZ’s aspirational and risk culture.
Assessments are undertaken through a
combination of quantitative and qualitative
analysis, including surveys, focus groups
and interviews. Since 2016, we have
conducted nearly 2,000 focus groups and
interviews and more than 25,000 employees
have participated in culture surveys.
Once complete, a report on cultural
themes, including underlying issues and
related impacts, is provided to the business.
The business must then develop an action
plan to mitigate any identified cultural
challenges. The plan is monitored and
the effectiveness of the actions in shifting
towards the desired culture is reviewed
before it is ‘closed’.
Internal Audit completed 18 culture reviews
in 2020, 11 of which were re-assessments.
Actions undertaken to address cultural
challenges have generally been effective,
particularly where leaders have taken
As part of the Group’s Reimagining Reward
program effective 1 October 2019, we made
adjustments to the remuneration mix for
staff, which included replacing individual
variable remuneration for around 80% of
employees with variable remuneration
based on the overall performance of the
Group. These changes respond to many of
the concerns about ‘bonus culture’ raised in
the final report of the Royal Commission,
and form part of the wide-ranging reforms
for 2020 regarding how we reward, recognise
and manage the performance of employees.
We are implementing the recommendations
from Stephen Sedgwick’s ‘Retail Banking
Remuneration Review’, which is focused
on strengthening the alignment of retail
bank incentives, sales practices and good
customer outcomes. Recommendations
ANZ is delivering independently are now
100% complete and were implemented
ahead of the October 2020 deadline. We
will continue to work with industry to
progress the remaining recommendations.
Management provides regular updates to
the Board Human Resources Committee
on progress.
29
ANZ 2020 Annual Report OUR NEW WAYS OF LEADING
Be
curious
Create
shared
clarity
Empower
people
Connect
with empathy
Grow people
selflessly
Building workforce capability
To help our leaders support their teams
through COVID-19, we provided additional
guidance aligned to two of our desired
leadership behaviours (referred to as our
‘New Ways of Leading’), ‘Creating Shared
Clarity’ and ‘Empowering People’. We want
our people leaders to display these behaviours
in order to inspire and engage their teams,
helping them to deliver on the bank’s
strategic imperatives. When we surveyed
our people in July, we saw an increase in
leaders modelling all of these behaviours.
We introduced a ‘Leading Through Change’
program for our 7,500 people leaders in
July, to help them lead with confidence and
optimism during this period of ongoing and
accelerated change. On completion, leaders
are provided with new tools to support
themselves and their teams to improve
focus, adapt faster and be more productive.
We have also introduced a simpler and
more flexible approach to performance
management. This includes giving
employees the ability to create and document
meaningful performance and growth
objectives in our new People+ system.
We are continuing to develop priority
capabilities aligned with our strategy and
aimed at ‘future-proofing’ our workforce
– data and engineering are two key
capabilities on which we are focused.
We have recruited more than 500 software
and systems engineers over the course of
the year. The COVID-19 pandemic has had
little effect on supply of this capability in
the market and critical engineering talent
remains scarce. In response, we are
investing in innovative recruitment
strategies and have a dedicated team
working on talent marketing, proactive
sourcing, and continuous improvement
of the recruitment approach.
We have continued to invest in the
capabilities of our people through the
provision of training and development
programs. Almost 970,000 hours of learning
were delivered in 2020, including over
530,000 hours of compliance training. Our
Way of Learning (OWL), our digital social
learning platform, enabled employees to
access learning materials relevant to their
current roles and future career aspirations
while working from home. The ability to
access digital content anywhere, anytime
and on any device led to a 29% increase in
self-directed content access across the bank.
Diversity and inclusion
We want our workforce to reflect the
communities we serve and believe that
leveraging the diversity of our people will
drive innovation, making us a better bank
for our customers.
As we come to the end of our current suite
of public diversity and inclusion targets,
we have been reflecting on our progress
and challenges.
Our Women in Leadership objective focuses
our effort on the categories with the lowest
levels of female representation, being our
Senior Executive, Executive and Senior
Manager populations of the bank. This work
is the key to closing our gender pay gap.
Both our Key Management Personnel
and Group Executive Committee are now
gender balanced. The representation of
Women in Leadership1 increased this year
to 33.4 % (up from 32.5% as at September
2019), falling short of our target of
34.1% by the end of 2020. Our progress
is monitored monthly by the CEO and
the Group Execution and Performance
Committee, and will remain a focus.
Over the last four years we have launched
our Spectrum Program – a tailored program
to support autistic individuals into the
workforce – and our Return to Work
Program for people who have taken a career
break. We have welcomed new employee
networks including Cultural Diversity &
Inclusion, Faith and Mental Health &
Wellbeing and been recognised as a leading
employer for LGBTIQ+ inclusion, inclusion of
people with disability and women. We are
developing our second ‘Stretch’ Reconciliation
Action Plan (RAP), reflecting and building on
the lessons learnt from our previous RAPs.
We have promoted the participation of
people from under-represented groups
in our workforce, including Aboriginal
and Torres Strait Islander peoples, people
with disability and refugees. Challenging
conditions, including most recently the
COVID-19 pandemic, have impacted our
goal of recruiting >1000 people from
under-represented groups. We recruited
185 people from under-represented groups
in 2020, bringing the total recruited since
2016 to 919.
We are currently finalising our new
Diversity and Inclusion strategy and it will
inform our approach and commitments
for 2021 and beyond.
Our new Diversity and Inclusion Policy
is available at anz.com/corporate
governance.
LINKS TO 2020 GROUP PERFORMANCE FRAMEWORK
In a challenging year, significant capacity and attention was focused on managing through COVID-19 and the Australian bushfires,
however, strong progress was still made on key priorities including embedding our new reward framework, building strategic and
leadership capabilities, and strengthening governance, accountability and culture. Highlights include a nine point increase in our
employee engagement score, reflecting our strong support for employees and clear senior leader communication during the
pandemic, as well as the enablement of significant increases in our remote working capacity.
See section 4.5.3 of the Remuneration report for more details.
1. Measures representation at the Senior Manager, Executive and Senior Executive levels. Includes all employees regardless of leave status but not contractors (who are included in FTE).
30
OverviewHow we create valuePerformance overviewRemuneration reportDirectors’ reportFinancial reportShareholder information COMMUNITY STORY
Building financial wellbeing
in the Pacific
According to participants
surveyed in the 2019
MoneyMinded Impact
Report, almost 50% of
people in Fiji and Kiribati
frequently run short of
money for food and other
regular expenses.
To help improve this
situation ANZ has partnered
with the United Nations
Development Programme
(UNDP) to deliver its
adult financial education
programs, MoneyMinded
and Business Basics.
The program will be delivered to female
small business owners in rural areas across
Fiji, Kiribati, Solomon Islands, Tonga,
and Vanuatu.
Deputy Team Leader for Inclusive Growth
at the UNDP Pacific Office in Fiji, Patrick
Tuimalealiifano, said the partnership is
more than just balancing a budget.
The MoneyMinded program is helping
Pacific people create a positive vision for
their future,” he said.
ANZ Regional Executive Pacific, Tessa Price,
said the partnership with UNDP enables
ANZ MoneyMinded to reach deeper into
rural communities and target different
groups of people, particularly women.
“A big part of our work is on helping women
in low income households to have financial
security and control over their future and
the future of their families.
“Building financial literacy and business
acumen translates into confidence and over
time we start seeing these women emerge
as community leaders, entrepreneurs
and successful businesswomen.
“We’ve already done a lot of work with
a number of different groups, including
seasonal workers who receive MoneyMinded
training before they travel to Australia and
New Zealand. This partnership with the
UNDP means we will be reaching straight
to the heart of rural communities and
to women who are at the heart of the
household,” she said.
31
FINANCIAL WELLBEINGANZ 2020 Annual Report Our community
Strong relationships with our stakeholders and the broader community is one of our key value
drivers. We are supporting the communities in which we live and work to recover from the
bushfires that devastated parts of Australia earlier this year, and through the COVID-19 pandemic.
We are investing in the
community through our
financial literacy programs,
as well as through local
partnerships with the
not-for-profit sector,
sponsorship, grants, and
staff volunteering and
workplace giving.
In 2020:
20.5% of our employees
volunteered over
66,000 hours to
community organisations,
we matched employee
donations, collectively
contributing almost
$3.9 million to
charitable organisations
in Australia, New Zealand
and Fiji
investing a total
$139.5 million in
the community1
Financial wellbeing
Helping improve the financial wellbeing of our customers is core to our strategy.
We have in particular demonstrated a long-term commitment to helping disadvantaged
people build money management skills and savings capabilities through our financial
inclusion programs.
Being in control of personal and household finances generates improved long-term
financial health and wellbeing, community connectedness and social participation.
More broadly, it also contributes to the social and economic development of communities.
Our financial inclusion programs
Saver Plus was developed by ANZ and the Brotherhood of St Laurence in 2003,
and is co-funded by ANZ and the Australian Government.
Program participants open an ANZ savings account, set a savings goal and save
towards it regularly over 10 months while also attending MoneyMinded financial
education sessions. On reaching their goal, savings are matched by ANZ dollar for
dollar, up to $500, which must be spent on education.
Since 2003, Saver Plus has helped more than 47,770 lower-income Australians save
over $24 million to support their own and their children’s educational needs, with
ANZ providing over $19 million in matched funds.
MoneyMinded supports adults with low levels of financial literacy and those on
lower incomes across 15 markets, including Australia and New Zealand. It is delivered
by community partner organisations in Australia and New Zealand, and a mix of
community organisations and ANZ employees in Asia and the Pacific.
MoneyBusiness has been operating since 2005 and is designed to build the money
management skills and confidence of Aboriginal and Torres Strait Islanders. Since
inception, it has reached over 82,520 participants and has been delivered in over
320 communities through either Australian Government-funded service providers
or ANZ’s partners.
“I am in control of my life and my money for the first time
since having children. Thank you to Saver Plus for being
a part of that positive journey in getting my life and
happiness back!”
Saver Plus participant
1. Figure includes forgone revenue of $105 million, being the cost of providing low or fee free accounts to a range of customers such as government benefit recipients, not-for-profit
organisations and students.
32
OverviewHow we create valuePerformance overviewRemuneration reportDirectors’ reportFinancial reportShareholder information LINKS TO 2020 GROUP PERFORMANCE FRAMEWORK
We have continued to regain community trust following the Royal Commission, and while we know this year has been difficult for many
people, we have had the opportunity prove the value we provide to the community. Our focus on our purpose and values, combined
with strong governance and leadership, has enabled us to help support the community. While across the industry community sentiment
scores have fluctuated during the year, in the RepTrak survey ANZ led for the majority of 2020 and was ranked second based on July to
September results. We achieved an A- rating in the 2019 CDP climate change assessment, the leading score for Australian banks.
See section 4.5.3 of the Remuneration report for more details.
Supporting Australia’s rural
and regional communities
Since 2003, we have been helping build
vibrant and sustainable rural communities
through our Seeds of Renewal financial grants
program, administered by the Foundation
for Rural and Regional Renewal (FRRR).
The program has provided more than
$5 million to help over 800 community
groups. In 2020 we again donated $250,000
to enable local community programs that
support the ongoing prosperity of
regional Australia.
Bushfire relief – helping
communities rebuild
In January 2020, we donated $1 million to
support our customers and the communities
affected by bushfires, including $300,000 to
volunteer fire services across New South
Wales, Victoria and South Australia.
We also matched a further $100,000 of
employee donations to volunteer fire services,
and allocated $500,000 to support local
community services as well as home loan
customers who lost their homes to bushfires
and suffered ongoing financial hardship.
Our $50 billion sustainable finance target
now includes $1 billion specifically for
funding and facilitating initiatives that
support customers and communities
impacted by disasters. Capital may be
allocated for weather related events (such
as bushfires, floods and cyclones) or to
build resilience against non-weather
related disasters such as pandemics.
Workplace giving
Our workplace giving program enables
employees in Australia to make contributions
to around 30 charity partners – many of
which operate in areas aligned to our
priority areas of financial wellbeing,
environmental sustainability and housing –
through regular pre-tax payroll deductions.
Donations are ‘double matched’ – for every
dollar donated by an employee (up to
$5,000 per employee in a tax year) through
the program, ANZ donates two dollars.
Our employees in New Zealand and Fiji
can also donate through payroll to their
respective staff foundations (charitable
trusts that provide small grants) and
ANZ double matches donations.
Volunteering
Our Volunteer Leave Policy, which applies
to permanent, regular and fixed-term
employees provides for at least one day
of paid volunteer leave each year.
This year we also made available extended
special paid leave for employees who
volunteer in emergency services to ensure
they were financially supported while they
served their community during the
bushfire season.
Contribution to public policy
We seek to contribute constructively to
public policy formation and understand
the perspectives of our community’s
elected representatives, policymakers
and regulators. We contribute to policy
formation on business, economic, social
and environmental issues affecting our
customers and shareholders.
We are also a member of a number of
industry associations that contribute to
public policy debate and formation.
In 2020, our key membership
payments included:
Australian Banking Association
$3,258, 203
Business Council of Australia
$93,500
New Zealand Bankers’ Association
NZ $309,079
Business New Zealand
NZ $40,250
We understand that our stakeholders are
interested in the position we take on issues
such as data security, privacy and climate
change, and our membership of industry
associations that develop policies and
undertake advocacy on these issues.
This year, in response to stakeholder
feedback, we reviewed the alignment of
ANZ’s policy position on climate change
with those of our industry associations.
The outcomes of this review will be
on anz.com/shareholder.
We have also committed to review our
memberships of industry associations at
least every three years. The results of any
such review, including any material changes
to our position, will be publicly disclosed.
Community organisation receives funding boost with Seeds of Renewal grant
In 2020, ANZ announced a grant of $15,000 to a NSW community organisation, ‘North Coast Community College’ for an Indigenous
land management employment pathway project. The money contributed to strengthening economic participation and employment
related activities for Aboriginal communities through the establishment of a training program run as a social enterprise.
33
ANZ 2020 Annual Report Our approach to climate change
We support the Paris Agreement’s goal of transitioning to net zero emissions by 2050 and
are committed to playing our part.
We understand the impact – positive and
negative – our financing has on climate
change. Through our lending decisions, we
support companies and projects that
contribute to reducing emissions and that
are resilient to a changing climate. We are
confident we can do this in parallel with
supporting strong economic growth.
Through our disclosures, we seek to provide
investors and other stakeholders with
information enabling them to assess the
adequacy of our approach to climate
change and our ability to manage the
associated risks and opportunities.
This year we released an updated Climate
Change Statement (available on anz.com/cs)
that outlines our approach and strengthened
commitments in support of a global transition
to net zero emissions. We are focused on
lowering emissions in key sectors, in a way
that carefully considers the potential for
community impacts and how we can
mitigate these.
IN SUPPORTING THE 2050 GOAL, OUR APPROACH IS TO:
Help our customers by
encouraging them to
identify climate risks and
opportunities, create
transition plans and report
publicly on their progress
Support transitioning
industries to help grow
the economy
Reduce our own impact
by managing and reducing
emissions from our own
operations
Engaging with 100 of our largest emitting business customers on their transition plans
We have engaged with 83 of our largest
emitting business customers to support
them to establish, and where appropriate,
strengthen existing low carbon transition
plans. This engagement will inform the
development of a model that can be
applied across our customer base.
Within each industry our customers
have different starting points. Through
customer discussions and reviews of
public disclosures we are developing a
better understanding of our customers’
preparation for, and management of, their
climate-related risks and opportunities.
Insights we have gained from customer
conversations include:
Energy: our engagement in this sector
has initially focused on customers with
thermal coal operations; however, we are
broadening this to include our largest oil
and gas producing customers. While the
impacts of COVID-19 have affected
short-term demand, some customers are
continuing to see strong demand for
high-quality, low-cost Australian thermal
coal for use in high efficiency, lower
emissions (HELE) plants across Asia; their
strategy is focused on developing high
quality thermal coal assets and they are
committed to improving their external
disclosures.
Other customers have undertaken
scenario analysis (aligned with
recommendations of the Financial Stability
Board Taskforce on Climate-related Financial
Disclosures (TCFD)), revealing that some
of their commodities will not perform
well under a low carbon transition; in
response, they are limiting expenditure
on thermal coal (with most capital directed
to maintenance rather than expansion),
or seeking to divest those assets. Some
companies are starting to set firmer targets
to work with their suppliers and customers
to seek to reduce the emissions associated
with the use of their mining commodities,
ie ‘Scope 3’ emissions.
Transport: a key customer in the airline
sector has committed to carbon neutral
growth from 2020 and halving 2005
emissions from international flights
by 2050. This aligns with the goals of the
international aviation sector.
Buildings: a number of customers have
established and are now implementing
net zero by 2030 carbon targets that will be
achieved largely through improved energy
efficiency and onsite solar installations.
34
OverviewHow we create valuePerformance overviewRemuneration reportDirectors’ reportFinancial reportShareholder information This is the fourth year we have reported using the TCFD. For detailed information see ‘ANZ 2020 Climate-related Financial Disclosures’
on anz.com/annualreport
Our progress on the TCFD
OUR PROGRESS TO DATE
FOCUS AREAS – 2021/22
BEYOND 2020 VISION
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• Board Risk Committee oversees management of climate-related risks
• Board Ethics, Environment, Social and Governance Committee
approves climate-related objectives, goals and targets
• Align with regulatory guidance on
climate-related risk governance,
including stress testing of selected
portfolios
• Ethics and Responsible Business Committee (executive management)
oversees our approach to environment, social and governance (ESG)
and reviews climate-related risks and opportunities
• Climate Change Statement (available on anz.com) reaffirms
support for the Paris Agreement goals and transition to a net
zero carbon economy
• Extending analysis of flood-related
risks to incorporate bushfire and other
risks relating to retail customers
• Include climate risk reference in
lending guidance documents for
relevant industry sectors, used
by our front line bankers
• Managing the net zero carbon transition focuses on an orderly and just
transition that gives careful consideration to the impacts on communities
• Participated in a United Nations Environment Program Finance
Industry (UNEP FI) working group on TCFD scenario analysis that
issued recommendations and methods to assess portfolio
transition and physical risks
• Low carbon products and services within our Institutional business
focused on climate-related opportunities
• Analysis of flood-related risks for our home loan portfolio
in a major regional location of Australia
• Test-pilot of socio-economic indicators showing financial resilience
of home loan customers with respect to flood risk
• An enhanced
risk management
framework that
anticipates potential
climate-related impacts,
and associated
regulatory requirements
• ANZ business strategy
more closely aligned
to a resilient and
sustainable economy
that supports the
Paris Agreement
and UN Sustainable
Development Goals
• Climate change risk added to Group and Institutional
Risk Appetite Statements
• Climate change identified as a Principal Risk and Uncertainty in
our UK Disclosure and Transparency Rules (DTR) Submission
• Guidelines and training provided to over 1,000 of our Institutional
bankers on customers’ transition plan discussions
• Enhanced financial analysis and stronger credit approval terms
applied to agricultural property purchases in regions of low average
rainfall or measured variability
• New agribusiness customers assessed for financial resilience and
understanding of rainfall and climate trends in their area, and water
budgets considered if irrigating
• Supporting 100 of our largest emitting
customers to develop and disclose
their transition plans
• Customer engagement to identify
customer or sector-specific transition
or physical risks, focused on corporate
and Institutional customers
• Develop an enhanced climate risk
management framework that strengthens
our governance and anticipates
potential climate-related impacts and
associated regulatory requirements
• Further integrate
assessment of climate-
related risks into our
Group Risk management
framework
• Standard discussions
with business customers
include climate-related
risks and opportunities
• Assessment of customer
transition plans part of
standard lending decisions
and portfolio analysis
• Support 100 of our largest emitting customers to establish or
strengthen low carbon transition plans by 2021, with metrics
developed to track progress
• New metrics to enable our progress to be tracked in reducing
‘financed emissions’, beginning with two key sectors: commercial
property and power generation. Metrics are tailored to each sector
(eg. carbon emissions per square metre of net lettable space for
commercial property) and disclosed every 12 months
• $50 billion target to fund and facilitate sustainable solutions by 2025
• Target to procure 100% renewable electricity for ANZ’s operations
by 2025
• Ongoing emissions reduction targets for ANZ energy use aligned
with the Paris Agreement goals
• Complete transition plan engagement
with high emitting customers and
consider how to integrate into
customer assessments
• Set targets to reduce metrics for
‘financed emissions’ for key sectors
towards a net zero goal by 2050
• Consider expanding new metrics for
measuring impact of our progress on
environmental sustainability to other
key sectors
• Continue to evolve our
reporting with leading
practices to measure the
alignment of our lending
with the Paris
Agreement goals
• Reduce ANZ’s
operational emissions
in line with the
decarbonisation
trajectory of the Paris
Agreement goals
35
ANZ 2020 Annual Report
We are supporting household, business and financial practices that improve environmental
sustainability. One way we do this is through encouraging and supporting 100 of our largest
emitting customers to establish, and where appropriate, strengthen existing low carbon
transition plans, by 2021.
CUSTOMER STORY
Supporting Wesfarmers to transition
to net zero emissions
Headquartered in
Western Australia and
with around 107,000
employees, Wesfarmers
Limited is one of Australia’s
largest listed companies,
with diversified operations
spanning across almost
30 retail and industrial
businesses.
Better known for its consumer brands such
as Bunnings, Kmart and Officeworks, it also
has interests in fertilisers, chemicals and in
the energy sector.
In September this year, it announced an
accelerated agenda to set and achieve net
zero emissions for its retail operations by
2030, and its industrial businesses by 2050.
This is on top of existing 2025 emissions
reduction targets.
Naomi Flutter, an Executive General
Manager at Wesfarmers said its climate
action was driven by a commitment to
contributing positively to the global goal
of achieving net zero emissions by 2050.
36
Wesfarmers has banked with ANZ since the
1980s and we are supporting the company
in its transition journey.
“We value the role ANZ plays as a key
banking partner – especially with respect
to the open and constructive dialogue we
have with them on our transition agenda,”
says Naomi.
“For us, transitioning to achieve net zero
emissions from our business is about doing
what’s right and good for the environment,
and we want to step up and contribute
in a responsible way. It’s also what our
customers believe in and want from us,
and so from that perspective it also
makes good business sense.”
To achieve its goals, Naomi says Wesfarmers
is pulling on numerous levers to significantly
reduce its emissions.
“We’re investing heavily in energy
efficiencies in our retail businesses through
new technology, solar panels and LED
lighting. And in our industrial business
we’re investing catalyst technologies
to reduce emissions intensity.”
ENVIRONMENTAL SUSTAINABILITYOverviewHow we create valuePerformance overviewRemuneration reportDirectors’ reportFinancial reportShareholder information CUSTOMER STORY
New Zealand’s agribusinesses leading
the way on transition planning
Greenhouse Gas Emissions
(GHG) from the food
and fibre sector, (and its
associated waste) account
for around half of New
Zealand’s total emissions.¹
Synlait Milk Limited is
working hard to reduce
emissions in line with its
commitment to the Paris
Agreement goals.
According to Hamish Reid, Director of
Sustainability and Brand at Synlait, “we
need to act now and we need to be bold.
It’s both a matter of mitigating climate-
related risks and at the same time, seizing
opportunities to reimagine all aspects
of our business and value chain.”
Synlait is implementing a range of initiatives
to reduce emissions and deliver long-term
financial benefits.
Targets relating to climate, welfare, water
and waste have been set – including an
off-farm² 50% reduction in GHG emissions
per kg of product by 2028, and an on-farm
35% reduction in GHG emissions per kg of
milk solids by 2028.
Within its on-farm certification program,
Lead With Pride™, educational resources
and milk price incentives are being offered
to its farmer suppliers to implement best
practice GHG mitigation techniques. It
has also recently opted for an energy and
emissions efficient electrode boiler, rather
than the traditional coal-fired boiler, to
run its fresh milk and cream facility in
Canterbury, NZ.
Synlait has been an ANZ customer since
2000, when the company’s founders bought
their first few Canterbury dairy farms, before
then expanding into processing in 2008. In
2019, ANZ arranged and funded a NZ$50 million
sustainability linked loan which has supported
Synlait’s sustainability agenda.
“ANZ enabled us to enter into an ESG linked
loan, sending two strong signals to our
stakeholders. First, that leading banks today
recognise that sustainability performance
results in lower risk, and second, that
sustainability performance can lead to
financial benefits. Having a diversity of
like-minded partners accompanying us
in our transition is critical for us to achieve
our goals,” says Hamish.
Another customer ANZ is assisting with
its transition towards a low carbon future
is Silver Fern Farms Limited.
Since 2018, the grass-fed red meat
processing and exporting company has
reduced its GHG emissions by 8%, and
reduced its fossil fuel usage by 12% since
2017. It is targeting a 30% reduction on
2005 levels of the GHG emissions intensity
of its operations per tonne of product
before 2030.
“We’ve taken a number of steps to embed
sustainability within our company, from
being the first red meat processor to certify
our carbon footprint in New Zealand, to
having strong Board involvement in our
sustainability agenda, to incorporating
sustainability and climate reporting into
our parent co-operative’s external
disclosures,” says Justin Courtney, Head
of Communications and Sustainability
from Silver Fern Farms.
Silver Fern Farms uses a ‘whole of farm’
system approach to reduce carbon in the
supply chain as a way to enhance the
natural, biodiverse farming environments
in New Zealand.
“In addition to our own initiatives, such
as sourcing animals from farms rich in
biodiversity and sourcing electricity from
100% renewable sources, we’re proactively
working with suppliers to better understand
their carbon footprints and where the
opportunities lie to reduce and optimise
carbon absorption on their farms,” says Justin.
The engagement with our largest emitting
customers on their transition plans is a top
priority for ANZ, as we seek to support them
to manage the climate-related risks and
opportunities. Synlait and Silver Fern Farms
are just two out of the 100 customers we
are engaging with on their transition plans.
1. www.mpi.govt.nz/protection-and-response/environment-and-natural-resources/emissions-trading-scheme/agriculture-and-greenhouse-gases/ 2. On-farm: Synlait’s farmer suppliers
(scope 3). Off-farm: Synlait’s own manufacturing processes (scope 1 and 2) and non-farm scope 3 emissions.
37
ENVIRONMENTAL SUSTAINABILITYANZ 2020 Annual Report Governance
Corporate Governance Framework
SHAREHOLDERS
BOARD OF DIRECTORS
Audit
Committee
Ethics, Environment,
Social and Governance
Committee
Risk
Committee
Human
Resources
Committee
Digital Business
and Technology
Committee
Nomination and
Board Operations
Committee
Board reserved powers and delegation of authority
CHIEF EXECUTIVE OFFICER
GROUP EXECUTIVE COMMITTEE
Board of Directors
The Board is responsible for the oversight of ANZ and its sound and
prudent management, with specific duties as set out in its charter
available at anz.com/corporategovernance.
delegations of authority framework that clearly outlines those
matters delegated to the CEO and other members of senior
management.
There are six principal Board Committees – the Audit Committee,
the Ethics, Environment, Social and Governance Committee, the Risk
Committee, the Human Resources Committee, the Digital Business
and Technology Committee and the Nomination and Board
Operations Committee.
Each Committee has its own charter setting out its roles and
responsibilities. At management level, the Group Executive
Committee comprises ANZ’s most senior executives. There is a
For further detail on ANZ’s governance framework see our
2020 Corporate Governance Statement available at
anz.com/corporategovernance.
Full biography details can be found on our website at
anz.com/directors and on pages 44–48 of this report.
38
ANZ’s strong governance framework provides a solid structure for effective and responsible decision-making within the organisation. OverviewHow we create valuePerformance overviewRemuneration reportDirectors’ reportFinancial reportShareholder information
PAUL O'SULLIVAN
SHAYNE ELLIOTT
Chairman, Independent Non-Executive Director
Chief Executive Officer, Executive Director
ILANA ATLAS, AO
PAULA DWYER
Independent Non-Executive Director
Independent Non-Executive Director
JANE HALTON, AO PSM
RT HON SIR JOHN KEY, GNZM AC
Independent Non-Executive Director
Independent Non-Executive Director
GRAEME LIEBELT
JOHN MACFARLANE
Independent Non-Executive Director
Independent Non-Executive Director
39
ANZ 2020 Annual Report Directors’ meetings
The number of Board, and Board Committee, meetings held during the year and each Directors’ attendance at those meetings are set out below:
Board
Risk
Committee
Audit
Committee
Human
Resources
Committee
PAUL O'SULLIVAN
ILANA ATLAS, AO
A
5
B
5
A
B
11 11
14 14
PAULA DWYER
14 14
7
7
SHAYNE ELLIOTT
14 14
A
B
8
8
8
8
DAVID GONSKI, AC2
14 14
7
7
8
8
JANE HALTON, AO PSM
14 14
A
5
6
6
6
6
B
5
6
6
6
6
RT HON SIR JOHN KEY, GNZM AC 14 14
GRAEME LIEBELT
JOHN MACFARLANE
14 14
14 14
7
7
7
7
7
7
6
6
8
8
8
8
Ethics,
Environment,
Social and
Governance
Committee
A
B
5
5
5
5
5
5
5
5
Digital Business
and Technology
Committee
Special
Committee
of the Board1
Nominations
and Board
Operations
Shares
Committee1
A
5
6
6
6
6
B
5
6
6
5
6
A
B
A
B
1
1
2
3
2
3
A
1
1
1
1
1
1
1
1
B
1
1
1
1
1
1
1
1
Column A Indicates the number of meetings the Director was eligible to attend as a member. Column B Indicates the number of meetings attended. The Chairman became an ex-officio
member of the Risk, Audit, Human Resources, Ethics, Environment, Social and Governance, Digital Business and Technology and Nomination and Board Operations Committees on 28 October
2020, upon David Gonski's retirement. With respect to Committee meetings, the table above records attendance of Committee members. Any Director is entitled to attend these meetings
and from time to time Directors attend meetings of Committees of which they are not a member. 1. The meetings of the Special Committee of the Board and Shares Committee as referred
to in the table above include those conducted by written resolution. 2. David Gonski retired as Chairman and as a Non-Executive Director on 28 October 2020.
40
OverviewHow we create valuePerformance overviewRemuneration reportDirectors’ reportFinancial reportShareholder information Executive Committee
Below from left to right
Emma Gray
1
Group Executive Data and Automation
Joined the Executive Committee on 1 May 2020
Maile Carnegie
2
Group Executive Digital and Australia Transformation
Joined the Executive Committee on 27 June 2016.
Farhan Faruqui
3
Group Executive International
Joined the Executive Committee on 1 February 2016.
Gerard Florian
4
Group Executive Technology
Joined the Executive Committee on 30 January 2017.
Alexis George
5
Deputy Chief Executive Officer and
Group Executive Wealth Australia
Joined the Executive Committee on 1 December 2016.
Kathryn van der Merwe
6
Group Executive Talent and Culture
Joined the Executive Committee on 1 May 2017.
Full biography details can be found on our website at anz.com/exco.
Kevin Corbally
7
Group Chief Risk Officer
Joined the Executive Committee on 19 March 2018.
Mark Whelan
8
Group Executive Institutional
Joined the Executive Committee* on 20 October 2014.
Antonia Watson
9
Chief Executive Officer New Zealand
Joined the Executive Committee on 17 June 2019.
Shayne Elliott
10
Chief Executive Officer
(appointed CEO on 1 January 2016).
Joined the Executive Committee* on 1 June 2009.
Michelle Jablko
11
Chief Financial Officer
Joined the Executive Committee on 18 July 2016.
Mark Hand
12
Group Executive Australia Retail
and Commercial Banking
Joined the Executive Committee on 15 May 2018.
*previously known as Management Board.
41
ANZ 2020 Annual Report Board areas of focus
The Board and its Committees engage in key strategic, governance and oversight activities
each year. The list below is not a comprehensive list of all the matters but is illustrative to
provide stakeholders with an insight into some of the key matters considered by the
Board during the year.
CRISIS MANAGEMENT
Over the year, Australia and the world has faced many crises,
and the Board and its Committees have played an active role
in providing oversight of the impact of and ANZ’s response
to, them, including the bushfires in Australia and the
COVID-19 pandemic.
In relation to the Australian bushfires, this included reviewing ANZ’s
customer relief response, the impact to our customers, staff and the
economy generally, ANZ’s public commitments and contributions,
and ANZ’s next steps to support ongoing resilience for communities
affected by this and future disasters. In addition to this, the Board
attended a bushfire marketplace where ANZ hosted at its Melbourne
Head Office small business customers and their peers who had
been impacted by the devastating bushfires in Victoria where
customers sold their goods and services.
In relation to the COVID-19 pandemic, the Board adopted a
multi-faceted approach utilising the range of its Committees as
well as discussions at the Board itself. At the onset of the pandemic,
Directors received a weekly informal briefing as to developments,
supplemented with more detailed discussions at Board and
Committee meetings.
Key topics of those discussions included:
• the measures put in place to support our customers, customer
take up of those measures, ANZ’s delivery of those measures and
ongoing communications with impacted customers;
• the impact of the pandemic on the economy (domestic and
international, looking at both the immediate and longer-term
impacts of the pandemic), on various industries, and ANZ’s risk
approach to them, including risk appetite settings;
• discussions regarding the impact of the pandemic on the
financial performance and position of the Group, including in
relation to capital requirements and the payment of dividends
to shareholders;
• the impact of the pandemic on ANZ’s people, and the different
geographic responses undertaken in the jurisdictions ANZ
operates in, the steps ANZ was taking to protect and support its
people and to prepare and equip them for operating remotely,
including looking at the potential cultural impacts this may have.
The Board also had numerous discussions in relation to geopolitical
matters and their potential impact on ANZ’s operations.
42
OverviewHow we create valuePerformance overviewRemuneration reportDirectors’ reportFinancial reportShareholder information RISK, REGULATION AND REPUTATION
ENGAGEMENT
The Board and its Committees
also continued overseeing the
important work being carried out
by Management to implement the
lessons learnt from the Royal
Commission, progress against ANZ’s
self-assessment roadmap, as well
as ANZ’s approach to improving
organisational and risk culture.
In addition, the Board continued its
oversight of customer remediation,
highlighting the importance to the Group
of redressing customers when things go
wrong and providing oversight of
prevention and detection activities.
The Board and its Committees also had
detailed and regular updates in relation
to interactions with regulators around the
world, including ASIC, APRA, AUSTRAC,
AFCA, RBNZ, FMA and MAS. Directors also
met with key regulators during the course
of the year with the purpose of maintaining
constructive and two-way dialogue.
The Board and its Committees also had
numerous meetings in relation to
developing ANZ’s Compliance Strategy,
its approach to the management of
non-financial risks, risk appetite settings
and the triennial independent review
of ANZ’s approach to compliance with
APRA Prudential Standard CPS 220 “Risk
Management”.
The Board and its Committees also
discussed key environmental and social
risk matters, including ANZ’s approach to
climate change, reviewing and approving
ANZ’s Climate Change Statement, reviewing
ANZ’s industry association alignment with
climate policy and changes to Modern
Slavery and Human Rights laws.
STRATEGY AND THE FUTURE
The Board and its Committees
continued to focus on longer-term
strategic matters. Directors participated
in an annual Board strategy session
utilising internal and external experts to
challenge and provide different points
of view to assist the Board and
Management in setting the strategic
direction of the Group.
The Board received regular updates on the
implementation of the Group’s strategy
from the Chief Executive Officer, and
corresponding updates from Risk and
Internal Audit in relation to their
assessments of the risks associated with
Management’s approach to implementing
the strategy.
The Board also received numerous updates
in relation to the strategic approach to
digitally transform its Australian Retail
and Commercial business.
Finally, the Board carried out succession
planning in respect of the Chairman,
with the Board appointing Paul O’Sullivan
to succeed David Gonski, following his
retirement on 28 October 2020.
In addition to the informal briefings
around the COVID-19 pandemic,
meetings with regulators and attending
the bushfire marketplace outlined
above, the Directors continued their
approach to meeting with customers,
staff and investors, both in person
and virtually.
This included having a virtual session with
all of ANZ’s Country Heads to discuss topical
matters impacting their businesses.
A subset of Directors played an active role
in attending meetings with Management
throughout the year to actively engage and
challenge their approach to stress testing
the portfolio against severe but plausible
events to inform risk appetite setting and
capital planning processes.
Prior to the pandemic, the Board had
established regular meetings in diverse
geographic areas with a view to maximising
interactions with customers, staff and other
stakeholders. It is envisaged that this will
continue when the environment allows it.
During the financial year, the Board held
physical meetings in Melbourne, Sydney
and Brisbane.
43
ANZ 2020 Annual Report Directors’ qualifications, experience
and special responsibilities
As at the date of this report, the Board
comprises seven Non-Executive Directors and
one Executive Director, the Chief Executive
Officer. David Gonski was Chairman and a
Non-Executive Director from 2014 until his
retirement in October 2020. The names of
the current Directors, together with details
of their qualifications, experience and
special responsibilities are set out below.
Audit Committee
Ethics, Environment, Social and
Governance Committee
Risk Committee
Human Resources Committee
Digital Business and Technology Committee
Nomination and Board Operations Committee
Paul O’Sullivan
CHAIR
MEMBER
POSITION
Chairman, Independent Non-Executive Director
QUALIFICATIONS
BA (Mod) Economics, Advanced Management Program of Harvard
RESPONSIBILITIES
Chairman since October 2020 and a Non-Executive Director since
November 2019.
Paul is an ex-officio member of all Board Committees and Chair of
the Ethics, Environment, Social and Governance Committee and
the Nomination and Board Operations Committee.
CAREER
Paul has experience in the telecommunications and oil
and gas sectors, both in Australia and overseas. He has held senior
executive roles with Singapore Telecommunications (Singtel) and
was previously the CEO of Optus. He has also held management
roles with the Colonial Group and the Royal Dutch Shell Group in
Canada, the Middle East, Australia and United Kingdom.
RELEVANT OTHER DIRECTORSHIPS
Chairman: Singtel Optus Pty Limited (from 2014, Director from
2004) and Western Sydney Airport Corporation (from 2017).
Director: Coca-Cola Amatil (from 2017), Telkomsel Indonesia
(from 2010) and St Vincent’s Health Australia (from 2019).
RELEVANT FORMER DIRECTORSHIPS HELD IN LAST
THREE YEARS INCLUDE
Former Director: Healthscope Limited (2016–2019) and
National Disability Insurance Agency (2017–2020).
Age | 60 years
Residence | Sydney, Australia
44
OverviewHow we create valuePerformance overviewRemuneration reportDirectors’ reportFinancial reportShareholder information Shayne Elliott
Ilana Atlas, AO
POSITION
CHAIR
MEMBER
POSITION
Chief Executive Officer and Executive Director
Independent Non-Executive Director
QUALIFICATIONS
BCom
QUALIFICATIONS
BJuris (Hons), LLB (Hons), LLM
RESPONSIBILITIES
RESPONSIBILITIES
Chief Executive Officer and Executive Director since
1 January 2016.
CAREER
Shayne has over 30 years’ experience in banking in Australia and
overseas, in all aspects of the industry. Shayne joined ANZ as CEO
Institutional in June 2009, and was appointed Chief Financial
Officer in 2012.
Prior to joining ANZ, Shayne held senior executive roles at EFG
Hermes, the largest investment bank in the Middle East, which
included Chief Operating Officer. He started his career with Citibank
New Zealand and worked with Citibank/Citigroup for 20 years,
holding various senior positions across the UK, USA, Egypt, Australia
and Hong Kong.
Shayne is a Director of the Financial Markets Foundation for Children
and a member of the Australian Banking Association, the Business
Council of Australia and the Australian Customs Advisory Board.
RELEVANT OTHER DIRECTORSHIPS
Director: ANZ Bank New Zealand Limited (from 2009) and
the Financial Markets Foundation for Children (from 2016).
Member: Business Council of Australia (from 2016), the Australian
Banking Association (from 2016, Chairman 2017-2019) and the
Australian Customs Advisory Board (from 2020).
Age | 56 years
Residence | Melbourne, Australia
Non-Executive Director since September 2014. Ilana is Chair of
the Human Resources Committee and is a member of the Audit
Committee, Ethics, Environment, Social and Governance
Committee and the Nomination and Board Operations
Committee.
CAREER
Ilana brings a strong financial services background and legal
experience to the Board. Ilana was a partner at law firm Mallesons
Stephen Jaques (now King & Wood Mallesons), where in addition
to her practice in corporate law, she held a number of management
roles in the firm including Executive Partner, People and Information,
and Managing Partner. She also worked at Westpac for 10 years,
where her roles included Group Secretary and General Counsel
and Group Executive, People, where she was responsible for human
resources, corporate affairs and sustainability. Ilana has a strong
commitment to the community, in particular the arts and education.
RELEVANT OTHER DIRECTORSHIPS
Chairman: Coca-Cola Amatil Limited (from 2017, Director from
2011) and Jawun (from 2017, Director from 2014).
Director: Paul Ramsay Foundation (from 2017).
Member: Panel of Adara Partners (from 2015).
RELEVANT FORMER DIRECTORSHIPS HELD IN LAST
THREE YEARS INCLUDE
Former Director: OneMarket Limited (2018-2019), Westfield
Corporation Limited (2014–2018), Human Rights Law Centre Ltd
(2012–2017) and Treasury Corporation of New South Wales
(2013–2017).
Former Fellow: Senate of the University of Sydney (2015–2019).
Age | 66 years
Residence | Sydney, Australia
45
ANZ 2020 Annual Report Directors’ qualifications, experience and special responsibilities continued
Paula Dwyer
Jane Halton, AO PSM
CHAIR
MEMBER
POSITION
CHAIR
MEMBER
POSITION
Independent Non-Executive Director
Independent Non-Executive Director
QUALIFICATIONS
BCom, FCA, SF Fin, FAICD
RESPONSIBILITIES
Non-Executive Director since April 2012. Paula is Chair of
the Audit Committee and is a member of the Risk Committee,
Human Resources Committee and Nomination and Board
Operations Committee.
CAREER
Paula has extensive experience in financial markets, corporate
finance, risk management and investments, having held senior
executive roles at Calibre Asset Management, Ord Minnett (now
J P Morgan) and at Price Waterhouse (now PricewaterhouseCoopers).
Her career as a company director spans financial services,
investment, insurance, healthcare, gambling and entertainment,
fast moving consumer goods, property and construction and
retailing sectors. Paula has a strong interest in education and
medical research, having served as a member of the Geelong
Grammar School Council and the Business and Economics
Faculty at the University of Melbourne and as Deputy Chairman
of Baker IDI.
RELEVANT OTHER DIRECTORSHIPS
Chairman: Tabcorp Holdings Limited (from 2011, Director from
2005), Kin Group Advisory Board (from 2014) and Allianz Australia
Limited (from 2020, Director from 2019).
Director: Lion Pty Ltd (from 2012).
Member: Kirin International Advisory Board (from 2012) and
Australian Government Takeovers Panel (from 2017).
RELEVANT FORMER DIRECTORSHIPS HELD IN LAST
THREE YEARS INCLUDE
Former Chairman: Healthscope Limited (2014-2019).
Age | 60 years
Residence | Melbourne, Australia
QUALIFICATIONS
BA (Hons) Psychology, FIPAA, Hon. FAAHMS, Hon. FACHSE,
Hon. DLitt, FAIM , FAICD
RESPONSIBILITIES
Non-Executive Director since October 2016. Jane is Chair of the
Digital Business and Technology Committee and is a member
of the Human Resources Committee, Ethics, Environment,
Social and Governance Committee and Nomination and
Board Operations Committee.
CAREER
Jane’s 33 year career in the public service includes the positions of
Secretary of the Australian Department of Finance, Secretary of the
Australian Department of Health, Secretary for the Department of
Health and Ageing, and Executive Co-ordinator (Deputy Secretary)
of the Department of the Prime Minister and Cabinet. She brings to
the Board extensive experience in finance, insurance, risk management,
information technology, human resources, health and ageing and
public policy. She also has significant international experience.
Jane has contributed extensively to community health through local
and international organisations including the World Health Organisation
and National Aboriginal and Torres Strait Islander Health Council.
RELEVANT OTHER DIRECTORSHIPS
Chairman: Vault Systems (from 2017), Coalition for Epidemic
Preparedness Innovations (Norway) (from 2018, Member from
2016) and Council on the Ageing Australia (from 2017).
Director: Clayton Utz (from 2017) and Crown Resorts Limited
(from 2018).
Member: Executive Board of the Institute of Health Metrics and
Evaluation at the University of Washington (from 2007) and National
COVID-19 Commission Advisory Board (from 2020).
Adjunct Professor: University of Sydney and University of Canberra.
Council Member: Australian Strategic Policy Institute (from 2016).
Age | 60 years
Residence | Canberra, Australia
46
OverviewHow we create valuePerformance overviewRemuneration reportDirectors’ reportFinancial reportShareholder information RT Hon Sir John Key,
GNZM AC
Graeme Liebelt
MEMBER
POSITION
CHAIR
MEMBER
POSITION
Independent Non-Executive Director
Independent Non-Executive Director
QUALIFICATIONS
BCom, DCom (Honoris Causa)
QUALIFICATIONS
BEc (Hons), FAICD, FTSE, FIML
RESPONSIBILITIES
RESPONSIBILITIES
Non-Executive Director since February 2018. Sir John is a
member of the Ethics, Environment, Social and Governance
Committee, Risk Committee, Digital Business and Technology
Committee and Nomination and Board Operations Committee.
Non-Executive Director since July 2013. Graeme is Chair of the
Risk Committee and is a member of the Audit Committee, Human
Resources Committee and Nomination and Board Operations
Committee.
CAREER
CAREER
Sir John was Prime Minister of New Zealand from 2008 to 2016,
having commenced his political career in 2002. Sir John had a long
career in international finance, primarily for Bankers Trust in New
Zealand and Merrill Lynch in Singapore, London and Sydney. He was
previously a member of the Foreign Exchange Committee of the
Federal Reserve Bank of New York (from 1999 to 2001).
Sir John was made a Knight Grand Companion of the New Zealand
Order of Merit in the 2017 Queen’s Birthday Honours. In 2017 Sir
John became a Companion of the Order of Australia for advancing
the Australia-New Zealand bilateral relationship.
RELEVANT OTHER DIRECTORSHIPS
Chairman: ANZ Bank New Zealand Limited (from 2018,
Director from 2017).
Director: Palo Alto Networks (from 2019).
RELEVANT FORMER DIRECTORSHIPS HELD IN LAST
THREE YEARS INCLUDE
Former Chairman: The International Democratic Union
(2014–2018).
Former Director: Air New Zealand Limited (2017-2020).
Age | 59 years
Residence | Auckland, New Zealand
Graeme brings to the Board his experience of a 23-year executive
career with Orica Limited (including a period as Chief Executive
Officer), a global mining services company with operations in more
than 50 countries. He has extensive international experience and a
strong record of achievement as a senior executive, including in
strategy development and implementation. Graeme is committed
to global trade and cooperation, as well as community education.
RELEVANT OTHER DIRECTORSHIPS
Chairman: Amcor Limited (from 2013, Director from 2012)
Director: Australian Foundation Investment Company Limited
(from 2012) and Carey Baptist Grammar School (from 2012).
RELEVANT FORMER DIRECTORSHIPS HELD IN LAST
THREE YEARS INCLUDE
Former Chairman: DuluxGroup Limited (2018–2019, Director
from 2016).
Age | 66 years
Residence | Melbourne, Australia
47
ANZ 2020 Annual Report Directors’ qualifications, experience and special responsibilities continued
John Macfarlane
MEMBER
POSITION
Company Secretaries’ qualifications
and experience
Currently there are two people appointed as Company Secretaries
of the Company. Details of their roles are contained in the Corporate
Governance Statement.
Their qualifications and experience are as follows
Independent Non-Executive Director
Ken Adams
QUALIFICATIONS
BCom, MCom (Hons)
RESPONSIBILITIES
Non-Executive Director since May 2014. John is a member
of the Audit Committee, Risk Committee, Digital Business
and Technology Committee and Nomination and Board
Operations Committee.
CAREER
John is one of Australia’s most experienced international bankers
having previously served as Executive Chairman of Deutsche Bank
Australia and New Zealand, and CEO of Deutsche Bank Australia.
John has also worked in the USA, Japan and PNG, and brings to
the Board a depth of banking experience in ANZ’s key markets in
Australia, New Zealand and the Asia Pacific. He is committed to
community health, and is a Director of the Aikenhead Centre
of Medical Discovery Limited (from 2016).
RELEVANT OTHER DIRECTORSHIPS
Director: Colmac Group Pty Ltd (from 2014), AGInvest Holdings
Limited (MyFarm Limited) (from 2014, Chairman 2014–2016),
Balmoral Pastoral Investments (from 2017) and L1 Long Short
Fund (from 2018).
RELEVANT FORMER DIRECTORSHIPS HELD IN LAST
THREE YEARS INCLUDE
Former Director: St Vincent’s Institute of Medical Research
(2008–2019) and Craigs Investment Partners Limited (2013-2020).
Age | 60 years
Residence | Melbourne, Australia
POSITION
QUALIFICATIONS
Group General Counsel
BA, LLB, LLM
Ken joined ANZ as Group General Counsel in August 2019, having
assisted ANZ with major legal issues for over 10 years. Prior to ANZ,
Ken was a Partner of Freehills and later Herbert Smith Freehills for
21 years, and for 6 years was a member of the Herbert Smith
Freehills Global Board. Ken is one of Australia’s leading commercial
lawyers with significant experience in class actions, and complex
problems requiring strategic and multi-disciplinary analysis. He
holds a Master of Laws from the University of Melbourne and is
a co-author of Class Actions in Australia.
Simon Pordage
POSITION
QUALIFICATIONS
Company Secretary
LLB (Hons), FGIA, FCG (CS, CGP)
Simon joined ANZ in May 2016. He is a Chartered Secretary and
Chartered Governance Practitioner and has extensive company
secretarial and corporate governance experience. From 2009 to 2016
he was Company Secretary for Australian Foundation Investment
Company Limited and a number of other listed investment companies.
Other former roles include being Deputy Company Secretary for ANZ
and Head of Board Support for Barclays PLC in the United Kingdom.
He is a formal brand ambassador for, and is a former National President
and Chairman of, Governance Institute of Australia, and is a member
and former Chairman of its National Legislation Review Committee.
Simon is committed to the promotion and practice of good
corporate governance, and regularly presents on governance issues.
48
OverviewHow we create valuePerformance overviewRemuneration reportDirectors’ reportFinancial reportShareholder information Risk management
2020 has seen the external operating environment dramatically impacted by a number of events,
notably the COVID-19 pandemic, the effects of which continue to unfold. The strength of the
ANZ Risk Management Framework has underpinned our response to the crisis. It has provided
the flexibility to adapt to the rapidly changing environment while maintaining sound risk
management practices.
Our progress
This year we have continued to invest
in our Risk Management Framework,
processes and systems which has further
strengthened our ability to respond to
changes in our existing risks but also deal
with new risks that have been introduced
through the increasingly complex external
environment, with particular focus on the
areas outlined below:
COVID-19
In response to the COVID-19 pandemic, we
developed a range of support measures to
assist employees and customers, and to
maintain safe and secure operations. The
risk management function contributed to
the successful execution of this support,
including through:
• Enactment of our Business Continuity
Plan enabling our operations to respond
swiftly to the changing environment
without material disruption to critical
business services. This allowed us
to continue operating through the
pandemic by:
– scaling of remote working capacity,
enabling the majority of non-branch
employees to work productively
from home
– ensuring no material impacts on
critical business services
– remaining agile and able to adapt
to changing conditions in line with
government restrictions.
• Continued partnering with our
businesses to protect the bank by:
– prioritising the re-rating of the Wholesale
book, with re-ratings complete for
93% of our total Institutional portfolio,
74% of our total Commercial Australia
portfolio, and 83% of our New Zealand
Commercial & Agri portfolios; and
– undertaking a series of industry deep
dives and stress tests across our
portfolios to assess potential
credit outcomes.
• Investment in systems, providing:
– enhanced data analytics to better
analyse and observe customer
behaviour
– an improved collections and
hardship platform that enables
customers to manage their arrears
online while facilitating holistic
conversations with customers
about their financial situation.
Culture and conduct
• We recognise that an ethical culture is
a pre-determinant for us to deliver on
our strategy, and that in order to prevent
unfair customer outcomes we need to
be able to identify and understand any
behavioural misalignment in order to
take corrective action. This year, to further
enhance how we measure, monitor and
manage conduct risk, we have explored
the use of behavioural science techniques
to improve compliant behaviour and will
look to apply the methodology more
broadly in the coming year.
• In order to align with ANZ’s aspirational
culture, priorities for this year have
continued to focus on transforming
behaviours through: focusing on
'speak-up'; continuing to strengthen
our Accountability and Consequence
Framework; fortifying leadership; further
embedding the new remuneration,
recognition and performance
management framework; listening
and responding to our people; and
fostering an 'always learning' culture.
• Risk culture (as a critical component of
our organisational culture) remains an
important focus for the organisation. In
addition to targeted initiatives created
to enhance elements of our risk culture,
our evolution to a more explicit and
simple approach to the management and
measurement of risk culture will allow us
to more easily monitor progress towards
our desired risk culture state, and assess
the effectiveness of our actions.
Non-financial risk
We are continuing to improve the way in
which we manage our obligations and
operational risks, following the redesign
and simplification of our non-financial risk
framework in 2019. Our Compliance and
Operational Risk Strategy provides a
comprehensive, proactive and well-planned
approach to improving ANZ’s management
of non-financial risk, guided by our purpose
and contributing to the bank’s strategic
priority to improve the financial wellbeing
of our customers.
Financial crime
Protecting the Australian banking system
from criminal use is one of our most
important roles. We continue to invest
in our financial crime risk management
program to ensure we regularly assess
and manage our financial crime risks.
Our program is designed to be compliant
with our financial crime obligations and
we report information that is useful to
government authorities to disrupt
financial crime. Further information is
in our 2020 ESG Supplement available
at anz.com/cs.
49
ANZ 2020 Annual Report Emerging risks
The risk
landscape
is continually
evolving and we are
therefore constantly
reviewing issues to
consider their materiality
to the bank’s operations.
Three risks that continue to evolve and
that we seek to better understand are:
Geopolitical risk: We continue to closely
monitor and support our businesses to
manage ongoing geopolitical tensions
and uncertainty.
Cybersecurity risk: Our approach to
mitigating cybersecurity risk involves
a range of controls relying on people,
technology and process and we are
continually testing our defences internally
and through independent third parties.
For further detail on our approach to
cybersecurity risk refer to pages 19 to 20.
Climate change risk: The financial risks
associated with climate change remain a
key focus. Developing an enhanced risk
management framework that anticipates
potential climate-related impacts, and
associated regulatory requirements is a
priority. We have set a new ESG target
to develop this enhanced framework
by FY22. For further detail on our
approach to climate-related financial
risk refer to pages 34 to 35.
Our Risk Management
Framework
The Board is responsible for establishing
and overseeing the Group’s Risk
Management Framework (RMF). The
Board has delegated authority to the
Board Risk Committee (BRC) to develop
and monitor compliance with the Group’s
risk management policies. The Committee
reports regularly to the Board on its
activities. The key pillars of the Group’s
RMF include:
• the Risk Appetite Statement (RAS),
which sets out the Board’s expectations
regarding the degree of risk that the
Group is prepared to accept in pursuing
its strategic objectives and its operating
plan; and
• the Risk Management Statement (RMS),
which describes the Group’s strategy
for managing risks and a summary of
the key elements of the RMF that give
effect to that strategy. The RMS 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 then either controls or
mitigates material risks.
The Group operates a Three Lines-
of-Defence Model in regard to risk
management that helps embed a culture
where risk is everyone’s responsibility.
The business – as the first line of defence –
has day to day ownership of risks and
controls and is accountable for
identifying and managing its own risks.
The Group Risk function is the second
line of defence, providing a strong and
independent oversight of the work
undertaken to manage the risk, as well
as developing and maintaining the RMF.
The final line of defence is Internal Audit
and includes independent assurance
that evaluates the adequacy and
effectiveness of both first and second
line risk management approaches.
The governance and oversight of risk,
while embedded in day-to-day activities,
is also the focus of committees and
regular forums across the bank (see
diagram next page). The committees
and forums discuss and monitor
known and emerging risks, reviewing
management plans and monitoring
progress to address known issues.
"The strength and adaptability of the bank's
risk function has played a key role in helping
navigate the organisation through the
current changing environment."
Kevin Corbally, Chief Risk Officer
LINKS TO 2020 GROUP PERFORMANCE FRAMEWORK
COVID-19 introduced a range of both new and increased risks for ANZ, our employees and our customers. Our existing strong Risk
Management Framework enabled us to respond well to these risks. We have continued to develop and improve our financial and
operational resilience and have maintained our focus on managing risk controls, demonstrating accountability for fixing issues in
a timely and sustainable manner. Strong progress continues on risk culture maturity, evidenced in employee engagement scores,
with ‘Leaders accountable for risk’ (87%) – up on 2019, and ‘Raise issues without fear of reprisal’ (74%) – also up on 2019.
See section 4.5.3 of the Remuneration report for more details.
50
OverviewHow we create valuePerformance overviewRemuneration reportDirectors’ reportFinancial reportShareholder information
CEO
PRINCIPAL BOARD COMMITTEES
BOARD OF DIRECTORS
Audit
Committee
Ethics, Environment,
Social & Governance
Committee
Risk
Committee
Digital Business
& Technology
Committee
Nomination &
Board Operations
Committee
Human
Resources
Committee
Consequence
Review Group
EXECUTIVE COMMITTEE
ANZ's most senior executives meet regularly to discuss performance and review shared initiatives
GROUP PERFORMANCE AND EXECUTIVE COMMITTEE (GPEC)
Oversight of the Group's overall operational performance and position and the execution of the operating plan
KEY MANAGEMENT COMMITTEES
Credit & Market
Risk Committee
(CMRC)
Group Asset &
Liability Committee
(GALCO)
Operational Risk
Executive
Committee (OREC)
Ethics &
Responsible
Business Committee
(ERBC)
Investment
Committee
Credit Ratings
System Oversight
Committee
(CRSOC)
Sub-commitee of CMRC
Capital and Stress
Testing Oversight
Committee
(CSTOC)
Sub-commitee of GALCO
Modelling Ratings Working Groups
and Usage Forums
Wholesale
Ratings
Working
Group
(WRWG)
Retail
Ratings
Working
Group
(RRWG)
Wholesale
Model
Usage
Forum
(WMUF)
Divisional
Initiatives
Review
Committees
(DIRC) /
Project Advisory
Councils (PAC)
Divisional
Risk
Management
Committees
(RMC)
Various Division Specific
Management Committees
Operational
Risk
Committees
Product
Committees
Divisional
Consequence
Review
Groups
Divisional
Consequence
Review
Groups
Regional or Country Risk
Management Committees (RMCs)
Country Assets and Liabilities
Committees (ALCOs)
p
u
o
r
G
n
o
i
s
i
v
D
i
y
r
t
n
u
o
C
51
ANZ 2020 Annual Report Key material risks
The material risks facing the group per the group’s Risk Management Statement, and how these risks are managed, are summarised below.
Note as part of the annual review of our Risk Management Strategy we have removed reputational risk as a key material risk. We recognise
that reputational risk is largely a consequence of the impact of other material risks. Reputational consequences are therefore mitigated
through the appropriate management of other material risks.
Risk type
Description
Managing the risk
Material
ESG issues1
We pursue an active approach to Capital Management
through ongoing review, and Board approval, of the level
and composition of our capital base against key policy
objectives.
Key features of how we manage Compliance Risk as part
of our Operational Risk and Compliance Framework include:
• centralised management of key obligations, and
emphasis on identifying changes in regulations and the
business environment, so as to enable us to proactively
assess emerging compliance risks and implement
robust reporting and certification processes.
• recognition of incident management as a separate
element to enhance ANZ's ability to identify, manage
and report on incidents/breaches in a timely manner.
• the Whistleblower Protection Policy allowing employees
and contractors to make confidential, anonymous
submissions regarding concerns relating to accounting,
internal control, compliance, audit and other matters.
Our Credit Risk framework is top down, being defined by
credit principles and policies. Credit policies, requirements
and procedures cover all aspects of the credit life cycle
— for example: transaction structuring, risk grading, initial
approval, ongoing management and problem debt
management, as well as specialist policy topics.
Capital
Adequacy
Risk
The risk of loss arising from the Group
failing to maintain the level of capital
required by prudential regulators and
other key stakeholders (shareholders, debt
investors, depositors, rating agencies, etc.)
to support ANZ’s consolidated operations
and risk appetite.
Compliance
Risk
The risk of failure to act in accordance with
laws, regulations, industry standards and
codes, internal policies and procedures
and principles of good governance as
applicable to the Group’s businesses.
Credit Risk
The risk of financial loss resulting from:
• a counterparty failing to fulfil its
obligations; or
• 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 or by changes to laws, regulations,
or other policies adopted by governments
or regulatory authorities, including carbon
pricing and climate change adaptation or
mitigation policies.
Liquidity and
Funding Risk
The risk that the Group is unable to meet
its payment obligations as they fall due,
including:
• repaying depositors or maturing
wholesale debt; or
Key principles in managing our Liquidity and Funding
Risk include:
• maintaining our ability to meet liquidity ‘survival
horizons’ under a range of stress scenarios to meet cash
flow obligations over a short-to-medium term horizon;
• the Group having insufficient capacity
• maintaining a strong structural funding profile; and
to fund increases in assets.
• maintaining a portfolio of high-quality liquid assets to
act as a source of liquidity in times of stress.
52
OverviewHow we create valuePerformance overviewRemuneration reportDirectors’ reportFinancial reportShareholder information
Risk type
Description
Managing the risk
Material
ESG issues1
Market Risk
The risk to the Group’s earnings
arising from:
Operational
Risk
Strategic Risk
Technology
Risk
• changes in any interest rates, foreign
exchange rates, credit spreads, volatility,
and correlations; or
• fluctuations in bond, commodity or
equity prices.
The risk of loss and/or non-compliance
with laws resulting from inadequate or
failed internal processes, people and/or
systems, or from external events. This
definition includes legal risk, and the risk
of reputation loss, or damage arising from
inadequate or failed internal processes,
people and systems, but excludes
strategic risk.
Risks that affect or are created by an
organisation’s business strategy and
strategic objectives. Strategic risk might
arise from making poor strategic business
decisions, from the sub-standard execution
of decisions, from inadequate resource
allocation, or from a failure to respond well
to changes in the business environment.
The risk of loss and/or non-compliance
with laws resulting from inadequate or
failed internal processes, people and
systems or from external events impacting
on IT assets, including the compromise of
an IT asset’s confidentiality, integrity
or availability.
Our risk management and control framework for Market
Risk involves us quantifying the magnitude of market risk
within the trading and balance sheet portfolios through
independent risk measurement. This identifies the range
of possible outcomes, the likely timeframe, and the
likelihood of the outcome occurring. Then we allocate an
appropriate amount of capital to support these activities.
We operate a three-lines-of-defence model to manage
Operational Risk, with each line of defence having
defined roles, responsibilities and escalation paths
to support effective communication and effective
management of our operational risk. We also have
ongoing review mechanisms to ensure Operational
Risk and Compliance Framework continues to meet
organisational needs and regulatory requirements.
We consider and manage strategic risks through our
annual strategic planning process, managed by the
Executive Committee and approved by the Board. Where
the strategy leads to an increase in other Key Material
Risks (e.g. Credit Risk, Market Risk, Operational Risk)
the risk management strategies associated with these
risks form the primary controls.
Technology Risk is managed in accordance with ANZ’s
Operational Risk and Compliance Framework, which is
consistent with the management of Operational Risk.
Fairness and
ethical conduct
Fraud and
data security
Customer
experience
Corporate
governance
Digital
innovation
For further information about
the principal risks and uncertainties
that the Group faces, see our
“Principal Risks and Uncertainties”
disclosure available at anz.com/
shareholder/centre.
1. See page 3 for information on our material ESG issues
53
ANZ 2020 Annual Report OUR PERFORMANCE (continued)
Performance overview
GROUP PERFORMANCE
The results of the Group’s operations and financial position are set out on pages 54-71. Page 11 outlines the Group’s strategy and pages
10-27 describes in further detail the Group’s prospects in terms of future financial position and performance. Discussion of our approach
to risk management, including a summary of our key material risks is outlined on pages 49-53.
Statutory profit after tax for the year ended 30 September 2020 decreased 40% on the prior year to $3,577 million. Statutory return on
equity is 5.9% and statutory earnings per share is 126.4 cents, a decrease of 40% on prior year.
GROUP PROFIT RESULTS
Income Statement
Net interest income
Other operating income
Operating income
Operating expenses
Profit before credit impairment and income tax
Credit impairment charge
Profit before income tax
Income tax expense
Non-controlling interests
Profit after tax from continuing operations
Profit/(Loss) after tax from discontinued operations
Profit for the year
2020
Statutory
$m
2019
Cash
$m
Statutory
$m
14,049
3,588
17,637
(9,383)
8,254
(2,738)
5,516
(1,840)
(1)
3,675
(98)
3,577
14,049
3,703
17,752
(9,383)
8,369
(2,738)
5,631
(1,872)
(1)
3,758
(98)
3,660
14,339
4,446
18,785
(9,071)
9,714
(794)
8,920
(2,609)
(15)
6,296
(343)
5,953
Cash
$m
14,339
4,690
19,029
(9,071)
9,958
(795)
9,163
(2,678)
(15)
6,470
(309)
6,161
The Group uses cash profit, a non-IFRS measure, to assess the performance of its business activities. It is an industry-wide measure which
enables comparison with our peer group. We calculate cash profit by adjusting statutory profit for non-core items. In general, it represents the
financial performance of our core business activities. We use cash profit internally to set targets and incentivise our Senior Executives and
leaders through our remuneration plans.
Refer to page 56 for adjustments between statutory and cash profit.
Cash profit is not subject to audit by the external auditor. Our external auditor has informed the Audit Committee that adjustments between
statutory and cash profit have been determined on a consistent basis across each of the periods presented.
As a result of the sale of our OnePath pensions and investment (OnePath P&I) and aligned dealer groups (ADG) businesses to IOOF Holdings
Limited and our life insurance business to Zurich Financial Services Australia, the financial results of these businesses and associated Group
reclassification and consolidation impacts are treated as discontinued operations from a financial reporting perspective (refer to page 67).
CORONAVIRUS (COVID-19)
The ongoing COVID-19 pandemic is causing major disruptions to community health and economic activity with wide-ranging impacts across
many business sectors in Australia, New Zealand and globally. Additionally, many of the Group’s customers have been impacted by the
COVID-19 pandemic. As a result, during the year the Group launched support packages for retail and commercial customers in Australia and
New Zealand, including the option of an up to six-month loan repayment deferral. The Group is continuing to work with customers impacted
by COVID-19 to restructure loans and in some circumstances will provide an extension to loan repayment deferrals for a further period.
Regulators and governments have implemented a broad range of measures to promote financial stability in response to COVID-19. Those
measures implemented by governments and regulators in Australia and New Zealand include financial assistance packages for homeowners
and businesses, liquidity and funding initiatives to strengthen the banking system, and regulatory changes to capital requirements.
The ongoing COVID-19 pandemic has also increased the estimation uncertainty in the preparation of the financial statements. The Group has
made various accounting estimates for future events in the financial statements based on forecasts of economic conditions which reflect
expectations and assumptions as at 30 September 2020 and that the Group believes are reasonable under the circumstances. There is a
considerable degree of judgement involved in preparing these estimates. The underlying assumptions are also subject to uncertainties which
are often outside the control of the Group. Accordingly, actual economic conditions are likely to be different from those forecast since
anticipated events frequently do not occur as expected, and the effect of those differences may significantly impact accounting estimates
included in the financial statements.
54
54 ANZ 2020 ANNUAL REPORT
OverviewHow we create valuePerformance overviewRemuneration reportDirectors’ reportFinancial reportShareholder information OUR PERFORMANCE (continued)
While pervasive across the financial statements, the estimation uncertainty is predominantly related to expected credit losses where the
Group recognised a credit impairment charge of $2.7 billion pre-tax in the year ended 30 September 2020, the fair value measurement and
recoverable amount assessments of non-financial assets where the Group recognised an impairment charge of $815 million in respect of two
of the Group’s Asian associate investments and an impairment charge of $77 million in respect of goodwill. For further details of these
estimation uncertainties refer to the detailed notes in the financial statements. The ramifications of COVID-19 continue to be uncertain and it
remains difficult to predict the impact or duration of the pandemic.
ACCOUNTING STANDARDS ADOPTED
During the September 2020 full year, the Group adopted AASB 16 Leases (AASB 16) and applied a modified retrospective transition approach
in recognising all leases (except for leases of low value assets and short term leases) on the balance sheet based on the present value of
remaining lease payments as of 1 October 2019. Consequently on 1 October 2019 the Group recognised an increase in lease liabilities of $1.7
billion, a right-of-use lease asset of $1.6 billion, an increase in deferred tax assets of $37 million and a net reduction to opening retained
earnings of $88 million. For further details on key requirements and impacts of the changes refer to Note 1 of the consolidated financial
statements.
The Group early adopted AASB 2019-3 Amendments to Australian Accounting Standards – Interest Rate Benchmark Reform from 1 October
2019. The standard modifies certain hedge accounting requirements to provide relief from the potential effects of the uncertainty caused by
interest rate benchmark reform. For further details on interest rate benchmark reform refer Note 1 of the consolidated financial statements.
CONTINUING OPERATIONS
We believe cash profit from continuing operations is a particularly important performance measure as we continue to strategically reposition
ourselves to create a simpler, better capitalised, better balanced and more agile bank. Key measures of our financial position and performance
are set out below.
1.
Information has been presented on a cash profit from continuing operations basis. Discontinued operations are detailed on page 67.
2. The Directors propose a final dividend of 35 cents fully franked for Australia tax purposes (30% tax rate) and carry New Zealand imputation credits of NZD 4 cents per ordinary shares.
ANZ 2020 ANNUAL REPORT
55
55
ANZ 2020 Annual Report OUR PERFORMANCE (continued)
Description of adjustments between continuing operations statutory profit and cash profit:
Adjustment
Economic hedges
2020: $121 million
2019: $118 million
Revenue and
expense hedges
2020: ($36) million
2019: ($19) million
Structured credit
intermediation
trades
2020: ($2) million
2019: ($2) million
Reason for the adjustment
The Group enters into economic hedges to manage its interest rate and foreign exchange risk which, in
accordance with accounting standards, result in fair value gains and losses being recognised within the Income
Statement. ANZ removes the fair value adjustments from cash profit since the profit or loss resulting from the
hedge transactions will reverse over time to match with the profit or loss from the economically hedged item as
part of cash profit. This includes gains and losses arising from derivatives not designated in accounting hedge
relationships but which are considered to be economic hedges, including hedges of foreign currency debt
issuances and foreign exchange denominated revenue and expense streams, primarily NZD and USD (and USD
correlated), as well as ineffectiveness from designated accounting hedges.
ANZ entered into a series of structured credit intermediation trades prior to the Global Financial Crisis with eight
US financial guarantors. This involved selling credit default swaps (CDSs) as protection over specific debt structures
and purchasing CDS protection over the same structures. ANZ has subsequently exited its positions with six US
financial guarantors. The remaining two portfolios with a $0.3 billion notional value are being monitored with a
view to reducing the exposures when ANZ deems it cost effective relative to the perceived risk associated with a
specific trade or counterparty.
Revaluation of policy
liabilities – OnePath
Life (NZ)
2020: nil
2019: $77 million
When calculating policy liabilities, the projected future cash flows on insurance contracts are discounted to reflect
the present value of the obligation, with the impact of changes in the market discount rate each period being
reflected in the Income Statement. ANZ includes the impact on the re-measurement of insurance contracts
attributable to changes in market discount rates as an adjustment to statutory profit to remove the volatility
attributable to changes in market interest rates which reverts to zero over the life of insurance contracts. With the
sale completion of the OnePath Life (NZ) Ltd business this adjustment is no longer required.
1. Information has been presented on a cash profit from continuing operations basis. Discontinued operations are detailed on page 67.
56
56 ANZ 2019 ANNUAL REPORT
OverviewHow we create valuePerformance overviewRemuneration reportDirectors’ reportFinancial reportShareholder information
OUR PERFORMANCE (continued)
GROUP CASH PROFIT PERFORMANCE
Cash profit performance and the analysis thereof has been presented on a cash profit from continuing operations basis. Discontinued
operations are described on page 67.
Net interest income
Other operating income
Operating income
Operating expenses
Profit before credit impairment and income tax
Credit impairment charge
Profit before income tax
Income tax expense
Non-controlling interests
Profit after tax from continuing operations
2020
$m
14,049
3,703
17,752
(9,383)
8,369
(2,738)
5,631
(1,872)
(1)
3,758
2019
$m
14,339
4,690
19,029
(9,071)
9,958
(795)
9,163
(2,678)
(15)
6,470
Movt
-2%
-21%
-7%
3%
-16%
244%
-39%
-30%
-93%
-42%
Cash profit from continuing operations decreased $2,712 million (42%) compared with the 2019 financial year.
• net interest income decreased $290 million (-2%) largely due to lower interest rates and competitive pressures resulting in a 13 basis point
decrease in the net interest margin, partially offset by 6% growth in average interest earning assets. The lower net interest margin reflects
lower earnings on capital, customers switching to principal and interest home loans in Australia and from variable to fixed loans in both
Australia and New Zealand, a higher proportionate growth in the lower margin Institutional business and the impacts of growth in liquid
assets due to increased system liquidity, partially offset by favourable short-term funding costs and growth in at-call deposits. The increase
in average interest earning assets reflects the impact of foreign currency translation movements and growth in the Institutional banking
portfolio, increases in average trading and investment securities and increases in average cash and other liquid assets.
• other operating income decreased $987 million (-21%) largely as the result of the impairment of Asian associates of $815 million, a reduction
associated with divestments of $342 million, a decrease in net fee and commission income of $252 million excluding divestment impacts, a
reduction in share of associates’ profit of $107 million, and a $79 million decrease due to widening credit spread impacts on loans measured
at fair value in Institutional. This was partially offset by higher Markets Other operating income of $598 million.
• operating expenses increased $312 million (3%) primarily due to an accelerated software amortisation charge of $197 million, lease-related
items of $85 million, higher restructuring expenses of $84 million, goodwill impairments of $77 million and higher compliance spend. This
was partially offset by lower customer remediation of $164 million within operating expenses, and productivity benefits.
• credit impairment charges increased $1,943 million largely due to additional collectively assessed credit impairment charges for the
expected impact of COVID-19.
ANZ 2020 ANNUAL REPORT
57
57
ANZ 2020 Annual Report OUR PERFORMANCE (continued)
LARGE/NOTABLE ITEMS INCLUDED IN CASH PROFIT FROM CONTINUING OPERATIONS
Within continuing cash profit, the Group recognised a number of large/notable items. The impact of these items on a post-tax basis is
as follows:
Gain/(Loss) on sale of divestments
OnePath Life NZ Ltd (OPL NZ)
ANZ Royal Bank (Cambodia) Ltd (Cambodia JV)
PNG Retail, Commercial and SME
Paymark
UDC Finance (UDC)
Divested business results1
OnePath Life NZ Ltd (OPL NZ)
ANZ Royal Bank (Cambodia) Ltd (Cambodia JV)
PNG Retail, Commercial and SME
Paymark
UDC Finance (UDC)
Other large/notable items
Customer remediation
Accelerated software amortisation
Asian associates impairments
Asian associate AASB 9 adjustment
Lease-related items
Royal Commission legal costs
Restructuring
Goodwill write-off
2020
$m
-
-
-
-
(34)
-
-
-
-
57
(279)
(138)
(815)
(66)
(72)
-
(115)
(77)
2019
$m
157
10
1
37
-
10
11
7
4
71
(475)
-
-
-
-
(10)
(54)
-
1. For business results that relate to completed divestments, comparative information has been restated for large/notable items included in the 2020 financial year.
58
58 ANZ 2019 ANNUAL REPORT
OverviewHow we create valuePerformance overviewRemuneration reportDirectors’ reportFinancial reportShareholder information
OUR PERFORMANCE (continued)
Description of large/notable items:
Item
Description
Gain/(Loss) on sale of
divestments
The 2020 financial year included a loss on sale upon completion of the sale of UDC. The 2019 financial year included
a gain on sale upon completion of the sale of OPL NZ, Paymark, Cambodia JV, and PNG Retail, Commercial and SME
businesses.
Divested business
results
The 2020 financial year includes the divested business results of UDC (comparative information restated). The 2019
financial year also included the divested business results of the Cambodia JV, OPL NZ, PNG Retail, Commercial and
SME, and Paymark.
Customer remediation Customer remediation includes provisions for expected refunds to customers, remediation project costs and related
customer and regulatory claims, penalties and litigation outcomes.
Accelerated software
amortisation
Accelerated amortisation charge arising from the revised application of the Group’s software amortisation policy to
reflect the shorter useful life of software caused by rapidly changing technology and business requirements. Refer
to Note 20 Goodwill and Other Intangible Assets of the consolidated financial statements for further details.
Asian associates
impairments
During the 2020 financial year, the Group recognised an impairment in respect of two of the Group’s investments to
adjust their carrying values in line with their value-in-use calculations (refer Note 26 Investments in Associates of the
consolidated financial statements).
Asian associate AASB
9 adjustment
When the Group adopted AASB 9 Financial Instruments on 1 October 2018, an estimate of PT Panin’s transition
adjustment was recognised through opening retained earnings to align accounting policies. PT Panin adopted
AASB 9 during the current financial year recognising a transition adjustment in retained earnings. The adjustment
represents the Group’s equity accounted share of the transition adjustment net of the previous transition
adjustment.
Lease-related items
During the 2020 financial year, the Group recognised charges associated with the adoption of the new lease
accounting standard on 1 October 2019. Comparative information has not been restated for the adoption of the
new lease accounting standard.
Royal Commission
legal costs
External legal costs associated with responding to the Banking Royal Commission.
Restructuring
Restructuring charges largely related to business and property changes in Australia Retail and Commercial division.
Goodwill write-off
Pacific division: The impact of COVID-19 on the economies of the Pacific has been significant and is expected to
take some time to recover. Goodwill of $50 million was impaired. No further impairment was required on the
carrying value of other assets in the Pacific.
New Zealand division: As a result of changes in the economic environment and outlook, the Group has announced
its intention to begin winding up the Bonus Bonds business in New Zealand no later than 31 October 2020. As a
result, the Group wrote off the associated goodwill of $27 million.
ANZ 2020 ANNUAL REPORT 59
59
ANZ 2020 Annual Report
OUR PERFORMANCE (continued)
ANALYSIS OF CASH PROFIT PERFORMANCE
Net interest income
Net interest income1
Average interest earning assets2
Average deposits and other borrowings2
Net interest margin (%) - cash1,2
2020
$m
14,049
862,882
679,336
1.63
2019
$m
14,339
813,219
638,380
1.76
Movt
-2%
6%
6%
-13bps
1.
Includes the major bank levy of -$406 million (2019: -$363 million).
2. Average balance sheet amounts include assets and liabilities of continuing operations reclassified as held for sale.
Net interest income decreased $290 million (-2%) largely due to lower interest rates and competitive pressures, partially offset by 6% growth
in average interest earning assets.
Net interest margin reduced 13 bps due to the impact of central bank rate cuts on low rate deposits, earnings on capital and replicated
deposits net of repricing. This was also impacted by customers switching to principal and interest home loans in Australia and from variable to
fixed loans in both Australia and New Zealand, higher proportionate growth in the lower margin Institutional business, the impacts of growth
in liquid assets due to increased system liquidity, partially offset by favourable short-term funding costs and growth in at-call deposits.
Average interest earning assets increased $49.7 billion (6%) reflecting growth in the Institutional banking portfolio, growth in liquid assets
and trading securities in Markets, higher central bank cash balances, higher collateral and the impact of foreign currency translation
movements.
Average deposits and other borrowings increased $41.0 billion (6%) driven by growth in all divisions but particularly in the Institutional and
Australia Retail and Commercial divisions, and the impact of foreign currency translation movements.
1. Market Balance Sheet activities includes the impact of discretionary liquid assets and other Balance Sheet activities.
60
60 ANZ 2019 ANNUAL REPORT
OverviewHow we create valuePerformance overviewRemuneration reportDirectors’ reportFinancial reportShareholder information Other operating income
Net fee and commission income1
Markets other operating income
Share of associates' profit
Other1
Total cash other operating income
OUR PERFORMANCE (continued)
2020
$m
2,215
1,884
155
(551)
3,703
2019
$m
2,493
1,286
262
649
4,690
Movt
-11%
47%
-41%
large
-21%
Net fee and
commission
income1
Markets other
operating income
Total increase/
(decrease)
$m
Movt
Explanation
(278)
-11% Net fee and commission income decreased primarily due to lower volume related fees
due to the impact of COVID-19, reduction or removal of fees, loss of income from
divested businesses, partially offset by lower customer remediation impacting Net fee
and commission income.
598
47% Markets other operating income increased across Franchise Trading, Franchise Sales and
Balance Sheet Trading. This was primarily due to increased customer sales flows and
improved trading conditions, particularly in International, as customers sought Markets
risk management products.
Share of associates’ profit decreased by $107m of which $68 million relates to the
Group’s equity accounted share of PT Panin’s transition adjustment on its adoption of
AASB 9. The equity accounted share of profits decreased by $10 million for PT Panin and
$24 million for AmBank.
Share of associates'
profit
(107)
-41%
Other1
(1,200)
large Other decreased primarily due the impairment of the Asian associates of $815 million,
the impact of divested businesses of $318 million and $79 million in Institutional division
related to widening credit spread impacts on loans measured at fair value.
(987)
-21%
Total cash other
operating income
from continuing
operations
1. Excluding Markets.
ANZ 2020 ANNUAL REPORT
61
61
ANZ 2020 Annual Report OUR PERFORMANCE (continued)
Operating expenses
Total cash operating expenses from continuing operations2
Full time equivalent staff (FTE) from continuing operations
Average full time equivalent staff (FTE) from continuing operations
Operating expenses increased by $312 million (3%). Key drivers:
2020
$m
9,383
37,506
37,728
2019
$m
9,071
37,588
37,480
Movt
3%
0%
1%
personnel expenses increased $113 million (2%) largely driven by higher investment spend in the New Zealand and Australia Retail and
Commercial divisions, higher customer remediation costs of $80 million, wage inflation and adverse foreign currency translation
movements. This was partially offset by lower variable remuneration and lower business as usual expenses, including reduced employee
leave balances.
premises expenses decreased $6 million (-1%) largely driven by lower premises expense in our International network, partially offset by a
change in accounting treatment associated with the new leasing standard (comparatives not restated).
technology expenses (excluding personnel) increased $290 million (19%) largely as a result of accelerated amortisation of $197 million due
to a change in application of the software amortisation policy, a change in accounting treatment associated with the new leasing standard
(comparatives not restated), an increase in investment spend and customer remediation ($13 million).
restructuring expenses increased $84 million largely related to business and distribution changes in the Australia Retail and Commercial
division.
other expenses decreased $169 million (-9%) largely due to lower customer remediation of $257 million and lower travel expenses, partially
offset by higher investment spend and Goodwill write-offs of $77 million in Pacific and New Zealand divisions.
Credit impairment
Collectively assessed credit impairment charge/(release) ($m)
Individually assessed credit impairment charge ($m)
Credit impairment charge ($m)
Gross impaired assets ($m)
Credit risk weighted assets ($b)
Total allowance for expected credit losses (ECL) ($m)
Individually assessed as % of gross impaired assets
Collectively assessed as % of credit risk weighted assets
2020
1,717
1,021
2,738
2,459
360.0
5,899
36.2%
1.39%
2019
17
778
795
2,029
358.1
4,190
40.1%
0.94%
Movt
large
large
large
21%
1%
41%
62
62 ANZ 2019 ANNUAL REPORT
OverviewHow we create valuePerformance overviewRemuneration reportDirectors’ reportFinancial reportShareholder information GROSS IMPAIRED ASSETS BY DIVISION ($m)
OUR PERFORMANCE (continued)
Gross impaired assets increased $430 million (21%) driven by the Institutional division ($169 million), Australia Retail and Commercial division
($166 million) and New Zealand division ($102 million). The increase in the Institutional division primarily relates to impairments on a small
number of single name exposures. The Australia Retail and Commercial division increase was driven by home loans with a combination of the
implementation of a more market responsive collateral valuation methodology and impairments as 90 days past due exposures increased,
combined with impairments on a small number of single name exposures in the commercial portfolio. The increase in the New Zealand
division is driven by impairments on a small number of single name commercial exposures.
The collectively assessed credit impairment charge increased by $1,700 million primarily driven by a $1,044 million increase in the Australia
Retail and Commercial division, a $363 million increase in the Institutional division and a $236 million increase in the New Zealand division.
The significant increases across all divisions are due to forward-looking assessments of the impacts of the COVID-19 pandemic driven by the
deterioration in the economic outlook as well as management adjustments to recognise the risk of credit quality deterioration expected to
emerge as COVID-19 stimulus and support programs ease.
The individually assessed credit impairment charge increased by $243 million primarily due to a single name impairment in the Institutional
division. This was partially offset by improved delinquencies in the Australia Retail portfolios combined with ongoing lower portfolio growth in
the unsecured portfolio, and lower provisions in the Commercial portfolio.
ANZ 2020 ANNUAL REPORT
63
63
ANZ 2020 Annual Report OUR PERFORMANCE (continued)
During the September 2020 year the collectively assessed allowance for expected credit losses increased by $1,632 million. This was
attributable to changes in economic outlook including impact of scenario weights of $1,018 million, COVID-19 related management
adjustments of $592 million, changes in risk of $61 million and a change in portfolio composition of $46 million, partially offset by reductions
from foreign exchange and divestments of $85 million.
During the September 2020 year, there was a net increase in the individually assessed allowance for expected credit losses of $77 million.
COVID-19 loan assistance packages offered to customers1
Since March 2020, the Group has offered various forms of assistance to customers to counteract the impact of COVID-19 on the ability of
customers to meet their loan obligations. The assistance provided has included arrangements such as temporary deferral of principal and
interest repayments, replacing principal and interest with interest only repayments, and extension of loan maturity dates.
The Group does not consider that when a customer is first provided assistance, all other things being equal, that there has been a Significant
Increase in Credit Risk (SICR) and a consequent impact on ECL when assessing provisions. Subsequent to take-up, customers have been
contacted to discuss available options once the packages reach their end date. Additional information on the customer’s financial position
and ability to recommence their loan repayments is used to assist in classification of customers into risk categories. Customers in higher risk
categories, and those that have requested a deferral extension have been classified as having a SICR. The Group continues to work with our
customers on arrangements in respect of their loan obligations once the assistance package has ceased.
The categories of assistance packages provided and the amounts outstanding as at 30 September 2020 are noted in the following table:
Assistance package category
Loan deferral package
Retail
Commercial and other
Interest only
Retail
Commercial and other
Term extensions
Retail
Commercial and other
Total
Retail
Commercial and other
Total
Australia Geography
At 30 September 2020
$m
New Zealand Geography
At 30 September 2020
$m
Total
At 30 September
2020
$m
26,117
8,989
126
33
3
24
35,292
26,246
9,046
35,292
3,705
193
2,287
494
611
66
7,356
6,603
753
7,356
29,822
9,182
2,413
527
614
90
42,648
32,849
9,799
42,648
1. COVID-19 loan deferral packages are available to customers if either their loan repayments are less than 30 days past due, or if their repayments are less than 90 days past due but were up to date
at 1 March 2020.
64
64 ANZ 2019 ANNUAL REPORT
OverviewHow we create valuePerformance overviewRemuneration reportDirectors’ reportFinancial reportShareholder information
OUR PERFORMANCE (continued)
DDIIVVIISSIIOONNAALL PPEERRFFOORRMMAANNCCEE
2020
Net interest margin
Operating expenses to operating income
Cash profit from continuing
operations ($m)
Net loans and advances ($b)
Customer deposits ($b)
Number of FTE
2019
Net interest margin
Operating expenses to operating income
Cash profit from continuing
operations ($m)
Net loans and advances ($b)
Customer deposits ($b)
Number of FTE
Australia
Retail and
Commercial
Institutional
2.59%
45.1%
2,337
339.4
234.6
14,078
0.76%
43.9%
1,854
157.6
223.3
5,291
Australia
Retail and
Commercial
Institutional
2.59%
43.2%
3,195
331.9
208.0
13,903
0.82%
50.6%
1,828
164.5
217.3
5,468
New
Zealand
2.26%
44.8%
1,017
116.6
91.0
5,761
New
Zealand
2.33%
38.8%
1,399
116.7
83.4
6,121
TSO and
Group
Centre
n/a
n/a
Group
1.63%
52.9%
Pacific
3.10%
106.2%
(62)
(1,388)
3,758
1.9
3.5
1,113
Pacific
3.75%
64.7%
59
2.1
3.5
1,086
1.6
-
11,263
TSO and
Group
Centre
n/a
n/a
(11)
0.1
(0.4)
11,010
617.1
552.4
37,506
Group
1.76%
47.7%
6,470
615.3
511.8
37,588
ANZ 2020 ANNUAL REPORT 65
65
ANZ 2020 Annual Report
OUR PERFORMANCE (continued)
DIVISIONAL PERFORMANCE
Australia Retail and Commercial
Lending volumes increased in the September 2020 half driven by successful home loan growth, partially offset by lower consumer
demand for unsecured borrowing and increased customer repayments following fiscal and regulatory stimulus and a low interest
rate environment. Net interest margin was flat as the headwinds from official cash rate decreases on low customer rate deposits and
earnings on capital, unfavourable lending mix from proportionately more growth in lower margin home loans compared to higher
margin unsecured lending were offset by home loan repricing benefits, lower funding costs and a favourable deposit mix impact.
Other operating income decreased driven by lower credit card and international transaction volumes driven by COVID-19 impacts
and fee removals. Operating expenses were flat with higher investment spend, higher restructuring expenses, additional charges for
lease-related items, accelerated amortisation due to changes in application of the software policy and inflationary increases being
offset by productivity benefits and lower remediation expenses. Credit impairment charges increased driven by collectively assessed
credit impairment charges for the expected impact of COVID-19.
Institutional
Average lending volumes increased against the prior period. Customer deposits increased in Transaction Banking, partially offset by
decreases in the other businesses. Net interest margin ex-Markets decreased mainly due to the impact of low interest rates on
deposit margins. Other operating income increased due to higher Markets income, partly offset by lower volume related fee income
in the transaction banking business with a subdued international trade environment. Operating expenses decreased as a result of
lower personnel costs, lower discretionary spend, lower property charges and lower remediation expenses, partly offset by
accelerated amortisation due to changes in application of the software policy and additional charges for lease-related items. Credit
impairment charges increased due to higher collectively assessed credit impairment charge for the expected impact of COVID-19
and an increase in individually assessed credit impairment charges in Transaction Banking.
New Zealand
Lending ended flat against the prior period impacted by the sale of UDC at the end of the year. Customer deposit volumes grew
across all portfolios while funds under management increased during the period. Net interest margin decreased mainly due to lower
interest rates compressing deposit margins. Other operating income decreased primarily driven by fee changes and lower volume
related fee income and fee waivers due to the impact of COVID-19. Operating expenses increased due to higher investment spend
on compliance projects, goodwill write-off related to the Bonus Bonds business, accelerated amortisation due to changes in
application of the software policy, and increased restructuring charges. Credit impairment charges increased driven by higher
collectively assessed credit impairment charges for the expected impact of COVID-19.
Pacific
Operating income for the Pacific division declined from the prior year due to the impact of COVID-19. Costs were higher largely due
to a goodwill write-off. Credit impairment charges increased driven by higher collectively assessed credit impairment charges for the
expected impact of COVID-19.
TSO and Group Centre
The 2020 financial year included the impairment of the Asian associates and a loss on sale of UDC. The 2019 financial year included
the gain on sale of OnePath Life (NZ), Paymark, Cambodia JV and PNG Retail, Commercial and SME.
66
66 ANZ 2019 ANNUAL REPORT
OverviewHow we create valuePerformance overviewRemuneration reportDirectors’ reportFinancial reportShareholder information
OUR PERFORMANCE (continued)
DISCONTINUED OPERATIONS
The financial results of the divested Wealth Australia businesses and associated Group reclassification and consolidation impacts are treated as
discontinued operations from a financial reporting perspective.
The comparative Group Income Statement and Statement of Comprehensive Income have been restated to show discontinued operations
separately from continuing operations in a separate line item ‘Profit/(Loss) from discontinued operations’.
Sale to IOOF Holdings Limited (IOOF)
On 17 October 2017, the Group announced it had agreed to sell its OnePath P&I and ADGs businesses to IOOF. The aligned dealer groups
business consists of ADGs that operate under their own Australian Financial Services licences. The sale of the ADGs completed on 1 October
2018 and the OnePath P&I business completed on 31 January 2020.
Sale to Zurich Financial Services Australia (Zurich)
On 12 December 2017, ANZ announced that it had agreed to the sale of its life insurance business to Zurich and regulatory approval was
obtained on 10 October 2018. The transaction was completed on 31 May 2019.
Included in the ‘Cash loss from discontinued operations’ is:
a $18 million loss on disposal ($13 million loss after tax) was recognised in the September 2020 full year attributable to sale completion
costs. The September 2019 full year included a $23 million loss ($81 million loss after tax) attributable to sale related adjustments and write-
downs, the reversal of the life-to-date cash profit adjustments on the revaluation of policy liabilities sold to Zurich, partially offset by the
recycling on sale completion of gains previously deferred in equity reserves; and
customer remediation which includes provisions for expected refunds to customers and related remediation costs associated with
inappropriate advice or services not provided in the pensions and investments and life insurance businesses. An amount of $126 million
pre-tax, $96 million post tax was recognised in the 2020 financial year (2019: $241m pre-tax, $207 million post-tax).
EExxppllaannaattiioonn ooff aaddjjuussttmmeennttss bbeettwweeeenn ssttaattuuttoorryy pprrooffiitt aanndd ccaasshh pprrooffiitt
Treasury shares adjustment
ANZ shares held by the Group in Wealth Australia discontinued operations are deemed to be Treasury shares for accounting purposes.
Dividends and realised and unrealised gains and losses from these shares are reversed as they are not permitted to be recognised as income
for statutory reporting purposes. In deriving cash profit, these earnings are included to ensure there is no asymmetrical impact on the
Group’s profits because the Treasury shares are held to support policy liabilities which are revalued through the Income Statement. With the
sale completion of the life insurance business to Zurich, there are no ANZ shares held by the Group in discontinued operations
Revaluation of policy liabilities
When calculating policy liabilities, the projected future cash flows on insurance contracts are discounted to reflect the present value of the
obligation, with the impact of changes in the market discount rate in each period being reflected in the Income Statement. ANZ includes
the impact on the re-measurement of the insurance contract attributable to changes in market discount rates as an adjustment to statutory
profit to remove the volatility attributable to changes in market interest rates which reverts to zero over the life of the insurance contract.
With the sale completion of the life insurance business to Zurich, the 2019 financial year includes the reversal of the life-to-date cash profit
adjustments on the revaluation of policy liabilities sold, reducing cash profit by $15 million from discontinued operations.
Statutory profit/(loss) from discontinued operations
Adjustments between statutory profit and cash profit
Treasury shares adjustment
Revaluation of policy liabilities
Cash profit/(loss) from discontinued operations
2020
$m
(98)
-
-
-
(98)
2019
$m
(343)
34
(11)
45
(309)
ANZ 2020 ANNUAL REPORT 67
67
ANZ 2020 Annual Report
OUR PERFORMANCE (continued)
FINANCIAL POSITION OF THE GROUP – INCLUDING DISCONTINUED OPERATIONS
Condensed balance sheet
Assets
Cash / Settlement balances owed to ANZ / Collateral paid
Trading and investment securities
Derivative financial instruments
Net loans and advances
Assets held for sale
Other
Total assets
Liabilities
Settlement balances owed by ANZ / Collateral received
Deposits and other borrowings
Derivative financial instruments
Debt issuances
Liabilities held for sale
Other
Total liabilities
Total equity
As at
2019
$b
2020
$b
129.7
144.3
135.3
617.1
-
15.9
1,042.3
31.5
682.3
134.7
119.7
-
12.8
981.0
61.3
100.3
126.9
120.7
615.3
1.8
16.1
981.1
18.8
637.7
121.0
129.7
2.1
11.0
920.3
60.8
Movt
29%
14%
12%
0%
-100%
-1%
6%
68%
7%
11%
-8%
-100%
16%
7%
1%
Cash/Settlement balances owed to ANZ/Collateral paid increased $29.4 billion (+29%) driven by an increase in balances with central
banks, increased overnight inter-bank deposits, and an increase in short term reverse repurchase agreements, partially offset by foreign
currency translation movements.
Trading and investment securities increased $17.4 billion (+14%) primarily driven by an increase in liquid assets in Markets, partially offset
by the impact of foreign currency translation movements.
Derivative financial assets and liabilities increased $14.6 billion (+12%) and $13.7 billion (+11%) respectively as interest rate and foreign
exchange movements resulted in higher derivative volumes and fair values, particularly in interest rate and foreign exchange
swap products.
Net loans and advances increased $1.8 billion (+0%), driven by growth in home loans in the Australia Retail and Commercial division
(+$10.1 billion) and New Zealand division (+$4.4 billion), partially offset by lower credit volumes in other products as a result of the
ongoing impacts of COVID-19 in the Institutional (-$4.1 billion) and Australia Retail and Commercial (-$1.6 billion) divisions, higher credit
provisions (-$1.5 billion) as a result of the ongoing impacts of COVID-19, the sale of the UDC business in New Zealand division in
September 2020 (-$3.4 billion) and foreign currency translation movements.
Deposits and other borrowings increased $44.6 billion (+7%) driven by increased customer deposits in the Australia Retail and
Commercial division (+$26.6 billion), Institutional division (+$11.8 billion), and New Zealand division (+$7.8 billion) and drawdown of the
RBA Term Funding Facility (TFF) (+$12 billion). This was partially offset by a reduction in certificates of deposit (-$4.0 billion), commercial
paper issued (-$2.7 billion) and the impact of foreign currency translation movements.
Debt issuances decreased $10.0 billion (-8%) driven by lower senior debt issuances. Funding was partially replaced by the RBA TFF, which
is classified as Deposits and other borrowings.
68
68 ANZ 2019 ANNUAL REPORT
OverviewHow we create valuePerformance overviewRemuneration reportDirectors’ reportFinancial reportShareholder information
FFuunnddiinngg
Customer liabilities
Wholesale funding
Shareholders’ equity
Total funding
Net Stable Funding Ratio
OUR PERFORMANCE (continued)
2020
$b
561.3
277.5
61.3
900.1
2019
$b
521.4
270.3
60.8
852.5
124%
116%
The Group targets a diversified funding base, avoiding undue concentration by investor type, maturity, market source and currency.
$13.2 billion of term wholesale debt with a remaining term greater than one year as at 30 September 2020 was issued during the year.
In March 2020, the RBA announced a Term Funding Facility (TFF) for the banking system. The RBA is providing a three-year secured funding
facility to ADIs at a fixed rate of 0.25%. APRA has determined that the TFF qualifies for inclusion in determining the Liquidity Coverage Ratio
(LCR) and Net Stable Funding Ratio (NSFR).
ADIs can obtain initial funding of up to 3% of their existing credit outstanding to Australian households and businesses. ADIs have access to
additional funding if they increase lending to small and medium-sized businesses. As at 30 September 2020, ANZ had drawn $12 billion from
its initial TFF allowance of $12 billion and had drawn $0 billion from its additional TFF allowance of $6 billion.
LLiiqquuiiddiittyy
Total liquid assets ($b) 1
Liquidity Coverage Ratio (LCR) 1
Full year average
2020
213.9
139%
2019
188.4
140%
1. Full year average, calculated as prescribed per APRA Prudential Regulatory Standard (APS 210 Liquidity) and consistent with APS 330 requirements.
The Group holds a portfolio of high quality unencumbered liquid assets in order to protect the Group’s liquidity position in a severely stressed
environment, as well as to meet regulatory requirements. High Quality Liquid Assets comprise three categories, with the definitions consistent
with Basel 3 LCR:
highest-quality liquid assets (HQLA1): Cash, highest credit quality government, central bank or public sector securities eligible for
repurchase with central banks to provide same-day liquidity.
high-quality liquid assets (HQLA2): High credit quality government, central bank or public sector securities, high quality corporate debt
securities and high quality covered bonds eligible for repurchase with central banks to provide same-day liquidity.
alternative liquid assets (ALA): Assets qualifying as collateral for the Committed Liquidity Facility (CLF) and other eligible securities listed by
the Reserve Bank of New Zealand (RBNZ).
The Group monitors and manages the size and composition of its liquid assets portfolio on an ongoing basis in line with regulatory
requirements and the risk appetite set by the Board.
COVID-19 has impacted the normal operations of financial markets including funding markets, however the actions of governments globally
and central banks including the RBA, RBNZ and the US Federal Reserve have provided significant liquidity support to the system and financial
markets generally. ANZ’s liquidity measures have remained above regulatory requirements throughout this period.
ANZ 2020 ANNUAL REPORT 69
69
ANZ 2020 Annual Report
OUR PERFORMANCE (continued)
Capital management
Common Equity Tier 1 (Level 2)
- APRA Basel 3
Credit risk weighted assets ($b)
Total risk weighted assets ($b)
APRA Leverage ratio
2020
2019
Movt
11.3%
360.0
429.4
5.4%
11.4%
358.1
417.0
5.6%
1%
3%
APRA, under the authority of the Banking Act 1959, sets minimum regulatory requirements for banks including what is acceptable as
regulatory capital and provides methods of measuring the risks incurred by the Bank.
The Group’s Common Equity Tier 1 ratio was 11.3% based on APRA Basel 3 standards, exceeding APRA’s minimum requirements. It decreased
2 bps as cash earnings and divestments were offset by the impact of dividends during the year.
At 30 September 2020 the Group’s APRA leverage ratio was 5.4% which is above the 3.5% proposed minimum for internal ratings based
approach ADI (IRB ADI) which includes ANZ.
Dividends
Our financial performance allowed us to propose that a final dividend of 35 cents be paid on each eligible fully paid ANZ ordinary share,
bringing the total dividend for the year ended 30 September 2020 to 60 cents per share. This represents a dividend payout ratio of 45.3% of
cash profit from continuing operations.
The proposed 2020 final dividend of 35 cents per share will be fully franked for Australian taxation purposes, and carry New Zealand
imputation credits of NZD 4 cents per ordinary share. It will be paid on 16 December 2020 to owners of ordinary shares at close of business on
10 November 2020 (record date).
ANZ has a Dividend Reinvestment Plan (DRP) and a Bonus Option Plan (BOP) that will operate in respect of the proposed 2020 final dividend.
For the 2020 final dividend, ANZ intends to provide shares under the DRP and BOP through the issue of new shares.
Further details on dividends provided for or paid during the year ended 30 September 2020 are set out in Note 5 of the consolidated financial
statements.
Shareholders Returns
1.
Information has been presented on a cash profit from continuing operations basis. Discontinued operations are detailed on page 67.
70
70 ANZ 2019 ANNUAL REPORT
OverviewHow we create valuePerformance overviewRemuneration reportDirectors’ reportFinancial reportShareholder information FIVE YEAR SUMMARY
Financial performance - cash2
Net interest income
Other operating income
Operating expenses
Profit before credit impairment and income tax
Credit impairment charge
Income tax expense
Non-controlling interests
Cash profit from continuing operations2
Cash profit/(loss) from discontinued operations
Cash profit
Adjustments to arrive at statutory profit2
Profit attributable to shareholders of the Company
Financial position
Assets
Net assets
Common Equity Tier 1
Common Equity Tier 1 – Internationally
Comparable Basel 33
Return on average ordinary equity (statutory)4
Return on average assets (statutory)
Cost to income ratio (cash)2
Shareholder value – ordinary shares
Total return to shareholders (share price movement plus
dividends)
Market capitalisation
Dividend (cents)
Franked portion
Share price
– interim
– final
– high (dollars)
– low (dollars)
– closing (dollars)
Share information
(per fully paid ordinary share)
Earnings per share (cents) (statutory)
Dividend payout ratio (statutory)
Net tangible assets per ordinary share5
No. of fully paid ordinary shares issued (millions)
Dividend reinvestment plan (DRP) issue price
– interim
– final
Other information
No. of employees (full time equivalents)
No. of shareholders
20201
$m
14,049
3,703
(9,383)
8,369
(2,738)
(1,872)
(1)
3,758
(98)
3,660
(83)
3,577
1,042,286
61,297
11.3%
16.7%
5.9%
0.3%
53.8%
-36.9%
48,839
60
100%
100%
$28.67
$14.10
$17.22
126.4
47.6%
$20.04
2,840
$18.06
-
38,579
553,171
20191
$m
14,339
4,690
(9,071)
9,958
(795)
(2,678)
(15)
6,470
(309)
6,161
(208)
5,953
981,137
60,794
11.4%
16.4%
10.0%
0.6%
49.5%
9.2%
80,842
160
100%
70%
$29.30
$22.98
$28.52
210.0
76.2%
$19.59
2,835
$27.79
$25.03
39,060
506,847
OUR PERFORMANCE (continued)
20181
$m
14,514
4,853
(9,401)
9,966
(688)
(2,775)
(16)
6,487
(682)
5,805
595
6,400
943,182
59,405
11.4%
16.8%
10.9%
0.7%
52.0%
0.6%
80,979
160
100%
100%
$30.80
$26.08
$28.18
221.6
72.1%
$18.47
2,874
$27.76
$26.03
39,924
509,238
20171
$m
14,875
4,941
(8,967)
10,849
(1,199)
(2,826)
(15)
6,809
129
6,938
(532)
6,406
897,326
59,075
10.6%
15.8%
11.0%
0.7%
46.1%
13.1%
86,948
160
100%
100%
$32.95
$25.78
$29.60
220.1
73.4%
$17.66
2,937
$28.80
$29.02
44,896
522,425
2016
$m
15,095
5,499
(10,439)
10,155
(1,956)
(2,299)
(11)
5,889
n/a
5,889
(180)
5,709
914,869
57,927
9.6%
14.5%
10.0%
0.6%
50.7%
9.2%
80,886
160
100%
100%
$29.17
$21.86
$27.63
197.4
81.9%
$17.13
2,927
$24.82
$28.16
46,554
545,256
1. During 2018, part of Wealth Australia and TSO and Group Centre division was classified as a discontinued operation. 2017 comparatives have been restated accordingly. 2016 has not been
restated. All ratios are presented on a Group basis inclusive of discontinued operations across all periods.
2. Cash profit excludes non-core items included in statutory profit and is provided to assist readers in understanding the result of the ongoing business activities of the Group. Cash profit is not
audited; however, the external auditor has informed the Audit Committee that the adjustments have been determined on a consistent basis across each period presented, and the adjustments
for the sale impact of Shanghai Rural Commercial Bank (SRCB) in 2018 and 2017 are appropriate.
Internationally Comparable Methodology applied for 2016–2020 aligns with APRA’s information paper entitled ‘International Capital Comparison Study’ (13 July 2015). Basel Internationally
Comparable ratios do not include an estimate of the Basel l capital floor requirement.
3.
4. Average ordinary equity excludes non-controlling interests and preference shares.
5. Equals shareholders’ equity less preference share capital, goodwill, software and other intangible assets divided by the number of ordinary shares
ANZ 2020 ANNUAL REPORT
71
71
ANZ 2020 Annual Report Five year summary (continued)
2020
2019
2018
2017
2016
Fair and Responsible Banking
Net Promoter Score Ranking (relative to peers)
Australia Retail1
Australia Commercial2
Australia Institutionall3
New Zealand Retail4
New Zealand Commercial and Agricultural5
New Zealand Institutional6
Code of conduct
Breaches7
Investigations resulting in termination
Whistleblower reports
Financial Wellbeing
Help enable social and economic participation
of 1 million people by 2020 (cumulative total)8
Employees
Employee engagement (%)9
Total Women in Leadership (%)10
Community
Total community investment ($m)
Volunteer hours
Employee volunteering participation rate (%)11
Sustainable solutions AU$50 billion target12
Total funded or facilitated towards:
Environmental sustainability ($ billion)
Housing ($ billion)13
Other social ($ billion)14
Environmental Sustainability
Environmental footprint
3
4
1
4
5
1
569
93
157
4
3
1
4
5
1
784
151
156
3
3
1
4
5
1
4
4
2
4
5
3
2
4
1
4
5
1
1,114
1,443
1,408
226
137
262
121
254
71
1,070,930
998,474
889,135
550,361
453,054
77
32.5
73
32.0
72
31.1
74
29.9
142.2
136.9
131.1
89.8
134,930
124,113
113,127
113,071
42.4
34.6
29.4
-
7.60
4.65
4.51
2.37
86
33.4
139.5
66,402
20.5
7.57
1.45
0.06
Total scope 1 & 2 GHG emissions (tCO2e)
Total scope 1,2 & 3 GHG emissions (tCO2e)
134,093
203,700
156,568
250,857
171,012
180,993
266,906
273,216
193,569
299,224
Project finance portfolio15
Renewables (%)
Coal (%)
Gas (%)
87
5
7
83
9
8
76
13
10
70
16
13
Project finance commitment to renewable energy ($m)
1,501
1,371
1,076
1,141
Average emissions intensity of generation financed
Australia (tCO2e/Mwh generated)
Outside Australia (tCO2e/Mwh generated)
0.40
0.01
0.54
0.02
0.66
0.08
0.58
0.24
63
19
18
875
0.62
0.16
1. Roy Morgan Single Source, Australian population aged 14+, Main Financial Institution, six month rolling average to Sep’16, Sep’17, Sep’18, Sep’19 & Sep'20. Ranking based on the four major
Australian banks. 2. DBM Business Atlas. Base: Commercial (<$100 million annual turnover) Main Financial Institution customers. Six month average to Sep’16, Sep’17, Sep’18, Sep’19 & Sep'20.
Ranking based on the four major Australian banks. 3. Peter Lee Associates, 2020 Large Corporate and Institutional Relationship Banking surveys, Australia. 4. Retail Market Monitor, Camorra
Research, six month rolling average to Sep’16, Sep’17, Sep’18, Sep’19 & Sep'20. Ranking based on the five major New Zealand banks. 5. Business Finance Monitor, TNS Kantar Research. Base:
Commercial ($3 million – $150 million annual turnover) and Agricultural (>$500K annual turnover) customers. Four quarter rolling average to Q3’16, Q3’17, Q3’18, Q3’19 & Q3’20. Ranking based
on the five major New Zealand commercial / agricultural banks. 6. Peter Lee Associates Large Corporate and Institutional Relationship Banking surveys, New Zealand 2016 - 2020, ranked
against the Top 4 competitors (in 2016 rank based on question ‘which bank would you most likely to recommend’). 7. Resulting in a formal consequence or the employee leaving ANZ
8. Target commenced in 2016. Performance includes people helped through our initiatives to support financial wellbeing, including our financial inclusion, employment and community
programs, and targeted banking products and services for small business and retail customers. Refer to the 2020 ESG Supplement for methodology. 9. The 2017 engagement survey was
run as a pulse survey sent to 10% of the bank's employees with a 57% response rate. 10. Measures representation at the Senior Manager, Executive and Senior Executive levels. Includes all
employees regardless of leave status but not contractors (which are included in FTE). 11. Commenced reporting in 2017. 12. 2016 –2019 figures represent annual contributions towards ANZ’s
2020 $15bn sustainable solutions target, which had an environmental focus. In 2020, ANZ set a new 2025 $50bn target with an expanded focus on environmental sustainability, housing and
financial wellbeing. 13. Commenced reporting in 2020. 14. Commenced reporting in 2020. Includes Green, Social, Sustainability Bond transactions issued by Financial Institutions that align to
SDG 6, 7, 9, 11, 12 and 13 and indirectly align to Financial Wellbeing. 15. Breakdowns for 2020, 2018 and 2017 do not total to 100% due to rounding.
72
OverviewHow we create valuePerformance overviewRemuneration reportDirectors’ reportFinancial reportShareholder information This page has been intentionally left blank.
73
ANZ 2020 Annual Report Remuneration report
Dear Shareholder,
2020 Remuneration Report –
audited
In many respects this was not the year
we planned it to be. However, despite the
unprecedented combination of challenges
from COVID-19, bushfires and ongoing
industry transformation, management
navigated the year extremely well and
delivered the vast majority of the priorities
and objectives agreed with the Board. Like
many businesses, ANZ has been affected
both operationally and financially.
From an operational perspective, we took
swift action to ensure our people could
safely and productively work at home, while
still supporting customers during a period
of significant stress.
Since March 2020 we have provided
142,000 home and business loan repayment
deferrals in Australia and New Zealand –
providing much needed relief for those who
had either lost income or face uncertainty
due to the pandemic.
Shareholders will be acutely aware of the
financial impacts COVID-19 has had on the
bank. Increased provisions for potential
future credit losses (which the Board
determined were appropriate), along with
the impairment of two of the Group’s Asian
associate investments, have reduced profits
and our share price has also been adversely
affected.
remuneration on Group rather than
individual performance for around 80%
of employees.
While these provisions were appropriate
given the uncertain environment, they have
reduced the amount of profit we are able to
pay to shareholders in the form of dividends
this year.
Aside from the financial impact of COVID-19,
the Group Performance Framework met the
Board’s expectations when considering the
stretching objectives we set ourselves at
the start of the year. Solid growth in our key
markets, a continued simplification of our
operations and maintaining our disciplined
approach to expense management were
key highlights.
The Board was also pleased with the way
the bank responded to the challenges
of COVID-19 with our plan designed to
protect our people and the things that
matter, adapt quickly to the new operating
environment, increase engagement
with important stakeholders, including
Governments and regulators and prepare
for the future.
In 2020 we also moved to a new approach
to how we reward, recognise and manage
the performance of our employees as
part of the Group’s Reimagining Reward
program. This included basing variable
Fixed remuneration
To ensure remuneration remained
market competitive, the Board engaged
PricewaterhouseCoopers in September 2019
to assist the Board to conduct a detailed
remuneration market benchmarking review
for our Chief Executive Officer and our
Disclosed Executives.
Shayne Elliott’s fixed remuneration was
increased (effective 1 October 2019 before
the COVID-19 pandemic) from $2.1 million
to $2.5 million and this is reflected in this
year’s Remuneration Report. Shayne’s Long
Term Variable Remuneration was reduced
by $700k, with the target decreasing from
200% to 140% of fixed remuneration.
The Annual Variable Remuneration target
remained unchanged at 100% of fixed
remuneration.
It should be noted that Shayne has not
received a fixed remuneration increase
since starting as Chief Executive Officer
in January 2016, and his target total
remuneration remains largely consistent
with previous years.
Ilana Atlas, AO,
Chair – Human
Resources Committee
74
OverviewHow we create valuePerformance overviewRemuneration reportDirectors’ reportFinancial reportShareholder information Remuneration report
2020 Remuneration Report –
affected.
of employees.
associate investments, have reduced profits
remuneration on Group rather than
and our share price has also been adversely
individual performance for around 80%
Dear Shareholder,
audited
In many respects this was not the year
we planned it to be. However, despite the
unprecedented combination of challenges
from COVID-19, bushfires and ongoing
industry transformation, management
navigated the year extremely well and
delivered the vast majority of the priorities
and objectives agreed with the Board. Like
many businesses, ANZ has been affected
both operationally and financially.
From an operational perspective, we took
swift action to ensure our people could
safely and productively work at home, while
still supporting customers during a period
of significant stress.
Since March 2020 we have provided
142,000 home and business loan repayment
deferrals in Australia and New Zealand –
providing much needed relief for those who
had either lost income or face uncertainty
due to the pandemic.
Shareholders will be acutely aware of the
financial impacts COVID-19 has had on the
bank. Increased provisions for potential
future credit losses (which the Board
determined were appropriate), along with
the impairment of two of the Group’s Asian
While these provisions were appropriate
given the uncertain environment, they have
reduced the amount of profit we are able to
pay to shareholders in the form of dividends
this year.
Aside from the financial impact of COVID-19,
the Group Performance Framework met the
Board’s expectations when considering the
stretching objectives we set ourselves at
the start of the year. Solid growth in our key
markets, a continued simplification of our
operations and maintaining our disciplined
approach to expense management were
key highlights.
The Board was also pleased with the way
the bank responded to the challenges
of COVID-19 with our plan designed to
protect our people and the things that
matter, adapt quickly to the new operating
environment, increase engagement
with important stakeholders, including
Governments and regulators and prepare
for the future.
In 2020 we also moved to a new approach
to how we reward, recognise and manage
the performance of our employees as
part of the Group’s Reimagining Reward
program. This included basing variable
Fixed remuneration
To ensure remuneration remained
market competitive, the Board engaged
PricewaterhouseCoopers in September 2019
to assist the Board to conduct a detailed
remuneration market benchmarking review
for our Chief Executive Officer and our
Disclosed Executives.
Shayne Elliott’s fixed remuneration was
increased (effective 1 October 2019 before
the COVID-19 pandemic) from $2.1 million
to $2.5 million and this is reflected in this
year’s Remuneration Report. Shayne’s Long
Term Variable Remuneration was reduced
by $700k, with the target decreasing from
200% to 140% of fixed remuneration.
The Annual Variable Remuneration target
remained unchanged at 100% of fixed
remuneration.
It should be noted that Shayne has not
received a fixed remuneration increase
since starting as Chief Executive Officer
in January 2016, and his target total
remuneration remains largely consistent
with previous years.
Contents
1. Who is covered by this report
2. 2020 outcomes at a glance
3. Overview of ANZ’s
remuneration framework
4. 2020 outcomes
5. Executive remuneration
structure and delivery
6. Accountability and
Consequence Framework
7. Non-Executive Director
(NED) remuneration
8. Remuneration governance
9. Other information
76
76
77
79
93
97
98
100
102
Fixed remuneration increases were also
applied to five Disclosed Executives
on 1 October 2019 to improve market
positioning, and one increase was made
on permanent appointment. For the year
commencing 1 October 2020, the Board
determined there would be no fixed
remuneration increases for any of the
Disclosed Executives, including the Chief
Executive Officer.
There were no increases to the Chairman
fee or Non-Executive Director base fee for
the 2020 year.
Variable remuneration
outcomes
Shayne had a successful year and has ANZ
well positioned to assist our customers and
the community in the most challenging
environment in decades, while also
delivering a decent result for shareholders.
Shayne has role modelled ANZ’s values
and culture, demonstrated outstanding
leadership as well as making strong
progress in simplifying and improving our
operations. Despite this good performance,
the Board took into account the significant
impact of COVID-19 on returns and the
profitability of our business as well as the
impact on the broader community, and
exercised its discretion by applying a 50%
reduction to his 2020 Annual Variable
Remuneration outcome.
As a result, the Board awarded an Annual
Variable Remuneration outcome of $1.25
million (33% of maximum opportunity)
for 2020.
Long Term Variable Remuneration of
$3.5 million (reduced from $4.2 million
the previous year) is proposed. This
reinforces Shayne’s focus on achieving
longer term strategic objectives and
creating long-term value for all stakeholders.
This allocation of course remains subject to
shareholder approval at the 2020 Annual
General Meeting and performance hurdles
being met.
For Disclosed Executives, the Board also
exercised its discretion and applied a
50% reduction to their 2020 Variable
Remuneration outcomes resulting in an
average outcome of 36% of maximum
opportunity. Total remuneration reduced
by 15% year-on-year for 2020 Disclosed
Executives who were in role for the full
year 2019 and 2020.
Performance rights granted in late 2016 to
the Chief Executive Officer and Disclosed
Executives (excluding the Chief Risk Officer)
did not meet their hurdles when tested in
November 2019. Therefore, the rights were
lapsed and executives received no value
from these awards.
This has been a difficult year for all our
stakeholders and as a Board we believe
we have struck the right balance in
rewarding our executives for good
performance while also taking into
account the broader environment.
On behalf of the Board, I invite you to
consider our Remuneration Report which will
be presented to shareholders for adoption
at the 2020 Annual General Meeting.
Ilana Atlas, AO
Chair – Human Resources Committee
Ilana Atlas, AO,
Chair – Human
Resources Committee
75
ANZ 2020 Annual Report
1. WHO IS COVERED BY THIS REPORT
1.1 DISCLOSED EXECUTIVE AND NED CHANGES
2020 Chief Executive Officer (CEO) and Disclosed Executives
There were several changes to our Key Management Personnel
(KMP) during the 2020 year:
• Paul O’Sullivan was appointed as a Non-Executive Director (NED)
from November 2019 and as Chairman from 28 October 2020
(following the retirement of Chairman, David Gonski on that date).
• All Group Executive Committee (ExCo) roles with key
responsibility for the strategic direction and management of
the Group, and who report directly to the Chief Executive Officer
(CEO) have been included in this year’s report, and so the roles of
Group Executive, Talent and Culture (Kathryn van der Merwe) and
Group Executive, Technology (Gerard Florian) are now included.
• Antonia Watson was permanently appointed to the Group
Executive and Chief Executive Officer, New Zealand (NZ) role
in December 2019 (acting since June 2019).
1.2 KEY MANAGEMENT PERSONNEL (KMP)
The KMP whose remuneration is disclosed in this year’s report are:
2020 Non-Executive Directors (NEDs)
D Gonski
Chairman (retired 28 October 2020)
I Atlas
P Dwyer
J Halton
J Key
G Liebelt
Director
Director
Director
Director
Director
J Macfarlane
Director
P O’Sullivan
Director – appointed 4 November 2019
(Chairman from 28 October 2020)
2. 2020 OUTCOMES AT A GLANCE
2020 REMUNERATION CHANGES
2020 OUTCOMES
S Elliott
Chief Executive Officer and Executive Director
M Carnegie
Group Executive, Digital and
Australia Transformation
K Corbally
Chief Risk Officer (CRO)
G Florian
Group Executive, Technology
A George
Deputy Chief Executive Officer (title changed
effective 22 September 2020 from Deputy
Chief Executive Officer and Group Executive,
Wealth Australia)
M Hand
Group Executive, Australia Retail and
Commercial Banking
M Jablko
Chief Financial Officer (CFO)
K van der
Merwe
A Watson
Group Executive, Talent and Culture (GE T&C)
Group Executive and Chief Executive Officer,
New Zealand (NZ) – appointed 18 December
2019 (Acting Group Executive and Chief
Executive Officer, NZ to 17 December 2019)
M Whelan
Group Executive, Institutional
There have been no changes to KMP since the end of 2020 up to
the date of signing the Directors’ Report, other than Paul O’Sullivan
commencing as Chairman on the retirement of David Gonski from
that role.
The Remuneration Report for the Group outlines our remuneration
strategy and framework and the remuneration practices that apply
to KMP. This report has been prepared, and audited, as required by
the Corporations Act 2001. It forms part of the Directors’ Report.
The following remuneration changes
were made at the start of the 2020
financial year following a detailed
review to better align to the external
market:
• On 1 October 2019 the CEO’s fixed
remuneration was increased and
Long Term Variable Remuneration
(LTVR) was reduced (see section 3.2).
• On 1 October 2019 fixed
remuneration was increased for
a number of Disclosed Executives
(see section 4.1).
• No increase to the Chairman fee
or NED base fee, and Committee
fees remained unchanged except
for the Digital Business and
Technology Committee Chair fee
in recognition of the significant
increase in workload of the
Committee Chair (see section 7.1).
• For the 2021 financial year (i.e. year
commencing 1 October 2020), the
Board determined that there would be
no increases to fixed remuneration for
either the CEO or Disclosed Executives.
• The Board exercised their discretion and
applied a 50% reduction to the Annual
Variable Remuneration (AVR)/Variable
Remuneration (VR) outcomes for the CEO
and Disclosed Executives having regard
to the impact of COVID-19 (see section 4).
– The CEO received an AVR award
of 33% of maximum opportunity.
– Disclosed Executives’ VR outcomes
averaged 36% of maximum
opportunity, with individual
outcomes ranging from 31% to
44% of maximum opportunity.
• The CEO will be awarded LTVR of $3.5
million subject to shareholder approval at
the 2020 Annual General Meeting (AGM).
• 100% of the performance rights granted
in late 2016 to the CEO and Disclosed
Executives (excluding the CRO) were
lapsed, as the performance hurdles were
not met when tested at the end of the
performance period in November 2019
(see section 4.4.3).
• As part of the Group’s Reimagining
Reward program effective 1 October
2019, ANZ made adjustments to the
remuneration mix for staff (increased
fixed/reduced variable remuneration),
which included replacing individual
variable remuneration for around 80%
of employees with variable remuneration
based on the overall performance of the
Group (see section 4.5.1).
• Enhancements were made to continue
to strengthen and further embed
ANZ’s Accountability and Consequence
Framework (A&CF) (see section 6).
76
OverviewHow we create valuePerformance overviewRemuneration reportDirectors’ reportFinancial reportShareholder information 1. WHO IS COVERED BY THIS REPORT
1.1 DISCLOSED EXECUTIVE AND NED CHANGES
2020 Chief Executive Officer (CEO) and Disclosed Executives
There were several changes to our Key Management Personnel
S Elliott
Chief Executive Officer and Executive Director
3. OVERVIEW OF ANZ’S REMUNERATION FRAMEWORK
3.1 REMUNERATION FRAMEWORK OVERVIEW
The structure of our remuneration framework is aligned with our Reward Principles and has been designed to support ANZ’s purpose and strategy.
The KMP whose remuneration is disclosed in this year’s report are:
A Watson
Group Executive and Chief Executive Officer,
(KMP) during the 2020 year:
• Paul O’Sullivan was appointed as a Non-Executive Director (NED)
from November 2019 and as Chairman from 28 October 2020
(following the retirement of Chairman, David Gonski on that date).
• All Group Executive Committee (ExCo) roles with key
responsibility for the strategic direction and management of
the Group, and who report directly to the Chief Executive Officer
(CEO) have been included in this year’s report, and so the roles of
Group Executive, Talent and Culture (Kathryn van der Merwe) and
Group Executive, Technology (Gerard Florian) are now included.
• Antonia Watson was permanently appointed to the Group
Executive and Chief Executive Officer, New Zealand (NZ) role
in December 2019 (acting since June 2019).
1.2 KEY MANAGEMENT PERSONNEL (KMP)
2020 Non-Executive Directors (NEDs)
D Gonski
Chairman (retired 28 October 2020)
I Atlas
P Dwyer
J Halton
J Key
G Liebelt
Director
Director
Director
Director
Director
J Macfarlane
Director
P O’Sullivan
Director – appointed 4 November 2019
(Chairman from 28 October 2020)
2. 2020 OUTCOMES AT A GLANCE
2020 REMUNERATION CHANGES
2020 OUTCOMES
M Carnegie
Group Executive, Digital and
Australia Transformation
K Corbally
Chief Risk Officer (CRO)
G Florian
Group Executive, Technology
A George
Deputy Chief Executive Officer (title changed
effective 22 September 2020 from Deputy
Chief Executive Officer and Group Executive,
Wealth Australia)
M Hand
Group Executive, Australia Retail and
Commercial Banking
M Jablko
Chief Financial Officer (CFO)
K van der
Merwe
Group Executive, Talent and Culture (GE T&C)
New Zealand (NZ) – appointed 18 December
2019 (Acting Group Executive and Chief
Executive Officer, NZ to 17 December 2019)
M Whelan
Group Executive, Institutional
There have been no changes to KMP since the end of 2020 up to
the date of signing the Directors’ Report, other than Paul O’Sullivan
commencing as Chairman on the retirement of David Gonski from
that role.
The Remuneration Report for the Group outlines our remuneration
strategy and framework and the remuneration practices that apply
to KMP. This report has been prepared, and audited, as required by
the Corporations Act 2001. It forms part of the Directors’ Report.
The following remuneration changes
• For the 2021 financial year (i.e. year
• 100% of the performance rights granted
were made at the start of the 2020
financial year following a detailed
commencing 1 October 2020), the
in late 2016 to the CEO and Disclosed
Board determined that there would be
Executives (excluding the CRO) were
review to better align to the external
no increases to fixed remuneration for
lapsed, as the performance hurdles were
market:
either the CEO or Disclosed Executives.
not met when tested at the end of the
• On 1 October 2019 the CEO’s fixed
• The Board exercised their discretion and
remuneration was increased and
Long Term Variable Remuneration
applied a 50% reduction to the Annual
(see section 4.4.3).
Variable Remuneration (AVR)/Variable
• As part of the Group’s Reimagining
(LTVR) was reduced (see section 3.2).
Remuneration (VR) outcomes for the CEO
Reward program effective 1 October
performance period in November 2019
• No increase to the Chairman fee
– Disclosed Executives’ VR outcomes
• On 1 October 2019 fixed
remuneration was increased for
a number of Disclosed Executives
(see section 4.1).
or NED base fee, and Committee
fees remained unchanged except
for the Digital Business and
Technology Committee Chair fee
in recognition of the significant
increase in workload of the
Committee Chair (see section 7.1).
and Disclosed Executives having regard
2019, ANZ made adjustments to the
to the impact of COVID-19 (see section 4).
remuneration mix for staff (increased
– The CEO received an AVR award
of 33% of maximum opportunity.
averaged 36% of maximum
opportunity, with individual
outcomes ranging from 31% to
44% of maximum opportunity.
• The CEO will be awarded LTVR of $3.5
million subject to shareholder approval at
the 2020 Annual General Meeting (AGM).
fixed/reduced variable remuneration),
which included replacing individual
variable remuneration for around 80%
of employees with variable remuneration
based on the overall performance of the
Group (see section 4.5.1).
• Enhancements were made to continue
to strengthen and further embed
ANZ’s Accountability and Consequence
Framework (A&CF) (see section 6).
ANZ’S PURPOSE AND STRATEGY1
IS UNDERPINNED BY OUR REMUNERATION POLICY WHICH INCLUDES OUR REWARD PRINCIPLES:
Attract, motivate and
keep great people
Reward our people for doing the right thing
having regard to our customers and shareholders
Focus on how things are achieved
as much as what is achieved
Are fair and simple
to understand
WITH REMUNERATION DELIVERED TO OUR CEO AND DISCLOSED EXECUTIVES THROUGH:
Fixed remuneration Cash salary and superannuation contributions. The Board sets (and reviews annually) the CEO and
Disclosed Executives’ fixed remuneration based on financial services market relativities reflecting their responsibilities,
performance, qualifications, experience and location.
Variable remuneration (at risk) The CEO and Disclosed Executives are eligible to receive variable remuneration under the ANZ
Incentive Plan (ANZIP), our variable remuneration plan.
CEO
Annual Variable Remuneration (AVR)
• Rewards the achievement of Group, and individual outcomes
DISCLOSED EXECUTIVES4
Variable Remuneration (VR)
• Rewarded under a single VR framework enabling us to:
over a 12-month period
• Determination: ANZ Group Performance Framework, individual
strategic objectives, ANZ values2 and risk/compliance
assessments, and Board discretion
• Maximum opportunity: 150% of fixed remuneration
• Delivery: 50% cash and 50% as ANZ shares deferred over
four years, subject to malus3
Long Term Variable Remuneration (LTVR)
• Reinforces the CEO’s focus on achieving longer term strategic
objectives and creating long-term value for all stakeholders
• Face value at full vesting: 140% of fixed remuneration
• Delivery: Performance rights deferred for four years subject to
performance hurdles and malus
• Performance hurdles: Relative total shareholder return (TSR)
(75%), absolute TSR (25%)
– Provide the appropriate mix of short and long-term rewards
(including performance hurdles) to drive performance, and
attract and retain talent;
– Tie the full VR award to the performance of ANZ; and
– Defer VR over the short, medium and longer term.
• Determination: ANZ Group Performance Framework,
Divisional Performance Frameworks, ANZ values and risk/
compliance assessments, and Board discretion
• Maximum opportunity: 402% of fixed remuneration5
• Delivery: 25% cash, 25% as ANZ shares deferred over four
years subject to malus, and 50% as performance rights
deferred for four years subject to performance hurdles
and malus
• Performance hurdles: Relative TSR (75%), absolute TSR (25%)
Board discretion is applied when determining CEO and Disclosed Executive performance and remuneration outcomes, and also
before any scheduled release of previously deferred remuneration (see section 5.3). All deferred variable remuneration is subject
to malus adjustment.
REINFORCED BY ALIGNING REMUNERATION AND RISK:
Assessing behaviours based on ANZ’s
values and risk/compliance standards
(including the Banking Executive
Accountability Regime (BEAR))
Determining variable
remuneration outcomes,
with risk as a key input at
a pool and individual level
Weighting remuneration
toward the longer-
term with a significant
proportion at risk
Determining
accountability and
applying consequences
where appropriate
Prohibiting
the hedging
of unvested
equity
WHILE SUPPORTING THE ALIGNMENT OF EXECUTIVES AND SHAREHOLDERS THROUGH:
Substantial shareholding
requirements
Significant variable
remuneration deferral
in ANZ equity
Use of relative and
absolute TSR hurdles
Consideration of cash
profit and economic profit
in determining the ANZIP
variable remuneration pool
Consideration of the
impact to shareholders
of the reduction in share
price and dividends
The Human Resources (HR) Committee and the Board determining fixed remuneration and the variable remuneration outcomes for the
CEO and each Disclosed Executive. Additionally, the CEO’s LTVR outcome is also subject to shareholder approval at the AGM.
WHILE GOVERNED BY:
1. See the ‘About our business’ and ‘Our vision and strategy’ sections of the Annual Report. 2. ANZ’s values (Integrity, Collaboration, Accountability, Respect, Excellence (ICARE)) – the
foundation of how we work, supported by our Code of Conduct and our New Ways of Leading framework. 3. Malus relates to downward adjustment of unvested remuneration. 4. The
maximum opportunity and delivery of VR differs for the CRO to that of other Disclosed Executives. See section 5 for further details. 5. Performance rights face value at full vesting.
77
ANZ 2020 Annual Report
3.2 CHANGES TO THE CEO AND DISCLOSED EXECUTIVES’ REMUNERATION FRAMEWORKS MADE IN 2020
CEO
With the assistance of a detailed market benchmarking review conducted by PricewaterhouseCoopers in September 2019, the Board
re-balanced the CEO’s remuneration mix from 1 October 2019 to ensure both the CEO’s fixed remuneration and total remuneration were
market competitive at that time. There have been no changes to the delivery of AVR or LTVR for the 2020 financial year.
In summary:
• Fixed remuneration was increased from $2.1 million to $2.5 million (to better align to the external market while also recognising the
skills and experience the CEO brings to the role, noting that this was the first increase since his appointment in January 2016).
• Target AVR remains unchanged at 100% of fixed remuneration.
• LTVR has reduced from 200% to 140% of fixed remuneration providing an appropriate balance between rewarding for short-term and
long-term performance and ensuring total remuneration at target remains largely unchanged.
• Total remuneration at target increased from $8.4 million to $8.5 million (~1%).
CHANGE IN CEO’S REMUNERATION MIX
2020
2019
29%
$2.5 million
29%
$2.5 million
42%
$3.5 million
25%
$2.1 million
25%
$2.1 million
50%
$4.2 million
$8.5 million
$8.4 million
Fixed remuneration
Target AVR
LTVR face value at full vesting
Disclosed Executives
No changes have been made to the remuneration framework for Disclosed Executives for 2020.
A detailed review of our remuneration frameworks was planned for 2020, however this is now expected to occur in 2021 to enable
appropriate consideration of the new APRA Prudential Standard CPS 511 Remuneration and to ensure that our frameworks continue to
appropriately support ANZ’s purpose, strategy and Reward Principles.
78
OverviewHow we create valuePerformance overviewRemuneration reportDirectors’ reportFinancial reportShareholder information 3.2 CHANGES TO THE CEO AND DISCLOSED EXECUTIVES’ REMUNERATION FRAMEWORKS MADE IN 2020
4. 2020 OUTCOMES
CEO
In summary:
2020
2019
With the assistance of a detailed market benchmarking review conducted by PricewaterhouseCoopers in September 2019, the Board
re-balanced the CEO’s remuneration mix from 1 October 2019 to ensure both the CEO’s fixed remuneration and total remuneration were
market competitive at that time. There have been no changes to the delivery of AVR or LTVR for the 2020 financial year.
• Fixed remuneration was increased from $2.1 million to $2.5 million (to better align to the external market while also recognising the
skills and experience the CEO brings to the role, noting that this was the first increase since his appointment in January 2016).
• Target AVR remains unchanged at 100% of fixed remuneration.
• LTVR has reduced from 200% to 140% of fixed remuneration providing an appropriate balance between rewarding for short-term and
long-term performance and ensuring total remuneration at target remains largely unchanged.
• Total remuneration at target increased from $8.4 million to $8.5 million (~1%).
CHANGE IN CEO’S REMUNERATION MIX
29%
$2.5 million
29%
$2.5 million
42%
$3.5 million
25%
$2.1 million
25%
$2.1 million
50%
$4.2 million
$8.5 million
$8.4 million
Fixed remuneration
Target AVR
LTVR face value at full vesting
Disclosed Executives
No changes have been made to the remuneration framework for Disclosed Executives for 2020.
Variable remuneration at ANZ is truly at risk and can range from zero to maximum opportunity. The HR Committee and the Board make
variable remuneration outcome decisions for the CEO and Disclosed Executives following lengthy and detailed discussions and assessment,
supported by comprehensive analysis of performance from a number of sources.
The tables in sections 4.1 and 4.2 supplement, and are different to, the Statutory Remuneration table (see section 9.1) which presents the
accounting expense for both vested and unvested awards in accordance with Australian Accounting Standards.
4.1 YEAR-ON-YEAR REMUNERATION AWARDED
These tables show a year-on-year comparison of remuneration awarded to the CEO and Disclosed Executives for the 2018, 2019 and 2020
performance periods. Remuneration awarded includes any cash payments (e.g. fixed remuneration and cash variable remuneration) and the
value of deferred shares and performance rights awarded for the year but which have not yet vested (i.e. the value was not received during
the year).
Although 2020 performance was assessed as ‘Met Expectations’, the Board determined it was both necessary and appropriate to use its
discretion to ensure the market conditions arising from COVID-19 were factored into the process, resulting in a 50% reduction to the AVR/VR
outcomes for the CEO and Disclosed Executives. In determining the 50% reduction, the Board judged what was fair and reasonable having
regard to the impact on shareholders, and considering expectations from customers and the community.
CEO
The 2020 LTVR shown below has not yet been awarded to the CEO, approval will be sought from shareholders at the 2020 AGM. Note the
CEO’s 2018 LTVR award was significantly reduced as a result of the matters raised in the Royal Commission relating to conduct issues and
associated reputational damage (as previously disclosed).
YEAR-ON-YEAR REMUNERATION AWARDED – CEO
A detailed review of our remuneration frameworks was planned for 2020, however this is now expected to occur in 2021 to enable
appropriate consideration of the new APRA Prudential Standard CPS 511 Remuneration and to ensure that our frameworks continue to
appropriately support ANZ’s purpose, strategy and Reward Principles.
CEO
Financial
year
Fixed
remuneration
$
AVR
deferred
shares
$
AVR
cash
$
LTVR
performance
rights
$
Total
remuneration
awarded
$
LTVR
performance
rights
$
Total
remuneration
awarded
$
Total
AVR
$
Target
opport-
unity
Maximum
opport-
unity
Threshold vesting
Full vesting
AVR as % of
S Elliott
2020
2,500,000
625,000
625,000 1,250,000
1,750,000
5,500,000
3,500,000
7,250,000
2019
2018
2,100,000
750,000
750,000 1,500,000
2,100,000
5,700,000
4,200,000
7,800,000
2,100,000
875,000
875,000 1,750,000
1,400,000
5,250,000
2,800,000
6,650,000
50%
71%
83%
33%
48%
56%
79
ANZ 2020 Annual Report Disclosed Executives
• Fixed remuneration increases were applied to five Disclosed Executives on 1 October 2019 to improve alignment to desired market
positioning, and one increase was made on permanent appointment (Antonia Watson). External benchmarking conducted by
PricewaterhouseCoopers in September 2019 highlighted that ANZ was paying behind the market on fixed remuneration and these increases
were designed to deliver more market competitive remuneration reflecting executive’s responsibilities, qualifications and experience.
• There were no fixed remuneration increases for the 2021 year commencing 1 October 2020.
• Year-on-year remuneration awarded for both Mark Hand and Antonia Watson is not directly comparable, as they were Disclosed Executives
for only part of the 2019 financial year. In addition, Antonia Watson’s 2020 remuneration awarded reflects her permanent appointment to
the Group Executive and CEO, NZ role.
• The average 2020 VR outcome for Disclosed Executives was 36% (45% in 2019) of maximum opportunity (ranging from 31% to 44%).
Despite good performance these outcomes were deemed by the Board to better reflect the impact of the current economic conditions.
• Despite the increases to fixed remuneration applied to a number of executives at the start of 2020, year-on-year total remuneration has
reduced by 15%, and VR by 28% (at full vesting), for the 2020 Disclosed Executives who were in role for full year 2019 and 2020.
• Variable remuneration continues to differ both year-on-year and between different executives demonstrating the at risk nature of this
element of remuneration and the variability in Group and individual performance year-on-year. See section 4.4 for details.
YEAR-ON-YEAR REMUNERATION AWARDED – DISCLOSED EXECUTIVES
Threshold vesting
Full vesting
VR as % of
Financial
year
Fixed
remuneration
$
VR
cash
$
VR
deferred
shares
$
VR
performance
rights1
$
Total
remuneration
awarded
$
VR
performance
rights1
$
Total
remuneration
awarded
$
Target
opport-
unity
Maximum
opport-
unity
Current Disclosed Executives
M Carnegie
2020
1,200,000
409,200
409,200
421,600
2,440,000
843,200
2,861,600
2019
2018
1,000,000
495,000
495,000
510,000
2,500,000
1,020,000
3,010,000
1,000,000
528,000
528,000
544,000
2,600,000
1,088,000
3,144,000
K Corbally
2020
1,100,000
429,000
429,000
442,000
2,400,000
442,000
2,400,000
G Florian
A George
M Hand
2019
2018
(6.5 months in role)
2020
2020
2019
2018
(12 months/4.5 months
as Deputy CEO)
2020
2019
(9 months as Disclosed
Executive)
950,000
478,500
478,500
493,000
2,400,000
493,000
2,400,000
486,000
164,835
164,835
169,830
985,500
169,830
985,500
1,075,000
371,250
371,250
382,500
2,200,000
765,000
2,582,500
1,100,000
363,000
363,000
374,000
2,200,000
748,000
2,574,000
1,000,000
528,000
528,000
544,000
2,600,000
1,088,000
3,144,000
876,000
354,750
354,750
365,500
1,951,000
731,000
2,316,500
1,200,000
462,000
462,000
476,000
2,600,000
952,000
3,076,000
726,000
198,000
198,000
204,000
1,326,000
408,000
1,530,000
M Jablko
2020
1,100,000
363,000
363,000
374,000
2,200,000
748,000
2,574,000
K van der Merwe
A Watson2
2019
2018
2020
2020
2019
1,000,000
544,500
544,500
561,000
2,650,000
1,122,000
3,211,000
1,000,000
577,500
577,500
595,000
2,750,000
1,190,000
3,345,000
850,000
330,000
330,000
340,000
1,850,000
680,000
2,190,000
1,015,599
334,681
334,681
344,822
2,029,783
689,645
2,374,605
219,440
170,255
113,504
-
503,199
-
503,199
(3.5 months in role)
M Whelan
2020
1,200,000
363,000
363,000
374,000
2,300,000
748,000
2,674,000
2019
2018
1,200,000
874,500
874,500
901,000
3,850,000
1,802,000
4,751,000
1,200,000
717,750
717,750
739,500
3,375,000
1,479,000
4,114,500
1. Deferred share rights for the CRO. 2. Paid in NZD and converted to AUD.
52%
75%
80%
66%
85%
83%
52%
50%
80%
61%
58%
41%
50%
83%
88%
59%
50%
65%
46%
110%
91%
34%
50%
53%
44%
57%
55%
35%
33%
53%
41%
39%
28%
33%
55%
58%
39%
33%
43%
31%
74%
60%
80
OverviewHow we create valuePerformance overviewRemuneration reportDirectors’ reportFinancial reportShareholder information • Fixed remuneration increases were applied to five Disclosed Executives on 1 October 2019 to improve alignment to desired market
positioning, and one increase was made on permanent appointment (Antonia Watson). External benchmarking conducted by
PricewaterhouseCoopers in September 2019 highlighted that ANZ was paying behind the market on fixed remuneration and these increases
were designed to deliver more market competitive remuneration reflecting executive’s responsibilities, qualifications and experience.
• There were no fixed remuneration increases for the 2021 year commencing 1 October 2020.
• Year-on-year remuneration awarded for both Mark Hand and Antonia Watson is not directly comparable, as they were Disclosed Executives
for only part of the 2019 financial year. In addition, Antonia Watson’s 2020 remuneration awarded reflects her permanent appointment to
the Group Executive and CEO, NZ role.
• The average 2020 VR outcome for Disclosed Executives was 36% (45% in 2019) of maximum opportunity (ranging from 31% to 44%).
Despite good performance these outcomes were deemed by the Board to better reflect the impact of the current economic conditions.
• Despite the increases to fixed remuneration applied to a number of executives at the start of 2020, year-on-year total remuneration has
reduced by 15%, and VR by 28% (at full vesting), for the 2020 Disclosed Executives who were in role for full year 2019 and 2020.
• Variable remuneration continues to differ both year-on-year and between different executives demonstrating the at risk nature of this
element of remuneration and the variability in Group and individual performance year-on-year. See section 4.4 for details.
YEAR-ON-YEAR REMUNERATION AWARDED – DISCLOSED EXECUTIVES
Threshold vesting
Full vesting
VR as % of
Financial
Fixed
year
remuneration
VR
cash
$
$
deferred
performance
remuneration
performance
remuneration
rights1
awarded
rights1
awarded
VR
shares
$
VR
$
Total
$
VR
$
Total
Target
Maximum
opport-
unity
opport-
unity
$
Current Disclosed Executives
M Carnegie
2020
1,200,000
409,200
409,200
421,600
2,440,000
843,200
2,861,600
1,000,000
495,000
495,000
510,000
2,500,000
1,020,000
3,010,000
1,000,000
528,000
528,000
544,000
2,600,000
1,088,000
3,144,000
K Corbally
2020
1,100,000
429,000
429,000
442,000
2,400,000
442,000
2,400,000
950,000
478,500
478,500
493,000
2,400,000
493,000
2,400,000
486,000
164,835
164,835
169,830
985,500
169,830
985,500
G Florian
A George
1,075,000
371,250
371,250
382,500
2,200,000
765,000
2,582,500
1,100,000
363,000
363,000
374,000
2,200,000
748,000
2,574,000
1,000,000
528,000
528,000
544,000
2,600,000
1,088,000
3,144,000
876,000
354,750
354,750
365,500
1,951,000
731,000
2,316,500
1,000,000
544,500
544,500
561,000
2,650,000
1,122,000
3,211,000
1,000,000
577,500
577,500
595,000
2,750,000
1,190,000
3,345,000
K van der Merwe
850,000
330,000
330,000
340,000
1,850,000
680,000
2,190,000
A Watson2
1,015,599
334,681
334,681
344,822
2,029,783
689,645
2,374,605
219,440
170,255
113,504
-
503,199
-
503,199
(3.5 months in role)
M Whelan
2020
1,200,000
363,000
363,000
374,000
2,300,000
748,000
2,674,000
1,200,000
874,500
874,500
901,000
3,850,000
1,802,000
4,751,000
1,200,000
717,750
717,750
739,500
3,375,000
1,479,000
4,114,500
1. Deferred share rights for the CRO. 2. Paid in NZD and converted to AUD.
52%
75%
80%
66%
85%
83%
52%
50%
80%
61%
58%
41%
50%
83%
88%
59%
50%
65%
46%
110%
91%
34%
50%
53%
44%
57%
55%
35%
33%
53%
41%
39%
28%
33%
55%
58%
39%
33%
43%
31%
74%
60%
(6.5 months in role)
(12 months/4.5 months
as Deputy CEO)
(9 months as Disclosed
Executive)
2019
2018
2019
2018
2020
2020
2019
2018
2020
2019
2019
2018
2020
2020
2019
2019
2018
Disclosed Executives
4.2 2020 ACTUAL REMUNERATION RECEIVED
This table shows the remuneration the CEO and Disclosed Executives actually received in relation to the 2020 performance year as cash,
or in the case of prior equity awards, the value which vested in 2020. The final column also shows the value of prior equity awards which
lapsed/were forfeited in 2020 (these awards reflect the 2016 performance rights which fully lapsed when tested against their performance
hurdles in November 2019).
2020 ACTUAL REMUNERATION RECEIVED – CEO AND DISCLOSED EXECUTIVES
Fixed
remuneration
$
Cash variable
remuneration
$
Deferred variable
remuneration
which vested
during the year1
$
Other deferred
remuneration
which vested
during the year1
$
Total
cash
$
Actual
remuneration
received
$
Deferred variable
remuneration which
lapsed/forfeited
during the year1, 2
$
CEO and Current Disclosed Executives
S Elliott
M Carnegie
K Corbally
G Florian
A George
M Hand
M Jablko3
2,500,000
625,000
3,125,000
1,200,000
409,200
1,609,200
1,100,000
429,000
1,529,000
1,075,000
371,250
1,446,250
1,100,000
363,000
1,463,000
1,200,000
462,000
1,662,000
1,100,000
363,000
1,463,000
K van der Merwe
850,000
330,000
1,180,000
A Watson4
M Whelan
1,015,599
334,681
1,350,280
1,200,000
363,000
1,563,000
597,362
276,999
247,891
141,723
222,997
335,786
326,785
125,309
289,148
570,684
-
-
-
-
-
-
3,722,362
1,886,199
1,776,891
1,587,973
1,685,997
1,997,786
195,305
1,985,090
1,305,309
1,639,428
-
-
-
(3,768,401)
(241,617)
(135,003)
-
(117,474)
(196,368)
(241,617)
-
(90,473)
2,133,684
(1,374,281)
M Hand
1,200,000
462,000
462,000
476,000
2,600,000
952,000
3,076,000
to ensure retention of key talent – particularly in a more volatile and uncertain environment.
726,000
198,000
198,000
204,000
1,326,000
408,000
1,530,000
• Focus on how things are achieved as much as what is achieved: The Board has ensured that appropriate consideration and weight was
given to performance against objectives and how that performance was achieved (i.e. in accordance with our values and purpose).
• Be fair and simple to understand: Variable remuneration should be fair and consistent through the cycle and have regard to external
M Jablko
2020
1,100,000
363,000
363,000
374,000
2,200,000
748,000
2,574,000
influences outside of management’s control.
1. The point in time value of previously deferred remuneration granted as shares/share rights and/or performance rights is based on the one day Volume Weighted Average Price (VWAP) of
the Company’s shares traded on the ASX on the date of vesting or lapsing/forfeiture multiplied by the number of shares/share rights and/or performance rights. 2. The lapsed/forfeited values
relate to the performance rights we awarded in November/December 2016 which lapsed in November/December 2019 due to the performance hurdles not being met. 3. Other deferred
remuneration for M Jablko relates to previously disclosed compensation for deferred remuneration forfeited as a result of joining ANZ. 4. Paid in NZD and converted to AUD.
4.3 APPLICATION OF REWARD PRINCIPLES
In considering the 2020 outcomes the HR Committee and Board reflected on the application of ANZ’s Reward Principles in the current
environment:
• Reward our people for doing the right thing having regard to our customers and shareholders: Variable remuneration should be
primarily based on ‘outcomes’ rather than ‘effort’ and proportionate relative to performance. It also needs to consider the experience/
expectations of all stakeholders (including shareholders, customers, employees, community and regulators). On this basis, for 2020 the
Board determined to apply a 50% reduction to the outcomes for the CEO (AVR) and Disclosed Executives (VR).
• Attract, motivate and keep great people: The Board acknowledged the importance of fixed remuneration being market competitive
81
ANZ 2020 Annual Report 4.4 VARIABLE REMUNERATION – DETAIL
4.4.1 CEO performance, AVR and LTVR
Performance
With regard to AVR, the CEO is assessed 50% on the ANZ Group
Performance Framework and 50% on achievement of individual
strategic objectives aligned to ANZ’s strategy. Both the Group
Performance Framework and individual strategic objectives are agreed
by the Board at the start of the financial year and are stretching.
WEIGHTING OF FINANCIAL METRICS
AVR
Financial metrics have a 35% weighting in the Group
Performance Framework and therefore notionally have a
17.5% weighting in the CEO’s AVR. However, the CEO’s AVR
is not formulaic – outcomes are moderated by the Risk and
Reputation element of the Group Performance Framework
and the Board’s judgement on the appropriate AVR
considering all aspects of performance.
LTVR
100% of the LTVR hurdles are based on TSR (both relative
and absolute).
At the end of the financial year, ANZ’s performance is assessed against
the Group Performance Framework, and the CEO’s performance
is assessed against his individual strategic objectives, the ANZ
values (behaviours), delivery of the BEAR obligations and ANZ’s risk
and compliance standards. In conducting the CEO’s performance
assessment, the HR Committee seeks input from the Chairman, CRO
(on risk management), CFO (on financial performance), GE T&C (on
talent and culture matters) and Group General Manager Internal Audit
(GGM IA) (on internal audit matters). Material risk events that have
either occurred or come to light in the year (provided by the CRO) are
also considered together with input from both the Audit Committee
and the Risk Committee of the Board.
The Board has assessed the CEO’s 2020 performance as follows:
Group Performance Framework = Met Expectations
(see section 4.5.3)
Individual strategic objectives
= Met Expectations (see Board
ANZ values
assessment below)
= Above Expectations
Risk/compliance assessment
= Met Expectations
The Board has exercised their discretion in determining the
appropriate AVR outcome for 2020 and applied a 50% reduction
which has resulted in an AVR outcome of 33% of maximum
opportunity.
2020 CEO individual strategic objectives
• Lead and role model the culture and accountability
required to transform ANZ
• Enhance the reputation of ANZ
• Drive the strategic direction of the organisation with a
focus on growth
• Show material progress on the productivity initiatives to
improve customer and staff experience while driving cost
towards a materially reduced run rate by close of 2022
• Continue to build ExCo effectiveness and CEO succession
• Focus on operational excellence, including remediation and
system stability, to ensure ANZ has a robust and reliable
platform to support long-term growth
Board assessment of performance on individual
strategic objectives: Met Expectations
The CEO has had a successful year, despite this being a
difficult period, marked by the pandemic and other problems
affecting Australia. He has been a role model for ANZ’s
values and culture – including risk culture, demonstrating
outstanding leadership both internally and externally,
particularly in providing support and caring for our customers,
community and employees during COVID-19.
His crafting and leadership of ANZ’s response to COVID-19
enabled the organisation to focus on what mattered most:
• Protecting our people, our customers and our balance sheet
• Adapting to the COVID-19 environment
• Engaging and staying connected with all of our stakeholders
• Preparing for the future and being ready to embrace
opportunities
The CEO has maintained the strength of ANZ’s leadership,
infrastructure, balance sheet, and employee engagement to
allow ANZ to be well positioned to assist our customers and the
community in the most challenging environment in decades.
He has also enhanced the reputation of ANZ, by embedding
purpose and values in our decision making and through his
leadership in response to COVID-19.
During the last 12 months the CEO has remained focused on
driving the strategic agenda for ANZ with progress towards
simplifying the business, improving our IT infrastructure and
restoring momentum in our core home loans business, while
re-shaping the business for the future. Growth continued to be
an area of focus in 2020, however opportunities have had to be
balanced against our COVID-19 response.
2020 has seen the bulk of our employees working from home
(remotely) and productivity has not faltered. The CEO has
focused on the safety, wellbeing and engagement of our
people whilst also continuing to invest in the business and
cultivating a more efficient workforce at all levels. In difficult
times, he has continued productivity improvements, with strong
management of expenses.
ExCo is functioning very effectively under his leadership and the
addition of the Group Executive, Data and Automation role this
year appropriately reflects the importance of data within ANZ.
Infrastructure stability has improved and ANZ is well on track in
building a better platform for responsible well managed growth.
82
OverviewHow we create valuePerformance overviewRemuneration reportDirectors’ reportFinancial reportShareholder information 4.4 VARIABLE REMUNERATION – DETAIL
4.4.1 CEO performance, AVR and LTVR
Performance
With regard to AVR, the CEO is assessed 50% on the ANZ Group
Performance Framework and 50% on achievement of individual
strategic objectives aligned to ANZ’s strategy. Both the Group
Performance Framework and individual strategic objectives are agreed
by the Board at the start of the financial year and are stretching.
WEIGHTING OF FINANCIAL METRICS
AVR
Financial metrics have a 35% weighting in the Group
Performance Framework and therefore notionally have a
17.5% weighting in the CEO’s AVR. However, the CEO’s AVR
is not formulaic – outcomes are moderated by the Risk and
Reputation element of the Group Performance Framework
and the Board’s judgement on the appropriate AVR
considering all aspects of performance.
LTVR
and absolute).
100% of the LTVR hurdles are based on TSR (both relative
At the end of the financial year, ANZ’s performance is assessed against
the Group Performance Framework, and the CEO’s performance
is assessed against his individual strategic objectives, the ANZ
values (behaviours), delivery of the BEAR obligations and ANZ’s risk
and compliance standards. In conducting the CEO’s performance
assessment, the HR Committee seeks input from the Chairman, CRO
(on risk management), CFO (on financial performance), GE T&C (on
talent and culture matters) and Group General Manager Internal Audit
(GGM IA) (on internal audit matters). Material risk events that have
either occurred or come to light in the year (provided by the CRO) are
also considered together with input from both the Audit Committee
and the Risk Committee of the Board.
The Board has assessed the CEO’s 2020 performance as follows:
Group Performance Framework = Met Expectations
2020 CEO individual strategic objectives
• Lead and role model the culture and accountability
required to transform ANZ
• Enhance the reputation of ANZ
• Drive the strategic direction of the organisation with a
focus on growth
• Show material progress on the productivity initiatives to
improve customer and staff experience while driving cost
towards a materially reduced run rate by close of 2022
• Continue to build ExCo effectiveness and CEO succession
• Focus on operational excellence, including remediation and
system stability, to ensure ANZ has a robust and reliable
platform to support long-term growth
Board assessment of performance on individual
strategic objectives: Met Expectations
The CEO has had a successful year, despite this being a
difficult period, marked by the pandemic and other problems
affecting Australia. He has been a role model for ANZ’s
values and culture – including risk culture, demonstrating
outstanding leadership both internally and externally,
particularly in providing support and caring for our customers,
community and employees during COVID-19.
His crafting and leadership of ANZ’s response to COVID-19
enabled the organisation to focus on what mattered most:
• Protecting our people, our customers and our balance sheet
• Adapting to the COVID-19 environment
• Engaging and staying connected with all of our stakeholders
• Preparing for the future and being ready to embrace
opportunities
The CEO has maintained the strength of ANZ’s leadership,
infrastructure, balance sheet, and employee engagement to
allow ANZ to be well positioned to assist our customers and the
community in the most challenging environment in decades.
He has also enhanced the reputation of ANZ, by embedding
purpose and values in our decision making and through his
(see section 4.5.3)
leadership in response to COVID-19.
Individual strategic objectives
= Met Expectations (see Board
ANZ values
assessment below)
= Above Expectations
Risk/compliance assessment
= Met Expectations
The Board has exercised their discretion in determining the
During the last 12 months the CEO has remained focused on
driving the strategic agenda for ANZ with progress towards
simplifying the business, improving our IT infrastructure and
restoring momentum in our core home loans business, while
re-shaping the business for the future. Growth continued to be
an area of focus in 2020, however opportunities have had to be
appropriate AVR outcome for 2020 and applied a 50% reduction
balanced against our COVID-19 response.
which has resulted in an AVR outcome of 33% of maximum
opportunity.
2020 has seen the bulk of our employees working from home
(remotely) and productivity has not faltered. The CEO has
focused on the safety, wellbeing and engagement of our
people whilst also continuing to invest in the business and
cultivating a more efficient workforce at all levels. In difficult
times, he has continued productivity improvements, with strong
management of expenses.
ExCo is functioning very effectively under his leadership and the
addition of the Group Executive, Data and Automation role this
year appropriately reflects the importance of data within ANZ.
Infrastructure stability has improved and ANZ is well on track in
building a better platform for responsible well managed growth.
AVR and LTVR
At the end of the financial year, the HR Committee makes a recommendation to the Board for their approval in respect of the CEO’s
AVR outcome.
The CEO’s AVR will vary up or down year-on-year, it is not guaranteed, and may range from zero to a maximum opportunity.
The 2020 AVR awarded to the CEO is 33% of maximum opportunity.
Despite having been assessed as being above expectations on the ANZ values, and having met expectations on risk/compliance assessment,
individual strategic objectives and the Group Performance Framework, the Board has exercised its discretion and applied a 50% reduction
to the AVR. This takes into account the current environment in light of the COVID-19 pandemic (including the decline in returns and
profitability), the impact on shareholders and having regard to customer, community and regulator expectations. Accordingly, the Board
determined that an AVR outcome of $1.25 million (33% of maximum opportunity) was appropriate for 2020, noting that this is 17% lower
than 2019.
The CEO’s proposed LTVR of $3.5 million (performance rights face value at full vesting) (reduced from $4.2 million in 2019) is subject to
shareholder approval at the 2020 AGM.
2020 AVR Awarded
This table shows the AVR awarded to the CEO for the year ending 30 September 2020.
2020 AVR AWARDED – CEO
CEO
S Elliott1
AVR $1,250,000
+
LTVR $3,500,000 performance rights face value at full vesting (subject to shareholder approval at the 2020 AGM)
$625,000
$625,000
=
+
Maximum opportunity
33% of max
Cash
Deferred shares
1. Variable remuneration for the CEO = AVR + LTVR.
Summary of Total Remuneration
The remuneration Shayne Elliott received in 2020 differs to the remuneration he was awarded in relation to the 2020 performance year
(which may or may not vest in future years). It also differs to his statutory remuneration which reflects the accounting expense value for 2020.
Awarded remuneration shown below includes the face value of the performance rights at both threshold (50%) and full (100%) vesting.
SUMMARY OF TOTAL REMUNERATION – CEO
2020
2019
2018
Total Remuneration
Awarded
Threshold vesting
$
5,500,000
5,700,000
5,250,000
Full vesting
$
7,250,000
7,800,000
6,650,000
Received1
$
3,722,362
4,093,464
3,849,666
Statutory2
$
5,225,308
5,181,339
5,645,295
1. Includes the value of previously awarded AVR deferred shares and LTVR performance rights at the date of vesting. 2. Includes the value of AVR and LTVR that has been expensed in the year.
The CEO’s awarded remuneration based on full vesting value reduced by 7% from 2019 to 2020, despite the increase in fixed remuneration,
reflecting the significant reduction in his 2020 variable remuneration awards. Note his 2018 (variable) remuneration reflected ANZ’s
acknowledgement of the matters raised in the Royal Commission relating to conduct issues and associated reputational damage.
The reduction in the CEO’s received remuneration from 2019 to 2020 reflects the reduction in 2020 variable remuneration and the fact that
the LTVR performance rights granted in December 2016 failed to vest when tested in November 2019.
Historical AVR and LTVR
This table shows the AVR as a % of maximum opportunity and LTVR vesting outcomes for the CEO over the last three years.
HISTORICAL AVR AND LTVR – CEO
AVR outcome (% of maximum opportunity)
LTVR vesting outcome (% vested)
2018
56%
0%
2019
48%
21.8%
2020
33%
0%
83
ANZ 2020 Annual Report VR
At the end of the financial year, the CEO and HR Committee
determine VR recommendations for each Disclosed Executive, which
are ultimately approved by the Board3. VR should and does vary year-
on-year in line with performance – it is not guaranteed and may be
adjusted up or down ranging from zero to a maximum opportunity.
The variance in individual VR outcomes reflect the relative
performance of the different areas/individuals, ensuring appropriate
alignment between performance and reward. There is less individual
differentiation in 2020 in recognition of the significant collaboration
and team work across the Executive Committee throughout 2020 and
particularly in managing ANZ’s response to COVID-19. The outcomes
demonstrate the at risk nature of VR, and that outcomes vary across
the Disclosed Executives and also from year to year. The average 2020
VR for Disclosed Executives is 36% of maximum opportunity (ranging
from 31% to 44%), reflecting the impact of the 50% reduction applied
by the Board.
3. Remuneration arrangements for the Group Executive and CEO, NZ are determined and
approved by the ANZ NZ Board in consultation with and endorsed by the Board, consistent
with their respective regulatory obligations.
4.4.2 Disclosed Executive performance and VR
Performance
At the start of each year, stretching performance objectives are
set by the HR Committee in the form of Divisional Performance
Frameworks for each of our Disclosed Executives, in alignment with
the Group Performance Framework approved by the Board.
Similar to the Group Performance Framework, the Divisional
Performance Frameworks include the key elements of Financial
and Discipline, Customer, and People and Culture, with Risk and
Reputation acting as a modifier1. The weighting of each element
varies to reflect the responsibilities of each individual’s role. The
Financial and Discipline element weightings range from 20% to 45%.
At the end of the financial year, the performance of each Disclosed
Executive2 is assessed against their contribution to the Group
Performance Framework, their Divisional Performance Framework,
ANZ’s values (behaviours), delivery of BEAR obligations and ANZ’s
risk and compliance standards.
The HR Committee seeks input from the CEO, and independent
reports from Risk, Finance, Talent and Culture, and Internal Audit,
and also reviews material risk event data provided by the CRO, and
seeks input from both the Audit Committee and the Risk Committee
of the Board.
The HR Committee reviews and recommends to the Board for
approval the overall performance outcomes for each Disclosed
Executive.
1. Except for the CRO who has a weighting assigned to Risk and Reputation measures.
2. Performance arrangements for the CRO are addressed additionally by the Risk Committee.
Performance arrangements for the Group Executive and CEO, NZ are determined and
approved by the ANZ NZ HR Committee/ANZ NZ Board in consultation with and endorsed
by the HR Committee/Board, consistent with their respective regulatory obligations.
84
OverviewHow we create valuePerformance overviewRemuneration reportDirectors’ reportFinancial reportShareholder information 4.4.2 Disclosed Executive performance and VR
Performance
VR
At the start of each year, stretching performance objectives are
set by the HR Committee in the form of Divisional Performance
Frameworks for each of our Disclosed Executives, in alignment with
the Group Performance Framework approved by the Board.
Similar to the Group Performance Framework, the Divisional
Performance Frameworks include the key elements of Financial
and Discipline, Customer, and People and Culture, with Risk and
Reputation acting as a modifier1. The weighting of each element
varies to reflect the responsibilities of each individual’s role. The
Financial and Discipline element weightings range from 20% to 45%.
At the end of the financial year, the performance of each Disclosed
Executive2 is assessed against their contribution to the Group
Performance Framework, their Divisional Performance Framework,
ANZ’s values (behaviours), delivery of BEAR obligations and ANZ’s
risk and compliance standards.
The HR Committee seeks input from the CEO, and independent
reports from Risk, Finance, Talent and Culture, and Internal Audit,
and also reviews material risk event data provided by the CRO, and
seeks input from both the Audit Committee and the Risk Committee
of the Board.
Executive.
The HR Committee reviews and recommends to the Board for
approval the overall performance outcomes for each Disclosed
1. Except for the CRO who has a weighting assigned to Risk and Reputation measures.
2. Performance arrangements for the CRO are addressed additionally by the Risk Committee.
Performance arrangements for the Group Executive and CEO, NZ are determined and
approved by the ANZ NZ HR Committee/ANZ NZ Board in consultation with and endorsed
by the HR Committee/Board, consistent with their respective regulatory obligations.
At the end of the financial year, the CEO and HR Committee
determine VR recommendations for each Disclosed Executive, which
are ultimately approved by the Board3. VR should and does vary year-
on-year in line with performance – it is not guaranteed and may be
adjusted up or down ranging from zero to a maximum opportunity.
The variance in individual VR outcomes reflect the relative
performance of the different areas/individuals, ensuring appropriate
alignment between performance and reward. There is less individual
differentiation in 2020 in recognition of the significant collaboration
and team work across the Executive Committee throughout 2020 and
particularly in managing ANZ’s response to COVID-19. The outcomes
demonstrate the at risk nature of VR, and that outcomes vary across
the Disclosed Executives and also from year to year. The average 2020
VR for Disclosed Executives is 36% of maximum opportunity (ranging
from 31% to 44%), reflecting the impact of the 50% reduction applied
by the Board.
3. Remuneration arrangements for the Group Executive and CEO, NZ are determined and
approved by the ANZ NZ Board in consultation with and endorsed by the Board, consistent
with their respective regulatory obligations.
2020 VR Awarded
This table shows the combined VR awarded to Disclosed Executives for the year ending 30 September 2020.
2020 VR AWARDED – DISCLOSED EXECUTIVES
Current Disclosed Executives
Maximum opportunity
M Carnegie
VR $1,661,600
K Corbally1
VR $1,300,000
G Florian
VR $1,507,500
A George
VR $1,474,000
M Hand
VR $1,876,000
M Jablko
VR $1,474,000
K van der Merwe
VR $1,340,000
A Watson
VR $1,359,006
M Whelan
VR $1,474,000
=
=
=
=
=
=
=
=
=
+
+
$409,200
$409,200
$843,200
+
+
$429,000
$429,000
$442,000
+
+
$371,250
$371,250
$765,000
+
+
$363,000 $363,000
$748,000
+
+
$462,000 $462,000
$952,000
+
+
$363,000 $363,000
$748,000
+
+
$330,000
$330,000
$680,000
+
+
$334,681 $334,681 $689,645
+
+
$363,000 $363,000
$748,000
34% of max
44% of max
35% of max
33% of max
39% of max
33% of max
39% of max
33% of max
31% of max
Cash
Deferred shares or deferred share rights
Performance rights face value at full vesting2
1. CRO receives deferred share rights instead of performance rights. 2. Divide by two to convert to face value at threshold vesting for performance rights.
Historical Disclosed Executive VR
This table shows the VR as a % of maximum opportunity for the executives who were disclosed over the last three years. Although ANZ’s
performance has been stronger this year and the Group has been assessed by the Board as having ‘Met Expectations’ against the Group
Performance Framework, the 50% reduction applied by the Board has resulted in a significant reduction in 2020 VR outcomes compared
to prior years.
HISTORICAL DISCLOSED EXECUTIVE VR
VR outcome (average % of maximum opportunity)
VR outcome (range % of maximum opportunity)
VR performance rights vesting outcome (% vested)
2018
51%
40% – 60%
0%
2019
45%
0% – 74%
21.8%
2020
36%
31% – 44%
0%
85
ANZ 2020 Annual Report 4.4.3 Performance rights outcomes (CEO and Disclosed Executives)
Performance rights granted to the CEO in December 2016 and Disclosed Executives (excluding the CRO) in November 2016 reached the
end of their performance period in November 2019. As the performance hurdles were not met none of these performance rights vested,
the rights were lapsed and executives received no value from these awards.
PERFORMANCE RIGHTS OUTCOMES
Hurdle
75% relative TSR
– Select Financial Services (SFS)
comparator group3
Grant date1
22 Nov 16
First date
exercisable1
22 Nov 19
ANZ TSR
over three years/
CAGR2 TSR
Median TSR
over three years/
CAGR2 TSR target
18.32%
26.21%
25% absolute CAGR2 TSR
22 Nov 16
22 Nov 19
5.78%
9.00%
Overall
performance
rights outcome
0% vested and
100% lapsed
% vested
0%
0%
1. Grant date for the CEO was 16 December 2016, and date first exercisable was 16 December 2019. The CEO’s performance period was the same as the performance period for Disclosed
Executives. 2. Compound Annual Growth Rate (CAGR). 3. See section 5.2.3a for details of the SFS comparator group.
4.5 ANZIP VARIABLE REMUNERATION POOL AND GROUP PERFORMANCE
4.5.1 ANZIP variable remuneration
The ANZ Incentive Plan (ANZIP) is the variable remuneration plan operating across ANZ, and 2020 is the first year employees will participate
in a single Group plan where individual variable remuneration for around 80% of employees has been replaced with a variable payment
based on the overall performance of the Group. This change addresses many of the concerns about ‘bonus culture’ raised in the final report
of the Royal Commission, and forms part of wide ranging reforms for 2020 as to how we reward, recognise and manage the performance
of employees.
With the exception of the CEO, individual variable remuneration outcomes for all other employees including Disclosed Executives are
funded under ANZIP. The Board decides the CEO’s variable remuneration outcomes separately to help mitigate potential conflicts of interest.
See section 8.1.3.
At the end of each financial year, the HR Committee makes a recommendation to the Board for their approval on the size of the ANZIP variable
remuneration pool for that year. The Board exercise their judgement to determine the appropriate pool size – it is not a formulaic outcome.
ANZIP variable remuneration
pool recommended to the
Board for approval based on
performance and affordability
<
Board review and
approve the ANZIP variable
remuneration pool
<
Business and individual
allocations from ANZIP
variable remuneration pool
The Board considered a range of factors in determining a fair and reasonable ANZIP pool, particularly given the unique circumstances in 2020.
01
02
The balance between performance
in 2020, considering financial and
non-financial performance, and the
long-term (strengthening the bank):
• Our 2020 financial performance – in particular cash profit and economic profit,
informed the pool range. Given financials were down on 2019 (due to the significant
impact of the COVID-19 pandemic), the pool range was negatively impacted.
• The ‘Met Expectations’ Group Performance Framework assessment (see 4.5.3) and the
quality of the result then guided the broad positioning in the pool range.
The final ANZIP pool outcome also
considered:
• The shareholder experience during 2020 and customer and community expectations.
• Increased volatility and uncertainty in the current environment.
• Our Reward Principles.
4.5.2 ANZ Group Performance Framework
The ANZ Group Performance Framework is approved by the Board at the start of each year and is designed around the following three key inputs:
01
Creating a safe
bank with sound
risk practices
02
Achieving our
agreed annual and
longer term goals
03
Realising our
strategic vision
86
OverviewHow we create valuePerformance overviewRemuneration reportDirectors’ reportFinancial reportShareholder information 4.4.3 Performance rights outcomes (CEO and Disclosed Executives)
Performance rights granted to the CEO in December 2016 and Disclosed Executives (excluding the CRO) in November 2016 reached the
end of their performance period in November 2019. As the performance hurdles were not met none of these performance rights vested,
the rights were lapsed and executives received no value from these awards.
PERFORMANCE RIGHTS OUTCOMES
Hurdle
75% relative TSR
– Select Financial Services (SFS)
comparator group3
Grant date1
22 Nov 16
First date
exercisable1
22 Nov 19
ANZ TSR
over three years/
CAGR2 TSR
Median TSR
over three years/
CAGR2 TSR target
18.32%
26.21%
Overall
performance
% vested
rights outcome
0%
0%
0% vested and
100% lapsed
25% absolute CAGR2 TSR
22 Nov 16
22 Nov 19
5.78%
9.00%
1. Grant date for the CEO was 16 December 2016, and date first exercisable was 16 December 2019. The CEO’s performance period was the same as the performance period for Disclosed
Executives. 2. Compound Annual Growth Rate (CAGR). 3. See section 5.2.3a for details of the SFS comparator group.
4.5 ANZIP VARIABLE REMUNERATION POOL AND GROUP PERFORMANCE
4.5.1 ANZIP variable remuneration
The ANZ Incentive Plan (ANZIP) is the variable remuneration plan operating across ANZ, and 2020 is the first year employees will participate
in a single Group plan where individual variable remuneration for around 80% of employees has been replaced with a variable payment
based on the overall performance of the Group. This change addresses many of the concerns about ‘bonus culture’ raised in the final report
of the Royal Commission, and forms part of wide ranging reforms for 2020 as to how we reward, recognise and manage the performance
of employees.
See section 8.1.3.
With the exception of the CEO, individual variable remuneration outcomes for all other employees including Disclosed Executives are
funded under ANZIP. The Board decides the CEO’s variable remuneration outcomes separately to help mitigate potential conflicts of interest.
At the end of each financial year, the HR Committee makes a recommendation to the Board for their approval on the size of the ANZIP variable
remuneration pool for that year. The Board exercise their judgement to determine the appropriate pool size – it is not a formulaic outcome.
ANZIP variable remuneration
pool recommended to the
Board for approval based on
performance and affordability
<
Board review and
approve the ANZIP variable
remuneration pool
<
Business and individual
allocations from ANZIP
variable remuneration pool
The Board considered a range of factors in determining a fair and reasonable ANZIP pool, particularly given the unique circumstances in 2020.
01
02
The balance between performance
• Our 2020 financial performance – in particular cash profit and economic profit,
in 2020, considering financial and
non-financial performance, and the
long-term (strengthening the bank):
informed the pool range. Given financials were down on 2019 (due to the significant
impact of the COVID-19 pandemic), the pool range was negatively impacted.
• The ‘Met Expectations’ Group Performance Framework assessment (see 4.5.3) and the
quality of the result then guided the broad positioning in the pool range.
The final ANZIP pool outcome also
• The shareholder experience during 2020 and customer and community expectations.
considered:
• Increased volatility and uncertainty in the current environment.
• Our Reward Principles.
4.5.2 ANZ Group Performance Framework
The ANZ Group Performance Framework is approved by the Board at the start of each year and is designed around the following three key inputs:
01
Creating a safe
bank with sound
risk practices
02
Achieving our
agreed annual and
longer term goals
03
Realising our
strategic vision
The key objective of our Group Performance Framework is to
enable aligned focus across the organisation on delivering the
critical outcomes that matter most in delivering on our strategy.
It plays a key role to:
• message internally what matters most;
These in-year adjustments occurred through the lens of our
purpose-led approach to managing through COVID-19 with
our objectives being to:
• Protect our people, customers, shareholders and ANZ,
including strengthening our operational resilience;
• reinforce the importance of sound management in addition
• Adapt to the changing environment;
to risk, customer, people and financial outcomes; and
• inform focus of effort, prioritisation and decision-making
across ANZ.
The emergence of the significant economic and social impacts
of the COVID-19 pandemic required a rapid response and
reprioritisation of resources. We tested our business strategy and
resolved it remains relevant to create long-term sustainable value
for our stakeholders, notwithstanding changes caused by the
impact of COVID-19.
However, our priorities, sequencing and emphasis needed to
change, particularly in the short to medium-term. We also reviewed
our 2020 Group performance objectives and determined that
while they too remained directionally appropriate, the pandemic
demanded a material shift in our focus for the second half of the
year resulting in a sharpened emphasis on some key objectives and
a shift of focus within others.
• Engage even more proactively with our stakeholders; and
• Prepare for the future.
For example:
• Balancing our immediate responses and medium-term cost
ambitions became even more critical, particularly in the current
low interest-rate environment;
• In times of a crisis, restoring and retaining community trust is
crucial, making a focus on strong governance, leadership and
corporate citizenship vital in supporting our customers and the
community to navigate through the pandemic;
• Our focus on providing great digital solutions was accelerated,
encouraged by rapid changes in customer behaviour;
• Immediate efforts to embed positive cultural change involved
enabling our people to work safely and productively, while
supporting them through clear communications to engage and
maintain their wellbeing and performance; and
• Our talent priorities shifted partly away from hiring and retaining
strategic capabilities and towards supporting rapid internal
moves to maintain operational resilience and respond to rapid
changes in customer needs.
4.5.3 Assessment against the Group Performance Framework for 2020
RISK & REPUTATION
CUSTOMER
PEOPLE & CULTURE
Overall
Adjustment
35%
weight
x
30%
weight
+
FINANCIAL &
DISCIPLINE
35%
weight
+
OVERALL
Group
Performance
=
ASSESSMENT:
ASSESSMENT:
ASSESSMENT:
ASSESSMENT:
ASSESSMENT:
Met Expectations
Met Expectations
Above Expectations
Below Expectations
Met Expectations
As managing risk appropriately is fundamental to the way ANZ operates, Risk and Reputation forms an integral part of the assessment, directly
impacting the overall Group Performance Framework outcome (a modifier ranging from 0% to 110% of the Group Performance assessment).
When assessing Financial and Discipline (see section below), the Board considered a range of factors. This included an assessment of external
influences outside of the control of management. In 2020, returns and profitability were significantly impacted by COVID-19 – including
higher collective credit provision charges and the impairment of two of the Group’s Asian associate investments. Accordingly, cash profit from
continuing operations decreased 42% and Return on Equity (ROE) declined to 6.2%. This decline in profitability and returns was also considered
when the Board determined the size of the ANZIP variable remuneration pool for the year. For the purpose of assessing performance against the
Group Performance Framework, the extent these factors were considered outside of the control of management, have been factored into the
assessment of performance.
Overall, ANZ’s performance ‘Met Expectations’ when considering the objectives we set ourselves. While we were largely on track to achieve the
targets we set before COVID-19, we also demonstrated appropriate responses to the pandemic, supporting our customers and people while
remaining well-managed, including through the demonstration of strong financial discipline.
The below table outlines ANZ’s focus areas in 2020 (aligned to the three key inputs), and provides a summary of performance outcomes
for each of the key performance categories to inform the overall assessment for 2020. Performance against expectations is evaluated using
a range of objective indicators and subjective considerations including management input on work undertaken, evidence of outcomes
realised and lessons learned, and with consideration given to the operating, regulatory and competitive environment.
87
ANZ 2020 Annual Report
RISK & REPUTATION (MODIFIER 0% TO 110%)
RISK & REPUTATION (MODIFIER 0% TO 110%)
COVID-19 introduced a range of both new and increased risks for ANZ, our employees and our customers. Our existing strong risk
management framework enabled ANZ to respond well to these risks and continue to support our customers and the communities we
serve. In anticipation of the potential future impact of COVID-19 on our customers we increased our forward looking expected credit loss
provisions using a range of economic scenarios and we have continued to stress test our portfolio to re-assess our provisioning levels. At
the same time, management demonstrated accountability for fixing issues in a sustainable manner.
Risk culture measures reached all time high levels as concerted efforts to transform our culture prepared the bank well to manage
through the pandemic in a calm, measured and proactive manner. Strong leadership and citizenship have been paramount, centred
on regaining the trust of the community through our commitment to fair and responsible banking.
2020 focus areas
Performance commentary
Strengthen our financial
and non-financial risk,
control, governance
and compliance focus
in line with the risk
management framework
• We have continued to develop and improve our financial and operational
resilience which has helped position us well to respond to the impact
of the evolving external environment including from the impacts of
COVID-19, increased regulatory and compliance focus, bushfires and
floods, the uncertainty from geopolitical and trade tensions and increased
cyber activities.
Performance against
expectations
Below
Met
Above
Focus on being
well-managed and
maintaining or improving
across key risk control
and cultural indicators
Timely delivery of the
APRA Governance,
Culture and
Accountability (GCA)
self-assessment action
plan recommendations
and success measures
Improve our reputation
relative to industry as
evaluated by all key
stakeholders
• We prepared and adapted our workforce and increased operational
resilience by enabling over 95% of our workforce to work from home.
• We have maintained our focus on managing risk controls, and
demonstrated accountability for fixing issues in a timely and sustainable
manner.
• Strong progress continues on risk culture maturity, evidenced in employee
engagement scores, with ‘Leaders accountable for risk’ (87%) – up on
2019, and ‘Raise issues without fear of reprisal’ (74%) – also up on 2019.
• We have strengthened the bank’s focus on non-financial risk (NFR) and
progress has been made in uplifting our NFR control, governance and
compliance focus, including continuing to deliver sound progress to
address the themes identified by the self-assessment and lessons learned
from the Royal Commission.
• After being the first bank to make Royal Commission commitments, ANZ
continues to act on these with a particular focus on supporting our most
vulnerable customers in both Australia and NZ.
• We remained committed to supporting our customers during the
Australian bushfires and COVID-19, through loan payment deferrals and
financial support whilst also remaining focused on responsible credit
decision making.
• Across the industry, community perception scores have fluctuated
however, ANZ currently leads the major banks in the IPSOS survey
measuring social media sentiment, while in the RepTrak survey ANZ led
for the majority of 2020 and was second based on July to September
results. An A- rating was achieved in the 2019 CDP climate change
assessment, the leading score for Australian banks.
Risk & Reputation overall: Met Expectations
88
OverviewHow we create valuePerformance overviewRemuneration reportDirectors’ reportFinancial reportShareholder information RISK & REPUTATION (MODIFIER 0% TO 110%)
RISK & REPUTATION (MODIFIER 0% TO 110%)
CUSTOMER (35% WEIGHT)
COVID-19 introduced a range of both new and increased risks for ANZ, our employees and our customers. Our existing strong risk
management framework enabled ANZ to respond well to these risks and continue to support our customers and the communities we
serve. In anticipation of the potential future impact of COVID-19 on our customers we increased our forward looking expected credit loss
provisions using a range of economic scenarios and we have continued to stress test our portfolio to re-assess our provisioning levels. At
the same time, management demonstrated accountability for fixing issues in a sustainable manner.
Risk culture measures reached all time high levels as concerted efforts to transform our culture prepared the bank well to manage
through the pandemic in a calm, measured and proactive manner. Strong leadership and citizenship have been paramount, centred
on regaining the trust of the community through our commitment to fair and responsible banking.
2020 focus areas
Performance commentary
Performance against
expectations
We have continued to demonstrate our commitment to improve the financial wellbeing of our customers, including ensuring our most
vulnerable customers and those undergoing COVID-19 related stress are aware of and can access the support we have available to them.
Despite the serious challenges faced by the sector and community this year, our actions over previous years to simplify and strengthen the
bank provided us with the capacity to support our customers at a time of need and strengthen our long-term relationships. A proactive
approach to reallocating resources and keeping in close contact with customers through the Australian bushfires and COVID-19 ensured
we were available to listen and respond effectively. Across all our retail and commercial businesses in the region, we were also able to work
quickly and comprehensively provide an appropriate series of support packages including loan deferrals and access to working capital.
While the focus has clearly been on assisting customers in need, there has also been opportunity to build new customer relationships and
enable more digital services that have been especially valued in a restricted COVID-19 environment.
Below
Met
Above
2020 focus areas
Performance commentary
Performance against
expectations
Below
Met
Above
Strengthen relationships
and maintain customer
experience in our target
segments
• Net Promoter Score (NPS)1 centred on key onboarding episodes in Australia,
where strong improvements have been made in retail home lending and
business lending, while NZ Retail achieved all time high scores.
• ANZ was ranked the #1 lead institutional bank by Peter Lee Associates2
for the fifth year running and #1 for relationship strength for the seventh
consecutive year, while a new online payments experience has been
processing ~1 million payments daily and providing digital self-service for
our Institutional customers.
• In Australia, customer complaint resolution and home lending assessment
timeframes have remained a challenge, however uplift programs are
in place to improve these outcomes. Customer complaint timeframes
improved from 63% to 66% resolved within five business days, while
median home lending decision times increased from 6.0 days to 9.4 days
as improved processes and campaigns drove an overwhelmingly strong
demand from customers.
Help our people to make
wise customer-focused
choices every day
• Launched a public campaign to improve financial wellbeing and behaviours
in the community and commenced embedding financial wellbeing
principles into key products and services.
• Supporting our customers through the Australian bushfires and COVID-19
pandemic has been a priority, incorporating financial relief packages and
making sure we have remained available to provide assistance where it has
been needed.
• In Australia, significant progress was made on the customer commitments
and initiatives announced in 2019, including a focus on supporting
vulnerable customers. In NZ, our Good Customer Outcome principles and
product simplification reviews are delivering better customer experiences,
including the removal or reduction of several fees, including on Visa debit,
low rate products, payments and statements.
Quickly and effectively
remediate individual and
systemic customer issues
across the Group
• Approximately 1.8 million customer accounts in Australia have been
refunded (against a target of 500,000 accounts), with a total of ~$161
million returned. Sound progress continues to be made in closing out
large remediation streams in both Australia and NZ.
Customer overall: Met Expectations
89
Strengthen our financial
• We have continued to develop and improve our financial and operational
and non-financial risk,
control, governance
and compliance focus
in line with the risk
management framework
resilience which has helped position us well to respond to the impact
of the evolving external environment including from the impacts of
COVID-19, increased regulatory and compliance focus, bushfires and
floods, the uncertainty from geopolitical and trade tensions and increased
cyber activities.
Focus on being
well-managed and
maintaining or improving
across key risk control
and cultural indicators
manner.
• We prepared and adapted our workforce and increased operational
resilience by enabling over 95% of our workforce to work from home.
• We have maintained our focus on managing risk controls, and
demonstrated accountability for fixing issues in a timely and sustainable
• Strong progress continues on risk culture maturity, evidenced in employee
engagement scores, with ‘Leaders accountable for risk’ (87%) – up on
2019, and ‘Raise issues without fear of reprisal’ (74%) – also up on 2019.
• We have strengthened the bank’s focus on non-financial risk (NFR) and
progress has been made in uplifting our NFR control, governance and
compliance focus, including continuing to deliver sound progress to
address the themes identified by the self-assessment and lessons learned
from the Royal Commission.
Improve our reputation
• After being the first bank to make Royal Commission commitments, ANZ
Timely delivery of the
APRA Governance,
Culture and
Accountability (GCA)
self-assessment action
plan recommendations
and success measures
relative to industry as
evaluated by all key
stakeholders
continues to act on these with a particular focus on supporting our most
vulnerable customers in both Australia and NZ.
• We remained committed to supporting our customers during the
Australian bushfires and COVID-19, through loan payment deferrals and
financial support whilst also remaining focused on responsible credit
decision making.
• Across the industry, community perception scores have fluctuated
however, ANZ currently leads the major banks in the IPSOS survey
measuring social media sentiment, while in the RepTrak survey ANZ led
for the majority of 2020 and was second based on July to September
results. An A- rating was achieved in the 2019 CDP climate change
assessment, the leading score for Australian banks.
Risk & Reputation overall: Met Expectations
ANZ 2020 Annual Report PEOPLE & CULTURE (30% WEIGHT)
PEOPLE & CULTURE (30% WEIGHT)
In a challenging year, significant capacity and attention was focused on managing through COVID-19 and the Australian bushfires,
however strong progress was still made on key priorities including embedding our new reward framework, building strategic and
leadership capabilities, and strengthening governance, accountability and culture. Our ability to make progress in the face of disruption
is the product of sustained efforts to embed our purpose and aspirational culture over multiple years, including through implementing
agile working practices and strong leadership behaviours.
In response to COVID-19, our core focus was protecting the safety of our people and in turn, our customers. By quickly enabling
significant increases in our remote working capacity, over 95% of all employees (excluding Australian branches) were able to continue
to work productively and safely from home and continue to deliver great outcomes for our customers.
Performance against
expectations
Below
Met
Above
2020 focus areas
Performance commentary
Strengthen governance,
accountability, actions
and measurement of
culture
Engaging our people
and diversifying our
workforce
• Continued to embed the Accountability and Consequence Framework
(A&CF) including in support of our new reward model, with 12 full and
26 preliminary accountability reviews completed.
• Divisions have continued to share progress and lessons learned through
our culture steering groups and we have undertaken a review of our
culture measurement and assessment approach.
• Overall engagement score increased to a record high of 86% (up from
77% in 2019), with strong results also seen in key measures, reflecting
ANZ’s strong support for our employees and clear senior leader
communication during the pandemic.
• Women in leadership increased 0.9% to 33.4% (against a 34.1% target).
Improve leader capability
• Commenced rollout of a bank wide leadership capability program for all
Embed Reimagining
Reward, including
new Performance
Management approach
Strengthen strategic
capabilities
people leaders.
• Key leadership survey results continued to improve, including scores for
leaders role modelling our values and demonstrating effective leadership
behaviours.
• Finalised and embedded changes to how we manage and reward our
people to better focus on the interests of our customers, collaboration,
and the long-term health of the bank.
• Implemented a more dynamic approach to performance management,
including a stronger emphasis on more frequent check-in conversations
to review and drive performance, as well as maintain employee wellbeing
during COVID-19. Some plans to embed performance changes had to be
scaled back due to capacity constraints.
• In response to COVID-19, safe internal workforce movement principles
were developed, and we rapidly enabled internal moves to support
operational resilience and supplement areas where customer demand
was highest.
• Enhanced recruiting, assessment and onboarding processes, especially for
graduates and high demand capabilities. Achieved targets for hiring into
strategic capability areas, such as data and engineering skillsets.
People & Culture overall: Above Expectations
90
OverviewHow we create valuePerformance overviewRemuneration reportDirectors’ reportFinancial reportShareholder information PEOPLE & CULTURE (30% WEIGHT)
PEOPLE & CULTURE (30% WEIGHT)
FINANCIAL & DISCIPLINE (35% WEIGHT)
FINANCIAL & DISCIPLINE (35% WEIGHT)
In a challenging year, significant capacity and attention was focused on managing through COVID-19 and the Australian bushfires,
however strong progress was still made on key priorities including embedding our new reward framework, building strategic and
leadership capabilities, and strengthening governance, accountability and culture. Our ability to make progress in the face of disruption
is the product of sustained efforts to embed our purpose and aspirational culture over multiple years, including through implementing
agile working practices and strong leadership behaviours.
In response to COVID-19, our core focus was protecting the safety of our people and in turn, our customers. By quickly enabling
significant increases in our remote working capacity, over 95% of all employees (excluding Australian branches) were able to continue
to work productively and safely from home and continue to deliver great outcomes for our customers.
Profitability and returns have been significantly impacted by the COVID-19 pandemic this year, including the impact of higher credit
provision charges and the impairment of two of the Group’s Asian associate investments. ANZ has been able to manage well through
this challenging period given our long-term strategy to simplify the business and strengthen the balance sheet enabled us to enter the
COVID-19 environment in a strong financial position. As a result, we have been able to both support our customers and enable prudent
dividends to be paid to our shareholders, while absorbing a significant increase in credit reserves and without needing to raise capital.
Costs have again been well managed, with expenses broadly flat despite record levels of investment to grow and simplify the business,
and increased regulatory and compliance spend. Divestments during the year reduced the complexity of the Group. Ongoing work to
identify and rectify customers in need of remediation led to further remediation charges, which impacted financial performance.
2020 focus areas
Performance commentary
2020 focus areas
Performance commentary
Performance against
expectations
Below
Met
Above
Performance against
expectations
Below
Met
Above
Strengthen governance,
• Continued to embed the Accountability and Consequence Framework
accountability, actions
and measurement of
culture
(A&CF) including in support of our new reward model, with 12 full and
26 preliminary accountability reviews completed.
• Divisions have continued to share progress and lessons learned through
our culture steering groups and we have undertaken a review of our
culture measurement and assessment approach.
Engaging our people
and diversifying our
workforce
• Overall engagement score increased to a record high of 86% (up from
77% in 2019), with strong results also seen in key measures, reflecting
ANZ’s strong support for our employees and clear senior leader
communication during the pandemic.
• Women in leadership increased 0.9% to 33.4% (against a 34.1% target).
Improve leader capability
• Commenced rollout of a bank wide leadership capability program for all
Embed Reimagining
• Finalised and embedded changes to how we manage and reward our
Reward, including
new Performance
Management approach
people leaders.
behaviours.
• Key leadership survey results continued to improve, including scores for
leaders role modelling our values and demonstrating effective leadership
people to better focus on the interests of our customers, collaboration,
and the long-term health of the bank.
• Implemented a more dynamic approach to performance management,
including a stronger emphasis on more frequent check-in conversations
to review and drive performance, as well as maintain employee wellbeing
during COVID-19. Some plans to embed performance changes had to be
scaled back due to capacity constraints.
Strengthen strategic
• In response to COVID-19, safe internal workforce movement principles
capabilities
were developed, and we rapidly enabled internal moves to support
operational resilience and supplement areas where customer demand
was highest.
• Enhanced recruiting, assessment and onboarding processes, especially for
graduates and high demand capabilities. Achieved targets for hiring into
strategic capability areas, such as data and engineering skillsets.
People & Culture overall: Above Expectations
Balance appropriately
between financial results,
safety and soundness,
and investment in the
future
• On a cash continuing basis, ROE decreased to 6.2% and NPAT fell 42%
due to the impacts of COVID-19 outlined above. Excluding large/notable
items3, a 1% decline in profit before provisions (PBP) was
on target, noting the difficult operating environment.
• Costs remained broadly flat despite record levels of investment to grow and
simplify the business, and increased regulatory and compliance spend.
• Capital continued to be well managed. CET1 of 11.3% has remained above
regulatory minimums, while enabling dividends (albeit reduced) to be
paid to our shareholders and the disciplined use of our balance sheet to
support our customers.
• Liquidity and funding was prudently managed in the environment, with
the Liquidity Coverage Ratio (LCR) of 139% and Net Stable Funding Ratio
(NSFR) of 124%, well above regulatory minimums.
Progress agreed
simplification plan
• We continued to reduce the complexity of our business (e.g. sale of UDC
Finance to Shinsei Bank, sale of offsite ATM network to Armaguard).
• Through strong cost management, we created capacity to invest into the
business and remain committed to building a simpler and better bank.
• We are well progressed in the preparation for both the RBNZ capital
changes and BS11 compliance.
Prepare NZ business
for Reserve Bank of
New Zealand (RBNZ)
outsourcing policy (BS11)
and capital changes
Financial & Discipline overall: Below Expectations
OVERALL
OVERALL
Group Performance assessment: Met Expectations
The impact to profitability and returns in 2020 as a result of the COVID-19 pandemic was considered
when the Board determined the ANZIP outcome (see section 4.5.1). For the purpose of assessing financial
performance against the Group Performance Framework, the extent these factors were considered outside
of the control of management, have been considered when forming the overall assessment of performance.
On balance, the Board considered an overall assessment of ‘Met Expectations’ fair and appropriate.
1. Net Promoter Score (NPS) is a customer loyalty metric used globally to evaluate a company’s brand, products or services. Net Promoter® and NPS® are registered trademarks and Net
Promoter Score and Net Promoter System are trademarks of Bain & Company, Satmetrix Systems and Fred Reichheld. 2. Peter Lee Associates 2020 Large Corporate and Institutional
Relationship Banking surveys, Australia and NZ. 3. Large/notable items include the impact of divestments, customer remediation, accelerated software amortisation, Royal Commission legal
costs, lease-related items, restructuring and impairments.
91
ANZ 2020 Annual Report 4.5.4 ANZ performance outcomes
ANZ’s financial performance 2016 – 2020
As discussed in section 4.5.1, when determining variable remuneration outcomes for Disclosed Executives and employees more broadly
cash profit and economic profit are considered. The Group uses cash profit1 as a measure of performance for the Group’s ongoing business
activities, as this provides a basis to assess Group and Divisional performance against earlier periods and against peer institutions. Although
cash profit is not audited, the external auditor has informed the Audit Committee that recurring adjustments have been determined on a
consistent basis across each period presented.
Statutory profit has decreased 40% compared to the prior financial year, while cash profit from continuing operations has decreased 42%.
The decline was driven primarily by:
• Credit impairment charges of $2.7 billion pre-tax (up from $795 million in the prior financial year), which included increased credit reserves
for the impacts of the ongoing COVID-19 pandemic; and
• An $815 million impairment in the valuation of two of the Group’s Asian associate investments, largely due to the impact COVID-19 has
had in those markets.
Excluding the movement in these two items, cash profit fell 5% from the prior financial year.
The table below provides ANZ’s financial performance, including cash profit, over the last five years.
Statutory profit ($m)
Cash profit ($m, unaudited)
Cash profit – Continuing operations ($m, unaudited)2
2016
5,709
5,889
5,889
2017
6,406
6,938
6,809
Cash profit before provisions – Continuing operations ($m, unaudited)2
10,155
10,849
Cash ROE (%) – Continuing operations (unaudited)2
Cash EPS – Continuing operations (unaudited)2
Share price at 30 September ($)
(On 1 October 2015, opening share price was $27.25)
Total dividend (cents per share)
Total shareholder return (12 month %)
10.3
202.6
27.63
160
9.2
11.7
232.7
29.60
160
13.1
2018
6,400
5,805
6,487
9,966
11.0
223.4
28.18
160
0.6
2019
5,953
6,161
6,470
9,958
10.9
227.6
28.52
160
9.2
2020
3,577
3,660
3,758
8,369
6.2
132.7
17.22
60
(36.9)
1. Cash profit excludes non-core items included in statutory profit and is provided to assist readers understand the results of the core business activities of the Group. 2. Cash profit from
continuing operations has been presented for 2017, 2018, 2019 and 2020 (2016 has not been restated). Cash profit from continuing operations represents the Group’s cash profit excluding the
impact of our discontinued businesses, which consist of OnePath Pensions and Investments and aligned dealer groups, and the Group’s life insurance business in Australia. The businesses
were reclassified to discontinuing in 2018, and only the 2017 result was restated in the table above. During 2019, the Group adopted AASB 15 Revenue from Contracts with Customers and only
2018 has been restated.
ANZ TSR performance (1 to 10 years)
The table below compares ANZ’s TSR performance against the median TSR and upper quartile TSR of the performance rights Select
Financial Services (SFS) comparator group1 over one to ten years, noting that for this table TSR is measured over a different timeframe to the
performance period for our performance rights, i.e. to 30 September 2020.
• ANZ’s TSR performance was slightly above the median TSR of the SFS comparator group1 when comparing over one and three years;
• slightly below the median over five years; and
• below the median over ten years.
While ANZ’s TSR performance over 10 years was lower than the median, since Shayne Elliott’s tenure as CEO, ANZ’s TSR has performed around
the median when assessed over one, three and five years.
ANZ (%)
Median TSR SFS (%)
Upper quartile TSR SFS (%)
Years to 30 September 2020
1
(36.9)
(37.3)
(18.4)
32
(31.8)
(32.0)
(1.7)
5
(15.7)
(14.9)
13.4
10
28.5
40.9
111.1
1. See section 5.2.3a for details of the SFS comparator group. 2. The outcomes for performance rights granted in November/December 2016 and tested in November 2019 are detailed in
section 4.4.3.
92
OverviewHow we create valuePerformance overviewRemuneration reportDirectors’ reportFinancial reportShareholder information 4.5.4 ANZ performance outcomes
ANZ’s financial performance 2016 – 2020
As discussed in section 4.5.1, when determining variable remuneration outcomes for Disclosed Executives and employees more broadly
cash profit and economic profit are considered. The Group uses cash profit1 as a measure of performance for the Group’s ongoing business
activities, as this provides a basis to assess Group and Divisional performance against earlier periods and against peer institutions. Although
cash profit is not audited, the external auditor has informed the Audit Committee that recurring adjustments have been determined on a
consistent basis across each period presented.
The decline was driven primarily by:
Statutory profit has decreased 40% compared to the prior financial year, while cash profit from continuing operations has decreased 42%.
• Credit impairment charges of $2.7 billion pre-tax (up from $795 million in the prior financial year), which included increased credit reserves
for the impacts of the ongoing COVID-19 pandemic; and
• An $815 million impairment in the valuation of two of the Group’s Asian associate investments, largely due to the impact COVID-19 has
had in those markets.
Excluding the movement in these two items, cash profit fell 5% from the prior financial year.
The table below provides ANZ’s financial performance, including cash profit, over the last five years.
2016
5,709
5,889
5,889
10.3
202.6
27.63
160
9.2
2017
6,406
6,938
6,809
11.7
232.7
29.60
160
13.1
2018
6,400
5,805
6,487
9,966
11.0
223.4
28.18
160
0.6
2019
5,953
6,161
6,470
9,958
10.9
227.6
28.52
160
9.2
2020
3,577
3,660
3,758
8,369
6.2
132.7
17.22
60
(36.9)
Cash profit before provisions – Continuing operations ($m, unaudited)2
10,155
10,849
Statutory profit ($m)
Cash profit ($m, unaudited)
Cash profit – Continuing operations ($m, unaudited)2
Cash ROE (%) – Continuing operations (unaudited)2
Cash EPS – Continuing operations (unaudited)2
Share price at 30 September ($)
(On 1 October 2015, opening share price was $27.25)
Total dividend (cents per share)
Total shareholder return (12 month %)
2018 has been restated.
ANZ TSR performance (1 to 10 years)
1. Cash profit excludes non-core items included in statutory profit and is provided to assist readers understand the results of the core business activities of the Group. 2. Cash profit from
continuing operations has been presented for 2017, 2018, 2019 and 2020 (2016 has not been restated). Cash profit from continuing operations represents the Group’s cash profit excluding the
impact of our discontinued businesses, which consist of OnePath Pensions and Investments and aligned dealer groups, and the Group’s life insurance business in Australia. The businesses
were reclassified to discontinuing in 2018, and only the 2017 result was restated in the table above. During 2019, the Group adopted AASB 15 Revenue from Contracts with Customers and only
The table below compares ANZ’s TSR performance against the median TSR and upper quartile TSR of the performance rights Select
Financial Services (SFS) comparator group1 over one to ten years, noting that for this table TSR is measured over a different timeframe to the
performance period for our performance rights, i.e. to 30 September 2020.
• ANZ’s TSR performance was slightly above the median TSR of the SFS comparator group1 when comparing over one and three years;
• slightly below the median over five years; and
• below the median over ten years.
While ANZ’s TSR performance over 10 years was lower than the median, since Shayne Elliott’s tenure as CEO, ANZ’s TSR has performed around
the median when assessed over one, three and five years.
ANZ (%)
Median TSR SFS (%)
Upper quartile TSR SFS (%)
section 4.4.3.
1. See section 5.2.3a for details of the SFS comparator group. 2. The outcomes for performance rights granted in November/December 2016 and tested in November 2019 are detailed in
5. EXECUTIVE REMUNERATION STRUCTURE AND DELIVERY
There are two core components of remuneration at ANZ – fixed remuneration and at risk variable remuneration.
In structuring remuneration, the Board aims to find the right balance between fixed and variable remuneration (at risk), the way it is delivered
(cash versus deferred remuneration) and appropriate time frames (the short, medium and long-term).
The Board sets (and reviews annually) the CEO and Disclosed Executives’ fixed remuneration based on financial services market relativities
and reflecting their responsibilities, performance, qualifications, experience and location.
The way variable remuneration operates differs somewhat between the CEO and Disclosed Executives. Namely:
• The CEO’s variable remuneration is comprised of AVR and LTVR (subject to shareholder approval), which provides consistency with external
market practice, and LTVR reinforces his focus on achieving longer term strategic objectives and long-term stakeholder value creation.
• Disclosed Executives are subject to one combined VR plan which enables us to:
– provide the appropriate mix of short and long-term rewards (including performance hurdles) to drive performance, and attract and
retain talent;
– tie the full VR award to the performance of ANZ; and
– defer VR over the short, medium and longer term.
Variable remuneration seeks to differentiate for performance and is designed to focus our CEO and Disclosed Executives on stretching
performance objectives supporting our business strategy, and encourage the delivery of long-term stakeholder value.
By deferring a significant portion of variable remuneration (74% of maximum opportunity for the CEO, 75% for Disclosed Executives and
67% for the CRO), we seek to ensure alignment with shareholder interests to deliver on ANZ’s strategic objectives and ensure a focus
on long-term value creation. Deferred variable remuneration has significant retention elements, and most importantly, can be adjusted
downwards, including to zero, allowing the Board to hold executives accountable, individually or collectively, for the longer term impacts
of their decisions and actions.
Board discretion is applied when determining all CEO and Disclosed Executive variable remuneration outcomes, and also before any
scheduled release of previously deferred remuneration (i.e. consider malus or further deferral).
5.1 REMUNERATION MIX
We structure the CEO and Disclosed Executives’ remuneration as follows:
REMUNERATION MIX – CEO
Minimum opportunity
$2.5 million
100%
Target opportunity
Maximum opportunity
29%
14.5%
14.5%
42%
26%
19%
19%
36%
$8.5 million
$9.75 million
Fixed remuneration
AVR cash
AVR deferred shares
LTVR performance rights
Minimum = Fixed remuneration ($2.5 million)
Target
= Fixed remuneration + target AVR (100% of fixed remuneration) + LTVR (140% of fixed remuneration (performance rights
at full vesting))
Maximum = Fixed remuneration + maximum AVR (150% of fixed remuneration) + LTVR (140% of fixed remuneration (performance rights
at full vesting))
Years to 30 September 2020
1
(36.9)
(37.3)
(18.4)
32
(31.8)
(32.0)
(1.7)
5
(15.7)
(14.9)
13.4
10
28.5
40.9
111.1
REMUNERATION MIX – DISCLOSED EXECUTIVE1
Minimum opportunity
Target opportunity
Maximum opportunity
100%
27%
18%
18%
37%
20%
20%
20%
40%
Fixed remuneration
VR cash
VR deferred shares
VR performance rights
Minimum = Fixed remuneration
Target
Maximum = Fixed remuneration + maximum VR (402% of fixed remuneration (150% of target VR and performance rights at full vesting))
= Fixed remuneration + target VR (268% of fixed remuneration (performance rights at full vesting))
1. Excluding CRO.
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ANZ 2020 Annual Report
CRO
To preserve the independence of the role and to minimise any conflicts of interest in carrying out the risk control function across the
organisation, the CRO’s remuneration arrangements differ to other Disclosed Executives.
The remuneration mix is 27% fixed remuneration and 73% VR maximum opportunity. The VR target opportunity is 180% of fixed
remuneration and VR maximum opportunity is 270% of fixed remuneration. VR is delivered as 33% cash, 33% deferred shares and 34%
deferred share rights (instead of performance rights).
5.2 VARIABLE REMUNERATION DELIVERY
Variable remuneration for the CEO and the Disclosed Executives (excluding the CRO) is delivered partly in cash, shares deferred over four
years, and performance rights deferred for four years. The performance rights are also subject to performance hurdles which determine
whether they vest in four years’ time.
60% of variable remuneration (AVR plus LTVR) for the CEO, 53% of VR for Disclosed Executives (other than the CRO), and 41% of VR for
the CRO will be deferred for at least four years (from the date the Board approved the variable remuneration in October (and the date
shareholders approve the CEO’s LTVR)), noting that this complies with the BEAR minimum deferral requirement of 60% for the CEO and
40% for Disclosed Executives.
Before any scheduled release of deferred shares/deferred share rights/performance rights, the Board considers whether any malus/
downward adjustment of previously deferred remuneration (or further deferral of vesting) should be made for the CEO and Disclosed
Executives. See section 5.3.
VARIABLE REMUNERATION DELIVERY – CEO AND DISCLOSED EXECUTIVES
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20% vesting at
the end of year 3
10% vesting at
the end of year 4
Vesting is subject to
meeting TSR performance
hurdles at the end of year 4
1. Variable remuneration outcomes were approved by the Board on 21 October 2020 (noting that the CEO’s performance rights are subject to shareholder approval at the 2020 AGM).
2. Deferred shares for the CRO vest as follows: 30% at the end of years 1 and 2, and 20% at the end of years 3 and 4. 3. Deferred share rights for the CRO.
5.2.1 Cash – CEO (AVR) and Disclosed Executives (VR)
The cash component is paid to executives at the end of the annual Performance and Remuneration Review (December 2020).
5.2.2 Deferred shares – CEO (AVR) and Disclosed Executives (VR)
Deferred shares are ordinary shares, deferred over one to four years. By deferring part of an executives’ remuneration over time (and it
remaining subject to malus), we enable a substantial amount of their remuneration to be directly linked to delivering long-term shareholder
value. We grant deferred shares in respect of performance for the 1 October to 30 September financial year in late November/early
December each year.
We calculate the number of deferred shares to be granted based on the VWAP of the shares traded on the ASX in the week leading up to and
including the date of grant. For disclosure and expensing purposes, we use the one day VWAP to determine the fair value.
In some cases (generally due to regulatory or tax reasons), we may grant deferred share rights to executives instead of deferred shares.
Each deferred share right entitles the holder to one ordinary share.
94
OverviewHow we create valuePerformance overviewRemuneration reportDirectors’ reportFinancial reportShareholder information
CRO
To preserve the independence of the role and to minimise any conflicts of interest in carrying out the risk control function across the
organisation, the CRO’s remuneration arrangements differ to other Disclosed Executives.
The remuneration mix is 27% fixed remuneration and 73% VR maximum opportunity. The VR target opportunity is 180% of fixed
remuneration and VR maximum opportunity is 270% of fixed remuneration. VR is delivered as 33% cash, 33% deferred shares and 34%
deferred share rights (instead of performance rights).
5.2 VARIABLE REMUNERATION DELIVERY
Variable remuneration for the CEO and the Disclosed Executives (excluding the CRO) is delivered partly in cash, shares deferred over four
years, and performance rights deferred for four years. The performance rights are also subject to performance hurdles which determine
whether they vest in four years’ time.
60% of variable remuneration (AVR plus LTVR) for the CEO, 53% of VR for Disclosed Executives (other than the CRO), and 41% of VR for
the CRO will be deferred for at least four years (from the date the Board approved the variable remuneration in October (and the date
shareholders approve the CEO’s LTVR)), noting that this complies with the BEAR minimum deferral requirement of 60% for the CEO and
Before any scheduled release of deferred shares/deferred share rights/performance rights, the Board considers whether any malus/
downward adjustment of previously deferred remuneration (or further deferral of vesting) should be made for the CEO and Disclosed
VARIABLE REMUNERATION DELIVERY – CEO AND DISCLOSED EXECUTIVES
1
2
0
2
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2
2
0
2
v
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N
3
2
0
2
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4
2
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40% for Disclosed Executives.
Executives. See section 5.3.
t
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1
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2
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2
0
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Fixed remuneration
1. Variable remuneration outcomes were approved by the Board on 21 October 2020 (noting that the CEO’s performance rights are subject to shareholder approval at the 2020 AGM).
2. Deferred shares for the CRO vest as follows: 30% at the end of years 1 and 2, and 20% at the end of years 3 and 4. 3. Deferred share rights for the CRO.
5.2.1 Cash – CEO (AVR) and Disclosed Executives (VR)
The cash component is paid to executives at the end of the annual Performance and Remuneration Review (December 2020).
5.2.2 Deferred shares – CEO (AVR) and Disclosed Executives (VR)
Deferred shares are ordinary shares, deferred over one to four years. By deferring part of an executives’ remuneration over time (and it
remaining subject to malus), we enable a substantial amount of their remuneration to be directly linked to delivering long-term shareholder
value. We grant deferred shares in respect of performance for the 1 October to 30 September financial year in late November/early
December each year.
We calculate the number of deferred shares to be granted based on the VWAP of the shares traded on the ASX in the week leading up to and
including the date of grant. For disclosure and expensing purposes, we use the one day VWAP to determine the fair value.
In some cases (generally due to regulatory or tax reasons), we may grant deferred share rights to executives instead of deferred shares.
Each deferred share right entitles the holder to one ordinary share.
5.2.3a Performance rights – CEO (LTVR) and Disclosed Executives (VR) excluding the CRO
A performance right is a right to acquire one ordinary ANZ share at nil cost – as long as time and performance hurdles are met. The future
value of performance rights may range from zero to an indeterminate value. The value depends on our performance against the hurdles and
on the share price at the time of exercise.
The performance rights have a four-year performance period (and remain subject to malus up to the vesting date). For the 2020 grant, the
performance period is from 22 November 2020 to 21 November 2024. A four-year performance period provides sufficient time for longer
term performance to be reflected.
More detail relating to the 2020 performance rights is provided below.
Element
Detail
Performance
rights hurdles
The performance rights have TSR performance hurdles reflecting the importance of focusing on achieving longer term
strategic objectives and aligning executives’ and shareholders’ interests. We will apply two TSR performance hurdles for
the 2020 grants of performance rights:
• 75% will be measured against a relative TSR hurdle, tranche 1.
• 25% will be measured against an absolute TSR hurdle, tranche 2.
1
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40% vesting at
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30% vesting at
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ANZ
financial year
20% vesting at
the end of year 3
10% vesting at
the end of year 4
Vesting is subject to
meeting TSR performance
hurdles at the end of year 4
Relative TSR
hurdle for the
November/
December
2020 grant
TSR represents the change in value of a share plus the value of reinvested dividends paid. We regard it as the most
appropriate long-term measure – it focuses on the delivery of shareholder value and is a well understood and tested
mechanism to measure performance.
The combination of relative and absolute TSR hurdles provides balance to the plan by:
• Relative: rewarding executives for performance that exceeds that of comparator companies; and
• Absolute: ensuring there is a continued focus on providing positive growth – even when the market is declining.
The two hurdles measure separate aspects of performance:
• the relative TSR hurdle measures our TSR compared to that of the Select Financial Services (SFS) comparator group,
made up of core local and global competitors. This comparator group is chosen to broadly reflect the geographies
and business segments in which ANZ competes for revenue; and
• the absolute Compound Annual Growth Rate (CAGR) TSR hurdle provides executives with a more direct line of sight
to the level of shareholder return to be achieved. It also provides a tighter correlation between the executives’ rewards
and the shareholders’ financial outcomes.
We will measure ANZ’s TSR against each hurdle at the end of the four-year performance period to determine whether
each tranche of performance rights become exercisable. We measure each tranche independently from the other – for
example one tranche may vest fully or partially but the other tranche may not vest.
The relative TSR hurdle is an external hurdle that measures our TSR against that of the SFS comparator group over four
years. The SFS comparator group (unchanged from prior years) is made up of: Bank of Queensland Limited; Bendigo and
Adelaide Bank Limited; Commonwealth Bank of Australia Limited; DBS Bank Limited; Macquarie Group Limited; National
Australia Bank Limited; Standard Chartered PLC; Suncorp Group Limited; and Westpac Banking Corporation.
If our TSR when compared to the TSR of the comparator group
then the percentage of performance rights that vest
is less than the 50th percentile
reaches at least the 50th percentile, but is less than
the 75th percentile
is nil
is 50% plus 2% for every one percentile increase
above the 50th percentile
reaches or exceeds the 75th percentile
is 100%
Absolute TSR
hurdle for the
November/
December
2020 grant
The absolute CAGR TSR hurdle is an internal hurdle as to whether ANZ achieves or exceeds a threshold level of growth
the Board sets at the start of the performance period.
The Board reviews and approves the absolute TSR targets each year for that year’s award. When reviewing the targets,
the Board references ANZ’s assessed Cost of Capital. The Cost of Capital is determined using methodologies including
the Capital Asset Pricing Model (CAPM). There has been no change to the absolute CAGR TSR targets for 2020.
If the absolute CAGR of our TSR
then the percentage of performance rights that vest
is less than 8.5%
is 8.5%
reaches at least 8.5%, but is less than 12.75%
is nil
is 50%
is progressively increased on a pro-rata, straight-line,
basis from 50% to 100%
reaches or exceeds 12.75%
is 100%
95
ANZ 2020 Annual Report
Calculating TSR
performance
When calculating performance against TSR, we:
• reduce the impact of share price volatility – by using an averaging calculation over a 90-trading day period for start
and end values;
• ensure an independent measurement – by engaging the services of an external organisation, Mercer Consulting
(Australia) Pty Ltd, to calculate ANZ’s performance against the TSR hurdles; and
• test the performance against the relevant hurdle once only at the end of the four-year performance period – the
rights lapse if the performance hurdle is not met – there is no retesting.
Calculating
the number of
performance
rights
The number of performance rights we grant is calculated using a face value basis – i.e. the full share price. Face value
at full vesting is split into two tranches. Each tranche value is then divided by the market price (five trading day VWAP
of ANZ shares at the start of the performance period) to determine the number of performance rights we award in
each tranche.
Performance rights are allocated in late November/early December for Disclosed Executives and December for the
CEO (subject to shareholder approval).
Expensing
performance
rights
ANZ engages PricewaterhouseCoopers to independently determine the fair value of performance rights, which is only
used for expensing purposes. They consider factors including: the performance conditions, share price volatility, life
of the instrument, dividend yield, and share price at grant date.
5.2.3b Deferred share rights – CRO (VR)
The CRO receives deferred share rights instead of performance rights to preserve the independence of the role and to minimise any conflicts
of interest in carrying out the risk control function across the organisation.
The CRO’s deferred share rights are subject to a time-based vesting hurdle of four years. The value the Board uses to determine the number
of deferred share rights to be allocated to the CRO is the face value of the Company’s shares traded on the ASX at the time of grant (five
trading day VWAP).
5.3 MALUS (DOWNWARD ADJUSTMENT OF PREVIOUSLY DEFERRED REMUNERATION) – BOARD DISCRETION
All deferred remuneration we award to an employee is subject to ANZ’s on-going and absolute discretion to adjust this downward (malus)
(including to zero) at any time.
ANZ may exercise this discretion, for example, where:
• there is a need to protect the financial soundness of ANZ or to meet regulatory requirements or there has been a material failure of risk
management or controls within ANZ;
• the employee has acted fraudulently or dishonestly, failed to act with due care, skill and diligence, or failed to comply with ANZ policies
(including the Code of Conduct), processes or directions;
• the employee is responsible or accountable, directly or indirectly, by virtue of their role or seniority for an occurrence/event which has had
an adverse impact on ANZ;
• there has been misconduct and the employee was involved directly or indirectly, failed to take adequate steps, could be considered
responsible due to their seniority, or the decision to award or grant the deferred remuneration was made on the basis of misinformation.
Further, where the CEO and/or Disclosed Executives of ANZ have failed to comply with their accountability obligations under the BEAR, their
deferred remuneration will be reduced by an amount that is proportionate to the failure, as required by the BEAR.
An employee’s deferred remuneration is also subject to ANZ’s on-going and absolute discretion to further defer the vesting. Where ANZ
exercises this discretion, the vesting date is postponed and will not vest unless and until ANZ determines it should vest.
Before any scheduled vesting of deferred remuneration, the Board (for the CEO, Disclosed Executives and other specified roles) and/or the
Consequence Review Group (CRG) (for other employees) considers whether malus/downward adjustment or further deferral should be
applied. See section 6 for details.
96
OverviewHow we create valuePerformance overviewRemuneration reportDirectors’ reportFinancial reportShareholder information Calculating TSR
When calculating performance against TSR, we:
performance
and end values;
• reduce the impact of share price volatility – by using an averaging calculation over a 90-trading day period for start
• ensure an independent measurement – by engaging the services of an external organisation, Mercer Consulting
(Australia) Pty Ltd, to calculate ANZ’s performance against the TSR hurdles; and
• test the performance against the relevant hurdle once only at the end of the four-year performance period – the
rights lapse if the performance hurdle is not met – there is no retesting.
Calculating
the number of
performance
rights
each tranche.
The number of performance rights we grant is calculated using a face value basis – i.e. the full share price. Face value
at full vesting is split into two tranches. Each tranche value is then divided by the market price (five trading day VWAP
of ANZ shares at the start of the performance period) to determine the number of performance rights we award in
Performance rights are allocated in late November/early December for Disclosed Executives and December for the
CEO (subject to shareholder approval).
Expensing
performance
rights
ANZ engages PricewaterhouseCoopers to independently determine the fair value of performance rights, which is only
used for expensing purposes. They consider factors including: the performance conditions, share price volatility, life
of the instrument, dividend yield, and share price at grant date.
5.2.3b Deferred share rights – CRO (VR)
The CRO receives deferred share rights instead of performance rights to preserve the independence of the role and to minimise any conflicts
of interest in carrying out the risk control function across the organisation.
The CRO’s deferred share rights are subject to a time-based vesting hurdle of four years. The value the Board uses to determine the number
of deferred share rights to be allocated to the CRO is the face value of the Company’s shares traded on the ASX at the time of grant (five
trading day VWAP).
5.3 MALUS (DOWNWARD ADJUSTMENT OF PREVIOUSLY DEFERRED REMUNERATION) – BOARD DISCRETION
All deferred remuneration we award to an employee is subject to ANZ’s on-going and absolute discretion to adjust this downward (malus)
(including to zero) at any time.
ANZ may exercise this discretion, for example, where:
management or controls within ANZ;
• there is a need to protect the financial soundness of ANZ or to meet regulatory requirements or there has been a material failure of risk
• the employee has acted fraudulently or dishonestly, failed to act with due care, skill and diligence, or failed to comply with ANZ policies
(including the Code of Conduct), processes or directions;
• the employee is responsible or accountable, directly or indirectly, by virtue of their role or seniority for an occurrence/event which has had
an adverse impact on ANZ;
• there has been misconduct and the employee was involved directly or indirectly, failed to take adequate steps, could be considered
responsible due to their seniority, or the decision to award or grant the deferred remuneration was made on the basis of misinformation.
Further, where the CEO and/or Disclosed Executives of ANZ have failed to comply with their accountability obligations under the BEAR, their
deferred remuneration will be reduced by an amount that is proportionate to the failure, as required by the BEAR.
An employee’s deferred remuneration is also subject to ANZ’s on-going and absolute discretion to further defer the vesting. Where ANZ
exercises this discretion, the vesting date is postponed and will not vest unless and until ANZ determines it should vest.
Before any scheduled vesting of deferred remuneration, the Board (for the CEO, Disclosed Executives and other specified roles) and/or the
Consequence Review Group (CRG) (for other employees) considers whether malus/downward adjustment or further deferral should be
applied. See section 6 for details.
6. ACCOUNTABILITY AND CONSEQUENCE FRAMEWORK
In 2020, we continued to strengthen and embed the Accountability
and Consequence Framework (A&CF).
The HR Committee and Board determine accountability and
consequences for the CEO and Disclosed Executives, including the
application of malus to previously deferred remuneration.
The CRO presented a report to the HR Committee of the Board
on the most material risk events for 2020, and input was also
sought from the Audit and Risk Committees of the Board. All of this
information was taken into consideration by the HR Committee and
the Board when considering the performance of the Group, and
determining the performance and remuneration outcomes for our
Group Executives including the CEO and the 2020 ANZIP variable
remuneration pool for all employees.
Adjustments were made to 2020 individual variable remuneration
outcomes to reflect accountability for relevant matters.
No malus was applied to the previously deferred remuneration
of the CEO and Disclosed Executives during 2020.
The Consequence Review Group (CRG) supports the Board in
monitoring the implementation and ongoing effectiveness of ANZ’s
A&CF, being cognisant of its impact on the culture of ANZ. The
CRG is chaired by the CEO and members include the CRO, CFO and
GE T&C. The CRG reviews material events, accountability and the
application of suitable consequences where appropriate.
When determining consequences consideration will be given to
the level of accountability, and the severity of the issue, including
customer impacts. Consequences may include, for example, one
or more of the following: counselling, formal warnings, impacts to
in year performance and remuneration outcomes or application
of malus to previously deferred remuneration and ultimately
termination of employment for the most serious issues.
Our ongoing focus on accountability, consequences and driving
a strong risk culture supports our customer commitment that when
things go wrong, we fix them quickly and hold executives, current
(and former where we can), to account where appropriate. We are
also focused on ensuring that we learn from the cause of the event,
and mitigate the risk of future recurrences and continuously seek
to strengthen our risk culture.
We review the effectiveness of the A&CF every year and implement
enhancements to further strengthen the framework based on
regulatory and internal stakeholder input.
We also examined the impact of the A&CF on our ‘speak up’ culture.
Across all measures reviewed, including our annual My Voice
survey, and percentage of self-disclosed audit issues and internal
audit cultural review data, we found that our speak-up culture had
strengthened in 2020 compared to 2019. This gives
us confidence that the implementation of the A&CF
is consistent with our speak-up culture. We continue
to raise employee awareness of, and promote the various
ways that employees can speak up including through
initiatives such as the annual Whistleblower Awareness Week.
In 2020 across the Group, there were 1,448 Code of Conduct cases
managed resulting in 199 employees being terminated for breaches
of our Code of Conduct, or who otherwise left the bank after an
investigation had been initiated. A further 370 employees received
a formal disciplinary outcome, with managers required to apply
impacts to their performance and remuneration outcomes as part
of the annual review process.
At the senior leadership level, 34 current or former senior
leaders (senior executives, executives and senior managers) had
consequences applied in 2020 for Code of Conduct breaches or
findings of accountability for a relevant event, or otherwise left the
bank after an investigation had been initiated. The 34 employees
represent 1.4% of our 2,443 senior leaders. The consequences
applied included warnings, impacts to performance and/or
remuneration outcomes and cessation of employment.
Senior leader consequences in 20201
Formal warnings2
No longer employed
Performance impacts3
19
7
18
1. Individuals are included under all categories that are relevant meaning one individual may
be reflected in multiple categories. 2. As part of the annual Performance and Remuneration
Review process, performance and remuneration consequences are applied in line with our
A&CF. 3. Performance rating impacts are as at end of October 2020. Remuneration impacts
will also be applied.
There are also performance and remuneration consequences for
employees who are non-compliant with the mandatory learning
requirements by over 30 days, with these employees being deemed
ineligible to participate in the year-end remuneration review
process (unless genuinely exceptional circumstances exist). In
2020, less than 0.4% of employees had a mandatory learning non-
compliance flag applied to their profiles as a result of becoming
overdue for 30 days on their mandatory learning requirements. The
remaining 99.6% of our employees completed their mandatory
learning requirements within the required period.
97
ANZ 2020 Annual Report 7. NON-EXECUTIVE DIRECTOR (NED) REMUNERATION
7.1 REMUNERATION STRUCTURE
The HR Committee reviewed NED fees for 2020 and determined not to increase Chairman, NED or Committee fees except for the Digital
Business and Technology Committee Chair fee (which increased from $35,000 to $45,000) in recognition of the significant increase in
workload of the Committee Chair.
NEDs receive a base fee for being a Director of the Board, and additional fees for either chairing, or being a member of a Board Committee.
The Chairman of the Board does not receive additional fees for serving on a Board Committee.
In setting Board and Committee fees, the Board considers: general industry practice, ASX Corporate Governance Principles and
Recommendations, the responsibilities and risks attached to the NED role, the time commitment expected of NEDs on Group and Company
matters, and fees paid to NEDs of comparable companies.
ANZ compares NED fees to a comparator group of Australian listed companies with a similar market capitalisation, with particular focus on
the major financial services institutions. This is considered an appropriate group, given similarity in size and complexity, nature of work and
time commitment by NEDs.
To maintain NED independence and impartiality:
• NED fees are not linked to the performance of the Group; and
• NEDs are not eligible to participate in any of the Group’s variable remuneration arrangements.
The current aggregate fee pool for NEDs of $4 million was approved by shareholders at the 2012 AGM. The annual total of NEDs’ fees,
including superannuation contributions, is within this agreed limit.
This table shows the NED fee policy structure for 2020.
2020 NED FEE POLICY STRUCTURE
Board1, 2
$825,000
$240,000
Audit
Committee
Risk
Committee
HR
Committee
Digital Business &
Technology
Committee
Ethics, Environment,
Social & Governance
Committee
$65,000
$32,500
$62,000
$31,000
$57,000
$29,000
$45,000
$15,000
$35,000
$15,000
Chair fee
Member fee
1. Including superannuation. 2. The Chairman of the Board does not receive additional fees for serving on a Board Committee. The Chairman of the Board and NEDs do not receive a fee for
serving on the Nomination and Board Operations Committee.
NED shareholding guidelines
We expect our NEDs to hold ANZ shares. NEDs are required:
• to accumulate shares – over a five-year period from their appointment – to the value of 100% (200% for the Chairman) of the NED
member fee; and
• to maintain this shareholding while they are a Director of ANZ.
Based on the ANZ share price as at 30 September 2020, all NEDs who have served five years met the holding requirement. NEDs appointed
within the last five years have either met or are building towards their shareholding requirement.
98
OverviewHow we create valuePerformance overviewRemuneration reportDirectors’ reportFinancial reportShareholder information 7.2 2020 STATUTORY REMUNERATION – NEDS
2020 STATUTORY REMUNERATION – NEDS
NEDs receive a base fee for being a Director of the Board, and additional fees for either chairing, or being a member of a Board Committee.
Current Non-Executive Directors
D Gonski1
I Atlas1
P Dwyer1
J Halton1
J Key1, 3
G Liebelt1
J Macfarlane1
P O’Sullivan4
Total of all Non-Executive Directors
Short-term NED benefits
Post-employment
Financial
year
Fees1
$
Non monetary
benefits
$
Super
contributions1
$
Total
remuneration2
$
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
2020
2020
2019
803,824
639,351
323,324
275,851
354,326
296,351
307,824
246,058
279,824
229,131
342,324
294,851
297,324
249,851
243,331
2,952,101
2,231,444
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
21,176
20,649
21,176
20,649
10,674
20,649
21,176
20,649
21,176
20,649
21,176
20,649
21,176
20,649
19,207
825,000
660,000
344,500
296,500
365,000
317,000
329,000
266,707
301,000
249,780
363,500
315,500
318,500
270,500
262,538
156,937
144,543
3,109,038
2,375,987
1. Year-on-year differences in fees relate to the 20% reduction to the Chairman fee and the NED member fees in 2019 (as a consequence of a decision taken by the Directors that their fees
should reflect shared accountability for the failures highlighted by the Royal Commission), changes in Committee memberships and changes to the superannuation Maximum Contribution
Base. From 1 January 2020 to 30 June 2020, P Dwyer elected to receive all payments in fees and therefore did not receive superannuation contributions during this period. 2. Long-term
benefits and share-based payments do not apply for the NEDs. 3. In addition to the fees shown above that J Key received as a NED for Australia and New Zealand Banking Group Limited
(ANZBGL), as Chairman for ANZ Bank New Zealand Limited J Key also received a total of NZD 391,000 in 2020 and NZD 382,950 in 2019. 4. P O’Sullivan commenced as a NED on 4 November
2019, so 2020 remuneration reflects a partial service year.
7. NON-EXECUTIVE DIRECTOR (NED) REMUNERATION
7.1 REMUNERATION STRUCTURE
The HR Committee reviewed NED fees for 2020 and determined not to increase Chairman, NED or Committee fees except for the Digital
Business and Technology Committee Chair fee (which increased from $35,000 to $45,000) in recognition of the significant increase in
workload of the Committee Chair.
The Chairman of the Board does not receive additional fees for serving on a Board Committee.
In setting Board and Committee fees, the Board considers: general industry practice, ASX Corporate Governance Principles and
Recommendations, the responsibilities and risks attached to the NED role, the time commitment expected of NEDs on Group and Company
matters, and fees paid to NEDs of comparable companies.
ANZ compares NED fees to a comparator group of Australian listed companies with a similar market capitalisation, with particular focus on
the major financial services institutions. This is considered an appropriate group, given similarity in size and complexity, nature of work and
time commitment by NEDs.
To maintain NED independence and impartiality:
• NED fees are not linked to the performance of the Group; and
• NEDs are not eligible to participate in any of the Group’s variable remuneration arrangements.
The current aggregate fee pool for NEDs of $4 million was approved by shareholders at the 2012 AGM. The annual total of NEDs’ fees,
including superannuation contributions, is within this agreed limit.
This table shows the NED fee policy structure for 2020.
2020 NED FEE POLICY STRUCTURE
Board1, 2
$825,000
$240,000
Audit
Committee
Risk
HR
Committee
Committee
Digital Business &
Technology
Committee
Ethics, Environment,
Social & Governance
Committee
$65,000
$32,500
$62,000
$31,000
$57,000
$29,000
$45,000
$15,000
$35,000
$15,000
Chair fee
Member fee
1. Including superannuation. 2. The Chairman of the Board does not receive additional fees for serving on a Board Committee. The Chairman of the Board and NEDs do not receive a fee for
serving on the Nomination and Board Operations Committee.
NED shareholding guidelines
We expect our NEDs to hold ANZ shares. NEDs are required:
member fee; and
• to maintain this shareholding while they are a Director of ANZ.
• to accumulate shares – over a five-year period from their appointment – to the value of 100% (200% for the Chairman) of the NED
Based on the ANZ share price as at 30 September 2020, all NEDs who have served five years met the holding requirement. NEDs appointed
within the last five years have either met or are building towards their shareholding requirement.
99
ANZ 2020 Annual Report
8. REMUNERATION GOVERNANCE
8.1 THE HUMAN RESOURCES (HR) COMMITTEE
8.1.1 Role of the HR Committee
To further reflect the importance of the link between
remuneration and risk:
The HR Committee supports the Board on remuneration and other
HR matters. It reviews the remuneration policies and practices
of the Group, and monitors market practice and regulatory and
compliance requirements in Australia and overseas.
During the year the HR Committee met on six occasions1 and
reviewed and approved, or made recommendations to the Board
on matters including:
• remuneration for the CEO and other key executives (broader
than those disclosed in the Remuneration Report) covered
by the ANZBGL Remuneration Policy, and fees for the NEDs;
• reward structure changes (including the Reimagining Reward
initiative);
• ANZ’s response to the industry-wide Retail Remuneration Review
by Stephen Sedgwick AO;
• updates on APRA’s draft Prudential Standard CPS 511
Remuneration, the BEAR Thematic Review, Treasury’s Financial
Accountability Regime (FAR), and ASIC’s review of governance
practices in the exercise of board discretion on executive
variable pay;
• the ANZ Group Performance Framework (annual objectives
setting and assessment) and annual variable remuneration spend;
• performance and reward outcomes for key senior executives,
including the consideration of material risk events that have
either occurred or came to light in the year, and malus/downward
adjustment;
• key senior executive appointments and terminations;
• the effectiveness of the ANZBGL Remuneration Policy;
• succession plans for key senior executives;
• culture and governance including updates on the strengthened
Accountability and Consequence Framework (A&CF); and
• diversity, inclusion, and employee engagement.
More details about the role of the HR Committee, including its
Charter, can be found on our website. Go to anz.com > Our
company > Strong governance framework > ANZ Human Resources
Committee Charter.
1. A subset of the HR Committee also met on a number of occasions during the year to
discuss regulatory developments and 2020 outcomes.
8.1.2 Link between remuneration and risk
The HR Committee has a strong focus on the relationship between
business performance, risk management and remuneration,
aligned with our business strategy. The chairs of the Risk and Audit
Committees are members of the HR Committee and the full Board
is in attendance for specific HR Committee meetings.
• the Board had three NEDs (in addition to the
Chairman) in 2020 who served on both the HR Committee
and the Risk Committee;
• the HR Committee has free and unfettered access to risk
and financial control personnel (the CRO and CFO attend
HR Committee meetings for specific agenda items);
• the CRO provides an independent report to the HR Committee on
material risk events to help inform considerations of performance
and remuneration, and accountability and consequences at the
Group, Divisional and individual level; and
• the chairs of the Audit and Risk Committees are asked to provide
input to the HR Committee to ensure appropriate consideration
of all relevant risk and internal audit issues.
8.1.3 Conflict of interest
To help mitigate potential conflicts of interest:
• management are not in attendance when their own performance
or remuneration is being discussed by the HR Committee or Board;
• the CEO’s AVR is funded and determined separately from the
ANZIP pool;
• the CRO’s remuneration arrangements differ to other Disclosed
Executives to preserve the independence of the role; and
• the HR Committee seeks input from a number of sources to
inform their consideration of performance and remuneration
outcomes for the CEO and Disclosed Executives including:
– independent reports from Risk, Finance, Talent and Culture
and Internal Audit;
– material risk event data provided by the CRO;
– input from both the Audit Committee and the Risk
Committee of the Board.
8.1.4 External advisors provided information but not
recommendations
The HR Committee can engage independent external advisors
as needed.
Throughout the year, the HR Committee and management received
information from the following external providers: Aon, Ashurst, EY,
Mercer Consulting (Australia) Pty Ltd and PricewaterhouseCoopers.
This information related to market data, market practices, legislative
requirements and the interpretation of governance and regulatory
requirements.
During the year, ANZ did not receive any remuneration
recommendations from external consultants about the
remuneration of KMP.
ANZ employs in-house remuneration professionals who provide
recommendations to the HR Committee and the Board. The Board
made its decisions independently, using the information provided
and with careful regard to ANZ’s strategic objectives, purpose
and values, risk appetite and the ANZBGL Remuneration Policy
and Principles.
100
OverviewHow we create valuePerformance overviewRemuneration reportDirectors’ reportFinancial reportShareholder information 8. REMUNERATION GOVERNANCE
8.1 THE HUMAN RESOURCES (HR) COMMITTEE
To further reflect the importance of the link between
8.1.1 Role of the HR Committee
remuneration and risk:
The HR Committee supports the Board on remuneration and other
HR matters. It reviews the remuneration policies and practices
of the Group, and monitors market practice and regulatory and
compliance requirements in Australia and overseas.
During the year the HR Committee met on six occasions1 and
reviewed and approved, or made recommendations to the Board
• the Board had three NEDs (in addition to the
Chairman) in 2020 who served on both the HR Committee
and the Risk Committee;
• the HR Committee has free and unfettered access to risk
and financial control personnel (the CRO and CFO attend
HR Committee meetings for specific agenda items);
on matters including:
• remuneration for the CEO and other key executives (broader
than those disclosed in the Remuneration Report) covered
by the ANZBGL Remuneration Policy, and fees for the NEDs;
• reward structure changes (including the Reimagining Reward
initiative);
• ANZ’s response to the industry-wide Retail Remuneration Review
by Stephen Sedgwick AO;
• updates on APRA’s draft Prudential Standard CPS 511
Remuneration, the BEAR Thematic Review, Treasury’s Financial
Accountability Regime (FAR), and ASIC’s review of governance
practices in the exercise of board discretion on executive
variable pay;
• the ANZ Group Performance Framework (annual objectives
setting and assessment) and annual variable remuneration spend;
• performance and reward outcomes for key senior executives,
including the consideration of material risk events that have
either occurred or came to light in the year, and malus/downward
adjustment;
• key senior executive appointments and terminations;
• the effectiveness of the ANZBGL Remuneration Policy;
• succession plans for key senior executives;
• culture and governance including updates on the strengthened
Accountability and Consequence Framework (A&CF); and
• diversity, inclusion, and employee engagement.
• the CRO provides an independent report to the HR Committee on
material risk events to help inform considerations of performance
and remuneration, and accountability and consequences at the
Group, Divisional and individual level; and
• the chairs of the Audit and Risk Committees are asked to provide
input to the HR Committee to ensure appropriate consideration
of all relevant risk and internal audit issues.
8.1.3 Conflict of interest
To help mitigate potential conflicts of interest:
• management are not in attendance when their own performance
or remuneration is being discussed by the HR Committee or Board;
• the CEO’s AVR is funded and determined separately from the
ANZIP pool;
• the CRO’s remuneration arrangements differ to other Disclosed
Executives to preserve the independence of the role; and
• the HR Committee seeks input from a number of sources to
inform their consideration of performance and remuneration
outcomes for the CEO and Disclosed Executives including:
– independent reports from Risk, Finance, Talent and Culture
and Internal Audit;
– material risk event data provided by the CRO;
– input from both the Audit Committee and the Risk
Committee of the Board.
8.1.4 External advisors provided information but not
The HR Committee can engage independent external advisors
Throughout the year, the HR Committee and management received
information from the following external providers: Aon, Ashurst, EY,
Mercer Consulting (Australia) Pty Ltd and PricewaterhouseCoopers.
This information related to market data, market practices, legislative
requirements and the interpretation of governance and regulatory
ANZ employs in-house remuneration professionals who provide
recommendations to the HR Committee and the Board. The Board
made its decisions independently, using the information provided
and with careful regard to ANZ’s strategic objectives, purpose
and values, risk appetite and the ANZBGL Remuneration Policy
and Principles.
More details about the role of the HR Committee, including its
recommendations
Charter, can be found on our website. Go to anz.com > Our
company > Strong governance framework > ANZ Human Resources
as needed.
Committee Charter.
1. A subset of the HR Committee also met on a number of occasions during the year to
discuss regulatory developments and 2020 outcomes.
8.1.2 Link between remuneration and risk
The HR Committee has a strong focus on the relationship between
business performance, risk management and remuneration,
requirements.
aligned with our business strategy. The chairs of the Risk and Audit
During the year, ANZ did not receive any remuneration
Committees are members of the HR Committee and the full Board
recommendations from external consultants about the
is in attendance for specific HR Committee meetings.
remuneration of KMP.
8.2 INTERNAL GOVERNANCE
8.2.1 Hedging prohibition
All deferred equity must remain at risk until it has fully vested. Accordingly, executives and their associated persons must not enter
into any schemes that specifically protect the unvested value of equity allocated. If they do so, then they forfeit the relevant equity.
8.2.2 CEO and Disclosed Executives’ shareholding guidelines
We expect the CEO and each Disclosed Executive to, over a five-year period:
• accumulate ANZ shares to the value of 200% of their fixed remuneration; and
• maintain this shareholding level while they are an executive of ANZ.
For this purpose, shareholdings include all vested and unvested equity that is not subject to performance hurdles.
CEO
While the CEO is still within his five-year accumulation period his shareholdings are above the holding guideline and we note that he has not
sold any ANZ shares since his commencement as CEO.
Disclosed Executives
All but one Disclosed Executive are still within their five-year accumulation period and are building their holdings. One Disclosed Executive has
passed the five-year period and their shareholding (based on 30 September 2020 share price) was below the holding guideline. The impact of
COVID-19 on ANZ’s share price has resulted in the overall value of the executive’s holding reducing and the Board has exercised its discretion and
is not requiring the executive to purchase additional shares at this time.
8.2.3 CEO and Disclosed Executives’ contract terms and equity treatment
The details of the contract terms and also the equity treatment on termination (in accordance with the Conditions of Grant) relating to the
CEO and Disclosed Executives are below. Although they are similar, they vary in some cases to suit different circumstances.
Type of contract
Permanent ongoing employment contract.
Notice on resignation
• 12 months by CEO;
Notice on termination
by ANZ1
How unvested equity
is treated on leaving
ANZ
• 6 months by Disclosed Executives.
• 12 months by ANZ for CEO and Disclosed Executives.
However, ANZ may immediately terminate an individual’s employment at any time in the case of serious
misconduct. In that case, the individual will be entitled only to payment of fixed remuneration up to the
date of their termination and their statutory entitlements.
Executives who resign or are terminated will forfeit all their unvested deferred equity – unless the Board
determines otherwise.
If an executive is terminated due to redundancy or they are classified as a ‘good leaver’, then:
• their deferred shares/share rights are released at the original vesting date; and
• their performance rights2 are prorated for service to the full notice termination date and released at the
original vesting date (to the extent that the performance hurdles are met).
On an executive’s death or total and permanent disablement, their deferred equity vests.
Unvested equity remains subject to malus post termination.
Change of control
(applies to the CEO only)
If a change of control or other similar event occurs, then we will test the performance conditions applying
to the CEO’s performance rights. They will vest to the extent that the performance conditions are satisfied.
1. For K Corbally and M Hand, their contracts state that in particular circumstances they may be eligible for a retrenchment benefit in accordance with the relevant ANZ policy, as varied from
time to time. For A Watson, notice on retrenchment is 6 weeks and compensation on retrenchment is calculated on a scale up to a maximum of 79 weeks after 25 years’ service. 2. Or deferred
share rights granted to the CRO instead of performance rights.
101
ANZ 2020 Annual Report 9. OTHER INFORMATION
9.1 2020 STATUTORY REMUNERATION – CEO AND DISCLOSED EXECUTIVES
The following table outlines the statutory remuneration disclosed in accordance with Australian Accounting Standards. While it shows the
fixed remuneration awarded (cash and superannuation contributions) and also the cash component of the 2020 variable remuneration
award, it does not show the actual variable remuneration awarded or received in 2020 (see sections 4.1 and 4.2), but instead shows
the amortised accounting value for this financial year of deferred remuneration (including prior year awards).
2020 STATUTORY REMUNERATION – CEO AND DISCLOSED EXECUTIVES
Short-term employee benefits
Post-employment
Financial
year
Cash salary1
$
Non monetary
benefits2
$
Total cash
incentive3
$
Super
contributions4
$
Retirement
benefit accrued
during year5
$
CEO and Current Disclosed Executives
Shares
$
Share rights
Performance
rights
$
Shares
$
Termination
benefits9
remuneration
Total
$
S Elliott
M Carnegie
K Corbally10
G Florian
A George
M Hand11
M Jablko12
K van der Merwe
A Watson13
M Whelan
2020
2019
2020
2019
2020
2019
2020
2020
2019
2020
2019
2020
2019
2020
2020
2019
2020
2019
2,478,824
2,079,351
1,178,824
979,351
1,078,824
929,351
1,053,824
1,078,824
979,351
1,178,824
710,307
1,078,824
979,351
828,824
975,974
214,999
1,178,824
1,179,351
15,089
19,383
20,646
32,221
9,589
16,633
20,646
26,146
37,721
9,589
10,868
9,589
17,083
15,089
11,176
273
9,589
13,883
625,000
750,000
409,200
495,000
429,000
478,500
371,250
363,000
528,000
462,000
198,000
363,000
544,500
330,000
334,681
170,255
363,000
874,500
21,176
20,649
21,676
21,149
21,176
20,649
21,176
21,676
21,149
21,176
15,693
21,676
21,149
21,676
39,625
4,441
21,176
20,649
-
-
-
-
-
-
-
-
-
25,177
17,851
-
-
-
-
-
-
-
1. Cash salary includes any adjustments required to reflect the use of ANZ’s Lifestyle Leave Policy for the period in the KMP role. 2. Non monetary benefits generally consist of company-
funded benefits (and the associated Fringe Benefits Tax) such as car parking, taxation services and costs met by the Company in relation to in-country benefits. 3. The total cash incentive
relates to the cash component only. The relevant amortisation of the AVR/VR deferred components is included in share-based payments and has been amortised over the vesting period.
The total AVR/VR was approved by the Board on 21 October 2020. 100% of the cash component of the AVR/VR awarded for the 2019 and 2020 years vested to the executive in the applicable
financial year. 4. For all Australian based executives, the 2019 and 2020 superannuation contributions reflect the Superannuation Guarantee Contribution based on the Maximum Contribution
Base. A Watson participates in KiwiSaver where ANZ provides an employer superannuation contribution matching member contributions up to 4% of total gross pay (less employer
superannuation contribution tax). 5. Accrual relates to Retirement Allowance. As a result of being employed with ANZ before November 1992, M Hand is eligible to receive a Retirement
Allowance on retirement, retrenchment, death, or resignation for illness, incapacity or domestic reasons. The Retirement Allowance is calculated as three months of preserved notional salary
(which is 65% of fixed remuneration) plus an additional 3% of notional salary for each year of full-time service above 10 years less the total accrual value of long service leave (including taken
and untaken). 6. Long service leave accrued during the year increased year-on-year for S Elliott, M Carnegie, A George, K Corbally, M Hand, M Jablko and A Watson as a result of their fixed
remuneration increases. 7. As required by AASB 2 Share-based payments, the amortisation value includes a proportion of the fair value (taking into account market-related vesting conditions)
of all equity that had not yet fully vested as at the commencement of the financial year. The fair value is determined at grant date and is allocated on a straight-line basis over the relevant
vesting period. The amount included as remuneration neither relates to, nor indicates, the benefit (if any) that the executive may ultimately realise if the equity becomes exercisable. No terms
of share-based payments have been altered or modified during the financial year.
102
Long-term
employee
benefits
Long service leave
accrued during
the year6
$
100,651
31,819
28,120
15,152
32,255
29,179
24,403
25,551
15,152
112,623
80,949
21,570
15,152
16,580
17,383
3,580
18,232
18,182
Share-based payments7
Total amortisation value of
Variable
remuneration
Other equity
allocations8
$
-
-
-
-
-
-
-
-
-
-
-
-
-
-
258,090
171,583
82,845
83,500
1,156,061
1,449,384
196,150
344,501
16,398
35,455
238,329
219,525
260,314
203,224
129,198
307,228
400,011
229,707
93,742
11,290
417,161
717,098
828,507
830,753
502,572
470,209
378,884
340,108
333,927
430,514
392,589
367,507
259,006
535,573
539,647
358,605
237,502
35,358
754,535
839,283
-
-
-
-
-
-
-
-
-
-
-
-
-
194,492
50,316
133,552
711
141
$
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
5,225,308
5,181,339
2,357,188
2,357,583
2,224,216
2,215,950
2,063,555
2,165,236
2,234,276
2,380,120
1,421,872
2,387,776
2,650,445
1,800,481
1,793,639
523,837
2,762,517
3,662,946
OverviewHow we create valuePerformance overviewRemuneration reportDirectors’ reportFinancial reportShareholder information 9. OTHER INFORMATION
9.1 2020 STATUTORY REMUNERATION – CEO AND DISCLOSED EXECUTIVES
The following table outlines the statutory remuneration disclosed in accordance with Australian Accounting Standards. While it shows the
fixed remuneration awarded (cash and superannuation contributions) and also the cash component of the 2020 variable remuneration
award, it does not show the actual variable remuneration awarded or received in 2020 (see sections 4.1 and 4.2), but instead shows
the amortised accounting value for this financial year of deferred remuneration (including prior year awards).
2020 STATUTORY REMUNERATION – CEO AND DISCLOSED EXECUTIVES
Short-term employee benefits
Short-term employee benefits
Post-employment
Post-employment
Financial
Financial
year
year
Cash salary1
Cash salary1
$
$
Non monetary
Non monetary
benefits2
benefits2
$
$
Total cash
Total cash
incentive3
incentive3
$
$
Retirement
Retirement
Super
Super
benefit accrued
benefit accrued
contributions4
contributions4
during year5
during year5
CEO and Current Disclosed Executives
CEO and Current Disclosed Executives
S Elliott
S Elliott
M Carnegie
M Carnegie
K Corbally10
K Corbally10
G Florian
G Florian
A George
A George
M Hand11
M Hand11
M Jablko12
M Jablko12
K van der Merwe
K van der Merwe
A Watson13
A Watson13
M Whelan
M Whelan
2020
2020
2019
2019
2020
2020
2019
2019
2020
2020
2019
2019
2020
2020
2020
2020
2019
2019
2020
2020
2019
2019
2020
2020
2019
2019
2020
2020
2020
2020
2019
2019
2020
2020
2019
2019
2,478,824
2,478,824
2,079,351
2,079,351
1,178,824
1,178,824
979,351
979,351
1,078,824
1,078,824
929,351
929,351
1,053,824
1,053,824
1,078,824
1,078,824
979,351
979,351
1,178,824
1,178,824
710,307
710,307
1,078,824
1,078,824
979,351
979,351
828,824
828,824
975,974
975,974
214,999
214,999
1,178,824
1,178,824
1,179,351
1,179,351
15,089
15,089
19,383
19,383
20,646
20,646
32,221
32,221
9,589
9,589
16,633
16,633
20,646
20,646
26,146
26,146
37,721
37,721
9,589
9,589
10,868
10,868
9,589
9,589
17,083
17,083
15,089
15,089
11,176
11,176
273
273
9,589
9,589
13,883
13,883
625,000
625,000
750,000
750,000
409,200
409,200
495,000
495,000
429,000
429,000
478,500
478,500
371,250
371,250
363,000
363,000
528,000
528,000
462,000
462,000
198,000
198,000
363,000
363,000
544,500
544,500
330,000
330,000
334,681
334,681
170,255
170,255
363,000
363,000
874,500
874,500
$
$
21,176
21,176
20,649
20,649
21,676
21,676
21,149
21,149
21,176
21,176
20,649
20,649
21,176
21,176
21,676
21,676
21,149
21,149
21,176
21,176
15,693
15,693
21,676
21,676
21,149
21,149
21,676
21,676
39,625
39,625
4,441
4,441
21,176
21,176
20,649
20,649
$
$
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
25,177
25,177
17,851
17,851
Long-term
Long-term
employee
employee
benefits
benefits
Long service leave
Long service leave
accrued during
accrued during
the year6
the year6
$
$
100,651
100,651
31,819
31,819
28,120
28,120
15,152
15,152
32,255
32,255
29,179
29,179
24,403
24,403
25,551
25,551
15,152
15,152
112,623
112,623
80,949
80,949
21,570
21,570
15,152
15,152
16,580
16,580
17,383
17,383
3,580
3,580
18,232
18,232
18,182
18,182
Share-based payments7
Share-based payments7
Total amortisation value of
Total amortisation value of
Variable
Variable
remuneration
remuneration
Other equity
Other equity
allocations8
allocations8
Shares
Shares
$
$
Share rights
Share rights
$
$
Performance
Performance
rights
rights
$
$
Shares
Shares
$
$
Termination
Termination
benefits9
benefits9
$
$
Total
Total
remuneration
remuneration
$
$
828,507
828,507
830,753
830,753
502,572
502,572
470,209
470,209
378,884
378,884
340,108
340,108
333,927
333,927
430,514
430,514
392,589
392,589
367,507
367,507
259,006
259,006
535,573
535,573
539,647
539,647
358,605
358,605
237,502
237,502
35,358
35,358
754,535
754,535
839,283
839,283
-
-
-
-
-
-
-
-
258,090
258,090
171,583
171,583
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
82,845
82,845
83,500
83,500
-
-
-
-
1,156,061
1,156,061
1,449,384
1,449,384
196,150
196,150
344,501
344,501
16,398
16,398
35,455
35,455
238,329
238,329
219,525
219,525
260,314
260,314
203,224
203,224
129,198
129,198
307,228
307,228
400,011
400,011
229,707
229,707
93,742
93,742
11,290
11,290
417,161
417,161
717,098
717,098
-
-
-
-
-
-
-
-
-
-
194,492
194,492
-
-
-
-
-
-
-
-
-
-
50,316
50,316
133,552
133,552
-
-
711
711
141
141
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
5,225,308
5,225,308
5,181,339
5,181,339
2,357,188
2,357,188
2,357,583
2,357,583
2,224,216
2,224,216
2,215,950
2,215,950
2,063,555
2,063,555
2,165,236
2,165,236
2,234,276
2,234,276
2,380,120
2,380,120
1,421,872
1,421,872
2,387,776
2,387,776
2,650,445
2,650,445
1,800,481
1,800,481
1,793,639
1,793,639
523,837
523,837
2,762,517
2,762,517
3,662,946
3,662,946
1. Cash salary includes any adjustments required to reflect the use of ANZ’s Lifestyle Leave Policy for the period in the KMP role. 2. Non monetary benefits generally consist of company-
funded benefits (and the associated Fringe Benefits Tax) such as car parking, taxation services and costs met by the Company in relation to in-country benefits. 3. The total cash incentive
relates to the cash component only. The relevant amortisation of the AVR/VR deferred components is included in share-based payments and has been amortised over the vesting period.
The total AVR/VR was approved by the Board on 21 October 2020. 100% of the cash component of the AVR/VR awarded for the 2019 and 2020 years vested to the executive in the applicable
financial year. 4. For all Australian based executives, the 2019 and 2020 superannuation contributions reflect the Superannuation Guarantee Contribution based on the Maximum Contribution
Base. A Watson participates in KiwiSaver where ANZ provides an employer superannuation contribution matching member contributions up to 4% of total gross pay (less employer
superannuation contribution tax). 5. Accrual relates to Retirement Allowance. As a result of being employed with ANZ before November 1992, M Hand is eligible to receive a Retirement
Allowance on retirement, retrenchment, death, or resignation for illness, incapacity or domestic reasons. The Retirement Allowance is calculated as three months of preserved notional salary
(which is 65% of fixed remuneration) plus an additional 3% of notional salary for each year of full-time service above 10 years less the total accrual value of long service leave (including taken
and untaken). 6. Long service leave accrued during the year increased year-on-year for S Elliott, M Carnegie, A George, K Corbally, M Hand, M Jablko and A Watson as a result of their fixed
remuneration increases. 7. As required by AASB 2 Share-based payments, the amortisation value includes a proportion of the fair value (taking into account market-related vesting conditions)
of all equity that had not yet fully vested as at the commencement of the financial year. The fair value is determined at grant date and is allocated on a straight-line basis over the relevant
vesting period. The amount included as remuneration neither relates to, nor indicates, the benefit (if any) that the executive may ultimately realise if the equity becomes exercisable. No terms
of share-based payments have been altered or modified during the financial year.
8. Other equity allocations relate to employment arrangements such as compensation for bonus opportunity foregone and deferred remuneration forfeited, retention awards, and shares
received in relation to the Employee Share Offer. 9. No 2020 Disclosed Executive received a termination benefit. Whilst F Ohlsson (former Group Executive, Australia and 2019 Disclosed
Executive) concluded in a Disclosed Executive role on 28 December 2018, he ceased employment 15 November 2019 while on career break. Termination benefits paid on cessation (relating
to accrued annual and long service leave, and pay in lieu of notice in accordance with his contract), annual leave and long service leave taken at the commencement of his career break, and
non monetary benefits relating to cessation totalled $1,303,863. 10. In relation to K Corbally’s role before his appointment to the ExCo, in August 2016 the Board approved an equity retention
award of $600,000 vesting in August 2019. Other equity allocations relate to this award. 11. M Hand’s 2019 remuneration reflects a partial service year as he commenced in a Disclosed
Executive role on 29 December 2018. 12. Other cash and other equity allocations for M Jablko relate to previously disclosed compensation for bonus opportunity foregone and deferred
remuneration forfeited. 13. A Watson’s 2019 remuneration reflects a partial service year as she commenced in a Disclosed Executive role on 17 June 2019 as Acting Group Executive and CEO,
NZ. A Watson’s fixed remuneration is paid in NZD and converted to AUD. In 2018, 2019 and 2020 A Watson was eligible to receive shares under the Employee Share Offer. That offer provided
a grant of ANZ shares in each financial year to eligible employees subject to Board approval. See Note 31 Employee Share and Option Plans for further details on the Employee Share Offer.
103
ANZ 2020 Annual Report 9.2 EQUITY HOLDINGS
For the equity granted to the CEO and Disclosed Executives in November/December 2019, all deferred shares were purchased on the market.
For deferred share rights and performance rights, we will determine our approach to satisfying awards closer to the time of vesting.
9.2.1 CEO and Disclosed Executives equity granted, vested, exercised/sold and lapsed/forfeited
The table below sets out details of deferred shares and rights that we granted to the CEO and Disclosed Executives:
• during the 2020 year; or
• in prior years and that then vested, were exercised/sold or which lapsed/were forfeited during the 2020 year.
EQUITY GRANTED VESTED, EXERCISED/SOLD AND LAPSED/FORFEITED – CEO AND DISCLOSED EXECUTIVES
Name
Type of equity
Number
granted1
Equity fair
value at
grant
(for 2020
grants
only)
$
Vested
Lapsed/
Forfeited
Exercised/Sold
First
date
exercisable
Grant
date
Date
of
expiry
Number %
Value2
$
Number %
$ Number %
Value2
Value2
$
Vested
and
exercis
able as
at 30
Sep
20203
Unexer
cisable
as at 30
Sep
20204
CEO and Current Disclosed Executives
S Elliott
Deferred shares
Deferred shares
Deferred shares
6,941
8,529
8,623
22-Nov-16
22-Nov-19
22-Nov-17
22-Nov-19
22-Nov-18
22-Nov-19
Deferred shares
12,006
24.79 22-Nov-19
22-Nov-20
Deferred shares
9,003
24.79 22-Nov-19
22-Nov-21
Deferred shares
6,002
24.79 22-Nov-19
22-Nov-22
Deferred shares
3,001
24.79 22-Nov-19
22-Nov-23
-
-
-
-
-
-
-
Performance rights
112,862
16-Dec-16
16-Dec-19 16-Dec-21
Performance rights
37,620
16-Dec-16
16-Dec-19 16-Dec-21
Performance rights
126,050
10.25 17-Dec-19
17-Dec-23 17-Dec-25
Performance rights
42,016
5.03 17-Dec-19
17-Dec-23 17-Dec-25
M Carnegie Deferred shares
Deferred shares
Deferred shares
1,182
4,785
5,205
22-Nov-16
22-Nov-19
22-Nov-17
22-Nov-19
22-Nov-18
22-Nov-19
Deferred shares
7,924
24.79 22-Nov-19
22-Nov-20
Deferred shares
5,942
24.79 22-Nov-19
22-Nov-21
Deferred shares
3,961
24.79 22-Nov-19
22-Nov-22
Deferred shares
1,980
24.79 22-Nov-19
22-Nov-23
-
-
-
-
-
-
-
Performance rights
7,309
22-Nov-16
22-Nov-19 22-Nov-21
Performance rights
2,436
22-Nov-16
22-Nov-19 22-Nov-21
Performance rights
30,612
10.45 22-Nov-19
22-Nov-23 22-Nov-25
Performance rights
10,204
5.14 22-Nov-19
22-Nov-23 22-Nov-25
K Corbally Deferred shares
21,497
22-Nov-16
20-Aug-19
Deferred shares
Deferred shares
Deferred shares
2,758
4,230
3,010
22-Nov-16
22-Nov-19
22-Nov-17
22-Nov-19
22-Nov-18
22-Nov-19
Deferred shares
5,745
24.79 22-Nov-19
22-Nov-20
Deferred shares
5,744
24.79 22-Nov-19
22-Nov-21
Deferred shares
3,829
24.79 22-Nov-19
22-Nov-22
Deferred shares
3,829
24.79 22-Nov-19
22-Nov-23
-
-
-
-
-
-
-
-
Deferred share rights
19,727
24.99 22-Nov-19
22-Nov-23 29-Nov-23
Performance rights
5,445
22-Nov-16
22-Nov-19 22-Nov-21
104
6,941 100 172,095
8,529 100 211,468
8,623 100 213,799
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,182 100
29,307
4,785 100 118,639
5,205 100 129,053
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
2,758 100
68,382
4,230 100 104,879
3,010 100
74,630
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(112,862) 100 (2,826,313)
(37,620) 100
(942,088)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(7,309) 100
(181,219)
(2,436) 100
(60,398)
(6,941)
100 173,814
(8,529)
100 213,581
(8,623)
100 215,935
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
12,006
-
-
-
-
-
9,003
6,002
3,001
-
-
- 126,050
-
42,016
1,182
4,785
5,205
-
-
-
-
-
-
-
-
-
7,924
5,942
3,961
1,980
-
-
-
30,612
-
10,204
-
-
-
-
-
-
-
-
-
-
-
-
5,745
5,744
3,829
3,829
-
19,727
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(21,497)
100 526,105
(2,758)
100
67,498
(4,230)
100 103,522
(3,010)
100
73,665
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(5,445) 100
(135,003)
OverviewHow we create valuePerformance overviewRemuneration reportDirectors’ reportFinancial reportShareholder information 9.2 EQUITY HOLDINGS
For the equity granted to the CEO and Disclosed Executives in November/December 2019, all deferred shares were purchased on the market.
For deferred share rights and performance rights, we will determine our approach to satisfying awards closer to the time of vesting.
9.2.1 CEO and Disclosed Executives equity granted, vested, exercised/sold and lapsed/forfeited
Name
Type of equity
Number
granted1
Equity fair
value at
grant
(for 2020
grants
only)
$
Vested
Lapsed/
Forfeited
Exercised/Sold
First
date
exercisable
Grant
date
Date
of
expiry
Number %
Value2
$
Number %
$ Number %
Value2
Value2
$
The table below sets out details of deferred shares and rights that we granted to the CEO and Disclosed Executives:
CEO and Current Disclosed Executives
Equity fair
value at
grant
(for 2020
grants
only)
$
Number
granted1
6,941
8,529
8,623
CEO and Current Disclosed Executives
S Elliott
Deferred shares
22-Nov-16
22-Nov-19
6,941 100 172,095
Deferred shares
Deferred shares
22-Nov-17
22-Nov-19
8,529 100 211,468
22-Nov-18
22-Nov-19
8,623 100 213,799
(6,941)
100 173,814
(8,529)
100 213,581
(8,623)
100 215,935
Deferred shares
12,006
24.79 22-Nov-19
22-Nov-20
Deferred shares
9,003
24.79 22-Nov-19
22-Nov-21
Deferred shares
6,002
24.79 22-Nov-19
22-Nov-22
Deferred shares
3,001
24.79 22-Nov-19
22-Nov-23
Performance rights
112,862
16-Dec-16
16-Dec-19 16-Dec-21
-
(112,862) 100 (2,826,313)
Performance rights
37,620
16-Dec-16
16-Dec-19 16-Dec-21
(37,620) 100
(942,088)
Performance rights
126,050
10.25 17-Dec-19
17-Dec-23 17-Dec-25
Performance rights
42,016
5.03 17-Dec-19
17-Dec-23 17-Dec-25
M Carnegie Deferred shares
22-Nov-16
22-Nov-19
1,182 100
29,307
Deferred shares
Deferred shares
1,182
4,785
5,205
22-Nov-17
22-Nov-19
4,785 100 118,639
22-Nov-18
22-Nov-19
5,205 100 129,053
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,182
4,785
5,205
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
12,006
9,003
6,002
3,001
- 126,050
-
42,016
7,924
5,942
3,961
1,980
-
30,612
-
10,204
-
-
-
-
-
-
-
-
-
-
-
-
-
-
5,745
5,744
3,829
3,829
-
19,727
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(7,309) 100
(181,219)
(2,436) 100
(60,398)
K Corbally Deferred shares
21,497
22-Nov-16
20-Aug-19
Deferred shares
Deferred shares
Deferred shares
2,758
4,230
3,010
22-Nov-16
22-Nov-19
2,758 100
68,382
22-Nov-17
22-Nov-19
4,230 100 104,879
22-Nov-18
22-Nov-19
3,010 100
74,630
-
(21,497)
100 526,105
(2,758)
100
67,498
(4,230)
100 103,522
(3,010)
100
73,665
Deferred shares
5,745
24.79 22-Nov-19
22-Nov-20
Deferred shares
5,744
24.79 22-Nov-19
22-Nov-21
Deferred shares
3,829
24.79 22-Nov-19
22-Nov-22
Deferred shares
3,829
24.79 22-Nov-19
22-Nov-23
Deferred share rights
19,727
24.99 22-Nov-19
22-Nov-23 29-Nov-23
Performance rights
5,445
22-Nov-16
22-Nov-19 22-Nov-21
(5,445) 100
(135,003)
Deferred shares
7,924
24.79 22-Nov-19
22-Nov-20
Deferred shares
5,942
24.79 22-Nov-19
22-Nov-21
Deferred shares
3,961
24.79 22-Nov-19
22-Nov-22
Deferred shares
1,980
24.79 22-Nov-19
22-Nov-23
Performance rights
7,309
22-Nov-16
22-Nov-19 22-Nov-21
Performance rights
2,436
22-Nov-16
22-Nov-19 22-Nov-21
Performance rights
30,612
10.45 22-Nov-19
22-Nov-23 22-Nov-25
Performance rights
10,204
5.14 22-Nov-19
22-Nov-23 22-Nov-25
• during the 2020 year; or
• in prior years and that then vested, were exercised/sold or which lapsed/were forfeited during the 2020 year.
EQUITY GRANTED VESTED, EXERCISED/SOLD AND LAPSED/FORFEITED – CEO AND DISCLOSED EXECUTIVES
Vested
Exercised/Sold
Lapsed/
Forfeited
Grant
First
date
Date
of
Value2
Value2
Value2
Vested
and
exercis
Unexer
able as
cisable
at 30
as at 30
Sep
Sep
G Florian
Deferred shares
Deferred shares
2,462
3,254
22-Nov-17
22-Nov-19
22-Nov-18
22-Nov-19
Deferred shares
4,491
24.79 22-Nov-19
22-Nov-20
Deferred shares
3,367
24.79 22-Nov-19
22-Nov-21
Deferred shares
2,244
24.79 22-Nov-19
22-Nov-22
Deferred shares
1,122
24.79 22-Nov-19
22-Nov-23
-
-
-
-
-
-
Performance rights
17,346
10.45 22-Nov-19
22-Nov-23 22-Nov-25
Name
Type of equity
date
exercisable
expiry
Number %
$
Number %
$ Number %
$
20203
20204
Performance rights
5,782
5.14 22-Nov-19
22-Nov-23 22-Nov-25
A George Deferred shares
Deferred shares
Deferred shares
2,400
3,096
3,498
22-Nov-16
22-Nov-19
22-Nov-17
22-Nov-19
22-Nov-18
22-Nov-19
Deferred shares
8,453
24.79 22-Nov-19
22-Nov-20
Deferred shares
6,338
24.79 22-Nov-19
22-Nov-21
Deferred shares
4,225
24.79 22-Nov-19
22-Nov-22
Deferred shares
2,112
24.79 22-Nov-19
22-Nov-23
-
-
-
-
-
-
-
Performance rights
2,746
18-Nov-15
18-Nov-18 18-Nov-20
Performance rights
4,738
22-Nov-16
22-Nov-19 22-Nov-21
Performance rights
32,653
10.45 22-Nov-19
22-Nov-23 22-Nov-25
Performance rights
10,884
5.14 22-Nov-19
22-Nov-23 22-Nov-25
M Hand
Deferred shares
Deferred shares
Deferred shares
4,012
6,277
3,254
22-Nov-16
22-Nov-19
22-Nov-17
22-Nov-19
22-Nov-18
22-Nov-19
Deferred shares
4,755
24.79 22-Nov-19
22-Nov-20
Deferred shares
3,565
24.79 22-Nov-19
22-Nov-21
Deferred shares
2,376
24.79 22-Nov-19
22-Nov-22
Deferred shares
1,188
24.79 22-Nov-19
22-Nov-23
-
-
-
-
-
-
-
Performance rights
7,920
22-Nov-16
22-Nov-19 22-Nov-21
Performance rights
18,367
10.45 22-Nov-19
22-Nov-23 22-Nov-25
Performance rights
6,122
5.14 22-Nov-19
22-Nov-23 22-Nov-25
M Jablko
Deferred shares
Deferred shares
Deferred shares
Deferred shares
Deferred shares
Deferred shares
Deferred shares
Deferred shares
Deferred shares
3,153
3,153
7,617
1,182
1,182
1,182
6,305
6,305
5,693
20-Aug-16
20-Aug-17
20-Aug-16
20-Aug-18
20-Aug-16
27-Feb-20
22-Nov-16
22-Nov-17
22-Nov-16
22-Nov-18
22-Nov-16
22-Nov-19
22-Nov-17
22-Nov-18
22-Nov-17
22-Nov-19
22-Nov-18
22-Nov-19
Deferred shares
8,717
24.79 22-Nov-19
22-Nov-20
Deferred shares
6,536
24.79 22-Nov-19
22-Nov-21
Deferred shares
4,357
24.79 22-Nov-19
22-Nov-22
Deferred shares
2,178
24.79 22-Nov-19
22-Nov-23
-
-
-
-
-
-
-
-
-
-
-
-
-
Performance rights
7,309
22-Nov-16
22-Nov-19 22-Nov-21
Performance rights
2,436
22-Nov-16
22-Nov-19 22-Nov-21
Performance rights
33,673
10.45 22-Nov-19
22-Nov-23 22-Nov-25
Performance rights
11,224
5.14 22-Nov-19
22-Nov-23 22-Nov-25
2,462 100
61,043
3,254 100
80,680
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
2,400 100
59,506
3,096 100
76,762
3,498 100
86,729
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
4,012 100
99,474
6,277 100 155,632
3,254 100
80,680
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
7,617 100 195,305
-
-
-
-
-
-
1,182 100
29,307
-
-
-
6,305 100 156,326
5,693 100 141,152
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(4,738) 100
(117,474)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(7,920) 100
(196,368)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(7,309) 100
(181,219)
(2,436) 100
(60,398)
-
-
-
-
-
-
Vested
and
exercis
able as
at 30
Sep
20203
Unexer
cisable
as at 30
Sep
20204
2,462
3,254
-
-
-
-
-
-
4,491
3,367
2,244
1,122
-
17,346
-
5,782
2,400
3,096
3,498
-
-
-
-
-
-
-
-
-
8,453
6,338
4,225
2,112
-
-
-
32,653
-
10,884
-
-
-
-
-
-
-
-
-
-
-
4,755
3,565
2,376
1,188
-
-
18,367
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(1,793)
65
46,678
-
-
-
-
-
-
-
-
-
(4,012)
100
99,242
(6,277)
100 155,270
(3,254)
100
80,492
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(3,153)
100
80,580
(3,153)
100
80,580
-
-
-
7,617
(1,182)
100
30,208
(1,182)
100
30,208
-
-
-
-
-
1,182
(6,305)
100 161,135
-
6,305
5,693
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
6,122
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
8,717
6,536
4,357
2,178
-
-
-
33,673
-
11,224
105
ANZ 2020 Annual Report Name
Type of equity
Number
granted1
Equity fair
value at
grant
(for 2020
grants
only)
$
Vested
Lapsed/
Forfeited
Exercised/Sold
First
date
exercisable
Grant
date
Date
of
expiry
Number %
Value2
$
Number %
$ Number %
Value2
Value2
$
CEO and Current Disclosed Executives
K van der
Merwe
Deferred shares
Deferred shares
1,477
3,577
22-Nov-17
22-Nov-19
22-Nov-18
22-Nov-19
Deferred shares
6,604
24.79 22-Nov-19
22-Nov-20
Deferred shares
4,951
24.79 22-Nov-19
22-Nov-21
Deferred shares
3,301
24.79 22-Nov-19
22-Nov-22
Deferred shares
1,650
24.79 22-Nov-19
22-Nov-23
-
-
-
-
-
-
Performance rights
25,510
10.45 22-Nov-19
22-Nov-23 22-Nov-25
Performance rights
8,503
5.14 22-Nov-19
22-Nov-23 22-Nov-25
A Watson Deferred shares
3,904
24.79 22-Nov-19
22-Nov-20
Deferred shares
3,901
24.79 22-Nov-19
22-Nov-21
Deferred shares
3,901
24.79 22-Nov-19
22-Nov-22
Deferred shares
4,541
24.79 22-Nov-19
22-Nov-23
Employee share offer
32
25.05 02-Dec-19
02-Dec-22
-
-
-
-
-
1,477 100
36,621
3,577 100
88,688
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Deferred share rights
2,237
22-Nov-16
22-Nov-19 22-Nov-21
2,237 100
55,464
Deferred share rights
4,409
22-Nov-17
22-Nov-19 22-Nov-21
4,409 100 109,317
Deferred share rights
5,016
22-Nov-18
22-Nov-19 22-Nov-21
5,016 100 124,367
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(2,237)
100
55,277
(4,409)
100 108,948
(5,016)
100 123,947
Performance rights
3,649
22-Nov-16
22-Nov-19 22-Nov-21
-
-
-
(3,649) 100
(90,473)
-
-
-
M Whelan Deferred shares
Deferred shares
Deferred shares
6,724
9,218
7,075
22-Nov-16
22-Nov-19
22-Nov-17
22-Nov-19
22-Nov-18
22-Nov-19
Deferred shares
13,998
24.79 22-Nov-19
22-Nov-20
Deferred shares
10,498
24.79 22-Nov-19
22-Nov-21
Deferred shares
6,998
24.79 22-Nov-19
22-Nov-22
Deferred shares
3,499
24.79 22-Nov-19
22-Nov-23
-
-
-
-
-
-
-
Performance rights
41,571
22-Nov-16
22-Nov-19 22-Nov-21
Performance rights
13,857
22-Nov-16
22-Nov-19 22-Nov-21
Performance rights
54,081
10.45 22-Nov-19
22-Nov-23 22-Nov-25
Performance rights
18,027
5.14 22-Nov-19
22-Nov-23 22-Nov-25
6,724 100 166,715
9,218 100 228,551
7,075 100 175,418
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(41,571) 100 (1,030,711)
(13,857) 100
(343,570)
-
-
-
-
-
-
(6,724)
100 166,715
(9,218)
100 228,551
(7,075)
100 175,418
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Vested
and
exercis
able as
at 30
Sep
20203
Unexer
cisable
as at 30
Sep
20204
1,477
3,577
-
-
-
-
-
-
6,604
4,951
3,301
1,650
-
25,510
-
-
-
-
-
-
-
-
-
-
-
-
-
8,503
3,904
3,901
3,901
4,541
32
-
-
-
-
-
-
-
-
13,998
-
10,498
-
-
-
-
6,998
3,499
-
-
-
54,081
-
18,027
1. For the purpose of the five highest paid executive disclosures, Executives are defined
as Disclosed Executives or other members of the ExCo. For the 2020 financial year the
five highest paid executives include four Disclosed Executives and the Group Executive,
International (F Faruqui). Rights granted to Disclosed Executives as remuneration in 2020
are included in the table. Rights granted to F Faruqui as remuneration in 2020 include
four tranches of deferred share rights and two tranches of performance rights granted on
22 Nov 2019. (14,298 (tranche 1) deferred share rights first exercisable 22 Nov 2020, expiring
29 Nov 2020; 11,363 (tranche 2) deferred share rights first exercisable 22 Nov 2021, expiring
29 Nov 2021; 8,033 (tranche 3) deferred share rights first exercisable 22 Nov 2022, expiring
29 Nov 2022; 4,257 (tranche 4) deferred share rights first exercisable 22 Nov 2023, expiring
29 Nov 2023; 51,839 (tranche 1) and 17,279 (tranche 2) performance rights first exercisable
22 Nov 2023 subject to meeting performance hurdles, expiring 22 Nov 2025). No rights
have been granted to the CEO, Disclosed Executives or the five highest paid executives
since the end of 2020 up to the Directors’ Report sign-off date. 2. The point in time
value of shares/share rights and/or performance rights is based on the one day VWAP
of the Company’s shares traded on the ASX on the date of vesting, lapsing/forfeiture or
exercising/sale/transfer out of trust, multiplied by the number of shares/share rights and/
or performance rights. The exercise price for all share rights/performance rights is $0.00.
No terms of share-based payment transactions have been altered or modified during the
reporting period. 3. The number vested and exercisable is the number of shares, options
and rights that remain vested at the end of the reporting period. No shares, options and
rights were vested and unexercisable.
4. Performance rights granted in prior years (by grant date) that remained unexerciseable at
30 Sep 2020 include:
S Elliott
M Carnegie
K Corbally
G Florian
A George
M Hand
M Jablko
K van der Merwe
A Watson
M Whelan
Nov-17
143,294
39,440
4,230
20,300
25,520
6,277
51,968
12,180
3,934
75,980
Nov-18
110,365
42,884
-
26,802
28,813
26,802
46,905
29,482
4,802
58,296
Nov-19
168,066
40,816
-
23,128
43,537
24,489
44,897
34,013
-
72,108
Performance rights granted to S Elliott in 2020 were approved by shareholders at the 2019
AGM in accordance with ASX Listing Rule 10.14.
106
OverviewHow we create valuePerformance overviewRemuneration reportDirectors’ reportFinancial reportShareholder information Performance rights
3,649
22-Nov-16
22-Nov-19 22-Nov-21
-
-
-
(3,649) 100
(90,473)
-
-
-
Performance rights
25,510
10.45 22-Nov-19
22-Nov-23 22-Nov-25
-
25,510
CEO and Current Disclosed Executives
K van der
Deferred shares
Merwe
Deferred shares
1,477
3,577
22-Nov-17
22-Nov-19
1,477 100
36,621
22-Nov-18
22-Nov-19
3,577 100
88,688
Deferred shares
6,604
24.79 22-Nov-19
22-Nov-20
Deferred shares
4,951
24.79 22-Nov-19
22-Nov-21
Deferred shares
3,301
24.79 22-Nov-19
22-Nov-22
Deferred shares
1,650
24.79 22-Nov-19
22-Nov-23
Performance rights
8,503
5.14 22-Nov-19
22-Nov-23 22-Nov-25
A Watson Deferred shares
3,904
24.79 22-Nov-19
22-Nov-20
Deferred shares
3,901
24.79 22-Nov-19
22-Nov-21
Deferred shares
3,901
24.79 22-Nov-19
22-Nov-22
Deferred shares
4,541
24.79 22-Nov-19
22-Nov-23
Employee share offer
32
25.05 02-Dec-19
02-Dec-22
Deferred share rights
2,237
22-Nov-16
22-Nov-19 22-Nov-21
2,237 100
55,464
Deferred share rights
4,409
22-Nov-17
22-Nov-19 22-Nov-21
4,409 100 109,317
Deferred share rights
5,016
22-Nov-18
22-Nov-19 22-Nov-21
5,016 100 124,367
M Whelan Deferred shares
22-Nov-16
22-Nov-19
6,724 100 166,715
Deferred shares
Deferred shares
6,724
9,218
7,075
22-Nov-17
22-Nov-19
9,218 100 228,551
22-Nov-18
22-Nov-19
7,075 100 175,418
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Deferred shares
13,998
24.79 22-Nov-19
22-Nov-20
Deferred shares
10,498
24.79 22-Nov-19
22-Nov-21
Deferred shares
6,998
24.79 22-Nov-19
22-Nov-22
Deferred shares
3,499
24.79 22-Nov-19
22-Nov-23
Performance rights
41,571
22-Nov-16
22-Nov-19 22-Nov-21
Performance rights
13,857
22-Nov-16
22-Nov-19 22-Nov-21
Performance rights
54,081
10.45 22-Nov-19
22-Nov-23 22-Nov-25
Performance rights
18,027
5.14 22-Nov-19
22-Nov-23 22-Nov-25
1. For the purpose of the five highest paid executive disclosures, Executives are defined
as Disclosed Executives or other members of the ExCo. For the 2020 financial year the
five highest paid executives include four Disclosed Executives and the Group Executive,
International (F Faruqui). Rights granted to Disclosed Executives as remuneration in 2020
are included in the table. Rights granted to F Faruqui as remuneration in 2020 include
four tranches of deferred share rights and two tranches of performance rights granted on
22 Nov 2019. (14,298 (tranche 1) deferred share rights first exercisable 22 Nov 2020, expiring
29 Nov 2020; 11,363 (tranche 2) deferred share rights first exercisable 22 Nov 2021, expiring
29 Nov 2021; 8,033 (tranche 3) deferred share rights first exercisable 22 Nov 2022, expiring
29 Nov 2022; 4,257 (tranche 4) deferred share rights first exercisable 22 Nov 2023, expiring
29 Nov 2023; 51,839 (tranche 1) and 17,279 (tranche 2) performance rights first exercisable
22 Nov 2023 subject to meeting performance hurdles, expiring 22 Nov 2025). No rights
have been granted to the CEO, Disclosed Executives or the five highest paid executives
since the end of 2020 up to the Directors’ Report sign-off date. 2. The point in time
value of shares/share rights and/or performance rights is based on the one day VWAP
of the Company’s shares traded on the ASX on the date of vesting, lapsing/forfeiture or
exercising/sale/transfer out of trust, multiplied by the number of shares/share rights and/
or performance rights. The exercise price for all share rights/performance rights is $0.00.
No terms of share-based payment transactions have been altered or modified during the
reporting period. 3. The number vested and exercisable is the number of shares, options
and rights that remain vested at the end of the reporting period. No shares, options and
rights were vested and unexercisable.
30 Sep 2020 include:
S Elliott
M Carnegie
K Corbally
G Florian
A George
M Hand
M Jablko
K van der Merwe
A Watson
M Whelan
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Vested
and
exercis
Unexer
able as
cisable
at 30
as at 30
Sep
Sep
1,477
3,577
-
-
6,604
4,951
3,301
1,650
8,503
3,904
3,901
3,901
4,541
32
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
13,998
-
10,498
-
-
-
-
6,998
3,499
-
-
-
54,081
-
18,027
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(2,237)
100
55,277
(4,409)
100 108,948
(5,016)
100 123,947
(6,724)
100 166,715
(9,218)
100 228,551
(7,075)
100 175,418
Nov-17
143,294
39,440
4,230
20,300
25,520
6,277
51,968
12,180
3,934
75,980
Nov-18
110,365
42,884
-
26,802
28,813
26,802
46,905
29,482
4,802
58,296
Nov-19
168,066
40,816
23,128
43,537
24,489
44,897
34,013
-
-
72,108
(41,571) 100 (1,030,711)
(13,857) 100
(343,570)
4. Performance rights granted in prior years (by grant date) that remained unexerciseable at
Performance rights granted to S Elliott in 2020 were approved by shareholders at the 2019
AGM in accordance with ASX Listing Rule 10.14.
Name
Type of equity
date
exercisable
expiry
Number %
$
Number %
$ Number %
$
20203
20204
Grant
First
date
Date
of
Value2
Value2
Value2
Vested
Exercised/Sold
Lapsed/
Forfeited
Equity fair
value at
grant
(for 2020
grants
only)
$
Number
granted1
9.2.2 NED, CEO and Disclosed Executives equity holdings
The table below sets out details of equity held directly, indirectly or beneficially by each NED, the CEO and each Disclosed Executive,
including their related parties.
EQUITY HOLDINGS – NED, CEO AND DISCLOSED EXECUTIVES
Name
Type of equity
Current Non-Executive Directors
D Gonski
I Atlas
P Dwyer
J Halton
J Key
G Liebelt
J Macfarlane
P O’Sullivan5
Ordinary shares
Ordinary shares
Ordinary shares
Ordinary shares
Ordinary shares
Ordinary shares
Capital notes 1
Capital notes 2
Ordinary shares
Capital notes 2
Capital notes 3
Ordinary shares
Capital notes 2
CEO and Current Disclosed Executives
S Elliott
M Carnegie
K Corbally
G Florian
A George
M Hand
M Jablko
K van der Merwe
A Watson
M Whelan
Deferred shares
Ordinary shares
Performance rights
Deferred shares
Ordinary shares
Performance rights
Deferred shares
Ordinary shares
Deferred share rights
Performance rights
Deferred shares
Ordinary shares
Performance rights
Deferred shares
Ordinary shares
Capital notes 1
Performance rights
Deferred shares
Ordinary shares
Performance rights
Deferred shares
Ordinary shares
Performance rights
Deferred shares
Ordinary shares
Performance rights
Deferred shares
Employee share offer
Ordinary shares
Deferred share rights
Performance rights
Deferred shares
Ordinary shares
Performance rights
Opening
balance at
1 Oct 2019
Granted during
the year as
remuneration1
Received during
the year on
exercise of
options or rights
Resulting from
any other
changes during
the year2
Closing
balance at
30 Sep 20203, 4
31,488
14,360
17,500
9,049
3,000
20,315
1,500
2,500
17,851
2,000
5,000
4,078
9,250
73,958
189,258
438,874
54,732
3,071
92,069
42,631
1,350
14,546
9,675
23,141
978
47,102
58,962
5,614
802
60,864
26,434
760
40,999
84,494
2,925
108,618
20,388
774
41,662
-
102
-
22,129
12,385
69,393
-
189,704
-
-
-
-
-
-
-
-
-
-
-
-
-
30,012
-
168,066
19,807
-
40,816
19,147
-
19,727
-
11,224
-
23,128
21,128
-
-
43,537
11,884
-
24,489
21,788
-
44,897
16,506
-
34,013
16,247
32
-
-
-
34,993
-
72,108
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,793
-
(1,793)
-
-
-
-
-
-
-
-
-
-
-
11,662
(11,662)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(24,093)
27,563
(150,482)
-
2,420
(9,745)
(31,495)
(255)
-
(5,445)
-
1,216
-
-
2,882
-
(4,738)
(13,543)
429
(7,920)
(16,851)
2,319
(9,745)
-
1,162
-
-
-
386
-
(3,649)
(23,017)
1,126
(55,428)
31,488
14,360
17,500
9,049
3,000
20,315
1,500
2,500
17,851
2,000
5,000
4,078
9,250
79,877
216,821
456,458
74,539
5,491
123,140
30,283
1,095
34,273
4,230
34,365
2,194
70,230
80,090
10,289
802
97,870
24,775
1,189
57,568
89,431
5,244
143,770
36,894
1,936
75,675
16,247
134
12,048
10,467
8,736
81,369
1,126
206,384
1. Details of options/rights granted as remuneration during 2020 are provided in the previous table. 2. Shares resulting from any other changes during the year include the net result of any
shares purchased (including under the ANZ Share Purchase Plan), forfeited, sold or acquired under the Dividend Reinvestment Plan. 3. The following shares (included in the holdings above)
were held on behalf of the NEDs, CEO and Disclosed Executives (i.e. indirect beneficially held shares) as at 30 September 2020: D Gonski – 31,488, I Atlas – 14,360, P Dwyer – 17,500, J Halton – 0,
J Key – 3,000, G Liebelt – 8,158, J Macfarlane – 24,851, P O’Sullivan – 0, S Elliott – 291,099, M Carnegie – 74,539, K Corbally – 30,283, G Florian – 34,365, A George – 83,570, M Hand – 24,775, M
Jablko – 89,431, K van der Merwe – 36,894, A Watson – 16,381 and M Whelan – 81,369. 4. 34,733 rights were vested and exercisable, and zero options/rights were vested and unexerciseable as
at 30 September 2020. There was no change in the balance as at the Directors’ Report sign-off date. 5. Commencing balance is based on holdings as at the date of commencement as a KMP.
107
ANZ 2020 Annual Report 9.3 LOANS
9.3.1 Overview
Directors’ report
When we lend to NEDs, the CEO or Disclosed Executives, we do so 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 – this includes the term of the loan, the security
required and the interest rate. Details of the terms and conditions of lending products can be found on anz.com. No amounts have been
written off during the period, or individual provisions raised in respect of these balances.
The table below sets out details of loans outstanding to NEDs, the CEO and Disclosed Executives including their related parties, if – at any
time during the year – the individual’s aggregate loan balance exceeded $100,000.
Total loans to NEDs, the CEO and Disclosed Executives, including their related parties at 30 September 2020 (including those with balances
less than $100,000) was $31,807,543 (2019: $29,359,432) with interest paid of $888,019 (2019: $731,353) during the period.
9.3.2 NED, CEO and Disclosed Executives loan transactions
LOAN TRANSACTIONS – NED, CEO AND DISCLOSED EXECUTIVES
Name
Current Non-Executive Directors
I Atlas
J Key
J Macfarlane
P O'Sullivan2
CEO and Current Disclosed Executives
S Elliott
G Florian
A George3
M Hand
K van der Merwe
M Whelan4
Total
Opening balance at
1 October 2019
$
Closing balance at
30 September 2020
$
Interest paid and payable
in the reporting period1
$
Highest balance in the
reporting period
$
-
-
13,330,653
1,005,057
2,926,267
2,362,366
1,612,899
4,437,179
1,982,996
1,653,414
1,608,028
-
13,280,942
888,916
2,782,319
2,306,807
1,535,414
4,226,595
3,584,607
1,575,953
8,021
23,206
370,053
2,348
68,358
62,602
51,538
149,695
101,228
50,263
2,308,028
4,000,000
15,470,727
1,022,409
2,938,399
2,389,584
1,618,459
4,444,867
3,818,341
1,696,126
29,310,831
31,789,581
887,312
39,706,940
1. Actual interest paid after considering offset accounts. The loan balance is shown gross, however the interest paid takes into account the impact of offset amounts. 2. Opening balance is at
the date of commencement as KMP. 3. Opening balance has been restated to include a credit card balance. 4. Opening balance has been adjusted to take account of a minor timing variance.
9.4 OTHER TRANSACTIONS
Other transactions with NEDs, the CEO and Disclosed Executives, and their related parties included deposits.
OTHER TRANSACTIONS – NED, CEO AND DISCLOSED EXECUTIVES
Total KMP deposits
Opening balance at
1 October 20191
$
Closing balance at
30 September 20202, 3
$
48,951,515
48,364,383
1. Opening balance is at 1 October 2019 or the date of commencement as KMP if part way through the year. 2. Closing balance is at 30 September 2020 or at the date of cessation as KMP if
part way through the year. 3. Interest paid on deposits for 2020 was $498,931 (2019: $682,040).
Other transactions with KMP and their related parties included amounts paid to the Group in respect of investment management service
fees, brokerage, 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 are no more favourable
than those given to other employees or customers.
108
The Directors’ Report for the financial year ended 30 September
2020 has been prepared in accordance with the requirements of
the Corporations Act 2001. The information below forms part of
Pillar 3 information
this Directors’ Report:
• Principal activities on page 10
• Operating and financial review on pages 54 to 71
• Dividends on page 70
• Information on the Directors, Company Secretaries and
Directors’ meetings on pages 38 to 48
• Remuneration report on pages 74 to 108
Significant changes in state of affairs
There have been no significant changes in the Group’s state of affairs.
Events since the end of the financial year
Specifically the Policy:
There have been no significant events from 30 September 2020
to the date of signing this report.
Political donations
Our policy is that we will make an annual donation to the two major
federal parties to support the democratic process in Australia. In the
2020 calendar year, we donated $100,000 to the Liberal Party of
and
ANZ provides information required by APS 330: Public Disclosure in
the Regulatory Disclosures section at anz.com/shareholder/centre/
reporting/regulatory-disclosure/.
Non-audit services
The Group’s Stakeholder Engagement Model for Relationship with
the External Auditor (the Policy), which incorporates requirements
of the Corporations Act 2001 and industry best practice, prevents the
external auditor from providing services that are perceived to be in
conflict with the role of the external auditor or breach independence
requirements. This includes consulting advice and sub-contracting
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.
• limits the scope of non-audit services that may be provided;
• requires that audit, audit-related and permitted non-audit services
be considered in light of independence requirements and for
any potential conflicts of interest before they are approved by
the Audit Committee, or approved by the Chair of the Audit
Committee (or delegate) and notified to the Audit Committee;
Australia and $100,000 to the Australian Labor Party.
• requires pre-approval before the external auditor can commence
any engagement for the Group.
Environmental regulation
ANZ recognises the expectations of its stakeholders – customers,
shareholders, staff and the community – to operate in a way that
mitigates its environmental impact.
In Australia, ANZ meets the requirements of the National
Greenhouse and Energy Reporting Act 2007 (Cth), which imposes
reporting obligations where energy production, usage or
greenhouse gas emissions trigger specified thresholds.
Further details about the Policy can be found in the Corporate
Governance Statement.
The external auditor has confirmed to the Audit Committee that it has:
• implemented procedures to ensure it complies with
independence rules in applicable jurisdictions; and
• complied with applicable policies and regulations in those
jurisdictions regarding the provision of non-audit services,
and the Policy.
The Group does not believe that its operations are subject to any other
particular and significant environmental regulation under a law of
The Audit Committee has reviewed the non-audit services provided
the Commonwealth of Australia or of an Australian State or Territory.
by the external auditor during the 2020 financial year, and has
It may become subject to environmental regulation as a result of its
confirmed that the provision of these services is consistent with
lending activities in the ordinary course of business and has developed
policies to identify and manage such environmental matters.
Having made due enquiry, and to the best of ANZ’s knowledge,
no entity of the Group has incurred any material environmental
liability during the year.
the Policy, compatible with the general standard of independence
for auditors imposed by the Corporations Act 2001 and did not
compromise the auditor independence requirements of the
Corporations Act 2001. This has been formally advised by the Audit
Committee to the Board of Directors.
Further details of ANZ’s environmental performance, including
progress against its targets and details of its emissions profile, are
available on anz.com.au/about-us/sustainability-framework/
environmental-sustainability/.
The categories of non-audit services supplied to the Group during
the year ended 30 September 2020 by the external auditor, KPMG,
or by another person or firm on KPMG’s behalf, and the amounts
paid or payable (including GST) by the Group are as follows:
Corporate Governance Statement
ANZ is committed to maintaining a high standard in its governance
framework. ANZ confirms it has followed the ASX Corporate Governance
Council’s Corporate Governance Principles and Recommendations (3rd
edition) during the 2020 financial year. ANZ’s Corporate Governance
Non-audit services
Training related services
Statement, together with the ASX Appendix 4G which relates to
Methodology and procedural reviews
the Corporate Governance Statement, can be viewed at anz.com/
corporategovernance and has been lodged with the ASX.
Total
Amount paid/payable
$’000
2020
2019
16
107
123
106
10
116
OverviewHow we create valuePerformance overviewRemuneration reportDirectors’ reportFinancial reportShareholder information
9.3 LOANS
9.3.1 Overview
Name
I Atlas
J Key
J Macfarlane
P O'Sullivan2
S Elliott
G Florian
A George3
M Hand
K van der Merwe
M Whelan4
Total
Current Non-Executive Directors
CEO and Current Disclosed Executives
When we lend to NEDs, the CEO or Disclosed Executives, we do so 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 – this includes the term of the loan, the security
required and the interest rate. Details of the terms and conditions of lending products can be found on anz.com. No amounts have been
written off during the period, or individual provisions raised in respect of these balances.
The table below sets out details of loans outstanding to NEDs, the CEO and Disclosed Executives including their related parties, if – at any
time during the year – the individual’s aggregate loan balance exceeded $100,000.
Total loans to NEDs, the CEO and Disclosed Executives, including their related parties at 30 September 2020 (including those with balances
less than $100,000) was $31,807,543 (2019: $29,359,432) with interest paid of $888,019 (2019: $731,353) during the period.
9.3.2 NED, CEO and Disclosed Executives loan transactions
LOAN TRANSACTIONS – NED, CEO AND DISCLOSED EXECUTIVES
Opening balance at
Closing balance at
Interest paid and payable
Highest balance in the
1 October 2019
30 September 2020
in the reporting period1
reporting period
$
$
$
-
-
$
-
1,608,028
13,330,653
1,005,057
13,280,942
888,916
2,926,267
2,362,366
1,612,899
4,437,179
1,982,996
1,653,414
2,782,319
2,306,807
1,535,414
4,226,595
3,584,607
1,575,953
8,021
23,206
370,053
2,348
68,358
62,602
51,538
149,695
101,228
50,263
2,308,028
4,000,000
15,470,727
1,022,409
2,938,399
2,389,584
1,618,459
4,444,867
3,818,341
1,696,126
1. Actual interest paid after considering offset accounts. The loan balance is shown gross, however the interest paid takes into account the impact of offset amounts. 2. Opening balance is at
the date of commencement as KMP. 3. Opening balance has been restated to include a credit card balance. 4. Opening balance has been adjusted to take account of a minor timing variance.
29,310,831
31,789,581
887,312
39,706,940
9.4 OTHER TRANSACTIONS
Other transactions with NEDs, the CEO and Disclosed Executives, and their related parties included deposits.
OTHER TRANSACTIONS – NED, CEO AND DISCLOSED EXECUTIVES
Total KMP deposits
1. Opening balance is at 1 October 2019 or the date of commencement as KMP if part way through the year. 2. Closing balance is at 30 September 2020 or at the date of cessation as KMP if
part way through the year. 3. Interest paid on deposits for 2020 was $498,931 (2019: $682,040).
Other transactions with KMP and their related parties included amounts paid to the Group in respect of investment management service
fees, brokerage, 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 are no more favourable
than those given to other employees or customers.
Opening balance at
Closing balance at
1 October 20191
30 September 20202, 3
$
$
48,951,515
48,364,383
Directors’ report
The Directors’ Report for the financial year ended 30 September
2020 has been prepared in accordance with the requirements of
the Corporations Act 2001. The information below forms part of
this Directors’ Report:
Pillar 3 information
ANZ provides information required by APS 330: Public Disclosure in
the Regulatory Disclosures section at anz.com/shareholder/centre/
reporting/regulatory-disclosure/.
• Principal activities on page 10
• Operating and financial review on pages 54 to 71
• Dividends on page 70
• Information on the Directors, Company Secretaries and
Directors’ meetings on pages 38 to 48
• Remuneration report on pages 74 to 108
Significant changes in state of affairs
There have been no significant changes in the Group’s state of affairs.
Non-audit services
The Group’s Stakeholder Engagement Model for Relationship with
the External Auditor (the Policy), which incorporates requirements
of the Corporations Act 2001 and industry best practice, prevents the
external auditor from providing services that are perceived to be in
conflict with the role of the external auditor or breach independence
requirements. This includes consulting advice and sub-contracting
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.
Events since the end of the financial year
Specifically the Policy:
There have been no significant events from 30 September 2020
to the date of signing this report.
Political donations
Our policy is that we will make an annual donation to the two major
federal parties to support the democratic process in Australia. In the
2020 calendar year, we donated $100,000 to the Liberal Party of
Australia and $100,000 to the Australian Labor Party.
Environmental regulation
ANZ recognises the expectations of its stakeholders – customers,
shareholders, staff and the community – to operate in a way that
mitigates its environmental impact.
In Australia, ANZ meets the requirements of the National
Greenhouse and Energy Reporting Act 2007 (Cth), which imposes
reporting obligations where energy production, usage or
greenhouse gas emissions trigger specified thresholds.
The Group does not believe that its operations are subject to any other
particular and significant environmental regulation under a law of
the Commonwealth of Australia or of an Australian State or Territory.
It may become subject to environmental regulation as a result of its
lending activities in the ordinary course of business and has developed
policies to identify and manage such environmental matters.
Having made due enquiry, and to the best of ANZ’s knowledge,
no entity of the Group has incurred any material environmental
liability during the year.
• limits the scope of non-audit services that may be provided;
• requires that audit, audit-related and permitted non-audit services
be considered in light of independence requirements and for
any potential conflicts of interest before they are approved by
the Audit Committee, or approved by the Chair of the Audit
Committee (or delegate) and notified to the Audit Committee;
and
• requires pre-approval before the external auditor can commence
any engagement for the Group.
Further details about the Policy can be found in the Corporate
Governance Statement.
The external auditor has confirmed to the Audit Committee that it has:
• implemented procedures to ensure it complies with
independence rules in applicable jurisdictions; and
• complied with applicable policies and regulations in those
jurisdictions regarding the provision of non-audit services,
and the Policy.
The Audit Committee has reviewed the non-audit services provided
by the external auditor during the 2020 financial year, and has
confirmed that the provision of these services is consistent with
the Policy, compatible with the general standard of independence
for auditors imposed by the Corporations Act 2001 and did not
compromise the auditor independence requirements of the
Corporations Act 2001. This has been formally advised by the Audit
Committee to the Board of Directors.
Further details of ANZ’s environmental performance, including
progress against its targets and details of its emissions profile, are
available on anz.com.au/about-us/sustainability-framework/
environmental-sustainability/.
The categories of non-audit services supplied to the Group during
the year ended 30 September 2020 by the external auditor, KPMG,
or by another person or firm on KPMG’s behalf, and the amounts
paid or payable (including GST) by the Group are as follows:
Corporate Governance Statement
ANZ is committed to maintaining a high standard in its governance
framework. ANZ confirms it has followed the ASX Corporate Governance
Council’s Corporate Governance Principles and Recommendations (3rd
edition) during the 2020 financial year. ANZ’s Corporate Governance
Statement, together with the ASX Appendix 4G which relates to
the Corporate Governance Statement, can be viewed at anz.com/
corporategovernance and has been lodged with the ASX.
Non-audit services
Training related services
Methodology and procedural reviews
Total
Amount paid/payable
$’000
2020
2019
16
107
123
106
10
116
109
ANZ 2020 Annual Report
Further details on the compensation paid to KPMG is provided
in Note 34 Auditor Fees to the financial statements including details
of audit-related services provided during the year of $5.37 million
(2019: $5.71 million).
For the reasons set out above, the Directors are satisfied that the
provision of non-audit services by the external auditor during the
year ended 30 September 2020 is compatible with the general
standard of independence for external auditors imposed by the
Corporations Act 2001 and did not compromise the auditor
independence requirements of the Corporations Act 2001.
Directors’ and officers’ indemnity
The Company’s Constitution (Rule 11.1) permits the Company to:
• indemnify any officer or employee of the Company, or its auditor,
against liabilities (so far as may be permitted under applicable law)
incurred as such by an officer, employee or auditor, including
liabilities incurred as a result of appointment or nomination by
the Company as a trustee or as an officer or employee of another
corporation; and
• make payments in respect of legal costs incurred by an officer,
employee or auditor in defending an action for a liability incurred
as such by an officer, employee or auditor, or in resisting or
responding to actions taken by a government agency, a duly
constituted Royal Commission or other official inquiry, a liquidator,
administrator, trustee in bankruptcy or other authorised official.
It is the Company’s policy that its employees should be protected
from any liability they incur as a result of acting in the course of their
employment, subject to appropriate conditions.
Under the policy, the Company will indemnify employees and former
employees against any liability they incur to any third party as a result
of acting in the course of their employment with the Company or a
subsidiary of the Company and this extends to liability incurred as a
result of their appointment/nomination by or at the request of the
Group as an officer or employee of another corporation or body or
as trustee.
The indemnity is subject to applicable law and certain exceptions.
In accordance with the employee indemnity policy, the Company has
during or since the year ended 30 September 2020 paid legal expenses
totalling $1,233,965.13 incurred by Mr Richard Moscati in relation to legal
proceedings brought against him and the Company by a third party.
The Company has entered into Indemnity Deeds with each of its
Directors, with certain secretaries and former Directors of the Company,
and with certain employees and other individuals who act as directors
or officers of related bodies corporate or of another company, to
indemnify them against liabilities and legal costs of the kind
mentioned in the Company’s Constitution.
During the financial year, the Company has paid premiums for
insurance for the benefit of the Directors and employees of the
Company and related bodies corporate of the Company. In
accordance with common commercial practice, the insurance
prohibits disclosure of the nature of the liability insured against
and the amount of the premium.
Key management personnel and employee
share and option plans
The Remuneration Report contains details of Non-Executive
Directors, Chief Executive Officer and Disclosed Executives’ equity
holdings and options/rights issued during the 2020 financial year
and as at the date of this report.
Note 31 Employee Share and Option Plans to the 2020 Financial
Report contains details of the 2020 financial year and as at the date
of this report:
• Options/rights issued over shares granted to employees;
• Shares issued as a result of the exercise of options/rights
granted to employees; and
• Other details about share options/rights issued, including any
rights to participate in any share issues of the Company.
The names of all persons who currently hold options/rights are entered
in the register kept by the Company pursuant to section 170 of the
Corporations Act 2001. This register may be inspected free of charge.
Rounding of amounts
The Company is a company of the kind referred to in Australian
Securities and Investments Commission Corporations (Rounding in
Financial/Directors’ Reports) Instrument 2016/191 dated 24 March 2016
and, in accordance with that Instrument, amounts in the consolidated
financial statements and this Directors’ Report have been rounded
to the nearest million dollars unless specifically stated otherwise.
This report is made in accordance with a resolution of the Board
of Directors and is signed for and on behalf of the Directors.
Paul D O'Sullivan
Chairman
4 November 2020
Shayne C Elliott
Managing Director
Lead Auditor’s Independence Declaration
The Lead Auditors Independence Declaration given under Section
307C of the Corporations Act 2001 is set out below and forms part of
the Directors' Report for the year ended 30 September 2020.
To: the Directors of Australia and New Zealand Banking Group Limited
I declare that, to the best of my knowledge and belief, in relation to
the audit of Australia and New Zealand Banking Group Limited for
the financial year ended 30 September 2020, there have been:
• no contraventions of the auditor independence requirements as
set out in the Corporations Act 2001 in relation to the audit; and
• no contraventions of any applicable code of professional conduct
in relation to the audit.
KPMG
Alison Kitchen
Partner
©2020 KPMG, an Australian partnership and a member firm of the KPMG global
organisation of independent member firms affiliated with KPMG International Limited,
a private English company limited by guarantee. All rights reserved. The KPMG name
and logo are trademarks used under license by the independent member firms of the
KPMG global organisation. Liability limited by a scheme approved under Professional
Standards Legislation.
110110
OverviewHow we create valuePerformance overviewRemuneration reportDirectors’ reportFinancial reportShareholder information
Financial report
CONTENTS
Consolidated Financial Statements
Income Statement
Statement of Comprehensive Income
Balance Sheet
Cash Flow Statement
Statement of Changes in Equity
112
113
114
115
116
Notes to The Consolidated Financial Statements
Basis of Preparation
Non-Financial Liabilities
1. About Our Financial Statements
117
21. Other Provisions
Financial Performance
2. Operating Income
3. Operating Expenses
4.
Income Tax
5. Dividends
6. Earnings per Ordinary Share
7. Segment Reporting
Financial Assets
8. Cash and Cash Equivalents
9. Trading Securities
10. Derivative Financial Instruments
11. Investment Securities
12. Net Loans and Advances
13. Allowance for Expected Credit losses
Financial Liabilities
14. Deposits and Other Borrowings
15. Debt Issuances
Financial Instrument Disclosures
16. Financial Risk Management
17. Fair Value of Financial Assets and Financial Liabilities
18.
Assets Charged as Security for Liabilities
and Collateral Accepted as Security for Assets
19. Offsetting
Non-Financial Assets
20. Goodwill and Other Intangible Assets
123
126
128
130
132
133
137
138
139
147
149
150
160
161
166
182
187
188
189
Equity
22. Shareholders’ Equity
23. Capital Management
Consolidation and Presentation
24. Parent Entity Financial Information
25. Controlled Entities
26.
Investments in Associates
27. Structured Entities
28. Transfers of Financial Assets
29. Discontinued Operations and Assets
and Liabilities Held For Sale
Employee and Related Party Transactions
30. Superannuation and Post Employment
Benefits Obligations
31. Employee Share and Option Plans
32. Related Party Disclosures
Other Disclosures
33. Commitments, Contingent Liabilities
and Contingent Assets
34. Auditor Fees
35. Events Since the End of the Financial Year
Directors’ Declaration
Independent Auditor’s Report
194
196
198
200
201
203
205
208
209
212
214
219
220
223
224
225
226
111
ANZ 2020 Annual Report
ANZ 2020 ANNUAL REPORT
FINANCIAL REPORT
INCOME STATEMENT
For the year ended 30 September
Note
Interest income1
Interest expense
Net interest income
Other operating income
Net income from insurance business
Share of associates’ profit
Operating income
Operating expenses
Profit before credit impairment and income tax
Credit impairment charge
Profit before income tax
Income tax expense
Profit after tax from continuing operations
Profit/(Loss) after tax from discontinued operations
Profit for the year
Comprising:
Profit attributable to shareholders of the Company
Profit attributable to non-controlling interests
Earnings per ordinary share (cents) including discontinued operations
Basic
Diluted
Earnings per ordinary share (cents) from continuing operations
Basic
Diluted
Dividend per ordinary share (cents)
2
2
2
2
3
13
4
29
6
6
6
6
5
2020
$m
24,426
(10,377)
14,049
3,355
78
155
17,637
(9,383)
8,254
(2,738)
5,516
(1,840)
3,676
(98)
3,578
3,577
1
126.4
118.0
129.8
121.1
60
2019
$m
31,077
(16,738)
14,339
4,058
126
262
18,785
(9,071)
9,714
(794)
8,920
(2,609)
6,311
(343)
5,968
5,953
15
210.0
201.9
222.1
213.0
160
1.
Includes interest income calculated using the effective interest method of $23,837 million on financial assets measured at amortised cost or fair value through other comprehensive income (2019: $30,224
million).
The notes appearing on pages 117 to 225 form an integral part of these financial statements.
112
112
OverviewHow we create valuePerformance overviewRemuneration reportDirectors’ reportFinancial reportShareholder information
STATEMENT OF COMPREHENSIVE INCOME
For the year ended 30 September
Profit for the year from continuing operations
Other comprehensive income
Items that will not be reclassified subsequently to profit or loss
Investment securities - equity securities at FVOCI
Other reserve movements
Items that may be reclassified subsequently to profit or loss
Foreign currency translation reserve1
Other reserve movements
Income tax attributable to the above items
Share of associates’ other comprehensive income2
Other comprehensive income after tax from continuing operations
Profit/(Loss) after tax from discontinued operations
Other comprehensive income/(loss) after tax from discontinued operations
Total comprehensive income for the year
Comprising total comprehensive income attributable to:
Shareholders of the Company
Non-controlling interests
FINANCIAL REPORT
2019
$m
6,311
45
67
697
909
(288)
26
1,456
(343)
(97)
7,327
7,307
20
2020
$m
3,676
(157)
13
(550)
712
(180)
51
(111)
(98)
-
3,467
3,467
-
1.
Includes foreign currency translation differences attributable to non-controlling interests of a $1 million loss (2019: $5 million gain).
2. Share of associates’ Other comprehensive income includes a FVOCI reserve gain of $48 million (2019: $20 million gain), defined benefits gain of $3 million (2019: $7 million gain), cash flow hedge reserve
loss of $1 million (2019: $2 million loss) and a foreign currency translation reserve gain of $1 million (2019: $1 million gain) that may be reclassified subsequently to profit or loss.
The notes appearing on pages 117 to 225 form an integral part of these financial statements.
2020
2020
$m
$m
24,426
24,426
(10,377)
(10,377)
14,049
14,049
3,355
3,355
78
78
155
155
17,637
17,637
(9,383)
(9,383)
8,254
8,254
(2,738)
(2,738)
5,516
5,516
(1,840)
(1,840)
3,676
3,676
(98)
(98)
3,578
3,578
3,577
3,577
1
1
126.4
126.4
118.0
118.0
129.8
129.8
121.1
121.1
60
60
2019
2019
$m
$m
31,077
31,077
(16,738)
(16,738)
14,339
14,339
4,058
4,058
126
126
262
262
18,785
18,785
(9,071)
(9,071)
9,714
9,714
(794)
(794)
8,920
8,920
(2,609)
(2,609)
6,311
6,311
(343)
(343)
5,968
5,968
5,953
5,953
15
15
210.0
210.0
201.9
201.9
222.1
222.1
213.0
213.0
160
160
2
2
2
2
2
2
2
2
3
3
13
13
4
4
29
29
6
6
6
6
6
6
6
6
5
5
For the year ended 30 September
For the year ended 30 September
Note
Note
Earnings per ordinary share (cents) including discontinued operations
Earnings per ordinary share (cents) including discontinued operations
Earnings per ordinary share (cents) from continuing operations
Earnings per ordinary share (cents) from continuing operations
Dividend per ordinary share (cents)
Dividend per ordinary share (cents)
Includes interest income calculated using the effective interest method of $23,837 million on financial assets measured at amortised cost or fair value through other comprehensive income (2019: $30,224
Includes interest income calculated using the effective interest method of $23,837 million on financial assets measured at amortised cost or fair value through other comprehensive income (2019: $30,224
The notes appearing on pages 117 to 225 form an integral part of these financial statements.
The notes appearing on pages 117 to 225 form an integral part of these financial statements.
113
113
ANZ 2020 ANNUAL REPORT
ANZ 2020 ANNUAL REPORT
FINANCIAL REPORT
FINANCIAL REPORT
INCOME STATEMENT
INCOME STATEMENT
Net income from insurance business
Net income from insurance business
Interest income1
Interest income1
Interest expense
Interest expense
Net interest income
Net interest income
Other operating income
Other operating income
Share of associates’ profit
Share of associates’ profit
Operating income
Operating income
Operating expenses
Operating expenses
Credit impairment charge
Credit impairment charge
Profit before income tax
Profit before income tax
Income tax expense
Income tax expense
Profit before credit impairment and income tax
Profit before credit impairment and income tax
Profit after tax from continuing operations
Profit after tax from continuing operations
Profit/(Loss) after tax from discontinued operations
Profit/(Loss) after tax from discontinued operations
Profit for the year
Profit for the year
Comprising:
Comprising:
Profit attributable to shareholders of the Company
Profit attributable to shareholders of the Company
Profit attributable to non-controlling interests
Profit attributable to non-controlling interests
Basic
Basic
Diluted
Diluted
Basic
Basic
Diluted
Diluted
1.
1.
million).
million).
112
112
ANZ 2020 Annual Report
ANZ 2020 ANNUAL REPORT
FINANCIAL REPORT (continued)
BALANCE SHEET
As at 30 September
Assets
Cash and cash equivalents
Settlement balances owed to ANZ
Collateral paid
Trading securities
Derivative financial instruments
Investment securities
Net loans and advances
Regulatory deposits
Assets held for sale
Investments in associates
Current tax assets
Deferred tax assets1
Goodwill and other intangible assets
Premises and equipment1
Other assets
Total assets
Liabilities
Settlement balances owed by ANZ
Collateral received
Deposits and other borrowings
Derivative financial instruments
Current tax liabilities
Deferred tax liabilities
Liabilities held for sale
Payables and other liabilities1
Employee entitlements
Other provisions
Debt issuances
Total liabilities
Net assets
Shareholders' equity
Ordinary share capital
Reserves
Retained earnings1
Share capital and reserves attributable to shareholders of the Company
Non-controlling interests
Note
8
9
10
11
12
29
26
20
14
10
29
21
15
22
22
22
22
22
2020
$m
107,923
7,541
14,308
50,913
135,331
93,391
617,093
801
-
2,164
161
2,124
4,379
3,013
3,144
2019
$m
81,621
3,739
15,006
43,169
120,667
83,709
615,258
879
1,831
2,957
265
1,356
4,861
1,924
3,895
1,042,286
981,137
22,241
9,304
682,333
134,711
349
80
-
9,128
596
2,579
119,668
980,989
61,297
26,531
1,501
33,255
61,287
10
10,867
7,929
637,677
120,951
260
67
2,121
7,968
589
2,223
129,691
920,343
60,794
26,490
1,629
32,664
60,783
11
60,794
Total shareholders' equity
1. On adoption of AASB 16 on 1 October 2019, the Group recognised right-of-use assets of $1.6 billion presented within Premises and equipment and lease liabilities of $1.7 billion presented within Payables
and other liabilities. This resulted in a reduction to opening retained earnings of $88 million and an increase in deferred tax assets of $37 million. Comparative information has not been restated. Refer to
Note 1 for further details.
61,297
22
The notes appearing on pages 117 to 225 form an integral part of these financial statements.
114
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ANZ 2020 ANNUAL REPORT
ANZ 2020 ANNUAL REPORT
FINANCIAL REPORT (continued)
FINANCIAL REPORT (continued)
FINANCIAL REPORT
CASH FLOW STATEMENT
The Consolidated Cash Flow Statement includes discontinued operations. Please refer to Note 29 for cash flows associated with discontinued
operations and cash and cash equivalents reclassified as held for sale.
For the year ended 30 September
Profit after income tax
Adjustments to reconcile to net cash provided by/(used in) operating activities:
Allowance for expected credit losses
Impairment of investment in associates
Depreciation and amortisation1, 2
Goodwill impairment
(Profit)/loss on sale of premises and equipment
Net derivatives/foreign exchange adjustment
(Gain)/loss on sale from divestments
Other non-cash movements
Net (increase)/decrease in operating assets:
Collateral paid
Trading securities
Net loans and advances
Investments backing policy liabilities
Other assets
Net increase/(decrease) in operating liabilities:
Deposits and other borrowings
Settlement balances owed by ANZ
Collateral received
Other liabilities
Total adjustments
Net cash (used in)/provided by operating activities3
Cash flows from investing activities
Investment securities assets:
Purchases
Proceeds from sale or maturity
2020
$m
3,578
2,738
815
1,391
77
(8)
(3,046)
25
(80)
283
(1,803)
(7,119)
-
(76)
51,875
11,476
1,739
(9,581)
48,706
52,284
2019
$m
5,968
794
-
871
-
(5)
4,940
(137)
(356)
(3,493)
(7,941)
(10,268)
(3,542)
(454)
7,006
(1,077)
1,004
2,140
(10,518)
(4,550)
(40,029)
28,642
1,309
(800)
(587)
(11,465)
(23,847)
21,228
2,121
800
(508)
(206)
Proceeds from divestments, net of cash disposed
Proceeds from/(Repayment of) IOOF secured notes
Other assets
Net cash (used in)/provided by investing activities
Cash flows from financing activities
Debt issuances:4
Issue proceeds
Redemptions
Dividends paid5
On market purchase of treasury shares
Repayment of lease liabilities6
Share buyback
Net cash (used in)/provided by financing activities
Net (decrease)/increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
Effects of exchange rate changes on cash and cash equivalents
Cash and cash equivalents at end of year7
1. Includes depreciation of right-of-use assets recognised on 1 October 2019 following the adoption of AASB 16. Comparatives have not been restated.
2. Includes accelerated amortisation of $197 million following the Group’s change in the application of its software amortisation policy to reflect the shorter useful life of software caused by rapidly changing
12,260
(21,430)
(2,861)
(122)
(281)
-
(12,434)
28,385
81,621
(2,083)
107,923
25,900
(22,958)
(4,471)
(112)
-
(1,120)
(2,761)
(7,517)
84,964
4,174
81,621
technology and business requirements. Refer to Note 20 Goodwill and Other Intangible Assets for further details.
3. Net cash inflows/(outflows) from operating activities includes income taxes paid of $2,348 million (2019: $3,129 million).
4. Non-cash changes in debt issuances includes fair value hedging loss of $1,127 million (2019: $2,437 million loss) and foreign exchange gains of $1,623 million (2019: $3,815 million loss).
5. Cash outflow for shares purchased to satisfy the dividend reinvestment plan are classified in Dividends paid.
6. Relates to repayments of lease liabilities which the Group commenced recognising on 1 October 2019 following the adoption of AASB 16. Comparative information has not been restated.
7. Includes cash and cash equivalents recognised on the face of balance sheet of $107,923 million (2019: $81,621 million) with no amounts recorded as part of assets held for sale. (2019: nil).
The notes appearing on pages 117 to 225 form an integral part of these financial statements.
115
115
Note
Note
8
8
9
9
10
10
11
11
12
12
29
29
26
26
20
20
14
14
10
10
29
29
21
21
15
15
22
22
22
22
22
22
22
22
22
22
22
22
1,042,286
1,042,286
981,137
981,137
2020
2020
$m
$m
107,923
107,923
7,541
7,541
14,308
14,308
50,913
50,913
135,331
135,331
93,391
93,391
617,093
617,093
801
801
-
-
2,164
2,164
161
161
2,124
2,124
4,379
4,379
3,013
3,013
3,144
3,144
22,241
22,241
9,304
9,304
682,333
682,333
134,711
134,711
349
349
80
80
-
-
9,128
9,128
596
596
2,579
2,579
119,668
119,668
980,989
980,989
61,297
61,297
26,531
26,531
1,501
1,501
33,255
33,255
61,287
61,287
10
10
61,297
61,297
2019
2019
$m
$m
81,621
81,621
3,739
3,739
15,006
15,006
43,169
43,169
120,667
120,667
83,709
83,709
615,258
615,258
879
879
1,831
1,831
2,957
2,957
265
265
1,356
1,356
4,861
4,861
1,924
1,924
3,895
3,895
10,867
10,867
7,929
7,929
637,677
637,677
120,951
120,951
260
260
67
67
2,121
2,121
7,968
7,968
589
589
2,223
2,223
129,691
129,691
920,343
920,343
60,794
60,794
26,490
26,490
1,629
1,629
32,664
32,664
60,783
60,783
11
11
60,794
60,794
Share capital and reserves attributable to shareholders of the Company
Share capital and reserves attributable to shareholders of the Company
1. On adoption of AASB 16 on 1 October 2019, the Group recognised right-of-use assets of $1.6 billion presented within Premises and equipment and lease liabilities of $1.7 billion presented within Payables
1. On adoption of AASB 16 on 1 October 2019, the Group recognised right-of-use assets of $1.6 billion presented within Premises and equipment and lease liabilities of $1.7 billion presented within Payables
and other liabilities. This resulted in a reduction to opening retained earnings of $88 million and an increase in deferred tax assets of $37 million. Comparative information has not been restated. Refer to
and other liabilities. This resulted in a reduction to opening retained earnings of $88 million and an increase in deferred tax assets of $37 million. Comparative information has not been restated. Refer to
The notes appearing on pages 117 to 225 form an integral part of these financial statements.
The notes appearing on pages 117 to 225 form an integral part of these financial statements.
BALANCE SHEET
BALANCE SHEET
As at 30 September
As at 30 September
Assets
Assets
Cash and cash equivalents
Cash and cash equivalents
Settlement balances owed to ANZ
Settlement balances owed to ANZ
Collateral paid
Collateral paid
Trading securities
Trading securities
Derivative financial instruments
Derivative financial instruments
Investment securities
Investment securities
Net loans and advances
Net loans and advances
Regulatory deposits
Regulatory deposits
Assets held for sale
Assets held for sale
Investments in associates
Investments in associates
Current tax assets
Current tax assets
Deferred tax assets1
Deferred tax assets1
Goodwill and other intangible assets
Goodwill and other intangible assets
Premises and equipment1
Premises and equipment1
Other assets
Other assets
Total assets
Total assets
Liabilities
Liabilities
Settlement balances owed by ANZ
Settlement balances owed by ANZ
Collateral received
Collateral received
Deposits and other borrowings
Deposits and other borrowings
Derivative financial instruments
Derivative financial instruments
Current tax liabilities
Current tax liabilities
Deferred tax liabilities
Deferred tax liabilities
Liabilities held for sale
Liabilities held for sale
Payables and other liabilities1
Payables and other liabilities1
Employee entitlements
Employee entitlements
Other provisions
Other provisions
Debt issuances
Debt issuances
Total liabilities
Total liabilities
Net assets
Net assets
Shareholders' equity
Shareholders' equity
Ordinary share capital
Ordinary share capital
Reserves
Reserves
Retained earnings1
Retained earnings1
Non-controlling interests
Non-controlling interests
Total shareholders' equity
Total shareholders' equity
Note 1 for further details.
Note 1 for further details.
114
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ANZ 2020 Annual Report
ANZ 2020 ANNUAL REPORT
FINANCIAL REPORT (continued)
STATEMENT OF CHANGES IN EQUITY
As at 1 October 2018
Impact on transition to AASB 9
Profit or loss from continuing operations
Profit or loss from discontinued operations
Other comprehensive income for the year from
continuing operations
Other comprehensive income for the year from
discontinued operations
Total comprehensive income for the year
Transactions with equity holders in their capacity
as equity holders:
Dividends paid
Dividend income on treasury shares held within
the Group’s life insurance statutory funds
Group share buy-back2
Other equity movements:
Treasury shares Wealth Australia
discontinued operations adjustment3
Other items
As at 30 September 2019
Impact on transition to AASB 16
Profit or loss from continuing operations
Profit or loss from discontinued operations
Other comprehensive income for the year from
continuing operations
Total comprehensive income for the year
Transactions with equity holders in their capacity
as equity holders:
Dividends paid
Dividend Reinvestment Plan1
Other equity movements:
Group employee share acquisition scheme
Other items
Ordinary
share capital
$m
27,205
-
-
-
-
-
-
-
-
(1,120)
405
-
-
-
-
-
(4)
12
-
-
9
26,490
1,629
32,664
-
-
-
-
-
-
61
(20)
-
-
-
-
(88)
3,675
(98)
(124)
14
(124)
3,591
-
-
-
(4)
(2,922)
-
-
10
Reserves
$m
323
14
-
-
1,393
(97)
Retained
earnings
$m
31,737
(624)
6,296
(343)
58
-
Share capital
and reserves
attributable to
shareholders
of the Company
$m
Non-
controlling
interests
$m
Total
shareholders’
equity
$m
59,265
(610)
6,296
(343)
1,451
(97)
140
-
15
-
5
-
59,405
(610)
6,311
(343)
1,456
(97)
1,296
6,011
7,307
20
7,327
(4,481)
(4,481)
(2)
(4,483)
12
(1,120)
405
5
60,783
(88)
3,675
(98)
(110)
3,467
(2,922)
61
(20)
6
61,287
-
-
-
(147)
11
-
1
-
(1)
-
-
-
-
(1)
10
12
(1,120)
405
(142)
60,794
(88)
3,676
(98)
(111)
3,467
(2,922)
61
(20)
5
61,297
As at 30 September 2020
26,531
1,501
33,255
1 3.4 million shares were issued under the Dividend Reinvestment Plan (DRP) for the 2020 interim dividend (nil shares for the 2019 final Dividend; nil shares for the 2019 interim dividend as the shares were
purchased on-market and provided directly to shareholders participating in the DRP). On-market share purchases for the DRP in 2020 were $185 million (2019: $432 million).
2 The Company completed a $3.0 billion on-market share buy-back of ANZ ordinary shares purchasing $1,120 million worth of shares in 2019 resulting in 42.0 million shares being cancelled.
3 The successor funds transfer performed in preparation for the sale of the Group’s wealth business to Zurich and IOOF completed on 13 April 2019. As a result, the Group no longer eliminates the ANZ shares
previously held in Wealth Australia discontinued operations (treasury shares).
The notes appearing on pages 117 to 225 form an integral part of these financial statements.
116
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OverviewHow we create valuePerformance overviewRemuneration reportDirectors’ reportFinancial reportShareholder information
share capital
share capital
Reserves
Reserves
of the Company
of the Company
interests
interests
Share capital
Share capital
and reserves
and reserves
attributable to
attributable to
Non-
Non-
Total
Total
shareholders
shareholders
controlling
controlling
shareholders’
shareholders’
ANZ 2020 ANNUAL REPORT
ANZ 2020 ANNUAL REPORT
FINANCIAL REPORT (continued)
FINANCIAL REPORT (continued)
STATEMENT OF CHANGES IN EQUITY
STATEMENT OF CHANGES IN EQUITY
As at 1 October 2018
As at 1 October 2018
Impact on transition to AASB 9
Impact on transition to AASB 9
Profit or loss from continuing operations
Profit or loss from continuing operations
Profit or loss from discontinued operations
Profit or loss from discontinued operations
Other comprehensive income for the year from
Other comprehensive income for the year from
continuing operations
continuing operations
Other comprehensive income for the year from
Other comprehensive income for the year from
discontinued operations
discontinued operations
Total comprehensive income for the year
Total comprehensive income for the year
Transactions with equity holders in their capacity
Transactions with equity holders in their capacity
as equity holders:
as equity holders:
Dividends paid
Dividends paid
Dividend income on treasury shares held within
Dividend income on treasury shares held within
the Group’s life insurance statutory funds
the Group’s life insurance statutory funds
Group share buy-back2
Group share buy-back2
Other equity movements:
Other equity movements:
Treasury shares Wealth Australia
Treasury shares Wealth Australia
discontinued operations adjustment3
discontinued operations adjustment3
Other items
Other items
As at 30 September 2019
As at 30 September 2019
Impact on transition to AASB 16
Impact on transition to AASB 16
Profit or loss from continuing operations
Profit or loss from continuing operations
Profit or loss from discontinued operations
Profit or loss from discontinued operations
Other comprehensive income for the year from
Other comprehensive income for the year from
continuing operations
continuing operations
Total comprehensive income for the year
Total comprehensive income for the year
Transactions with equity holders in their capacity
Transactions with equity holders in their capacity
as equity holders:
as equity holders:
Dividends paid
Dividends paid
Dividend Reinvestment Plan1
Dividend Reinvestment Plan1
Other equity movements:
Other equity movements:
Group employee share acquisition scheme
Group employee share acquisition scheme
Other items
Other items
As at 30 September 2020
As at 30 September 2020
Ordinary
Ordinary
$m
$m
27,205
27,205
(1,120)
(1,120)
405
405
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
61
61
(20)
(20)
-
-
Retained
Retained
earnings
earnings
$m
$m
31,737
31,737
(624)
(624)
6,296
6,296
(343)
(343)
58
58
-
-
12
12
-
-
-
-
9
9
(88)
(88)
3,675
3,675
(98)
(98)
14
14
(2,922)
(2,922)
-
-
-
-
10
10
$m
$m
323
323
14
14
-
-
-
-
1,393
1,393
(97)
(97)
(4)
(4)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(4)
(4)
(124)
(124)
(124)
(124)
3,591
3,591
26,490
26,490
1,629
1,629
32,664
32,664
26,531
26,531
1,501
1,501
33,255
33,255
previously held in Wealth Australia discontinued operations (treasury shares).
previously held in Wealth Australia discontinued operations (treasury shares).
The notes appearing on pages 117 to 225 form an integral part of these financial statements.
The notes appearing on pages 117 to 225 form an integral part of these financial statements.
(4,481)
(4,481)
(4,481)
(4,481)
(2)
(2)
(4,483)
(4,483)
$m
$m
59,265
59,265
(610)
(610)
6,296
6,296
(343)
(343)
1,451
1,451
(97)
(97)
12
12
(1,120)
(1,120)
405
405
5
5
60,783
60,783
(88)
(88)
3,675
3,675
(98)
(98)
(110)
(110)
3,467
3,467
(2,922)
(2,922)
61
61
(20)
(20)
6
6
61,287
61,287
$m
$m
140
140
-
-
15
15
-
-
5
5
-
-
(147)
(147)
11
11
-
-
1
1
-
-
(1)
(1)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(1)
(1)
10
10
equity
equity
$m
$m
59,405
59,405
(610)
(610)
6,311
6,311
(343)
(343)
1,456
1,456
(97)
(97)
12
12
(1,120)
(1,120)
405
405
(142)
(142)
60,794
60,794
(88)
(88)
3,676
3,676
(98)
(98)
(111)
(111)
3,467
3,467
(2,922)
(2,922)
61
61
(20)
(20)
5
5
61,297
61,297
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Notes to the consolidated financial statements
1. ABOUT OUR FINANCIAL STATEMENTS
These are the financial statements for Australia and New Zealand Banking Group Limited (the Company) and its controlled entities (together, ‘the
Group’ or ‘ANZ’) for the year ended 30 September 2020. The Company is incorporated and domiciled in Australia. The address of the Company’s
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 33 markets.
On 4 November 2020, 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:
the amount is significant in size (quantitative factor);
the information is significant by nature (qualitative factor);
the user cannot understand the Group’s results without the specific disclosure (qualitative factor);
1,296
1,296
6,011
6,011
7,307
7,307
20
20
7,327
7,327
the information is critical to a user’s understanding of the impact of significant changes in the Group’s business during the period - for example,
business acquisitions or disposals (qualitative factor);
the information relates to an aspect of the Group’s operations that is important to its future performance (qualitative factor); and
the information is required under legislative requirements of the Corporations Act 2001, the Banking Act 1959 (Cth) or by the Group’s principal
regulators, including the Australian Securities and Investments Commission (ASIC) and the Australian Prudential Regulation Authority (APRA).
This section of the financial statements:
outlines the basis upon which the Group’s financial statements have been prepared; and
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 ‘for profit’ 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’s 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
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:
derivative financial instruments and in the case of fair value hedging, a fair value adjustment made to the underlying hedged exposure;
financial instruments held for trading;
financial assets and financial liabilities designated at fair value through profit or loss;
financial assets at fair value through other comprehensive income; and
assets and liabilities classified as held for sale (except those at their carrying value as per Note 29).
1 3.4 million shares were issued under the Dividend Reinvestment Plan (DRP) for the 2020 interim dividend (nil shares for the 2019 final Dividend; nil shares for the 2019 interim dividend as the shares were
1 3.4 million shares were issued under the Dividend Reinvestment Plan (DRP) for the 2020 interim dividend (nil shares for the 2019 final Dividend; nil shares for the 2019 interim dividend as the shares were
purchased on-market and provided directly to shareholders participating in the DRP). On-market share purchases for the DRP in 2020 were $185 million (2019: $432 million).
purchased on-market and provided directly to shareholders participating in the DRP). On-market share purchases for the DRP in 2020 were $185 million (2019: $432 million).
2 The Company completed a $3.0 billion on-market share buy-back of ANZ ordinary shares purchasing $1,120 million worth of shares in 2019 resulting in 42.0 million shares being cancelled.
2 The Company completed a $3.0 billion on-market share buy-back of ANZ ordinary shares purchasing $1,120 million worth of shares in 2019 resulting in 42.0 million shares being cancelled.
3 The successor funds transfer performed in preparation for the sale of the Group’s wealth business to Zurich and IOOF completed on 13 April 2019. As a result, the Group no longer eliminates the ANZ shares
3 The successor funds transfer performed in preparation for the sale of the Group’s wealth business to Zurich and IOOF completed on 13 April 2019. As a result, the Group no longer eliminates the ANZ shares
In accordance with AASB 1038 Life Insurance Contracts (AASB 1038) we have measured life insurance liabilities using the Margin on Services (MoS)
model. In accordance with AASB 119 Employee Benefits (AASB 119) we have measured defined benefit obligations using the Projected Unit
Credit Method.
DISCONTINUED OPERATIONS
The aligned dealer groups business sold to IOOF Holdings Limited (IOOF) completed on 1 October 2018; the life insurance business sold to Zurich
Financial Services Australia Limited completed on 31 May 2019; and the Wealth Australia pensions and investments business sold to IOOF was
completed on 31 January 2020. As a result of these sale transactions, the associated Group reclassification and consolidation impacts are treated as
discontinued operations from a financial reporting perspective.
116
116
117
117
ANZ 2020 Annual Report
ANZ 2020 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
1. ABOUT OUR FINANCIAL STATEMENTS (continued)
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 Group 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 at fair value through profit or loss 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 fair value through other comprehensive income 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 – but if for a significant transaction 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 as part of the gain or
loss on sale.
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.
118
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OverviewHow we create valuePerformance overviewRemuneration reportDirectors’ reportFinancial reportShareholder information
BASIS OF CONSOLIDATION
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
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
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
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 Group the current ability to direct the relevant activities of the
power over the entity. We assess power by examining existing rights that give the Group 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.
entity. We have eliminated, on consolidation, the effect of all transactions between entities in the Group.
FOREIGN CURRENCY TRANSLATION
FOREIGN CURRENCY TRANSLATION
TRANSACTIONS AND BALANCES
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
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.
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.
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 at fair value through profit or loss and report them as part of the fair value gain or loss on
We measure translation differences on non-monetary items at fair value through profit or loss 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 fair value through other comprehensive income translation
these items. For non-monetary items classified as investment securities measured at fair value through other comprehensive income translation
differences are included in Other comprehensive income.
differences are included in Other comprehensive income.
FINANCIAL STATEMENTS OF FOREIGN OPERATIONS THAT HAVE A FUNCTIONAL CURRENCY THAT IS NOT AUSTRALIAN DOLLARS
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
The financial statements of our foreign operations are translated into Australian dollars for consolidation into the Group financial statements using the
following method:
following method:
Foreign currency item
Foreign currency item
Exchange rate used
Exchange rate used
Assets and liabilities
Assets and liabilities
The reporting date rate
The reporting date rate
Equity
Equity
The initial investment date rate
The initial investment date rate
Income and expenses
Income and expenses
The average rate for the period – but if for a significant transaction we believe the average rate is not
The average rate for the period – but if for a significant transaction we believe the average rate is not
reasonable, then we use the rate at the date of the transaction
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
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 as part of the gain or
reserve in equity. When we dispose of a foreign operation, the cumulative exchange differences are transferred to profit or loss as part of the gain or
loss on sale.
loss on sale.
FIDUCIARY ACTIVITIES
FIDUCIARY ACTIVITIES
another legislative requirement.
another legislative requirement.
ANZ 2020 ANNUAL REPORT
ANZ 2020 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
Notes to the consolidated financial statements (continued)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. ABOUT OUR FINANCIAL STATEMENTS (continued)
1. ABOUT OUR FINANCIAL STATEMENTS (continued)
1. ABOUT OUR FINANCIAL STATEMENTS (continued)
KEY JUDGEMENTS AND ESTIMATES
In the process of applying the Group’s 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.
Coronavirus (COVID-19) pandemic
The COVID-19 pandemic and its effect on the global economy have impacted our customers, operations and Group performance. The
outbreak necessitated governments to respond at unprecedented levels to protect the health of the population, local economies and
livelihoods. It has affected different regions at different times and at varying degrees and there remains a risk of subsequent waves of
infection. Thus the pandemic has significantly increased the estimation uncertainty in the preparation of these financial statements
including:
•
•
•
the extent and duration of the disruption to business arising from the actions of governments, businesses and consumers to
contain the spread of the virus;
the extent and duration of the expected economic downturn, and subsequent recovery. This includes the impacts on capital
markets and liquidity, credit quality, increasing unemployment, declines in consumer spending, reductions in production, and
other restructuring activities; and
the effectiveness of government and central bank measures to support businesses and consumers through this disruption and
economic downturn.
The Group has made various accounting estimates in these financial statements based on forecasts of economic conditions which
reflect expectations and assumptions as at 30 September 2020 about future events that the Directors believe are reasonable in the
circumstances. There is a considerable degree of judgement involved in preparing these estimates. The underlying assumptions are
also subject to uncertainties which are often outside the control of the Group. Accordingly, actual economic conditions are likely to be
different from those forecast since anticipated events frequently do not occur as expected, and the effect of those 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, fair value measurement, and the assessment of the recoverable amount of non-financial assets.
The impact of the COVID-19 pandemic on each of these estimates is discussed further in the relevant note of these financial
statements. Readers should carefully consider these disclosures in light of the inherent uncertainty described above.
The Group provides fiduciary services to third parties including custody, nominee and trustee services. This involves the Group holding assets on
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
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
control the assets, then we do not recognise these transactions in these financial statements, except when required by accounting standards or
ACCOUNTING STANDARDS ADOPTED IN THE PERIOD
AASB 16 Leases (AASB 16)
AASB 16 became effective for the Group from 1 October 2019 and replaced the previous standard AASB 117 Leases (AASB 117). AASB 16 primarily
impacts the Group’s property and technology leases which were previously classified as operating leases. Under AASB 117, operating leases were not
recognised on balance sheet and rent payments were expensed over the lease term.
Under AASB 16, the Group recognises all leases (except for leases of low value assets and short term leases) on balance sheet under a single
accounting model. Accordingly, the Group recognises its right to use an underlying leased asset over the lease term as a right-of-use (ROU) asset, and
its obligation to make lease payments as a lease liability. In the income statement, the Group recognises depreciation expense on the ROU asset and
interest expense on the lease liability. As a result, lease expenses will be higher in the early periods of a lease and lower in the later periods of the lease
compared to the previous standard where expenses were constant over the lease term. Cumulative expenses over the life of a lease will not change.
As permitted by the standard, the Group does not recognise ROU assets and lease liabilities for leases of low value items and short term leases (less
than 12 months). Instead, the lease payments associated with these leases are recognised as an operating expense in the income statement on a
straight-line basis over the lease term.
The Group has applied the modified retrospective transition approach whereby initial lease liabilities are recognised based on the present value of
remaining lease payments as of the transition date. The initial ROU asset recognised for certain large commercial and retail leases was measured as if
AASB 16 had always been applied to the leases. For all other leases, the initial ROU asset was measured as equal to the initial lease liability.
The implementation of AASB 16 requires management to make certain key judgements including the determination of lease terms, discount rates
and identifying arrangements that contain a lease. Extension options are included in the lease term if the Group is reasonably certain the option will
be exercised. This assessment includes consideration of facts and circumstances that create an economic incentive for the Group to exercise the
option.
Based on the modified retrospective transition approach, the Group recognised lease liabilities of $1.7 billion presented within Payables and other
liabilities and ROU assets of $1.6 billion presented within Premises and equipment. This resulted in a reduction to opening retained earnings of $88
million and an increase in deferred tax assets of $37 million as of 1 October 2019. Comparatives have not been restated.
118
118
119
119
ANZ 2020 Annual Report
ANZ 2020 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
1. ABOUT OUR FINANCIAL STATEMENTS (continued)
ACCOUNTING STANDARDS ADOPTED IN THE PERIOD (continued)
In addition, the Group elected to apply the following practical expedients as permitted under the modified retrospective transition approach:
a)
Impairment of ROU assets at the transition date was assessed by relying on onerous lease provisions previously recognised as of 30 September
2019 under AASB 117;
Initial direct costs associated with entering leases prior to the transition date were excluded from the carrying value of ROU assets recognised at
transition;
b)
c) No ROU assets or lease liabilities were recognised for certain leases with less than 12 months remaining as of the transition date; these leases were
treated as short-term leases with all lease payments recognised in rent expense as incurred; and
d) Hindsight was used to determine the lease term of contracts that contained options to extend the lease.
The following table reconciles the operating lease commitments disclosed under AASB 117 as at 30 September 2019 to the opening lease liabilities
recognised under AASB 16 as at 1 October 2019.
Operating Lease Commitments as at 30 September 2019
Increase in lease term for extension options
Exclusion of low value leases and leases of less than 12 months
Exclusion of service components
Other
Total Undiscounted Lease Payments
Effect of discounting at a weighted average incremental borrowing rate of 2.44%
Total lease liabilities under AASB 16 as at 1 October 2019
During the reporting period, the Group recognised the following amounts in the income statement
Depreciation expense on ROU assets
Interest expense on lease liabilities
Interest expense on makegood provisions
Rent expense in relation to low value leases and leases of less than 12 months
Other income in relation to subleases
$m
1,656
210
(19)
(10)
(17)
1,820
(141)
1,679
$m
394
37
2
35
21
The Group's accounting policies with respect to lease arrangements where it acts as lessor have not changed under AASB 16 except where the Group
subleases certain leased properties. Where the Group acts as intermediate lessor, it classifies the sublease as either a finance lease or operating lease
by reference to the ROU asset of the head lease. Income from operating subleases is recognised in Other operating income in the Income Statement.
120
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OverviewHow we create valuePerformance overviewRemuneration reportDirectors’ reportFinancial reportShareholder information 2019 under AASB 117;
2019 under AASB 117;
transition;
transition;
b)
b)
Initial direct costs associated with entering leases prior to the transition date were excluded from the carrying value of ROU assets recognised at
Initial direct costs associated with entering leases prior to the transition date were excluded from the carrying value of ROU assets recognised at
c) No ROU assets or lease liabilities were recognised for certain leases with less than 12 months remaining as of the transition date; these leases were
c) No ROU assets or lease liabilities were recognised for certain leases with less than 12 months remaining as of the transition date; these leases were
treated as short-term leases with all lease payments recognised in rent expense as incurred; and
treated as short-term leases with all lease payments recognised in rent expense as incurred; and
d) Hindsight was used to determine the lease term of contracts that contained options to extend the lease.
d) Hindsight was used to determine the lease term of contracts that contained options to extend the lease.
recognised under AASB 16 as at 1 October 2019.
recognised under AASB 16 as at 1 October 2019.
Operating Lease Commitments as at 30 September 2019
Operating Lease Commitments as at 30 September 2019
Increase in lease term for extension options
Increase in lease term for extension options
Exclusion of low value leases and leases of less than 12 months
Exclusion of low value leases and leases of less than 12 months
Exclusion of service components
Exclusion of service components
Other
Other
Total Undiscounted Lease Payments
Total Undiscounted Lease Payments
Effect of discounting at a weighted average incremental borrowing rate of 2.44%
Effect of discounting at a weighted average incremental borrowing rate of 2.44%
Total lease liabilities under AASB 16 as at 1 October 2019
Total lease liabilities under AASB 16 as at 1 October 2019
During the reporting period, the Group recognised the following amounts in the income statement
During the reporting period, the Group recognised the following amounts in the income statement
Depreciation expense on ROU assets
Depreciation expense on ROU assets
Interest expense on lease liabilities
Interest expense on lease liabilities
Interest expense on makegood provisions
Interest expense on makegood provisions
Rent expense in relation to low value leases and leases of less than 12 months
Rent expense in relation to low value leases and leases of less than 12 months
Other income in relation to subleases
Other income in relation to subleases
$m
$m
1,656
1,656
210
210
(19)
(19)
(10)
(10)
(17)
(17)
1,820
1,820
(141)
(141)
1,679
1,679
$m
$m
394
394
37
37
2
2
35
35
21
21
The Group's accounting policies with respect to lease arrangements where it acts as lessor have not changed under AASB 16 except where the Group
The Group's accounting policies with respect to lease arrangements where it acts as lessor have not changed under AASB 16 except where the Group
subleases certain leased properties. Where the Group acts as intermediate lessor, it classifies the sublease as either a finance lease or operating lease
subleases certain leased properties. Where the Group acts as intermediate lessor, it classifies the sublease as either a finance lease or operating lease
by reference to the ROU asset of the head lease. Income from operating subleases is recognised in Other operating income in the Income Statement.
by reference to the ROU asset of the head lease. Income from operating subleases is recognised in Other operating income in the Income Statement.
ANZ 2020 ANNUAL REPORT
ANZ 2020 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
Notes to the consolidated financial statements (continued)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. ABOUT OUR FINANCIAL STATEMENTS (continued)
1. ABOUT OUR FINANCIAL STATEMENTS (continued)
ACCOUNTING STANDARDS ADOPTED IN THE PERIOD (continued)
ACCOUNTING STANDARDS ADOPTED IN THE PERIOD (continued)
1. ABOUT OUR FINANCIAL STATEMENTS (continued)
ACCOUNTING STANDARDS ADOPTED IN THE PERIOD (continued)
In addition, the Group elected to apply the following practical expedients as permitted under the modified retrospective transition approach:
In addition, the Group elected to apply the following practical expedients as permitted under the modified retrospective transition approach:
Interest Rate Benchmark Reform
a)
a)
Impairment of ROU assets at the transition date was assessed by relying on onerous lease provisions previously recognised as of 30 September
Impairment of ROU assets at the transition date was assessed by relying on onerous lease provisions previously recognised as of 30 September
Background
Interbank offered rates (IBORs), such as the London Interbank Offered Rate (LIBOR), play a critical role in global financial markets, serving as reference
rates for derivatives, loans and securities, and as parameters in the valuation of financial instruments.
Uncertainty surrounding the integrity of IBOR rates has in recent years, led regulators, central banks and market participants to work towards a
transition to alternative risk-free benchmark reference rates (RFRs) and market-led working groups in respective jurisdictions have recommended
alternative risk-free reference rates, which are gradually being adopted. Progress in the transition to these new benchmarks has resulted in significant
uncertainty in the future of IBOR benchmarks beyond 1 January 2022.
The following table reconciles the operating lease commitments disclosed under AASB 117 as at 30 September 2019 to the opening lease liabilities
The following table reconciles the operating lease commitments disclosed under AASB 117 as at 30 September 2019 to the opening lease liabilities
Accounting amendments
In response to the uncertainty about the long-term viability of these benchmark rates, and LIBOR in particular, the International Accounting Standards
Board (IASB) has established a project to consider the financial reporting implications of the reform. The transition from IBORs is expected to have an
impact on various elements of financial instrument accounting, including hedge accounting, as well as fair value methodologies and disclosures.
In October 2019, the AASB issued AASB 2019-3 Amendments to Australian Accounting Standards – Interest Rate Benchmark Reform, which amends certain
existing hedge accounting requirements to provide relief from potential effects of the uncertainty caused by the interest rate benchmark reform. The
Group elected to early adopt the amendments from 1 October 2019 which have not had a significant impact on the Group. These amendments
address the accounting effects of uncertainty in the period leading up to the reform arising from the Group’s ability to satisfy the existing prospective
hedge effectiveness requirements of AASB 139. This uncertainty arises as it is not known when the hedged items (such as debt issuances) and
associated hedging instruments (such as interest rate swaps) will be changed to reference the RFRs, or if both the hedging item and the associated
hedging instrument will move to the new rates at the same time. The Group has applied this amendment to all hedge accounted relationships (cash
flow or fair value hedges) where the reform gives rise to uncertainties about the timing or amount of IBOR based cash flows of the hedged item or
hedging instrument.
In September 2020, the AASB issued AASB 2020-8 Amendments to Australian Accounting Standards – Interest Rate Benchmark Reform – Phase 2 which is
mandatory for the Group for the 2022 financial year. This standard addresses issues that may affect the Group at the point of transition from an
existing IBOR rate to a RFR, including the effects of changes to contractual cash flows or hedging relationships. The standard includes amendments in
respect of:
Modification of a financial asset or a financial liability measured at amortised cost
IBOR reform is expected to result in a change to the basis for determining contractual cash flows of impacted assets and liabilities of the Group.
The amendments provide a practical expedient to account for a change in the basis for determining the contractual cash flows as a result of
IBOR reform by updating the effective interest rate. As a result, no immediate gain or loss is recognised. This applies only when the change is
necessary as a direct consequence of the reform, and the new basis for determining the contractual cash flows is economically equivalent to the
previous basis.
Additional relief for hedging relationships
The Standard also amends a number of existing hedge accounting requirements that will assist the Group to maintain its existing hedge
accounted relationships post IBOR transition. The Group will continue to record any ongoing hedge ineffectiveness, including that generated by
changes as a result of interest rate reform, within the Income Statement.
The Group is in the process of assessing the impact of the new standard on its financial statements.
Impact of IBOR reform
The Group has exposure to IBOR through its issuance of debt, the structural interest rate risk position, holdings of investment securities, products
denominated in foreign currencies and associated hedging activities in our treasury and markets businesses within the TSO and Group Centre and
Institutional divisions respectively.
The Group has established an enterprise-wide Benchmark Transition Program to manage the transition. The program includes the assessment and
actions necessary to accommodate the transition to RFRs as they apply to internal processes and systems including pricing, risk management,
documentation and hedge arrangements. The program includes management of the impact on customers.
Impact of IBOR reform on the Group’s hedging relationships
Certain IBOR rates are subject to replacement by RFRs. The Group has hedge accounted relationships referencing IBORs, with the most significant
interest rate benchmarks to which the Group's hedging relationships are exposed to are USD LIBOR, Euro Interbank Offered Rate (EURIBOR), Bank Bill
Swap Rate (BBSW) and Bank Bill Market (BKBM).
Of these benchmarks the Group expects BBSW, BKBM and EURIBOR to exist as benchmark rates for the foreseeable future and therefore does not
believe its BBSW, BKBM or EURIBOR benchmark fair value or cash flow hedges will be directly impacted by IBOR reform.
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ANZ 2020 Annual Report ANZ 2020 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
1. About Our Financial Statements (continued)
ACCOUNTING STANDARDS ADOPTED IN THE PERIOD (continued)
Interest Rate Benchmark Reform (continued)
The table below details the carrying values of the Group's exposures designated in hedge accounting relationships that will be impacted by IBOR
reform, principally USD LIBOR. The nominal value of the associated hedging instruments is also included:
Hedged items
Investment securities at FVOCI
Net loans and advances
Debt issuances
Hedging instruments
Fair value hedges
Cash flow hedges
Notional designated up to
31 December 2021
$m
12,778
Notional designated
beyond 31 December 2021
$m
32,250
As at 30 September 2020
USD LIBOR exposures
$m
15,002
111
32,235
Total Notional Amount
$m
45,028
-
1,055
1,055
As at 30 September 2020 the Group also has GBP LIBOR, CHF LIBOR and JPY LIBOR exposures designated in hedge accounting relationships of $927
million, $975 million and $2,131 million respectively.
In addition to hedge accounted relationships that will be impacted by IBOR reform, the Group has exposures to other financial instruments
referencing an IBOR rate that are also subject to reform. The Group is continuing to monitor market developments in relation to the transition to RFRs
from IBOR rates and their impact on the Group’s financial assets and liabilities to ensure that there are no unexpected consequences or disruption
from the transition.
AASB INTERPRETATION 23 UNCERTAINTY OVER INCOME TAX TREATMENTS (AASB Interpretation 23)
AASB Interpretation 23 became effective for the Group from 1 October 2019. The interpretation clarifies application of recognition and measurement
requirements in AASB 112 Income Taxes where there is uncertainty over income tax treatments. As the Group’s existing policy aligned with the
requirements of AASB Interpretation 23, the interpretation had no material impact on the Group.
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 2020, 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 introduces new hedge accounting requirements which more closely align accounting with risk management activities undertaken when
hedging both financial and non-financial risks. AASB 9 provides the Group with an accounting policy choice to continue to apply the AASB 139 hedge
accounting requirements until the International Accounting Standards Board’s ongoing project on 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 is not expected to have material impact on the Group.
REVISED CONCEPTUAL FRAMEWORK
In June 2019 the AASB issued a revised Conceptual Framework for Financial Reporting. The new Framework includes updated definitions and criteria
for the recognition and derecognition of assets and liabilities. Additionally, it introduces new concepts on measurement, including factors to consider
when selecting a measurement basis. The revised Conceptual Framework will apply to the Group from 1 October 2020 and is not expected to have a
material impact on the Group.
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ANZ 2020 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
1. About Our Financial Statements (continued)
1. About Our Financial Statements (continued)
ACCOUNTING STANDARDS ADOPTED IN THE PERIOD (continued)
ACCOUNTING STANDARDS ADOPTED IN THE PERIOD (continued)
Interest Rate Benchmark Reform (continued)
Interest Rate Benchmark Reform (continued)
The table below details the carrying values of the Group's exposures designated in hedge accounting relationships that will be impacted by IBOR
The table below details the carrying values of the Group's exposures designated in hedge accounting relationships that will be impacted by IBOR
reform, principally USD LIBOR. The nominal value of the associated hedging instruments is also included:
reform, principally USD LIBOR. The nominal value of the associated hedging instruments is also included:
Hedged items
Hedged items
Investment securities at FVOCI
Investment securities at FVOCI
Net loans and advances
Net loans and advances
Debt issuances
Debt issuances
Hedging instruments
Hedging instruments
Fair value hedges
Fair value hedges
Cash flow hedges
Cash flow hedges
Notional designated up to
Notional designated up to
Notional designated
Notional designated
31 December 2021
31 December 2021
beyond 31 December 2021
beyond 31 December 2021
Total Notional Amount
Total Notional Amount
$m
$m
12,778
12,778
-
-
$m
$m
32,250
32,250
1,055
1,055
As at 30 September 2020
As at 30 September 2020
USD LIBOR exposures
USD LIBOR exposures
$m
$m
15,002
15,002
111
111
32,235
32,235
$m
$m
45,028
45,028
1,055
1,055
As at 30 September 2020 the Group also has GBP LIBOR, CHF LIBOR and JPY LIBOR exposures designated in hedge accounting relationships of $927
As at 30 September 2020 the Group also has GBP LIBOR, CHF LIBOR and JPY LIBOR exposures designated in hedge accounting relationships of $927
million, $975 million and $2,131 million respectively.
million, $975 million and $2,131 million respectively.
In addition to hedge accounted relationships that will be impacted by IBOR reform, the Group has exposures to other financial instruments
In addition to hedge accounted relationships that will be impacted by IBOR reform, the Group has exposures to other financial instruments
referencing an IBOR rate that are also subject to reform. The Group is continuing to monitor market developments in relation to the transition to RFRs
referencing an IBOR rate that are also subject to reform. The Group is continuing to monitor market developments in relation to the transition to RFRs
from IBOR rates and their impact on the Group’s financial assets and liabilities to ensure that there are no unexpected consequences or disruption
from IBOR rates and their impact on the Group’s financial assets and liabilities to ensure that there are no unexpected consequences or disruption
from the transition.
from the transition.
AASB INTERPRETATION 23 UNCERTAINTY OVER INCOME TAX TREATMENTS (AASB Interpretation 23)
AASB INTERPRETATION 23 UNCERTAINTY OVER INCOME TAX TREATMENTS (AASB Interpretation 23)
AASB Interpretation 23 became effective for the Group from 1 October 2019. The interpretation clarifies application of recognition and measurement
AASB Interpretation 23 became effective for the Group from 1 October 2019. The interpretation clarifies application of recognition and measurement
requirements in AASB 112 Income Taxes where there is uncertainty over income tax treatments. As the Group’s existing policy aligned with the
requirements in AASB 112 Income Taxes where there is uncertainty over income tax treatments. As the Group’s existing policy aligned with the
requirements of AASB Interpretation 23, the interpretation had no material impact on the Group.
requirements of AASB Interpretation 23, the interpretation had no material impact on the Group.
ACCOUNTING STANDARDS NOT EARLY ADOPTED
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
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 2020, and have not been applied by the Group in preparing these financial statements. Further details of these are
for the year ended 30 September 2020, and have not been applied by the Group in preparing these financial statements. Further details of these are
set out below.
set out below.
GENERAL HEDGE ACCOUNTING
GENERAL HEDGE ACCOUNTING
AASB 9 introduces new hedge accounting requirements which more closely align accounting with risk management activities undertaken when
AASB 9 introduces new hedge accounting requirements which more closely align accounting with risk management activities undertaken when
hedging both financial and non-financial risks. AASB 9 provides the Group with an accounting policy choice to continue to apply the AASB 139 hedge
hedging both financial and non-financial risks. AASB 9 provides the Group with an accounting policy choice to continue to apply the AASB 139 hedge
accounting requirements until the International Accounting Standards Board’s ongoing project on macro hedge accounting is completed. The Group
accounting requirements until the International Accounting Standards Board’s ongoing project on macro hedge accounting is completed. The Group
continues to apply the hedge accounting requirements of AASB 139.
continues to apply the hedge accounting requirements of AASB 139.
AASB 17 INSURANCE CONTRACTS (AASB 17)
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,
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,
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.
presentation and disclosure of insurance contracts.
The measurement, presentation and disclosure requirements under AASB 17 are significantly different from current accounting standards. Although
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.
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 is not expected to have material impact on the Group.
AASB 17 is not expected to have material impact on the Group.
REVISED CONCEPTUAL FRAMEWORK
REVISED CONCEPTUAL FRAMEWORK
In June 2019 the AASB issued a revised Conceptual Framework for Financial Reporting. The new Framework includes updated definitions and criteria
In June 2019 the AASB issued a revised Conceptual Framework for Financial Reporting. The new Framework includes updated definitions and criteria
for the recognition and derecognition of assets and liabilities. Additionally, it introduces new concepts on measurement, including factors to consider
for the recognition and derecognition of assets and liabilities. Additionally, it introduces new concepts on measurement, including factors to consider
when selecting a measurement basis. The revised Conceptual Framework will apply to the Group from 1 October 2020 and is not expected to have a
when selecting a measurement basis. The revised Conceptual Framework will apply to the Group from 1 October 2020 and is not expected to have a
material impact on the Group.
material impact on the Group.
2. OPERATING INCOME
Net interest income
Interest income by type of financial asset
Investment securities - FVOCI
Financial assets at amortised cost
Trading securities
Financial assets designated at FV through profit or loss
Interest income
Interest expense by type of financial liability
Financial liabilities at amortised cost
Securities sold short
Financial liabilities designated at FV through profit or loss
Interest expense
Major bank levy
Net interest income
Other operating income
i) Fee and commission income
Lending fees1
Non-lending fees
Commissions
Funds management income
Fee and commission income
Fee and commission expense
Net fee and commission income
ii) Other income
Net foreign exchange earnings and other financial instruments income2
Impairment of AmBank
Impairment of PT Panin
Sale of UDC
Sale of OnePath Life (NZ) Ltd (OPL NZ)
Sale of Paymark Limited (Paymark)
Sale of ANZ Royal Bank (Cambodia) Ltd (Cambodia JV)
Sale of PNG Retail, Commercial & SME
Dividend income on equity securities
Other
Other income
Other operating income
Net income from insurance business
Share of associates' profit
Operating income3
1. Lending fees exclude fees treated as part of the effective yield calculation in interest income.
2.
Notes to the consolidated financial statements (continued)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
2020
$m
2019
$m
1,162
22,675
584
5
24,426
1,624
28,600
848
5
31,077
(9,783)
(16,149)
(95)
(93)
(9,971)
(406)
14,049
579
2,687
121
275
3,662
(1,337)
2,325
1,809
(595)
(220)
(7)
-
-
-
-
26
17
1,030
3,355
78
155
17,637
(110)
(116)
(16,375)
(363)
14,339
602
3,059
124
254
4,039
(1,462)
2,577
1,278
-
-
-
89
37
10
1
28
38
1,481
4,058
126
262
18,785
122
122
123
123
Includes fair value movements (excluding realised and accrued interest) on derivatives not designated as accounting hedges entered into to manage interest rate and foreign exchange risk on funding
instruments, ineffective portions of cash flow hedges, and fair value movements in financial assets and liabilities designated at fair value through profit or loss.
Includes charges for customer remediation of $174 million (2019: $212 million).
3.
ANZ 2020 Annual Report ANZ 2020 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
2. OPERATING INCOME (continued)
RECOGNITION AND MEASUREMENT
NET INTEREST INCOME
Interest Income and Expense
We recognise interest income and expense for all financial instruments, including those classified as held for trading, assets measured at fair
value through other comprehensive income or designated at fair value through profit or loss in net interest income. 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 fair value through other comprehensive income. 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. This is 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 the Company. The Group has
determined that the levy represents a finance cost for the Group and $406 million (2019: $363 million) is presented as interest expense in
the Income Statement.
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.
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 (including annual package fees that
provide benefits on other ANZ products).
non-lending fees includes fees associated with deposit and credit card accounts, interchange fees and fees charged for specific
customer transactions such as international money transfers. 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.
commissions represent fees from third parties where ANZ acts as an agent by arranging a third party (e.g. an insurance provider) to
provide goods and services to a customer. In such cases, ANZ is 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, the Group only recognises the net
commission it retains as revenue. When the commission is variable based on factors outside the control of the Group (e.g. 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.
funds management income represents fees earned from customers for providing financial advice and fees for asset management
services and advice provided to investment funds. Revenue is recognised either at the point the financial advice is provided or 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:
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;
fair value movements (excluding realised and accrued interest) on derivatives that we use to manage interest rate and foreign
exchange risk on funding instruments not designated as accounting hedges;
the ineffective portions of fair value hedges, cash flow hedges and net investment hedges;
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ANZ 2020 ANNUAL REPORT
ANZ 2020 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
Notes to the consolidated financial statements (continued)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
2. OPERATING INCOME (continued)
2. OPERATING INCOME (continued)
2. OPERATING INCOME (continued)
RECOGNITION AND MEASUREMENT (continued)
immediately upon sale or repayment of a hedged item, the unamortised fair value adjustments in items designated as fair value
hedges and amounts accumulated in equity related to designated cash flow hedges;
fair value movements on financial assets and financial liabilities designated at fair value through profit or loss or held for trading;
amounts released from the fair value through other comprehensive income (FVOCI) reserve when a debt instrument classified as
FVOCI is sold; and
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 the significant risks and rewards from the asset transfer to the buyer.
NET INCOME FROM INSURANCE BUSINESS
We recognise:
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
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’ PROFIT
The equity method is applied to accounting for associates. Under the equity method, the Group’s share of the after tax results of
associates is included in the Income Statement and the Statement of Comprehensive Income.
RECOGNITION AND MEASUREMENT
RECOGNITION AND MEASUREMENT
NET INTEREST INCOME
NET INTEREST INCOME
Interest Income and Expense
Interest Income and Expense
We recognise interest income and expense for all financial instruments, including those classified as held for trading, assets measured at fair
We recognise interest income and expense for all financial instruments, including those classified as held for trading, assets measured at fair
value through other comprehensive income or designated at fair value through profit or loss in net interest income. We use the effective
value through other comprehensive income or designated at fair value through profit or loss in net interest income. 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
interest rate method to calculate the amortised cost of assets held at amortised cost and to recognise interest income on financial assets
measured at fair value through other comprehensive income. The effective interest rate is the rate that discounts the stream of estimated
measured at fair value through other comprehensive income. 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
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
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.
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
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. This is presented as part of interest income or expense depending on whether the underlying financial
effective interest rate method. This is presented as part of interest income or expense depending on whether the underlying financial
instrument is a financial asset or financial liability.
instrument is a financial asset or financial liability.
The Major Bank Levy Act 2017 (‘Levy’ or ‘Major bank levy’) applies a rate of 0.06% to certain liabilities of the Company. The Group has
The Major Bank Levy Act 2017 (‘Levy’ or ‘Major bank levy’) applies a rate of 0.06% to certain liabilities of the Company. The Group has
determined that the levy represents a finance cost for the Group and $406 million (2019: $363 million) is presented as interest expense in
determined that the levy represents a finance cost for the Group and $406 million (2019: $363 million) is presented as interest expense in
Major Bank Levy
Major Bank Levy
the Income Statement.
the Income Statement.
OTHER OPERATING INCOME
OTHER OPERATING INCOME
Fee and Commission Revenue
Fee and Commission Revenue
satisfied within one reporting period.
satisfied within one reporting period.
We recognise fee and commission revenue arising from contracts with customers (a) over time when the performance obligation is
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 across more than one reporting period or (b) at a point in time when the performance obligation is satisfied immediately or is
lending fees exclude fees treated as part of the effective yield calculation of interest income. Lending fees include certain guarantee
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
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 (including annual package fees that
distinct good or service that are recognised separately from the underlying lending product (including annual package fees that
provide benefits on other ANZ products).
provide benefits on other ANZ products).
non-lending fees includes fees associated with deposit and credit card accounts, interchange fees and fees charged for specific
non-lending fees includes fees associated with deposit and credit card accounts, interchange fees and fees charged for specific
customer transactions such as international money transfers. Where the Group provides multiple goods or services to a customer
customer transactions such as international money transfers. 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
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.
relative stand-alone selling price of each performance obligation. Revenue is recognised as each performance obligation is satisfied.
commissions represent fees from third parties where ANZ acts as an agent by arranging a third party (e.g. an insurance provider) to
commissions represent fees from third parties where ANZ acts as an agent by arranging a third party (e.g. an insurance provider) to
provide goods and services to a customer. In such cases, ANZ is not primarily responsible for providing the underlying good or service
provide goods and services to a customer. In such cases, ANZ is 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, the Group only recognises the net
to the customer. If the Group collects funds on behalf of a third party when acting as an agent, the Group only recognises the net
commission it retains as revenue. When the commission is variable based on factors outside the control of the Group (e.g. a trail
commission it retains as revenue. When the commission is variable based on factors outside the control of the Group (e.g. 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
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.
future periods.
funds management income represents fees earned from customers for providing financial advice and fees for asset management
funds management income represents fees earned from customers for providing financial advice and fees for asset management
services and advice provided to investment funds. Revenue is recognised either at the point the financial advice is provided or over
services and advice provided to investment funds. Revenue is recognised either at the point the financial advice is provided or over
the period in which the asset management services are delivered. Performance fees associated with funds management activities are
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.
only recognised when it becomes highly probable the performance hurdle will be achieved.
Net Foreign Exchange Earnings and Other Financial Instruments Income
Net Foreign Exchange Earnings and Other Financial Instruments Income
We recognise the following as net foreign exchange earnings and other financial instruments income:
We recognise the following as net foreign exchange earnings and other financial instruments income:
exchange rate differences arising on the settlement of monetary items and translation differences on monetary items translated at
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;
rates different to those at which they were initially recognised or included in a previous financial report;
fair value movements (excluding realised and accrued interest) on derivatives that we use to manage interest rate and foreign
fair value movements (excluding realised and accrued interest) on derivatives that we use to manage interest rate and foreign
exchange risk on funding instruments not designated as accounting hedges;
exchange risk on funding instruments not designated as accounting hedges;
the ineffective portions of fair value hedges, cash flow hedges and net investment hedges;
the ineffective portions of fair value hedges, cash flow hedges and net investment hedges;
124
124
125
125
ANZ 2020 Annual Report
ANZ 2020 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
3. OPERATING EXPENSES
Personnel
Salaries and related costs
Superannuation costs
Other
Personnel1
Premises
Rent
Depreciation
Other
Premises2
Technology
Depreciation and amortisation2,3
Subscription licences and outsourced services
Other
Technology (excluding personnel)1
Restructuring
Other
Advertising and public relations
Professional fees
Freight, stationery, postage and communication
Royal Commission legal costs
Other4
Other1
Operating expenses1
2020
$m
4,310
329
239
4,878
84
517
188
789
858
780
186
1,824
161
177
667
205
-
682
1,731
9,383
20191
$m
4,249
293
223
4,765
450
167
178
795
694
672
168
1,534
77
226
537
216
15
906
1,900
9,071
1.
Includes customer remediation expenses of $209 million in 2020 (2019: $373 million).
2. Following the adoption of AASB 16 on 1 October 2019, with the exception of low value leases and leases of less than 12 months, expenses associated with leases are shown as depreciation of the right-of-
use asset and interest expense associated with the lease liability (comparatives not restated).
3. During the 2020 financial year, the Group amended the application of its software amortisation policy to reflect the shorter useful life of software caused by rapidly changing technology and business
requirements. As a result of these changes, the Group recognised accelerated amortisation of $197 million during the year. Refer to Note 20 Goodwill and Other Intangible Assets for further details.
Includes goodwill write-off of $77 million in the September 2020 financial year.
4.
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.
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
3. OPERATING EXPENSES
3. OPERATING EXPENSES
3. OPERATING EXPENSES (continued)
Notes to the consolidated financial statements (continued)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
RECOGNITION AND MEASUREMENT
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 on 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
31 Employee Share and Option Plans.
2020
2020
$m
$m
4,310
4,310
329
329
239
239
4,878
4,878
84
84
517
517
188
188
789
789
858
858
780
780
186
186
1,824
1,824
161
161
177
177
667
667
205
205
-
-
682
682
1,731
1,731
9,383
9,383
20191
20191
$m
$m
4,249
4,249
293
293
223
223
4,765
4,765
450
450
167
167
178
178
795
795
694
694
672
672
168
168
1,534
1,534
77
77
226
226
537
537
216
216
15
15
906
906
1,900
1,900
9,071
9,071
ANZ 2020 ANNUAL REPORT
ANZ 2020 ANNUAL REPORT
Personnel
Personnel
Salaries and related costs
Salaries and related costs
Superannuation costs
Superannuation costs
Other
Other
Personnel1
Personnel1
Premises
Premises
Rent
Rent
Depreciation
Depreciation
Other
Other
Premises2
Premises2
Technology
Technology
Other
Other
Restructuring
Restructuring
Other
Other
Other4
Other4
Other1
Other1
1.
1.
4.
4.
Depreciation and amortisation2,3
Depreciation and amortisation2,3
Subscription licences and outsourced services
Subscription licences and outsourced services
Technology (excluding personnel)1
Technology (excluding personnel)1
Advertising and public relations
Advertising and public relations
Professional fees
Professional fees
Freight, stationery, postage and communication
Freight, stationery, postage and communication
Royal Commission legal costs
Royal Commission legal costs
Operating expenses1
Operating expenses1
Includes customer remediation expenses of $209 million in 2020 (2019: $373 million).
Includes customer remediation expenses of $209 million in 2020 (2019: $373 million).
2. Following the adoption of AASB 16 on 1 October 2019, with the exception of low value leases and leases of less than 12 months, expenses associated with leases are shown as depreciation of the right-of-
2. Following the adoption of AASB 16 on 1 October 2019, with the exception of low value leases and leases of less than 12 months, expenses associated with leases are shown as depreciation of the right-of-
use asset and interest expense associated with the lease liability (comparatives not restated).
use asset and interest expense associated with the lease liability (comparatives not restated).
3. During the 2020 financial year, the Group amended the application of its software amortisation policy to reflect the shorter useful life of software caused by rapidly changing technology and business
3. During the 2020 financial year, the Group amended the application of its software amortisation policy to reflect the shorter useful life of software caused by rapidly changing technology and business
requirements. As a result of these changes, the Group recognised accelerated amortisation of $197 million during the year. Refer to Note 20 Goodwill and Other Intangible Assets for further details.
requirements. As a result of these changes, the Group recognised accelerated amortisation of $197 million during the year. Refer to Note 20 Goodwill and Other Intangible Assets for further details.
Includes goodwill write-off of $77 million in the September 2020 financial year.
Includes goodwill write-off of $77 million in the September 2020 financial year.
RECOGNITION AND MEASUREMENT
RECOGNITION AND MEASUREMENT
OPERATING EXPENSES
OPERATING EXPENSES
liability is created.
liability is created.
the liabilities are settled.
the liabilities are settled.
cash outflows.
cash outflows.
Operating expenses are recognised as services are provided to the Group, over the period in which an asset is consumed, or once a
Operating expenses are recognised as services are provided to the Group, over the period in which an asset is consumed, or once a
SALARIES AND RELATED COSTS - ANNUAL LEAVE, LONG SERVICE LEAVE AND OTHER EMPLOYEE BENEFITS
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
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
employees rendering service are measured at their nominal amounts using remuneration rates that the Group expects to pay when
We accrue employee entitlements relating to long service leave using an actuarial calculation. It includes assumptions regarding staff
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
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
yields are determined from a blended rate of high quality corporate bonds with terms to maturity that closely match the estimated future
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
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.
this amount (as a result of past service provided by the employee) and the obligation can be reliably measured.
126
126
127
127
ANZ 2020 Annual Report
ANZ 2020 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
4. 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:
Profit before income tax from continuing operations
Prima facie income tax expense at 30%
Tax effect of permanent differences:
Gains or losses on sale from divestments
Impairment of investment in AmBank and PT Panin
Share of associates' profit
Interest on convertible instruments
Overseas tax rate differential
Provision for foreign tax on dividend repatriation
Other
Subtotal
Income tax (over)/under provided in previous years
Income tax expense
Current tax expense
Adjustments recognised in the current year in relation to the current tax of prior years
Deferred tax expense/(income) relating to the origination and reversal of temporary differences
Income tax expense
Australia
Overseas
Effective tax rate
2020
$m
5,516
1,655
2
245
(47)
52
(86)
20
25
1,866
(26)
1,840
2,637
(26)
(771)
1,840
1,115
725
2019
$m
8,920
2,676
(25)
-
(78)
63
(112)
39
63
2,626
(17)
2,609
2,779
(17)
(153)
2,609
1,682
927
33.4%
29.2%
128
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OverviewHow we create valuePerformance overviewRemuneration reportDirectors’ reportFinancial reportShareholder information
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
Reconciliation of the prima facie income tax expense on pre-tax profit with the income tax expense recognised in profit or loss:
Reconciliation of the prima facie income tax expense on pre-tax profit with the income tax expense recognised in profit or loss:
ANZ 2020 ANNUAL REPORT
ANZ 2020 ANNUAL REPORT
4. INCOME TAX
4. INCOME TAX
INCOME TAX EXPENSE
INCOME TAX EXPENSE
Profit before income tax from continuing operations
Profit before income tax from continuing operations
Prima facie income tax expense at 30%
Prima facie income tax expense at 30%
Tax effect of permanent differences:
Tax effect of permanent differences:
Gains or losses on sale from divestments
Gains or losses on sale from divestments
Impairment of investment in AmBank and PT Panin
Impairment of investment in AmBank and PT Panin
Share of associates' profit
Share of associates' profit
Interest on convertible instruments
Interest on convertible instruments
Overseas tax rate differential
Overseas tax rate differential
Provision for foreign tax on dividend repatriation
Provision for foreign tax on dividend repatriation
Income tax (over)/under provided in previous years
Income tax (over)/under provided in previous years
Other
Other
Subtotal
Subtotal
Income tax expense
Income tax expense
Current tax expense
Current tax expense
Income tax expense
Income tax expense
Australia
Australia
Overseas
Overseas
Effective tax rate
Effective tax rate
2020
2020
$m
$m
5,516
5,516
1,655
1,655
2
2
245
245
(47)
(47)
52
52
(86)
(86)
20
20
25
25
1,866
1,866
(26)
(26)
1,840
1,840
2,637
2,637
(26)
(26)
(771)
(771)
1,840
1,840
1,115
1,115
725
725
2019
2019
$m
$m
8,920
8,920
2,676
2,676
(25)
(25)
-
-
(78)
(78)
63
63
(112)
(112)
39
39
63
63
2,626
2,626
(17)
(17)
2,609
2,609
2,779
2,779
(17)
(17)
(153)
(153)
2,609
2,609
1,682
1,682
927
927
Notes to the consolidated financial statements (continued)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
4. INCOME TAX (continued)
TAX CONSOLIDATION
The Company and all its wholly owned Australian resident entities are part of a tax-consolidated group under Australian taxation law. The Company 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 ‘group allocation’ basis: tax expense/income, and deferred tax liabilities/assets that arise from temporary differences of the
members of the tax-consolidated group. The Company (as head entity in the tax-consolidated group) recognises current tax liabilities and assets 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 the
Company and each member of the tax-consolidated group in relation to the tax contribution amounts paid or payable between the Company and
the other members of the tax-consolidated group.
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 $10 million (2019: $10 million).
Unrecognised deferred tax liabilities related to additional potential foreign tax costs (assuming all retained earnings in offshore branches and
subsidiaries are repatriated) total $329 million (2019: $429 million).
Adjustments recognised in the current year in relation to the current tax of prior years
Adjustments recognised in the current year in relation to the current tax of prior years
Deferred tax expense/(income) relating to the origination and reversal of temporary differences
Deferred tax expense/(income) relating to the origination and reversal of temporary differences
RECOGNITION AND MEASUREMENT
INCOME TAX EXPENSE
33.4%
33.4%
29.2%
29.2%
CURRENT TAX EXPENSE
DEFERRED TAX ASSETS AND LIABILITIES
128
128
129
129
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.
ANZ 2020 Annual Report
ANZ 2020 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
5. DIVIDENDS
ORDINARY SHARE DIVIDENDS
Dividends are provided for in the financial statements once determined, accordingly, the final dividend announced for the current financial year is provided for
and paid in the following financial year.
Dividends
Financial Year 2019
2018 final dividend paid1,2
2019 interim dividend paid1,2
Bonus option plan adjustment
Dividends paid during the year ended 30 September 2019
Cash
Dividend reinvestment plan
Dividends paid during the year ended 30 September 2019
Financial Year 2020
2019 final dividend paid2,3
2020 interim dividend paid1,2
Bonus option plan adjustment
Dividends paid during the year ended 30 September 2020
Cash
Dividend reinvestment plan
Dividends paid during the year ended 30 September 2020
% of total
Amount
per share
Total dividend
$m
80 cents
80 cents
80 cents
25 cents
90.4%
9.6%
93.7%
6.3%
2,295
2,267
(81)
4,481
4,049
432
4,481
2,268
709
(55)
2,922
2,737
185
2,922
Dividends announced and to be paid after year-end
Payment date
Amount
per share
Total
dividend
$m
2020 final dividend (fully franked for Australian tax, New Zealand imputation
credit NZD 4 cents per share)
16 December 2020
35 cents
994
1. Fully franked for Australian tax purposes (30% tax rate).
2. Carries New Zealand imputation credits of NZD 3 cents for the 2020 interim dividend, NZD 9 cents for the 2019 final dividend, 2019 interim dividend and 2018 final dividend.
3. Partially franked at 70% for Australian tax purposes (30% tax rate).
DIVIDEND REINVESTMENT PLAN AND BONUS OPTION PLAN
Eligible shareholders can elect to reinvest their dividend entitlement into ANZ ordinary shares under the Company’s Dividend Reinvestment Plan
(DRP). Eligible shareholders can elect to forgo their dividend entitlement and instead receive ANZ ordinary shares under the Company’s Bonus Option
Plan (BOP). For the 2020 final dividend, DRP and BOP participation will be satisfied by an issue of new ANZ ordinary shares. There will be no discount
applied to the DRP and BOP price.
See Note 22 Shareholders’ Equity for details of shares the Company issued or purchased in respect of the DRP and BOP.
DIVIDEND FRANKING ACCOUNT
Australian franking credits available at 30% tax rate
New Zealand imputation credits available (which can be attached to our Australian
dividends but may only be used by New Zealand resident shareholders)
Currency
AUD
NZD
2020
$m
477
4,583
2019
$m
35
4,068
The above amounts represent the balances of the franking accounts as at the end of the financial year, adjusted for:
franking credits that will arise from the payment of income tax payable as at the end of the financial year; and
franking credits/debits from the receipt/payment of dividends that have been recognised as tax receivables/payables as at the end of the financial
year.
The proposed final 2020 dividend will utilise $426 million of the franking credits available at 30 September 2020.
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
Notes to the consolidated financial statements (continued)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Dividends are provided for in the financial statements once determined, accordingly, the final dividend announced for the current financial year is provided for
Dividends are provided for in the financial statements once determined, accordingly, the final dividend announced for the current financial year is provided for
5. DIVIDENDS (continued)
RESTRICTIONS ON THE PAYMENT OF DIVIDENDS
APRA’s written approval is required before paying dividends on ANZ ordinary shares:
% of total
% of total
Amount
Amount
per share
per share
Total dividend
Total dividend
$m
$m
made on senior capital instruments) in the financial year to which they relate; or
if the Group’s Common Equity Tier 1 capital ratio falls within capital range buffers specified by APRA.
if the aggregate dividends exceed the Company’s after tax earnings (in calculating those after tax earnings, we take into account any payments we
80 cents
80 cents
80 cents
80 cents
80 cents
80 cents
25 cents
25 cents
90.4%
90.4%
9.6%
9.6%
93.7%
93.7%
6.3%
6.3%
2,295
2,295
2,267
2,267
(81)
(81)
4,481
4,481
4,049
4,049
432
432
4,481
4,481
2,268
2,268
709
709
(55)
(55)
2,922
2,922
2,737
2,737
185
185
2,922
2,922
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 ANZ ordinary shares.
In July 2020, APRA provided an update to their guidance on capital management. In the updated guidance, APRA acknowledged that the uncertainty
in the economic outlook has reduced somewhat since April 2020 and APRA had the opportunity to review ADIs’ financial projections and stress
testing results. Taking these and other developments since April 2020 into account, APRA advised ADIs to maintain caution in planning capital
distributions, including dividend payments and that for the remainder of the calendar year, the ADIs’ Board should:
seek to retain at least half of their earnings when making decisions on capital distributions (and utilise dividend reinvestment plans and other
initiatives to offset the diminution in capital from capital distributions where possible);
conduct regular stress testing to inform decision-making and demonstrate ongoing lending capacity; and
make use of capital buffers to absorb the impacts of stress, and continue to lend to support households and businesses.
The Company’s 2020 interim dividend of 25 cents per share (paid to shareholders on 30 September 2020) and 2020 final dividend of 35 cents per
share took into account the updated regulatory guidance above.
ANZ 2020 ANNUAL REPORT
ANZ 2020 ANNUAL REPORT
5. DIVIDENDS
5. DIVIDENDS
ORDINARY SHARE DIVIDENDS
ORDINARY SHARE DIVIDENDS
and paid in the following financial year.
and paid in the following financial year.
Dividends
Dividends
Financial Year 2019
Financial Year 2019
2018 final dividend paid1,2
2018 final dividend paid1,2
2019 interim dividend paid1,2
2019 interim dividend paid1,2
Bonus option plan adjustment
Bonus option plan adjustment
Cash
Cash
Dividend reinvestment plan
Dividend reinvestment plan
Financial Year 2020
Financial Year 2020
2019 final dividend paid2,3
2019 final dividend paid2,3
2020 interim dividend paid1,2
2020 interim dividend paid1,2
Bonus option plan adjustment
Bonus option plan adjustment
Cash
Cash
Dividend reinvestment plan
Dividend reinvestment plan
Dividends paid during the year ended 30 September 2019
Dividends paid during the year ended 30 September 2019
Dividends paid during the year ended 30 September 2019
Dividends paid during the year ended 30 September 2019
Dividends paid during the year ended 30 September 2020
Dividends paid during the year ended 30 September 2020
Dividends paid during the year ended 30 September 2020
Dividends paid during the year ended 30 September 2020
Amount
Amount
per share
per share
Total
Total
dividend
dividend
$m
$m
994
994
Dividends announced and to be paid after year-end
Dividends announced and to be paid after year-end
Payment date
Payment date
2020 final dividend (fully franked for Australian tax, New Zealand imputation
2020 final dividend (fully franked for Australian tax, New Zealand imputation
16 December 2020
16 December 2020
35 cents
35 cents
credit NZD 4 cents per share)
credit NZD 4 cents per share)
1. Fully franked for Australian tax purposes (30% tax rate).
1. Fully franked for Australian tax purposes (30% tax rate).
3. Partially franked at 70% for Australian tax purposes (30% tax rate).
3. Partially franked at 70% for Australian tax purposes (30% tax rate).
2. Carries New Zealand imputation credits of NZD 3 cents for the 2020 interim dividend, NZD 9 cents for the 2019 final dividend, 2019 interim dividend and 2018 final dividend.
2. Carries New Zealand imputation credits of NZD 3 cents for the 2020 interim dividend, NZD 9 cents for the 2019 final dividend, 2019 interim dividend and 2018 final dividend.
DIVIDEND REINVESTMENT PLAN AND BONUS OPTION PLAN
DIVIDEND REINVESTMENT PLAN AND BONUS OPTION PLAN
Eligible shareholders can elect to reinvest their dividend entitlement into ANZ ordinary shares under the Company’s Dividend Reinvestment Plan
Eligible shareholders can elect to reinvest their dividend entitlement into ANZ ordinary shares under the Company’s Dividend Reinvestment Plan
(DRP). Eligible shareholders can elect to forgo their dividend entitlement and instead receive ANZ ordinary shares under the Company’s Bonus Option
(DRP). Eligible shareholders can elect to forgo their dividend entitlement and instead receive ANZ ordinary shares under the Company’s Bonus Option
Plan (BOP). For the 2020 final dividend, DRP and BOP participation will be satisfied by an issue of new ANZ ordinary shares. There will be no discount
Plan (BOP). For the 2020 final dividend, DRP and BOP participation will be satisfied by an issue of new ANZ ordinary shares. There will be no discount
See Note 22 Shareholders’ Equity for details of shares the Company issued or purchased in respect of the DRP and BOP.
See Note 22 Shareholders’ Equity for details of shares the Company issued or purchased in respect of the DRP and BOP.
applied to the DRP and BOP price.
applied to the DRP and BOP price.
DIVIDEND FRANKING ACCOUNT
DIVIDEND FRANKING ACCOUNT
Australian franking credits available at 30% tax rate
Australian franking credits available at 30% tax rate
New Zealand imputation credits available (which can be attached to our Australian
New Zealand imputation credits available (which can be attached to our Australian
dividends but may only be used by New Zealand resident shareholders)
dividends but may only be used by New Zealand resident shareholders)
Currency
Currency
AUD
AUD
NZD
NZD
2020
2020
$m
$m
477
477
4,583
4,583
2019
2019
$m
$m
35
35
4,068
4,068
The above amounts represent the balances of the franking accounts as at the end of the financial year, adjusted for:
The above amounts represent the balances of the franking accounts as at the end of the financial year, adjusted for:
franking credits that will arise from the payment of income tax payable as at the end of the financial year; and
franking credits that will arise from the payment of income tax payable as at the end of the financial year; and
franking credits/debits from the receipt/payment of dividends that have been recognised as tax receivables/payables as at the end of the financial
franking credits/debits from the receipt/payment of dividends that have been recognised as tax receivables/payables as at the end of the financial
The proposed final 2020 dividend will utilise $426 million of the franking credits available at 30 September 2020.
The proposed final 2020 dividend will utilise $426 million of the franking credits available at 30 September 2020.
year.
year.
130
130
131
131
ANZ 2020 Annual Report ANZ 2020 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
6. EARNINGS PER ORDINARY SHARE
Earnings per ordinary share (EPS) - Basic
Earnings Per Share
Earnings Per Share from continuing operations1
Earnings Per Share from discontinued operations
Earnings per ordinary share (EPS) - Diluted
Earnings Per Share
Earnings Per Share from continuing operations1
Earnings Per Share from discontinued operations
2020
cents
126.4
129.8
(3.4)
2020
cents
118.0
121.1
(3.1)
2019
cents
210.0
222.1
(12.1)
2019
cents
201.9
213.0
(11.1)
Basic EPS is calculated by dividing the profit or loss attributable to ordinary shareholders by the weighted average number of ordinary shares
outstanding during the period (after eliminating ANZ shares held within the Group known as treasury shares). Diluted EPS is calculated by adjusting
the profit or loss attributable to ordinary shareholders and the weighted average number of ordinary shares used in the basic EPS calculation for the
effect of dilutive potential ordinary shares.
Reconciliation of earnings used in earnings per share calculations
Basic:
Profit for the year
Less: Profit attributable to non-controlling interests
Earnings used in calculating basic earnings per share
Less: Profit/(Loss) after tax from discontinued operations
Earnings used in calculating basic earnings per share from continuing operations
Diluted:
Earnings used in calculating basic earnings per share
Add: Interest on convertible subordinated debt
Earnings used in calculating diluted earnings per share
Less: Profit/(Loss) after tax from discontinued operations
Earnings used in calculating diluted earnings per share from continuing operations
Reconciliation of weighted average number of ordinary shares (WANOS) used in earnings per
share calculations1,2
WANOS used in calculating basic earnings per share
Add: Weighted average dilutive potential ordinary shares
Convertible subordinated debt
Share based payments (options, rights and deferred shares)
WANOS used in calculating diluted earnings per share
2020
$m
3,578
1
3,577
(98)
3,675
3,577
201
3,778
(98)
3,876
2019
$m
5,968
15
5,953
(343)
6,296
5,953
268
6,221
(343)
6,564
2020
millions
2019
millions
2,830.9
2,834.9
362.2
8.0
3,201.1
237.9
8.8
3,081.6
1. The successor fund transfer performed in preparation for the sale of the Group’s wealth businesses to Zurich and IOOF was completed on 13 April 2019. Post this date, treasury shares held in Wealth Australia
discontinued operations ceased to be eliminated in the Group’s consolidated financial statements and are included in the denominator used in calculating earnings per share. If the weighted average
number of treasury shares held in Wealth Australia discontinued operations was included in the denominator used in calculating earnings per share from continuing operations in the comparative period,
basic earnings per share from continuing operations for the comparative period would have been 221.4 cents and diluted earnings per share from continuing operations for the comparative period would
have been 212.4 cents.
2. Weighted average number of ordinary shares excludes the weighted average number of treasury shares held in ANZEST of 5.0 million (2019: 4.7 million) and Wealth Australia discontinued operations of 8.2
million in 2019.
132
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OverviewHow we create valuePerformance overviewRemuneration reportDirectors’ reportFinancial reportShareholder information ANZ 2020 ANNUAL REPORT
ANZ 2020 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
Notes to the consolidated financial statements (continued)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
6. EARNINGS PER ORDINARY SHARE
6. EARNINGS PER ORDINARY SHARE
7. SEGMENT REPORTING
Basic EPS is calculated by dividing the profit or loss attributable to ordinary shareholders by the weighted average number of ordinary shares
Basic EPS is calculated by dividing the profit or loss attributable to ordinary shareholders by the weighted average number of ordinary shares
outstanding during the period (after eliminating ANZ shares held within the Group known as treasury shares). Diluted EPS is calculated by adjusting
outstanding during the period (after eliminating ANZ shares held within the Group known as treasury shares). Diluted EPS is calculated by adjusting
the profit or loss attributable to ordinary shareholders and the weighted average number of ordinary shares used in the basic EPS calculation for the
the profit or loss attributable to ordinary shareholders and the weighted average number of ordinary shares used in the basic EPS calculation for the
effect of dilutive potential ordinary shares.
effect of dilutive potential ordinary shares.
Earnings per ordinary share (EPS) - Basic
Earnings per ordinary share (EPS) - Basic
Earnings Per Share
Earnings Per Share
Earnings Per Share from continuing operations1
Earnings Per Share from continuing operations1
Earnings Per Share from discontinued operations
Earnings Per Share from discontinued operations
Earnings per ordinary share (EPS) - Diluted
Earnings per ordinary share (EPS) - Diluted
Earnings Per Share
Earnings Per Share
Earnings Per Share from continuing operations1
Earnings Per Share from continuing operations1
Earnings Per Share from discontinued operations
Earnings Per Share from discontinued operations
Reconciliation of earnings used in earnings per share calculations
Reconciliation of earnings used in earnings per share calculations
Basic:
Basic:
Profit for the year
Profit for the year
Less: Profit attributable to non-controlling interests
Less: Profit attributable to non-controlling interests
Earnings used in calculating basic earnings per share
Earnings used in calculating basic earnings per share
Less: Profit/(Loss) after tax from discontinued operations
Less: Profit/(Loss) after tax from discontinued operations
Earnings used in calculating basic earnings per share from continuing operations
Earnings used in calculating basic earnings per share from continuing operations
Diluted:
Diluted:
Earnings used in calculating basic earnings per share
Earnings used in calculating basic earnings per share
Add: Interest on convertible subordinated debt
Add: Interest on convertible subordinated debt
Earnings used in calculating diluted earnings per share
Earnings used in calculating diluted earnings per share
Less: Profit/(Loss) after tax from discontinued operations
Less: Profit/(Loss) after tax from discontinued operations
Earnings used in calculating diluted earnings per share from continuing operations
Earnings used in calculating diluted earnings per share from continuing operations
Reconciliation of weighted average number of ordinary shares (WANOS) used in earnings per
Reconciliation of weighted average number of ordinary shares (WANOS) used in earnings per
share calculations1,2
share calculations1,2
WANOS used in calculating basic earnings per share
WANOS used in calculating basic earnings per share
Add: Weighted average dilutive potential ordinary shares
Add: Weighted average dilutive potential ordinary shares
Convertible subordinated debt
Convertible subordinated debt
Share based payments (options, rights and deferred shares)
Share based payments (options, rights and deferred shares)
WANOS used in calculating diluted earnings per share
WANOS used in calculating diluted earnings per share
2020
2020
millions
millions
2019
2019
millions
millions
2,830.9
2,830.9
2,834.9
2,834.9
362.2
362.2
8.0
8.0
3,201.1
3,201.1
237.9
237.9
8.8
8.8
3,081.6
3,081.6
2020
2020
cents
cents
126.4
126.4
129.8
129.8
(3.4)
(3.4)
2020
2020
cents
cents
118.0
118.0
121.1
121.1
(3.1)
(3.1)
2020
2020
$m
$m
3,578
3,578
1
1
3,577
3,577
(98)
(98)
3,675
3,675
3,577
3,577
201
201
3,778
3,778
(98)
(98)
3,876
3,876
2019
2019
cents
cents
210.0
210.0
222.1
222.1
(12.1)
(12.1)
2019
2019
cents
cents
201.9
201.9
213.0
213.0
(11.1)
(11.1)
2019
2019
$m
$m
5,968
5,968
15
15
5,953
5,953
(343)
(343)
6,296
6,296
5,953
5,953
268
268
6,221
6,221
(343)
(343)
6,564
6,564
DESCRIPTION OF SEGMENTS
The Group’s five continuing 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’s businesses are managed, rather than the legal structure
of the Group.
We measure the performance of these segments on a cash profit basis. To calculate cash profit, we remove certain non-core items from statutory
profit. Details of these items are included in the “Other Items” section of this note. Transactions between business units across segments within ANZ
are conducted on an arm’s-length basis and disclosed as part of the income and expenses of these segments.
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 and Commercial
The Australia Retail and Commercial division comprises:
Retail provides products and services to consumer customers in Australia via the branch network, mortgage specialists, contact centres, a variety
of self-service channels (internet banking, phone banking, ATMs, website, ANZ share investing and digital banking) and third party brokers in
addition to financial planning services provided by salaried financial planners.
Commercial provides a full range of banking products and financial services including asset financing across the following customer segments:
medium to large commercial customers and agribusiness customers across regional Australia, small business owners and high net worth
individuals and family groups.
Institutional
The Institutional division services governments, global institutional and corporate customers across three product sets: Transaction Banking, Corporate
Finance and Markets.
Transaction Banking provides working capital and liquidity solutions including documentary trade, supply chain financing, commodity financing
as well as cash management solutions, deposits, payments and clearing.
Corporate Finance (previously Loans and Specialised Finance) provides loan products, loan syndication, specialised loan structuring and
execution, project and export finance, debt structuring and acquisition finance and corporate advisory.
Markets provide risk management services on foreign exchange, interest rates, credit, commodities, debt capital markets in addition to managing
the Group's interest rate exposure and liquidity position.
New Zealand
The New Zealand division comprises:
Retail provides a full range of banking and wealth management services to consumer, private banking and small business banking customers. We
deliver our services via our internet and app-based digital solutions and a network of branches, mortgage specialists, relationship managers and
contact centres.
Commercial provides a full range of banking services including traditional relationship banking and sophisticated financial solutions through
dedicated managers focusing on privately owned medium to large enterprises, the agricultural business segment, government and government-
related entities.
Pacific
The Pacific division provides products and services to retail customers, small to medium-sized enterprises, institutional customers and governments
located in the Pacific Islands. Products and services include retail products provided to consumers, traditional relationship banking and sophisticated
financial solutions provided to business customers through dedicated managers.
Technology, Services & Operations (TSO) and Group Centre
TSO and Group Centre provide support to the operating divisions, including technology, group operations, shared services, property, risk
management, financial management, strategy, marketing, human resources and corporate affairs. The Group Centre includes residual components of
Group divestments, Group Treasury, Shareholder Functions and minority investments in Asia.
Refer to Note 29 for further details on Discontinued Operations.
1. The successor fund transfer performed in preparation for the sale of the Group’s wealth businesses to Zurich and IOOF was completed on 13 April 2019. Post this date, treasury shares held in Wealth Australia
1. The successor fund transfer performed in preparation for the sale of the Group’s wealth businesses to Zurich and IOOF was completed on 13 April 2019. Post this date, treasury shares held in Wealth Australia
discontinued operations ceased to be eliminated in the Group’s consolidated financial statements and are included in the denominator used in calculating earnings per share. If the weighted average
discontinued operations ceased to be eliminated in the Group’s consolidated financial statements and are included in the denominator used in calculating earnings per share. If the weighted average
number of treasury shares held in Wealth Australia discontinued operations was included in the denominator used in calculating earnings per share from continuing operations in the comparative period,
number of treasury shares held in Wealth Australia discontinued operations was included in the denominator used in calculating earnings per share from continuing operations in the comparative period,
basic earnings per share from continuing operations for the comparative period would have been 221.4 cents and diluted earnings per share from continuing operations for the comparative period would
basic earnings per share from continuing operations for the comparative period would have been 221.4 cents and diluted earnings per share from continuing operations for the comparative period would
OPERATING SEGMENTS
There have been no methodology or structural changes during the year which have impacted the presentation of the Group’s operating segments in
the 2020 financial year. As such, the presentation of the divisional results remains consistent with the prior period.
2. Weighted average number of ordinary shares excludes the weighted average number of treasury shares held in ANZEST of 5.0 million (2019: 4.7 million) and Wealth Australia discontinued operations of 8.2
2. Weighted average number of ordinary shares excludes the weighted average number of treasury shares held in ANZEST of 5.0 million (2019: 4.7 million) and Wealth Australia discontinued operations of 8.2
have been 212.4 cents.
have been 212.4 cents.
million in 2019.
million in 2019.
132
132
133
133
ANZ 2020 Annual Report ANZ 2020 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
7. SEGMENT REPORTING (continued)
OPERATING SEGMENTS (continued)
Year ended 30 September 2020
Net interest income
Net fee and commission income
- Lending fees
- Non-lending fees
- Commissions
- Funds management income
- Fee and commission expense
Net income from insurance business
Other income
Share of associates’ profit
Other operating income
Operating income
Operating expenses
Profit before credit impairment and income tax
Credit impairment (charge)/release
Profit before income tax
Income tax expense and non-controlling interests
Profit after tax from continuing operations
Profit/(Loss) after tax from discontinued operations
Profit after tax attributable to shareholders
Includes non-cash items:
Share of associates’ profit
Impairment of associates2
Depreciation and amortisation3
Equity-settled share based payment expenses
Credit impairment (charge)/release
Australia
Retail and
Commercial Institutional
$m
$m
New
Zealand
$m
7,916
3,182
2,731
TSO and
Group
Centre
$m
111
Pacific
$m
109
Other
items1
$m
Group
Total
$m
-
14,049
267
1,310
67
30
(588)
77
(1)
(1)
1,161
9,077
(4,091)
4,986
(1,647)
3,339
(1,002)
2,337
(1)
-
(197)
(7)
(1,647)
288
776
-
2
(308)
-
1,891
-
2,649
5,831
(2,558)
3,273
(694)
2,579
(725)
1,854
14
586
54
243
(436)
-
12
-
473
3,204
(1,435)
1,769
(345)
1,424
(407)
1,017
-
-
(188)
(70)
(694)
-
-
(103)
(7)
(345)
10
29
-
-
(5)
-
50
-
84
193
(205)
(12)
(52)
(64)
2
(62)
-
-
(11)
(1)
(52)
-
(14)
-
-
-
1
(807)
156
(664)
(553)
(1,094)
(1,647)
-
(1,647)
259
(1,388)
156
(815)
(892)
(25)
-
-
-
-
-
-
-
(115)
-
(115)
(115)
-
(115)
-
(115)
32
(83)
-
-
-
-
-
579
2,687
121
275
(1,337)
78
1,030
155
3,588
17,637
(9,383)
8,254
(2,738)
5,516
(1,841)
3,675
(98)
3,577
155
(815)
(1,391)
(110)
(2,738)
Financial position
Goodwill4
Investments in associates2
Australia
Retail and
Commercial Institutional
$m
$m
403
17
1,068
4
New
Zealand
$m
1,793
-
Pacific
$m
-
-
TSO and
Group
Centre
$m
-
2,143
Discontinued
operations
$m
-
-
Group
Total
$m
3,264
2,164
1. Cash profit represents ANZ's preferred measure of the result of the segments. We remove certain items from the segments as discussed on page 136 if we consider them not integral to the ongoing
performance of the segment.
2. During the 2020 financial year, ANZ recognised an $815 million impairment after tax in respect of two of the Group’s equity accounted investments to adjust their carrying values in line with their value-in-
use calculations. AMMB Holdings Berhad (AmBank) was impaired by $595 million and PT Bank Pan Indonesia (PT Panin) was impaired by $220 million. Refer to Note 26 Investments in Associates for further
details.
3. During the 2020 financial year, the Group amended the application of its software amortisation policy to reflect the shorter useful life of software caused by rapidly changing technology and business
requirements. As a result of these changes, the Group recognised accelerated amortisation of $197 million during the year (Australia Retail and Commercial $31 million, Institutional $38 million, New Zealand
$2 million, TSO and Group Centre $126 million). Refer to Note 20 Goodwill and Other Intangible Assets for further details.
4. During the 2020 financial year, the Group wrote off $50 million of goodwill in the Pacific division and wrote off $27 million of goodwill in the New Zealand division winding up the Bonus Bonds business, a
managed investment product in New Zealand. Refer to Note 20 Goodwill and Other Intangible Assets for further details.
134
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OverviewHow we create valuePerformance overviewRemuneration reportDirectors’ reportFinancial reportShareholder information
ANZ 2020 ANNUAL REPORT
ANZ 2020 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
Notes to the consolidated financial statements (continued)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
7. SEGMENT REPORTING (continued)
7. SEGMENT REPORTING (continued)
OPERATING SEGMENTS (continued)
OPERATING SEGMENTS (continued)
7. SEGMENT REPORTING (continued)
OPERATING SEGMENT (continued)
Year ended 30 September 2020
Year ended 30 September 2020
Net interest income
Net interest income
Net fee and commission income
Net fee and commission income
- Lending fees
- Lending fees
- Non-lending fees
- Non-lending fees
- Commissions
- Commissions
- Funds management income
- Funds management income
- Fee and commission expense
- Fee and commission expense
Net income from insurance business
Net income from insurance business
Other income
Other income
Share of associates’ profit
Share of associates’ profit
Other operating income
Other operating income
Operating income
Operating income
Operating expenses
Operating expenses
Profit before credit impairment and income tax
Profit before credit impairment and income tax
Credit impairment (charge)/release
Credit impairment (charge)/release
Profit before income tax
Profit before income tax
Income tax expense and non-controlling interests
Income tax expense and non-controlling interests
Profit after tax from continuing operations
Profit after tax from continuing operations
Profit/(Loss) after tax from discontinued operations
Profit/(Loss) after tax from discontinued operations
Profit after tax attributable to shareholders
Profit after tax attributable to shareholders
Includes non-cash items:
Includes non-cash items:
Share of associates’ profit
Share of associates’ profit
Impairment of associates2
Impairment of associates2
Depreciation and amortisation3
Depreciation and amortisation3
Equity-settled share based payment expenses
Equity-settled share based payment expenses
Credit impairment (charge)/release
Credit impairment (charge)/release
Australia
Australia
Retail and
Retail and
New
New
Commercial Institutional
Commercial Institutional
Zealand
Zealand
$m
$m
$m
$m
$m
$m
7,916
7,916
3,182
3,182
2,731
2,731
Pacific
Pacific
$m
$m
109
109
TSO and
TSO and
Group
Group
Centre
Centre
$m
$m
111
111
Other
Other
items1
items1
$m
$m
Group
Group
Total
Total
$m
$m
14,049
14,049
(588)
(588)
(308)
(308)
(436)
(436)
267
267
1,310
1,310
67
67
30
30
77
77
(1)
(1)
(1)
(1)
1,161
1,161
9,077
9,077
(4,091)
(4,091)
4,986
4,986
(1,647)
(1,647)
3,339
3,339
(1,002)
(1,002)
2,337
2,337
(1)
(1)
-
-
(197)
(197)
(7)
(7)
(1,647)
(1,647)
288
288
776
776
-
-
2
2
-
-
-
-
1,891
1,891
2,649
2,649
5,831
5,831
(2,558)
(2,558)
3,273
3,273
(694)
(694)
2,579
2,579
(725)
(725)
1,854
1,854
-
-
-
-
(188)
(188)
(70)
(70)
(694)
(694)
14
14
586
586
54
54
243
243
12
12
-
-
-
-
473
473
3,204
3,204
(1,435)
(1,435)
1,769
1,769
(345)
(345)
1,424
1,424
(407)
(407)
1,017
1,017
-
-
-
-
(103)
(103)
(7)
(7)
(345)
(345)
New
New
10
10
29
29
-
-
-
-
-
-
-
-
(5)
(5)
50
50
84
84
193
193
(205)
(205)
(12)
(12)
(52)
(52)
(64)
(64)
2
2
(62)
(62)
-
-
-
-
(11)
(11)
(1)
(1)
(52)
(52)
(14)
(14)
-
-
-
-
-
-
-
-
1
1
(807)
(807)
156
156
(664)
(664)
(553)
(553)
(1,094)
(1,094)
(1,647)
(1,647)
-
-
(1,647)
(1,647)
259
259
(1,388)
(1,388)
156
156
(815)
(815)
(892)
(892)
(25)
(25)
-
-
(115)
(115)
(115)
(115)
(115)
(115)
(115)
(115)
(115)
(115)
32
32
(83)
(83)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
579
579
2,687
2,687
121
121
275
275
(1,337)
(1,337)
78
78
1,030
1,030
155
155
3,588
3,588
17,637
17,637
(9,383)
(9,383)
8,254
8,254
(2,738)
(2,738)
5,516
5,516
(1,841)
(1,841)
3,675
3,675
(98)
(98)
3,577
3,577
155
155
(815)
(815)
(1,391)
(1,391)
(110)
(110)
(2,738)
(2,738)
Financial position
Financial position
Goodwill4
Goodwill4
Investments in associates2
Investments in associates2
performance of the segment.
performance of the segment.
details.
details.
1. Cash profit represents ANZ's preferred measure of the result of the segments. We remove certain items from the segments as discussed on page 136 if we consider them not integral to the ongoing
1. Cash profit represents ANZ's preferred measure of the result of the segments. We remove certain items from the segments as discussed on page 136 if we consider them not integral to the ongoing
2. During the 2020 financial year, ANZ recognised an $815 million impairment after tax in respect of two of the Group’s equity accounted investments to adjust their carrying values in line with their value-in-
2. During the 2020 financial year, ANZ recognised an $815 million impairment after tax in respect of two of the Group’s equity accounted investments to adjust their carrying values in line with their value-in-
use calculations. AMMB Holdings Berhad (AmBank) was impaired by $595 million and PT Bank Pan Indonesia (PT Panin) was impaired by $220 million. Refer to Note 26 Investments in Associates for further
use calculations. AMMB Holdings Berhad (AmBank) was impaired by $595 million and PT Bank Pan Indonesia (PT Panin) was impaired by $220 million. Refer to Note 26 Investments in Associates for further
3. During the 2020 financial year, the Group amended the application of its software amortisation policy to reflect the shorter useful life of software caused by rapidly changing technology and business
3. During the 2020 financial year, the Group amended the application of its software amortisation policy to reflect the shorter useful life of software caused by rapidly changing technology and business
requirements. As a result of these changes, the Group recognised accelerated amortisation of $197 million during the year (Australia Retail and Commercial $31 million, Institutional $38 million, New Zealand
requirements. As a result of these changes, the Group recognised accelerated amortisation of $197 million during the year (Australia Retail and Commercial $31 million, Institutional $38 million, New Zealand
$2 million, TSO and Group Centre $126 million). Refer to Note 20 Goodwill and Other Intangible Assets for further details.
$2 million, TSO and Group Centre $126 million). Refer to Note 20 Goodwill and Other Intangible Assets for further details.
4. During the 2020 financial year, the Group wrote off $50 million of goodwill in the Pacific division and wrote off $27 million of goodwill in the New Zealand division winding up the Bonus Bonds business, a
4. During the 2020 financial year, the Group wrote off $50 million of goodwill in the Pacific division and wrote off $27 million of goodwill in the New Zealand division winding up the Bonus Bonds business, a
managed investment product in New Zealand. Refer to Note 20 Goodwill and Other Intangible Assets for further details.
managed investment product in New Zealand. Refer to Note 20 Goodwill and Other Intangible Assets for further details.
Year ended 30 September 2019
Net interest income
Net fee and commission income
- Lending fees
- Non-lending fees
- Commissions
- Funds management income
- Fee and commission expense
Net income from insurance business
Other income
Share of associates’ profit
Other operating income
Operating income
Operating expenses
Profit before credit impairment and income tax
Credit impairment (charge)/release
Profit before income tax
Income tax expense and non-controlling interests
Profit after tax from continuing operations
Profit/(Loss) after tax from discontinued operations
Profit after tax attributable to shareholders
Non-cash items
Share of associates’ profit
Depreciation and amortisation
Equity-settled share based payment expenses
Credit impairment (charge)/release
Australia
Retail and
Commercial Institutional
$m
8,092
290
1,499
75
14
(657)
100
27
(1)
1,347
9,439
(4,074)
5,365
(712)
4,653
(1,458)
3,195
(1)
(176)
(13)
(712)
$m
3,080
282
847
-
2
(338)
-
1,399
-
2,192
5,272
(2,667)
2,605
2
2,607
(779)
1,828
-
(112)
(69)
2
New
Zealand
$m
2,736
Pacific
$m
128
16
691
61
243
(459)
18
6
4
580
3,316
(1,286)
2,030
(87)
1,943
(544)
1,399
4
(41)
(4)
(87)
14
42
-
-
(9)
-
57
-
104
232
(150)
82
1
83
(24)
59
-
(7)
(1)
1
TSO and
Group
Centre
$m
303
-
(20)
(12)
(5)
1
1
243
259
467
770
(894)
(124)
1
(123)
112
(11)
259
(535)
(33)
1
Other
items1
$m
-
Group
Total
$m
14,339
-
-
-
-
-
7
(251)
-
(244)
(244)
-
(244)
1
(243)
69
(174)
-
-
-
1
602
3,059
124
254
(1,462)
126
1,481
262
4,446
18,785
(9,071)
9,714
(794)
8,920
(2,624)
6,296
(343)
5,953
262
(871)
(120)
(794)
Group
Total
$m
3,509
2,957
Australia
Australia
Retail and
Retail and
Commercial Institutional
Commercial Institutional
Zealand
Zealand
$m
$m
403
403
17
17
$m
$m
$m
$m
1,068
1,068
1,793
1,793
4
4
-
-
Pacific
Pacific
$m
$m
-
-
-
-
$m
$m
-
-
2,143
2,143
TSO and
TSO and
Group
Group
Discontinued
Discontinued
Centre
Centre
operations
operations
Group
Group
Total
Total
$m
$m
3,264
3,264
2,164
2,164
$m
$m
-
-
-
-
Financial position
Goodwill
Investments in associates
Australia
Retail and
Commercial Institutional
$m
1,070
2
$m
410
17
New
Zealand
$m
1,937
-
Pacific
$m
50
-
TSO and
Group
Centre
$m
-
2,938
Discontinued
operations
$m
42
-
1. Cash profit represents ANZ's preferred measure of the result of the segments. We remove certain items from the segments as discussed on page 136 if we consider them not integral to the ongoing
performance of the segment.
134
134
135
135
ANZ 2020 Annual Report
ANZ 2020 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
7. SEGMENT REPORTING (continued)
OTHER ITEMS
The table below sets out the profit after tax impact of other items which are removed from statutory profit to reflect the cash profit of each segment.
Item
Revaluation of policy liabilities
Economic hedges
Related segment
New Zealand
Institutional, New Zealand, TSO and Group Centre
Revenue and expense hedges
TSO and Group Centre
Structured credit intermediation trades
Institutional
Total from continuing operations
Profit after tax
2020
$m
-
(121)
36
2
(83)
2019
$m
(77)
(118)
19
2
(174)
SEGMENT INCOME BY PRODUCTS AND SERVICES
The primary sources of our external income across all divisions are interest income and other operating income. The Australia Retail and Commercial,
New Zealand, and Pacific divisions derive income from products and services from 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’s income.
GEOGRAPHICAL INFORMATION
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 Retail and Commercial division - Australia
Institutional division – all three geographical regions
The reportable segments operate across three geographical regions as follows:
New Zealand division – New Zealand
Pacific division – International
TSO and Group Centre division – all three geographical regions
Discontinued operations – Australia
The International region includes Asia, Pacific, Europe and Americas.
Total operating income1
Australia
International
New Zealand
Total
2020
$m
2019
$m
2020
$m
11,838
12,394
1,975
2019
$m
2,613
2020
$m
3,773
2019
$m
2020
$m
2019
$m
3,947
17,586
18,954
Assets to be recovered in more than one year2
362,846
386,062
27,632
48,545
100,377
105,642
490,855
540,249
1. Includes operating income earned from Discontinued operations of -$51 million (2019: $169 million).
2. Consists of investment securities measured at fair value through other comprehensive income and net loans and advances.
136
136
OverviewHow we create valuePerformance overviewRemuneration reportDirectors’ reportFinancial reportShareholder information
ANZ 2020 ANNUAL REPORT
ANZ 2020 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
Notes to the consolidated financial statements (continued)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
7. SEGMENT REPORTING (continued)
7. SEGMENT REPORTING (continued)
OTHER ITEMS
OTHER ITEMS
FFIINNAANNCCIIAALL AASSSSEETTSS
Outlined below is a description of how we classify and measure financial assets relevant to the subsequent note disclosures.
The table below sets out the profit after tax impact of other items which are removed from statutory profit to reflect the cash profit of each segment.
The table below sets out the profit after tax impact of other items which are removed from statutory profit to reflect the cash profit of each segment.
Item
Item
Revaluation of policy liabilities
Revaluation of policy liabilities
Economic hedges
Economic hedges
Related segment
Related segment
New Zealand
New Zealand
Institutional, New Zealand, TSO and Group Centre
Institutional, New Zealand, TSO and Group Centre
Revenue and expense hedges
Revenue and expense hedges
TSO and Group Centre
TSO and Group Centre
Structured credit intermediation trades
Structured credit intermediation trades
Institutional
Institutional
Total from continuing operations
Total from continuing operations
Profit after tax
Profit after tax
2020
2020
$m
$m
-
-
(121)
(121)
36
36
2
2
(83)
(83)
2019
2019
$m
$m
(77)
(77)
(118)
(118)
19
19
2
2
(174)
(174)
SEGMENT INCOME BY PRODUCTS AND SERVICES
SEGMENT INCOME BY PRODUCTS AND SERVICES
The primary sources of our external income across all divisions are interest income and other operating income. The Australia Retail and Commercial,
The primary sources of our external income across all divisions are interest income and other operating income. The Australia Retail and Commercial,
New Zealand, and Pacific divisions derive income from products and services from retail and commercial banking. The Institutional division derives its
New Zealand, and Pacific divisions derive income from products and services from 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’s income.
income from institutional products and market services. No single customer amounts to greater than 10% of the Group’s income.
CLASSIFICATION AND MEASUREMENT
Financial assets - general
There are three measurement classifications for financial assets under AASB 9: amortised cost, fair value through profit or loss (FVTPL) and
fair value through other comprehensive income (FVOCI). Financial assets are classified into these measurement classifications on the basis
of two criteria:
the business model within which the financial asset is managed; and
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:
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;
FVOCI: Financial assets with contractual cash flows that comprise solely payments of principal and interest and which are held in a business
The following table sets out total operating income earned including discontinued operations and assets to be recovered in more than one year
The following table sets out total operating income earned including discontinued operations and assets to be recovered in more than one year
model whose objective is to collect their cash flows or to sell the assets; and
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 at FVTPL on initial recognition when the designation eliminates or significantly reduces an
accounting mismatch that would otherwise arise.
Australia
Australia
International
International
New Zealand
New Zealand
Total
Total
2020
2020
$m
$m
2019
2019
$m
$m
2020
2020
$m
$m
11,838
11,838
12,394
12,394
1,975
1,975
2019
2019
$m
$m
2,613
2,613
2020
2020
$m
$m
3,773
3,773
2019
2019
$m
$m
2020
2020
$m
$m
2019
2019
$m
$m
3,947
3,947
17,586
17,586
18,954
18,954
Total operating income1
Total operating income1
Assets to be recovered in more than one year2
Assets to be recovered in more than one year2
362,846
362,846
386,062
386,062
27,632
27,632
48,545
48,545
100,377
100,377
105,642
105,642
490,855
490,855
540,249
540,249
1. Includes operating income earned from Discontinued operations of -$51 million (2019: $169 million).
1. Includes operating income earned from Discontinued operations of -$51 million (2019: $169 million).
2. Consists of investment securities measured at fair value through other comprehensive income and net loans and advances.
2. Consists of investment securities measured at fair value through other comprehensive income and net loans and advances.
88.. CCAASSHH AANNDD CCAASSHH EEQQUUIIVVAALLEENNTTSS
Coins, notes and cash at bank
Money at call, bills receivable and remittances in transit
Securities purchased under agreements to resell in less than 3 months
Balances with central banks
Settlement balances owed to ANZ within 3 months
Cash and cash equivalents
2020
$m
1,514
-
35,603
46,091
24,715
107,923
2019
$m
1,186
3
25,277
25,681
29,474
81,621
GEOGRAPHICAL INFORMATION
GEOGRAPHICAL INFORMATION
based on the geographical regions in which the Group operates.
based on the geographical regions in which the Group operates.
The reportable segments operate across three geographical regions as follows:
The reportable segments operate across three geographical regions as follows:
Australia Retail and Commercial division - Australia
Australia Retail and Commercial division - Australia
Institutional division – all three geographical regions
Institutional division – all three geographical regions
New Zealand division – New Zealand
New Zealand division – New Zealand
Pacific division – International
Pacific division – International
TSO and Group Centre division – all three geographical regions
TSO and Group Centre division – all three geographical regions
Discontinued operations – Australia
Discontinued operations – Australia
The International region includes Asia, Pacific, Europe and Americas.
The International region includes Asia, Pacific, Europe and Americas.
136
136
137
137
ANZ 2020 Annual Report
ANZ 2020 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
9. TRADING SECURITIES
168
5,699
6,574
1,017
6,042
38,472
2020
2019
4,987
32,042
Government debt securities and notes1
Corporate and financial institution securities1
Commodities
Equity and other securities1
Total
Less: Assets reclassified as held for sale (refer to Note 29)
Total
Government debt
securities and notes
Corporate and financial
institutional securities
Commodities
Equity and other securities
2020
$m
38,472
6,574
5,699
168
50,913
-
50,913
2019
$m
32,042
4,987
6,042
1,017
44,088
(919)
43,169
1. In 2020, ANZ reclassified trading securities issued by development banks and supra-nationals from Corporate and financial institution securities and Equity and other securities to Government debt
securities and notes. Comparative information has been restated accordingly, with $4,865 million reclassified as Government debt securities and notes made up of $4,653 million from Corporate and
financial institution securities and $212 million from Equity and other securities.
RECOGNITION AND MEASUREMENT
Trading securities are financial instruments we either:
acquire principally for the purpose of selling in the short-term; or
hold as part of a portfolio we manage for short-term profit making.
We recognise purchases and sales of trading securities on trade date:
initially, we measure them at fair value; and
subsequently, we measure them in the balance sheet at their fair value with any change in fair value recognised in the profit and loss.
KEY JUDGEMENTS AND ESTIMATES
Judgement is required when applying the valuation techniques used to determine the fair value of trading securities not valued using
quoted market prices. Refer to Note 17 Fair Value of Financial Assets and Financial Liabilities for further details.
138
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OverviewHow we create valuePerformance overviewRemuneration reportDirectors’ reportFinancial reportShareholder information
ANZ 2020 ANNUAL REPORT
ANZ 2020 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
Notes to the consolidated financial statements (continued)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
9. TRADING SECURITIES
9. TRADING SECURITIES
10. DERIVATIVE FINANCIAL INSTRUMENTS
168
5,699
6,574
1,017
6,042
38,472
2020
2019
4,987
32,042
Government debt
securities and notes
Corporate and financial
institutional securities
Commodities
Equity and other securities
Fair Value
Derivative financial instruments - held for trading
Derivative financial instruments - designated in hedging relationships
Derivative financial instruments
FEATURES
Derivative financial instruments are contracts:
Assets
2020
$m
130,097
5,234
135,331
Liabilities
2020
$m
(130,227)
(4,484)
(134,711)
Assets
2019
$m
116,622
4,045
120,667
Liabilities
2019
$m
(116,778)
(4,173)
(120,951)
1. In 2020, ANZ reclassified trading securities issued by development banks and supra-nationals from Corporate and financial institution securities and Equity and other securities to Government debt
1. In 2020, ANZ reclassified trading securities issued by development banks and supra-nationals from Corporate and financial institution securities and Equity and other securities to Government debt
securities and notes. Comparative information has been restated accordingly, with $4,865 million reclassified as Government debt securities and notes made up of $4,653 million from Corporate and
securities and notes. Comparative information has been restated accordingly, with $4,865 million reclassified as Government debt securities and notes made up of $4,653 million from Corporate and
financial institution securities and $212 million from Equity and other securities.
financial institution securities and $212 million from Equity and other securities.
Government debt securities and notes1
Government debt securities and notes1
Corporate and financial institution securities1
Corporate and financial institution securities1
Commodities
Commodities
Equity and other securities1
Equity and other securities1
Less: Assets reclassified as held for sale (refer to Note 29)
Less: Assets reclassified as held for sale (refer to Note 29)
Total
Total
Total
Total
RECOGNITION AND MEASUREMENT
RECOGNITION AND MEASUREMENT
Trading securities are financial instruments we either:
Trading securities are financial instruments we either:
acquire principally for the purpose of selling in the short-term; or
acquire principally for the purpose of selling in the short-term; or
hold as part of a portfolio we manage for short-term profit making.
hold as part of a portfolio we manage for short-term profit making.
We recognise purchases and sales of trading securities on trade date:
We recognise purchases and sales of trading securities on trade date:
initially, we measure them at fair value; and
initially, we measure them at fair value; and
KEY JUDGEMENTS AND ESTIMATES
KEY JUDGEMENTS AND ESTIMATES
subsequently, we measure them in the balance sheet at their fair value with any change in fair value recognised in the profit and loss.
subsequently, we measure them in the balance sheet at their fair value with any change in fair value recognised in the profit and loss.
2020
2020
$m
$m
38,472
38,472
6,574
6,574
5,699
5,699
168
168
50,913
50,913
-
-
50,913
50,913
2019
2019
$m
$m
32,042
32,042
4,987
4,987
6,042
6,042
1,017
1,017
44,088
44,088
(919)
(919)
43,169
43,169
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;
that require little or no initial net investment; and
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’s derivative financial instruments have been categorised as following:
Trading
Derivatives held in order to:
meet customer needs for managing their own risks.
manage risks in the Group that are not in a designated hedge accounting relationship (balance sheet
management).
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 to underlying positions relating to:
hedges of the Group’s exposures to interest rate risk and currency risk.
hedges of other exposures relating to non-trading positions.
TYPES
The Group offers and uses four different types of derivative financial instruments:
Forwards
Futures
Swaps
Options
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.
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.
A contract in which two parties exchange a series of cash flows for another.
A contract in which the buyer of the contract has the right - but not the obligation - to buy (known as a “call option”)
or to sell (known as a “put option”) 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.
Judgement is required when applying the valuation techniques used to determine the fair value of trading securities not valued using
Judgement is required when applying the valuation techniques used to determine the fair value of trading securities not valued using
quoted market prices. Refer to Note 17 Fair Value of Financial Assets and Financial Liabilities for further details.
quoted market prices. Refer to Note 17 Fair Value of Financial Assets and Financial Liabilities for further details.
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
Commodity
Fixed or variable interest rates applying to money lent, deposited or borrowed.
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
Counterparty risk in the event of default.
138
138
139
139
ANZ 2020 Annual Report
ANZ 2020 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
10. DERIVATIVE FINANCIAL INSTRUMENTS (continued)
DERIVATIVE FINANCIAL INSTRUMENTS – HELD FOR TRADING
The majority of the Group’s derivative financial instruments are held for trading. The fair values of derivative financial instruments held for trading are:
Fair Value
Interest rate contracts
Forward rate agreements
Futures contracts
Swap agreements
Options purchased
Options sold
Total
Foreign exchange contracts
Spot and forward contracts
Swap agreements
Options purchased
Options sold
Total
Commodity contracts
Credit default swaps
Structured credit derivatives purchased
Other credit derivatives purchased
Credit derivatives purchased
Structured credit derivatives sold
Other credit derivatives sold
Credit derivatives sold
Total
Assets
2020
$m
86
31
104,814
1,676
-
106,607
11,815
8,703
372
-
20,890
2,577
18
4
22
-
1
1
23
Liabilities
2020
$m
(86)
(128)
(101,277)
-
(2,609)
(104,100)
(11,435)
(12,334)
-
(502)
(24,271)
(1,834)
-
(3)
(3)
(18)
(1)
(19)
(22)
Assets
2019
$m
Liabilities
2019
$m
74
41
82,996
1,454
-
84,565
15,987
13,836
405
-
30,228
1,807
16
4
20
-
2
2
22
(78)
(109)
(80,588)
-
(2,317)
(83,092)
(15,359)
(16,235)
-
(514)
(32,108)
(1,553)
-
(3)
(3)
(19)
(3)
(22)
(25)
Derivative financial instruments - held for trading
130,097
(130,227)
116,622
(116,778)
140
140
OverviewHow we create valuePerformance overviewRemuneration reportDirectors’ reportFinancial reportShareholder information
ANZ 2020 ANNUAL REPORT
ANZ 2020 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
Notes to the consolidated financial statements (continued)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
10. DERIVATIVE FINANCIAL INSTRUMENTS (continued)
10. DERIVATIVE FINANCIAL INSTRUMENTS (continued)
10. DERIVATIVE FINANCIAL INSTRUMENTS (continued)
DERIVATIVE FINANCIAL INSTRUMENTS – HELD FOR TRADING
DERIVATIVE FINANCIAL INSTRUMENTS – HELD FOR TRADING
DERIVATIVE FINANCIAL INSTRUMENTS – DESIGNATED IN HEDGING RELATIONSHIPS
The majority of the Group’s derivative financial instruments are held for trading. The fair values of derivative financial instruments held for trading are:
The majority of the Group’s derivative financial instruments are held for trading. The fair values of derivative financial instruments held for trading are:
There are three types of hedge accounting relationships the Group utilises:
Fair Value
Fair Value
Interest rate contracts
Interest rate contracts
Forward rate agreements
Forward rate agreements
Futures contracts
Futures contracts
Swap agreements
Swap agreements
Options purchased
Options purchased
Options sold
Options sold
Total
Total
Foreign exchange contracts
Foreign exchange contracts
Spot and forward contracts
Spot and forward contracts
Swap agreements
Swap agreements
Options purchased
Options purchased
Options sold
Options sold
Total
Total
Commodity contracts
Commodity contracts
Credit default swaps
Credit default swaps
Structured credit derivatives purchased
Structured credit derivatives purchased
Other credit derivatives purchased
Other credit derivatives purchased
Credit derivatives purchased
Credit derivatives purchased
Structured credit derivatives sold
Structured credit derivatives sold
Other credit derivatives sold
Other credit derivatives sold
Credit derivatives sold
Credit derivatives sold
Total
Total
Assets
Assets
2020
2020
$m
$m
86
86
31
31
104,814
104,814
1,676
1,676
-
-
106,607
106,607
11,815
11,815
8,703
8,703
372
372
-
-
20,890
20,890
2,577
2,577
18
18
4
4
22
22
-
-
1
1
1
1
23
23
Liabilities
Liabilities
2020
2020
$m
$m
(86)
(86)
(128)
(128)
(101,277)
(101,277)
-
-
(2,609)
(2,609)
(104,100)
(104,100)
(11,435)
(11,435)
(12,334)
(12,334)
-
-
(502)
(502)
(24,271)
(24,271)
(1,834)
(1,834)
-
-
(3)
(3)
(3)
(3)
(18)
(18)
(1)
(1)
(19)
(19)
(22)
(22)
Assets
Assets
2019
2019
$m
$m
Liabilities
Liabilities
2019
2019
$m
$m
74
74
41
41
82,996
82,996
1,454
1,454
-
-
84,565
84,565
15,987
15,987
13,836
13,836
405
405
-
-
30,228
30,228
1,807
1,807
16
16
4
4
20
20
-
-
2
2
2
2
22
22
(78)
(78)
(109)
(109)
(80,588)
(80,588)
-
-
(2,317)
(2,317)
(83,092)
(83,092)
(15,359)
(15,359)
(16,235)
(16,235)
-
-
(514)
(514)
(32,108)
(32,108)
(1,553)
(1,553)
-
-
(3)
(3)
(3)
(3)
(19)
(19)
(3)
(3)
(22)
(22)
(25)
(25)
Objective of this
hedging
arrangement
Recognition of
effective hedge
portion
Recognition of
ineffective hedge
portion
If a hedging
instrument expires,
or is sold, terminated,
or exercised; or no
longer qualifies for
hedge accounting
Fair value hedge
Cash flow hedge
Net investment hedge
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.
The following are recognised in profit
or loss at the same time:
all changes in the fair value of the
underlying item relating to the
hedged risk; and
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).
Recognised immediately in Other operating income.
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.
Derivative financial instruments - held for trading
Derivative financial instruments - held for trading
130,097
130,097
(130,227)
(130,227)
116,622
116,622
(116,778)
(116,778)
140
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ANZ 2020 Annual Report
ANZ 2020 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
10. DERIVATIVE FINANCIAL INSTRUMENTS (continued)
Under the policy choice provided by AASB 9 Financial Instruments, the Group has continued to apply the hedge accounting requirements of AASB 139
Financial Instruments: Recognition and Measurement.
The fair value of derivative financial instruments designated in hedging relationships are:
Fair value hedges
Foreign exchange swap agreements
Foreign exchange spot and forward contracts
Interest rate swap agreements
Interest rate futures contracts
Cash flow hedges
Interest rate swap agreements
Foreign exchange swap agreements
Foreign exchange spot and forward contracts
Net investment hedges
Foreign exchange spot and forward contracts
Derivative financial instruments - designated in
hedging relationships
Nominal
amount
$m
-
558
105,249
9,380
97,170
2,943
153
1,269
2020
2019
Assets
$m
Liabilities
$m
Nominal
amount
$m
Assets
$m
Liabilities
$m
-
-
-
(9)
21
581
2,871
(3,532)
108,243
-
(103)
3,139
2,233
63
-
67
(769)
(54)
-
84,365
2,934
159
(17)
1,484
1
-
2,093
-
1,876
75
-
-
-
(9)
(3,155)
(27)
(832)
(91)
(1)
(58)
216,722
5,234
(4,484)
200,926
4,045
(4,173)
The maturity profile of the nominal amounts of our hedging instruments held at 30 September 2020 is:
Nominal Amount
Fair value hedges
Interest rate
Interest Rate
Foreign exchange
HKD/AUD FX Rate
Cash flow hedges
Interest rate
Interest Rate
Foreign exchange1
Net investment hedges
Foreign exchange
AUD/USD FX Rate
USD/EUR FX Rate
TWD/AUD FX Rate
THB/AUD FX Rate
Average
Rate
Less than 3
months
$m
3 to 12
months
$m
1 to 5
years
$m
After
5 years
$m
Total
$m
1.47%
5.59
1.72%
0.72
0.91
20.29
21.63
3,548
558
12,736
69,836
28,509
114,629
-
-
-
558
9,062
30,364
55,549
38
613
1,157
2,195
1,288
97,170
3,096
591
678
-
-
1,269
1. Hedges of foreign exchange risk cover multiple currency pairs. The table reflects the larger currency pairs only.
142
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ANZ 2020 ANNUAL REPORT
ANZ 2020 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
Notes to the consolidated financial statements (continued)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
10. DERIVATIVE FINANCIAL INSTRUMENTS (continued)
10. DERIVATIVE FINANCIAL INSTRUMENTS (continued)
10. DERIVATIVE FINANCIAL INSTRUMENTS (continued)
Under the policy choice provided by AASB 9 Financial Instruments, the Group has continued to apply the hedge accounting requirements of AASB 139
Under the policy choice provided by AASB 9 Financial Instruments, the Group has continued to apply the hedge accounting requirements of AASB 139
The maturity profile of the nominal amounts of our hedging instruments held at 30 September 2019 is:
3,195
602
1.95%
5.38
2.15%
0.72
0.91
21.41
21.77
Average
Rate
Less than 3
months
$m
3 to 12
months
$m
18,407
-
1 to 5
years
$m
63,873
-
After
5 years
$m
Total
$m
25,907
111,382
-
602
1,088
14,040
66,880
40
120
1,652
2,357
1,281
84,365
3,093
474
1,010
-
-
1,484
Nominal Amount
Fair value hedges
Interest rate
Interest Rate
Foreign exchange
HKD/AUD FX Rate
Cash flow hedges
Interest rate
Interest Rate
Foreign exchange1
Net investment hedges
Foreign exchange
AUD/USD FX Rate
USD/EUR FX Rate
TWD/AUD FX Rate
THB/AUD FX Rate
Financial Instruments: Recognition and Measurement.
Financial Instruments: Recognition and Measurement.
The fair value of derivative financial instruments designated in hedging relationships are:
The fair value of derivative financial instruments designated in hedging relationships are:
Fair value hedges
Fair value hedges
Foreign exchange swap agreements
Foreign exchange swap agreements
Foreign exchange spot and forward contracts
Foreign exchange spot and forward contracts
Interest rate swap agreements
Interest rate swap agreements
Interest rate futures contracts
Interest rate futures contracts
Cash flow hedges
Cash flow hedges
Interest rate swap agreements
Interest rate swap agreements
Foreign exchange swap agreements
Foreign exchange swap agreements
Foreign exchange spot and forward contracts
Foreign exchange spot and forward contracts
Net investment hedges
Net investment hedges
Foreign exchange spot and forward contracts
Foreign exchange spot and forward contracts
Derivative financial instruments - designated in
Derivative financial instruments - designated in
hedging relationships
hedging relationships
Nominal
Nominal
amount
amount
$m
$m
-
-
558
558
105,249
105,249
9,380
9,380
97,170
97,170
2,943
2,943
153
153
1,269
1,269
2020
2020
2019
2019
Assets
Assets
Liabilities
Liabilities
$m
$m
$m
$m
Nominal
Nominal
amount
amount
$m
$m
Assets
Assets
Liabilities
Liabilities
$m
$m
$m
$m
2,871
2,871
(3,532)
(3,532)
108,243
108,243
2,093
2,093
-
-
-
-
-
-
2,233
2,233
63
63
-
-
67
67
-
-
(9)
(9)
21
21
581
581
(103)
(103)
3,139
3,139
(769)
(769)
(54)
(54)
-
-
84,365
84,365
2,934
2,934
159
159
(17)
(17)
1,484
1,484
1
1
-
-
-
-
-
-
-
-
1,876
1,876
75
75
-
-
(9)
(9)
(3,155)
(3,155)
(27)
(27)
(832)
(832)
(91)
(91)
(1)
(1)
(58)
(58)
216,722
216,722
5,234
5,234
(4,484)
(4,484)
200,926
200,926
4,045
4,045
(4,173)
(4,173)
The maturity profile of the nominal amounts of our hedging instruments held at 30 September 2020 is:
The maturity profile of the nominal amounts of our hedging instruments held at 30 September 2020 is:
Average
Average
Rate
Rate
Less than 3
Less than 3
months
months
$m
$m
3 to 12
3 to 12
months
months
$m
$m
1 to 5
1 to 5
years
years
$m
$m
After
After
5 years
5 years
$m
$m
Total
Total
$m
$m
3,548
3,548
558
558
12,736
12,736
69,836
69,836
28,509
28,509
114,629
114,629
-
-
-
-
558
558
Nominal Amount
Nominal Amount
Fair value hedges
Fair value hedges
Interest rate
Interest rate
Interest Rate
Interest Rate
Foreign exchange
Foreign exchange
HKD/AUD FX Rate
HKD/AUD FX Rate
Cash flow hedges
Cash flow hedges
Foreign exchange1
Foreign exchange1
Net investment hedges
Net investment hedges
Foreign exchange
Foreign exchange
AUD/USD FX Rate
AUD/USD FX Rate
USD/EUR FX Rate
USD/EUR FX Rate
TWD/AUD FX Rate
TWD/AUD FX Rate
THB/AUD FX Rate
THB/AUD FX Rate
1.47%
1.47%
5.59
5.59
1.72%
1.72%
0.72
0.72
0.91
0.91
20.29
20.29
21.63
21.63
Interest rate
Interest rate
Interest Rate
Interest Rate
9,062
9,062
30,364
30,364
55,549
55,549
38
38
613
613
1,157
1,157
2,195
2,195
1,288
1,288
97,170
97,170
3,096
3,096
1. Hedges of foreign exchange risk cover multiple currency pairs. The table reflects the larger currency pairs only.
1. Hedges of foreign exchange risk cover multiple currency pairs. The table reflects the larger currency pairs only.
591
591
678
678
-
-
1,269
1,269
-
-
-
-
1. Hedges of foreign exchange risk cover multiple currency pairs. The table reflects the larger currency pairs only.
The impact of ineffectiveness from our designated hedge relationships by type of hedge relationship and type of risk being hedged are:
2020
Fair value hedges1
Interest rate
Foreign exchange
Cash flow hedges1
Interest rate
Foreign exchange
Net investment hedges1
Foreign exchange
2019
Fair value hedges1
Interest rate
Foreign exchange
Cash flow hedges1
Interest rate
Foreign exchange
Net investment hedges1
Foreign exchange
Ineffectiveness
Change in value
of hedging
instrument
$m
Change in value
of hedged item
$m
Hedge ineffectiveness
recognised in profit
and loss
$m
Amount reclassified from
the cash flow hedge
reserve or FCTR to profit
and loss
$m
372
23
451
(15)
94
(358)
(23)
(449)
15
(94)
14
-
2
-
-
-
-
10
(2)
(15)
Ineffectiveness
Change in value
of hedging
instrument
$m
Change in value
of hedged item
$m
Hedge ineffectiveness
recognised in profit
and loss
$m
Amount reclassified from
the cash flow hedge
reserve or FCTR to profit
and loss
$m
586
(36)
836
20
(144)
(582)
36
(825)
(20)
144
4
-
11
-
-
-
-
14
2
-
1. All hedging instruments are held within Derivative Financial Instruments.
Hedge ineffectiveness recognised is classified within Other operating income. Reclassification adjustments to the Statement of Comprehensive
Income are recognised within Net interest income and Other operating income.
142
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ANZ 2020 Annual Report
ANZ 2020 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
10. DERIVATIVE FINANCIAL INSTRUMENTS (continued)
Hedged items in relation to the Group’s fair value hedges as at 30 September 2020 are as follows:
Fixed rate loans and advances
Balance sheet
presentation
Net loans and advances
Fixed rate debt issuance
Debt issuances
Hedged risk
Interest rate
Interest rate
Fixed rate investment securities (FVOCI)1
Investment securities
Interest rate
Equity securities at FVOCI1
Investment securities
Foreign exchange
Total
Carrying amount
Assets
$m
7,375
Liabilities
$m
-
-
(61,355)
55,233
558
-
-
63,166
(61,355)
Hedged items in relation to the Group’s fair value hedges for 30 September 2019 are as follows:
Fixed rate loans and advances
Net loans and advances
Interest rate
Balance sheet
presentation
Hedged risk
Carrying amount
Assets
$m
2,281
Liabilities
$m
-
Fixed rate debt issuance
Debt issuances
Interest rate
-
(67,555)
Fixed rate investment securities (FVOCI)1
Investment securities
Interest rate
Equity securities at FVOCI1
Investment securities
Foreign exchange
Total
47,641
581
-
-
50,503
(67,555)
Accumulated fair value
hedge adjustments on
the hedged item
Assets
$m
Liabilities
$m
52
-
2,256
29
2,337
-
(2,518)
-
-
(2,518)
Accumulated fair value
hedge adjustments on
the hedged item
Assets
$m
Liabilities
$m
17
-
1,907
52
1,976
-
(1,749)
-
-
(1,749)
1. The carrying amount of debt and equity instruments at fair value through other comprehensive income does not include the fair value hedge adjustment since accounting for the hedge relationship results
in the transfer of the hedge adjustment out of other comprehensive income into the Income Statement to match the profit or loss on the hedging instrument.
The cumulative amount of fair value hedge adjustments relating to ceased hedge relationships remaining on the Balance Sheet is $nil (2019: $8
million).
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ANZ 2020 ANNUAL REPORT
ANZ 2020 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
Notes to the consolidated financial statements (continued)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
10. DERIVATIVE FINANCIAL INSTRUMENTS (continued)
10. DERIVATIVE FINANCIAL INSTRUMENTS (continued)
10. DERIVATIVE FINANCIAL INSTRUMENTS (continued)
Hedged items in relation to the Group’s fair value hedges as at 30 September 2020 are as follows:
Hedged items in relation to the Group’s fair value hedges as at 30 September 2020 are as follows:
Hedged items in relation to the Group’s cash flow and net investment hedges as at 30 September 2020 are as follows:
Balance sheet
Balance sheet
presentation
presentation
Hedged risk
Hedged risk
$m
$m
Fixed rate loans and advances
Fixed rate loans and advances
Net loans and advances
Net loans and advances
Interest rate
Interest rate
Fixed rate debt issuance
Fixed rate debt issuance
Debt issuances
Debt issuances
Interest rate
Interest rate
-
-
(61,355)
(61,355)
Fixed rate investment securities (FVOCI)1
Fixed rate investment securities (FVOCI)1
Investment securities
Investment securities
Interest rate
Interest rate
Equity securities at FVOCI1
Equity securities at FVOCI1
Investment securities
Investment securities
Foreign exchange
Foreign exchange
Total
Total
63,166
63,166
(61,355)
(61,355)
(2,518)
(2,518)
Hedged items in relation to the Group’s fair value hedges for 30 September 2019 are as follows:
Hedged items in relation to the Group’s fair value hedges for 30 September 2019 are as follows:
Balance sheet
Balance sheet
presentation
presentation
Hedged risk
Hedged risk
$m
$m
Fixed rate loans and advances
Fixed rate loans and advances
Net loans and advances
Net loans and advances
Interest rate
Interest rate
Fixed rate debt issuance
Fixed rate debt issuance
Debt issuances
Debt issuances
Interest rate
Interest rate
-
-
(67,555)
(67,555)
Fixed rate investment securities (FVOCI)1
Fixed rate investment securities (FVOCI)1
Investment securities
Investment securities
Interest rate
Interest rate
Equity securities at FVOCI1
Equity securities at FVOCI1
Investment securities
Investment securities
Foreign exchange
Foreign exchange
1. The carrying amount of debt and equity instruments at fair value through other comprehensive income does not include the fair value hedge adjustment since accounting for the hedge relationship results
1. The carrying amount of debt and equity instruments at fair value through other comprehensive income does not include the fair value hedge adjustment since accounting for the hedge relationship results
in the transfer of the hedge adjustment out of other comprehensive income into the Income Statement to match the profit or loss on the hedging instrument.
in the transfer of the hedge adjustment out of other comprehensive income into the Income Statement to match the profit or loss on the hedging instrument.
The cumulative amount of fair value hedge adjustments relating to ceased hedge relationships remaining on the Balance Sheet is $nil (2019: $8
The cumulative amount of fair value hedge adjustments relating to ceased hedge relationships remaining on the Balance Sheet is $nil (2019: $8
50,503
50,503
(67,555)
(67,555)
(1,749)
(1,749)
Total
Total
million).
million).
Carrying amount
Carrying amount
Assets
Assets
Liabilities
Liabilities
Assets
Assets
Liabilities
Liabilities
Accumulated fair value
Accumulated fair value
hedge adjustments on
hedge adjustments on
the hedged item
the hedged item
$m
$m
7,375
7,375
55,233
55,233
558
558
$m
$m
2,281
2,281
47,641
47,641
581
581
-
-
-
-
-
-
-
-
-
-
-
-
$m
$m
52
52
-
-
2,256
2,256
29
29
2,337
2,337
$m
$m
17
17
-
-
1,907
1,907
52
52
1,976
1,976
$m
$m
(2,518)
(2,518)
$m
$m
(1,749)
(1,749)
-
-
-
-
-
-
-
-
-
-
-
-
Carrying amount
Carrying amount
Assets
Assets
Liabilities
Liabilities
Assets
Assets
Liabilities
Liabilities
Accumulated fair value
Accumulated fair value
hedge adjustments on
hedge adjustments on
the hedged item
the hedged item
Cash flow hedges
Floating rate loans and advances
Floating rate customer deposits
Foreign currency debt issuance
Foreign currency investment securities
Highly probable forecast transactions
Net investment hedges
Foreign operations
Hedged risk
Interest rate
Interest rate
Foreign exchange
Foreign exchange
Foreign exchange
Foreign exchange
Cash flow
hedge reserve
Foreign currency
translation reserve
Continuing
hedges
$m
Discontinued
hedges
$m
Continuing
hedges
$m
Discontinued
hedges
$m
2,013
(562)
(2)
10
(1)
-
38
(18)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(80)
(149)
Hedged items in relation to the Group’s cash flow and net investment hedges as at 30 September 2019 are as follows:
Cash flow hedges
Floating rate loans and advances
Floating rate customer deposits
Foreign currency debt issuance
Foreign currency investment securities
Highly probable forecast transactions
Net investment hedges
Foreign operations
Hedged risk
Interest rate
Interest rate
Foreign exchange
Foreign exchange
Foreign exchange
Foreign exchange
Cash flow
hedge reserve
Foreign currency
translation reserve
Continuing
hedges
$m
Discontinued
hedges
$m
Continuing
hedges
$m
Discontinued
hedges
$m
1,587
(577)
14
6
3
-
41
(32)
-
-
-
-
-
-
-
-
-
-
-
-
-
(159)
(149)
The table below details the reconciliation of the cash flow hedge reserve by risk type:
Balance at 1 October 2018
Fair value gains
Transferred to income statement
Income taxes and others
Balance at 30 September 2019
Fair value gains
Transferred to income statement
Income taxes and others
Balance at 30 September 2020
Interest rate
$m
Foreign
currency
$m
128
825
14
(251)
716
449
10
(141)
1,034
(1)
20
2
(6)
15
(15)
(2)
6
4
Total
$m
127
845
16
(257)
731
434
8
(135)
1,038
Hedges from net investments in a foreign operation resulted in a $94 million increase in FCTR during the year (2019: -$144 million). Of that, $15 million
(2019: nil) was reclassified from FCTR to the income statement during the year.
144
144
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ANZ 2020 Annual Report
ANZ 2020 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
10. DERIVATIVE FINANCIAL INSTRUMENTS (continued)
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.
Derecognition of
assets and liabilities
Impact on the
Income Statement
Valuation adjustments are integral in determining the fair value of derivatives. This includes:
a credit valuation adjustment (CVA) to reflect the counterparty risk and/or event of default; and
a funding valuation adjustment (FVA) to account for funding costs and benefits in the derivatives
portfolio.
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’s contractual obligations are discharged, cancelled or expired.
How we recognise gains or losses on derivative financial instruments depends on whether the
derivative is held for trading or is designated in a hedging 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 hedging relationship, the recognition of gains or losses depends on
the nature of the item being hedged. Refer to the previous table on page 141 for profit or loss
treatment depending on the hedge type.
Sources of hedge ineffectiveness may arise from basis risk and differences in discounting between the
hedged items and the hedging instruments. The hedging instruments are discounted using Overnight
Index Swaps discount curves which are not applied to the hedged items.
Hedge effectiveness
To qualify for hedge accounting, a hedge is expected to be highly effective. A hedge is highly effective
only if the following conditions are met:
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
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 least 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 17 Fair
Value of Financial Assets and Financial Liabilities for further details.
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RECOGNITION AND MEASUREMENT
RECOGNITION AND MEASUREMENT
Recognition
Recognition
Initially and at each reporting date, we recognise all derivatives at fair value. If the fair value of a
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
derivative is positive, then we carry it as an asset, but if its value is negative, then we carry it as a
Valuation adjustments are integral in determining the fair value of derivatives. This includes:
Valuation adjustments are integral in determining the fair value of derivatives. This includes:
a credit valuation adjustment (CVA) to reflect the counterparty risk and/or event of default; and
a credit valuation adjustment (CVA) to reflect the counterparty risk and/or event of default; and
a funding valuation adjustment (FVA) to account for funding costs and benefits in the derivatives
a funding valuation adjustment (FVA) to account for funding costs and benefits in the derivatives
Derecognition of
Derecognition of
assets and liabilities
assets and liabilities
We remove derivative assets from our balance sheet when the contracts expire or we have transferred
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
substantially all the risks and rewards of ownership. We remove derivative liabilities from our balance
sheet when the Group’s contractual obligations are discharged, cancelled or expired.
sheet when the Group’s contractual obligations are discharged, cancelled or expired.
Impact on the
Impact on the
Income Statement
Income Statement
How we recognise gains or losses on derivative financial instruments depends on whether the
How we recognise gains or losses on derivative financial instruments depends on whether the
derivative is held for trading or is designated in a hedging relationship. For derivative financial
derivative is held for trading or is designated in a hedging relationship. For derivative financial
instruments held for trading, gains or losses from changes in the fair value are recognised in profit or
instruments held for trading, gains or losses from changes in the fair value are recognised in profit or
liability.
liability.
portfolio.
portfolio.
loss.
loss.
Hedge effectiveness
Hedge effectiveness
To qualify for hedge accounting, a hedge is expected to be highly effective. A hedge is highly effective
To qualify for hedge accounting, a hedge is expected to be highly effective. A hedge is highly effective
For an instrument designated in a hedging relationship, the recognition of gains or losses depends on
For an instrument designated in a hedging relationship, the recognition of gains or losses depends on
the nature of the item being hedged. Refer to the previous table on page 141 for profit or loss
the nature of the item being hedged. Refer to the previous table on page 141 for profit or loss
treatment depending on the hedge type.
treatment depending on the hedge type.
Sources of hedge ineffectiveness may arise from basis risk and differences in discounting between the
Sources of hedge ineffectiveness may arise from basis risk and differences in discounting between the
hedged items and the hedging instruments. The hedging instruments are discounted using Overnight
hedged items and the hedging instruments. The hedging instruments are discounted using Overnight
Index Swaps discount curves which are not applied to the hedged items.
Index Swaps discount curves which are not applied to the hedged items.
only if the following conditions are met:
only if the following conditions are met:
the hedge is expected to be highly effective in achieving offsetting changes in fair value or cash
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
flows attributable to the hedged risk during the period for which the hedge is designated
(prospective effectiveness); and
(prospective effectiveness); and
the actual results of the hedge are within the range of 80-125% (retrospective effectiveness).
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 least at each
The Group monitors hedge effectiveness on a regular basis but at a minimum at least at each
reporting date.
reporting date.
KEY JUDGEMENTS AND ESTIMATES
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
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 17 Fair
valuation inputs that are not readily observable, and the application of valuation adjustments to certain derivatives. Refer to Note 17 Fair
Value of Financial Assets and Financial Liabilities for further details.
Value of Financial Assets and Financial Liabilities for further details.
ANZ 2020 ANNUAL REPORT
ANZ 2020 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
Notes to the consolidated financial statements (continued)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
10. DERIVATIVE FINANCIAL INSTRUMENTS (continued)
10. DERIVATIVE FINANCIAL INSTRUMENTS (continued)
11. INVESTMENT SECURITIES
2,762
11,617
1,062
2,491
9,444
1,221
2020
77,950
2019
70,553
Government securities
Corporate and financial
institution securities
Other securities
Equity securities
Investment securities measured at fair value through other comprehensive income
Debt securities
Equity securities
Investment securities measured at amortised cost
Debt securities1
Investment Securities measured at fair value through profit or loss
Debt securities
Total
2020 Investment securities
Government securities2
Corporate and financial institution securities2
Other securities2
Equity securities
Total
2019 Investment securities
Government securities2
Corporate and financial institution securities2
Other securities2
Equity securities
Total
Less than 3
months
$m
3 to 12
months 1 to 5 years After 5 years
$m
$m
$m
7,175
701
-
-
14,436
2,698
-
-
37,656
18,683
8,128
532
-
90
2,230
-
7,876
17,134
46,316
21,003
7,617
431
-
-
15,731
1,653
-
-
34,236
7,339
773
-
12,969
21
1,718
-
8,048
17,384
42,348
14,708
2020
$m
85,460
1,062
2019
$m
76,489
1,221
6,816
5,999
53
93,391
-
83,709
No
maturity
$m
-
-
-
1,062
1,062
-
-
-
1,221
1,221
Total
$m
77,950
11,617
2,762
1,062
93,391
70,553
9,444
2,491
1,221
83,709
1.
2.
Includes allowance for expected credit losses of $20 million (2019: $13 million).
In 2020, ANZ reclassified investment securities issued by development banks and supra-nationals from Corporate and financial institution securities to Government securities. Comparative information
has been restated accordingly, with $10,894 million reclassified as Government securities from Corporate and financial institution securities. In addition, ANZ reclassified certain investment securities from
Government securities to Other securities and comparative information was restated with $577 million reclassified.
146
146
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ANZ 2020 Annual Report
ANZ 2020 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
11. INVESTMENT SECURITIES (continued)
During the year, the Group recognised a net gain (before tax) in Other operating income from the recycling of gains/losses previously deferred in
equity of $23 million (2019: $240 million) in respect of investment securities.
The carrying value of equity securities at FVOCI is $1,062 million (2019: $1,221 million). This includes the Group’s $934 million (2019: $1,106 million)
investment in the Bank of Tianjin (BoT).
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’s
customer lending activities are classified as Loans and advances (rather than Investment securities) to better reflect the substance of the
arrangement.
Non-traded equity investments 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’s financial asset disclosures on page 137. Additionally, expected credit losses associated with
“Investment securities - debt securities at amortised cost” and “Investment securities - debt securities at fair value through other
comprehensive income” are recognised and measured in accordance with the accounting policy outlined in Note 13. For “Investment
securities – debt securities at fair value through other comprehensive income” 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 17 Fair Value of Financial Assets and
Financial Liabilities for further details.
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ANZ 2020 ANNUAL REPORT
ANZ 2020 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
11. INVESTMENT SECURITIES (continued)
11. INVESTMENT SECURITIES (continued)
During the year, the Group recognised a net gain (before tax) in Other operating income from the recycling of gains/losses previously deferred in
During the year, the Group recognised a net gain (before tax) in Other operating income from the recycling of gains/losses previously deferred in
equity of $23 million (2019: $240 million) in respect of investment securities.
equity of $23 million (2019: $240 million) in respect of investment securities.
The carrying value of equity securities at FVOCI is $1,062 million (2019: $1,221 million). This includes the Group’s $934 million (2019: $1,106 million)
The carrying value of equity securities at FVOCI is $1,062 million (2019: $1,221 million). This includes the Group’s $934 million (2019: $1,106 million)
investment in the Bank of Tianjin (BoT).
investment in the Bank of Tianjin (BoT).
RECOGNITION AND MEASUREMENT
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
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’s
purposes. By way of exception, bills of exchange (a form of security/transferable instrument) which are used to facilitate the Group’s
customer lending activities are classified as Loans and advances (rather than Investment securities) to better reflect the substance of the
customer lending activities are classified as Loans and advances (rather than Investment securities) to better reflect the substance of the
arrangement.
arrangement.
reclassified within equity.
reclassified within equity.
Non-traded equity investments may be designated at FVOCI on an instrument by instrument basis. If this election is made, gains or losses
Non-traded equity investments 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
are not reclassified from other comprehensive income to profit or loss on disposal of the investment. However, gains or losses may be
Assets disclosed as Investment securities are subject to the general classification and measurement policy for Financial Assets outlined at
Assets disclosed as Investment securities are subject to the general classification and measurement policy for Financial Assets outlined at
the commencement of the Group’s financial asset disclosures on page 137. Additionally, expected credit losses associated with
the commencement of the Group’s financial asset disclosures on page 137. Additionally, expected credit losses associated with
“Investment securities - debt securities at amortised cost” and “Investment securities - debt securities at fair value through other
“Investment securities - debt securities at amortised cost” and “Investment securities - debt securities at fair value through other
comprehensive income” are recognised and measured in accordance with the accounting policy outlined in Note 13. For “Investment
comprehensive income” are recognised and measured in accordance with the accounting policy outlined in Note 13. For “Investment
securities – debt securities at fair value through other comprehensive income” the allowance for Expected Credit Loss (ECL) is recognised in
securities – debt securities at fair value through other comprehensive income” the allowance for Expected Credit Loss (ECL) is recognised in
the FVOCI reserve in equity with a corresponding charge to profit or loss.
the FVOCI reserve in equity with a corresponding charge to profit or loss.
KEY JUDGEMENTS AND ESTIMATES
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
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 17 Fair Value of Financial Assets and
prices, particularly the selection of valuation inputs that are not readily observable. Refer to Note 17 Fair Value of Financial Assets and
Financial Liabilities for further details.
Financial Liabilities for further details.
Notes to the consolidated financial statements (continued)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
12. NET LOANS AND ADVANCES
The following table provides details of net loans and advances for the Group:
Overdrafts
Credit cards
Commercial bills
Term loans – housing
Term loans – non-housing
Other
Subtotal
Unearned income
Capitalised brokerage/mortgage origination fees
Gross loans and advances
Allowance for expected credit losses (refer to Note 13)
Net loans and advances
Residual contractual maturity:
Within one year
More than one year
Net loans and advances
2020
$m
5,214
7,194
6,383
358,350
241,725
2,406
621,272
(66)
868
622,074
(4,981)
617,093
126,238
490,855
617,093
Carried on Balance Sheet at:
Amortised cost
Fair value through profit or loss1
Net loans and advances
1. From 1 October 2019, the Group changed its accounting treatment for certain gold loan and deposit products which are now designated as at fair value through the profit and loss.
613,155
3,938
617,093
2019
$m
7,267
9,241
6,159
343,808
248,337
3,483
618,295
(398)
870
618,767
(3,509)
615,258
133,273
481,985
615,258
614,336
922
615,258
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/mortgage origination fees 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 provision for credit impairment, or at fair
value when they are specifically designated on initial recognition as fair value through profit or loss or when held for trading.
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 ‘Other’ 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’s 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 and liabilities as appropriate.
Assets disclosed as net loans and advances are subject to the general classification and measurement policy for financial assets outlined on
page 137. 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.
148
148
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ANZ 2020 Annual Report
ANZ 2020 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
13. ALLOWANCE FOR EXPECTED CREDIT LOSSES
The following tables present the movement in the allowance for ECL (2019 includes allowance for ECL reclassified as held for sale) for the year. The
total allowance for ECL at 30 September 2020 was $5,899 million (30 September 2019: $4,190 million).
Net loans and advances - at amortised cost
Allowance for ECL is included in Net loans and advances.
As at 1 October 2018
Transfer between stages
New and increased provisions (net of releases)
Write-backs
Bad debts written off (excluding recoveries)
Foreign currency translation and other movements2
As at 30 September 2019
Transfer between stages
New and increased provisions (net of releases)
Write-backs
Bad debts written off (excluding recoveries)
Foreign currency translation and other movements2
As at 30 September 2020
Stage 1
$m
920
166
(168)
-
-
9
927
200
110
-
-
(33)
1,204
Stage 2
$m
1,391
(308)
291
-
-
4
1,378
(308)
1,428
-
-
(33)
2,465
Stage 31
Collectively
assessed
$m
359
(91)
147
-
-
(2)
413
Individually
assessed
$m
894
233
1,139
(382)
(1,076)
(17)
791
(112)
162
-
-
(2)
461
220
1,324
(321)
(1,109)
(54)
851
1. The Group’s credit exposures that are purchased or originated credit-impaired financial assets are insignificant.
2. Other movements include the impacts of divestments completed during the year and the impact of discount unwind on individually assessed allowance for ECL.
Investment securities - debt securities at amortised cost
Allowance for ECL is included in Investment securities.
As at 1 October 2018
New and increased provisions (net of releases)
Foreign currency translation
As at 30 September 2019
New and increased provisions (net of releases)
Foreign currency translation
As at 30 September 2020
Stage 1
$m
9
2
1
12
10
(2)
20
Stage 2
$m
2
(1)
-
1
(1)
-
-
Stage 3
Collectively
assessed
$m
-
-
-
-
Individually
assessed
$m
-
-
-
-
-
-
-
-
-
-
Total
$m
3,564
-
1,409
(382)
(1,076)
(6)
3,509
-
3,024
(321)
(1,109)
(122)
4,981
Total
$m
11
1
1
13
9
(2)
20
150
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ANZ 2020 ANNUAL REPORT
ANZ 2020 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
Notes to the consolidated financial statements (continued)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
13. ALLOWANCE FOR EXPECTED CREDIT LOSSES
13. ALLOWANCE FOR EXPECTED CREDIT LOSSES
13. ALLOWANCE FOR EXPECTED CREDIT LOSSES (continued)
The following tables present the movement in the allowance for ECL (2019 includes allowance for ECL reclassified as held for sale) for the year. The
The following tables present the movement in the allowance for ECL (2019 includes allowance for ECL reclassified as held for sale) for the year. The
total allowance for ECL at 30 September 2020 was $5,899 million (30 September 2019: $4,190 million).
total allowance for ECL at 30 September 2020 was $5,899 million (30 September 2019: $4,190 million).
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 (OCI) with a corresponding charge to profit or loss.
Stage 31
Stage 31
Stage 1
Stage 1
Stage 2
Stage 2
assessed
assessed
assessed
assessed
Collectively
Collectively
Individually
Individually
(33)
(33)
(33)
(33)
1,204
1,204
2,465
2,465
$m
$m
920
920
166
166
(168)
(168)
-
-
-
-
9
9
927
927
200
200
110
110
-
-
-
-
$m
$m
9
9
2
2
1
1
12
12
10
10
(2)
(2)
20
20
$m
$m
1,391
1,391
(308)
(308)
291
291
-
-
-
-
4
4
-
-
-
-
1,378
1,378
(308)
(308)
1,428
1,428
$m
$m
2
2
(1)
(1)
-
-
1
1
-
-
-
-
(1)
(1)
$m
$m
359
359
(91)
(91)
147
147
(2)
(2)
413
413
(112)
(112)
162
162
-
-
-
-
-
-
-
-
(2)
(2)
461
461
-
-
-
-
-
-
-
-
-
-
-
-
-
-
$m
$m
894
894
233
233
1,139
1,139
(382)
(382)
(1,076)
(1,076)
(17)
(17)
791
791
220
220
1,324
1,324
(321)
(321)
(1,109)
(1,109)
(54)
(54)
851
851
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Total
Total
$m
$m
3,564
3,564
-
-
1,409
1,409
(382)
(382)
(1,076)
(1,076)
(6)
(6)
3,509
3,509
-
-
3,024
3,024
(321)
(321)
(1,109)
(1,109)
(122)
(122)
4,981
4,981
Total
Total
$m
$m
11
11
1
1
1
1
13
13
9
9
(2)
(2)
20
20
Stage 3
Stage 3
Collectively
Collectively
Individually
Individually
Stage 1
Stage 1
Stage 2
Stage 2
assessed
assessed
assessed
assessed
$m
$m
$m
$m
As at 1 October 2018
New and increased provisions (net of releases)
Foreign currency translation and other movements1
As at 30 September 2019
New and increased provisions (net of releases)
Foreign currency translation
As at 30 September 2020
1. Other movements includes the impacts of divestments completed in 2019.
Off-balance sheet commitments - undrawn and contingent facilities
Allowance for ECL is included in Other provisions.
As at 1 October 2018
Transfer between stages
New and increased provisions (net of releases)
Write-backs
Foreign currency translation and other movements2
As at 30 September 2019
Transfer between stages
New and increased provisions (net of releases)
Write-backs
Foreign currency translation and other movements2
As at 30 September 2020
Stage 1
$m
14
(2)
(4)
8
2
-
10
Stage 2
$m
-
-
-
-
-
-
-
Stage 3
Collectively
assessed
$m
-
-
-
-
Individually
assessed
$m
-
-
-
-
-
-
-
-
-
-
Stage 31
Collectively
assessed
$m
15
-
6
-
-
21
Individually
assessed
$m
26
2
-
(3)
(2)
23
(1)
3
-
-
23
7
24
(14)
-
40
Stage 1
$m
474
27
(36)
-
8
473
18
115
-
(10)
596
Stage 2
$m
166
(29)
12
-
2
151
(24)
115
-
(3)
239
Total
$m
14
(2)
(4)
8
2
-
10
Total
$m
681
-
(18)
(3)
8
668
-
257
(14)
(13)
898
1. The Group’s credit exposures that are purchased or originated credit-impaired financial assets are insignificant.
2. Other movements includes the impacts of divestments completed during the year.
Net loans and advances - at amortised cost
Net loans and advances - at amortised cost
Allowance for ECL is included in Net loans and advances.
Allowance for ECL is included in Net loans and advances.
As at 1 October 2018
As at 1 October 2018
Transfer between stages
Transfer between stages
New and increased provisions (net of releases)
New and increased provisions (net of releases)
Write-backs
Write-backs
Bad debts written off (excluding recoveries)
Bad debts written off (excluding recoveries)
Foreign currency translation and other movements2
Foreign currency translation and other movements2
As at 30 September 2019
As at 30 September 2019
Transfer between stages
Transfer between stages
New and increased provisions (net of releases)
New and increased provisions (net of releases)
Write-backs
Write-backs
Bad debts written off (excluding recoveries)
Bad debts written off (excluding recoveries)
Foreign currency translation and other movements2
Foreign currency translation and other movements2
As at 30 September 2020
As at 30 September 2020
Investment securities - debt securities at amortised cost
Investment securities - debt securities at amortised cost
Allowance for ECL is included in Investment securities.
Allowance for ECL is included in Investment securities.
As at 1 October 2018
As at 1 October 2018
New and increased provisions (net of releases)
New and increased provisions (net of releases)
Foreign currency translation
Foreign currency translation
As at 30 September 2019
As at 30 September 2019
Foreign currency translation
Foreign currency translation
As at 30 September 2020
As at 30 September 2020
New and increased provisions (net of releases)
New and increased provisions (net of releases)
1. The Group’s credit exposures that are purchased or originated credit-impaired financial assets are insignificant.
1. The Group’s credit exposures that are purchased or originated credit-impaired financial assets are insignificant.
2. Other movements include the impacts of divestments completed during the year and the impact of discount unwind on individually assessed allowance for ECL.
2. Other movements include the impacts of divestments completed during the year and the impact of discount unwind on individually assessed allowance for ECL.
150
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ANZ 2020 Annual Report
ANZ 2020 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
13. ALLOWANCE FOR EXPECTED CREDIT LOSSES (continued)
CREDIT IMPAIRMENT CHARGE - INCOME STATEMENT
Credit impairment charge/(release) analysis
New and increased provisions (net of releases)1
- Collectively assessed
- Individually assessed
Write-backs
Recoveries of amounts previously written-off
Total credit impairment charge
Less: credit impairment charge/(release) from discontinued operations
Total credit impairment charge
1.
Includes the impact of transfers between collectively assessed and individually assessed.
2020
$m
1,717
1,575
(335)
(219)
2,738
-
2,738
2019
$m
16
1,374
(385)
(212)
793
(1)
794
The contractual amount outstanding on financial assets that were written off during the period ended 30 September 2020 and that are still subject to
enforcement activity is $340 million (2019: $212 million).
COVID-19 REPAYMENT DEFERRAL PACKAGES OFFERED TO CUSTOMERS1
Since March 2020, the Group has offered various forms of assistance to customers to counteract the impact of COVID-19 on the ability of customers to
meet their loan obligations. The assistance provided has included arrangements such as temporary deferral of principal and interest repayments,
replacing principal and interest with interest only repayments, and extension of loan maturity dates. Refer to Key Judgements and Estimates in this
Note for details of the impact of deferrals when determining if there has been a Significant Increase in Credit Risk (SICR).
The loan repayment deferral package is considered to be a loan modification under AASB 9. This either results in the loan being derecognised and
replaced with a new loan (substantial modification) or the existing loan continuing to be recognised (non-substantial modification). The table below
shows the outstanding balance as at 30 September 2020 of all loans that have been modified (both substantial and non-substantial modifications):
Assistance package category
Loan deferral package
Retail
Commercial and other
Interest only
Retail
Commercial and other
Term extensions
Retail
Commercial and other
Total2
Retail
Commercial and other
Total2
Total loan outstanding
At 30 September 2020
$m
29,822
9,182
2,413
527
614
90
42,648
32,849
9,799
42,648
1. COVID-19 loan deferral packages are available to customers if either their loan repayments are less than 30 days past due, or if their repayments are less than 90 days past due but were up to date at 1 March 2020.
2. The gross carrying amount of loans at the date of modification that were considered non-substantial modifications and had loss allowances based on lifetime expected losses was $9,917 million. No gain or loss was
recognised as a result of the modification and none of the loans have subsequently changed to a 12 month expected loss allowance.
152
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ANZ 2020 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
Notes to the consolidated financial statements (continued)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
13. ALLOWANCE FOR EXPECTED CREDIT LOSSES (continued)
13. ALLOWANCE FOR EXPECTED CREDIT LOSSES (continued)
13. ALLOWANCE FOR EXPECTED CREDIT LOSSES (continued)
CREDIT IMPAIRMENT CHARGE - INCOME STATEMENT
CREDIT IMPAIRMENT CHARGE - INCOME STATEMENT
Credit impairment charge/(release) analysis
Credit impairment charge/(release) analysis
New and increased provisions (net of releases)1
New and increased provisions (net of releases)1
- Collectively assessed
- Collectively assessed
- Individually assessed
- Individually assessed
Write-backs
Write-backs
Recoveries of amounts previously written-off
Recoveries of amounts previously written-off
Total credit impairment charge
Total credit impairment charge
Less: credit impairment charge/(release) from discontinued operations
Less: credit impairment charge/(release) from discontinued operations
Total credit impairment charge
Total credit impairment charge
1.
1.
Includes the impact of transfers between collectively assessed and individually assessed.
Includes the impact of transfers between collectively assessed and individually assessed.
The contractual amount outstanding on financial assets that were written off during the period ended 30 September 2020 and that are still subject to
The contractual amount outstanding on financial assets that were written off during the period ended 30 September 2020 and that are still subject to
enforcement activity is $340 million (2019: $212 million).
enforcement activity is $340 million (2019: $212 million).
COVID-19 REPAYMENT DEFERRAL PACKAGES OFFERED TO CUSTOMERS1
COVID-19 REPAYMENT DEFERRAL PACKAGES OFFERED TO CUSTOMERS1
Since March 2020, the Group has offered various forms of assistance to customers to counteract the impact of COVID-19 on the ability of customers to
Since March 2020, the Group has offered various forms of assistance to customers to counteract the impact of COVID-19 on the ability of customers to
meet their loan obligations. The assistance provided has included arrangements such as temporary deferral of principal and interest repayments,
meet their loan obligations. The assistance provided has included arrangements such as temporary deferral of principal and interest repayments,
replacing principal and interest with interest only repayments, and extension of loan maturity dates. Refer to Key Judgements and Estimates in this
replacing principal and interest with interest only repayments, and extension of loan maturity dates. Refer to Key Judgements and Estimates in this
Note for details of the impact of deferrals when determining if there has been a Significant Increase in Credit Risk (SICR).
Note for details of the impact of deferrals when determining if there has been a Significant Increase in Credit Risk (SICR).
The loan repayment deferral package is considered to be a loan modification under AASB 9. This either results in the loan being derecognised and
The loan repayment deferral package is considered to be a loan modification under AASB 9. This either results in the loan being derecognised and
replaced with a new loan (substantial modification) or the existing loan continuing to be recognised (non-substantial modification). The table below
replaced with a new loan (substantial modification) or the existing loan continuing to be recognised (non-substantial modification). The table below
shows the outstanding balance as at 30 September 2020 of all loans that have been modified (both substantial and non-substantial modifications):
shows the outstanding balance as at 30 September 2020 of all loans that have been modified (both substantial and non-substantial modifications):
Assistance package category
Assistance package category
Loan deferral package
Loan deferral package
Retail
Retail
Commercial and other
Commercial and other
Interest only
Interest only
Retail
Retail
Commercial and other
Commercial and other
Term extensions
Term extensions
Retail
Retail
Commercial and other
Commercial and other
Total2
Total2
Retail
Retail
Total2
Total2
Commercial and other
Commercial and other
1. COVID-19 loan deferral packages are available to customers if either their loan repayments are less than 30 days past due, or if their repayments are less than 90 days past due but were up to date at 1 March 2020.
1. COVID-19 loan deferral packages are available to customers if either their loan repayments are less than 30 days past due, or if their repayments are less than 90 days past due but were up to date at 1 March 2020.
2. The gross carrying amount of loans at the date of modification that were considered non-substantial modifications and had loss allowances based on lifetime expected losses was $9,917 million. No gain or loss was
2. The gross carrying amount of loans at the date of modification that were considered non-substantial modifications and had loss allowances based on lifetime expected losses was $9,917 million. No gain or loss was
recognised as a result of the modification and none of the loans have subsequently changed to a 12 month expected loss allowance.
recognised as a result of the modification and none of the loans have subsequently changed to a 12 month expected loss allowance.
2020
2020
$m
$m
1,717
1,717
1,575
1,575
(335)
(335)
(219)
(219)
2,738
2,738
-
-
2,738
2,738
2019
2019
$m
$m
16
16
1,374
1,374
(385)
(385)
(212)
(212)
793
793
(1)
(1)
794
794
Total loan outstanding
Total loan outstanding
At 30 September 2020
At 30 September 2020
$m
$m
29,822
29,822
9,182
9,182
2,413
2,413
527
527
614
614
90
90
42,648
42,648
32,849
32,849
9,799
9,799
42,648
42,648
RECOGNITION AND MEASUREMENT
EXPECTED CREDIT LOSS IMPAIRMENT 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:
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 equivalent to 12 months 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.
Stage 2: Where there has been a SICR since origination, an allowance equivalent to lifetime 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 and a 12 month ECL applies.
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:
Probability of default (PD) - the estimate of the likelihood that a borrower will default over a given period;
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
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 macro-economic 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’s 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 substantial modifications.
DEFINITION OF DEFAULT, CREDIT IMPAIRED AND WRITE-OFFS
The definition of default used in measuring expected credit losses 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’s internal processes and when all reasonably expected recoveries have been collected. In subsequent periods, any recoveries of
amounts previously written-off are credited to credit impairment charge in the income statement.
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
13. ALLOWANCE FOR EXPECTED CREDIT LOSSES (continued)
RECOGNITION AND MEASUREMENT
MODIFIED FINANCIAL ASSETS
If the 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 Significant Increase in Credit Risk (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 probability of default 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 probability
of default 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:
there has been a deterioration in the economic outlook, or an increase in economic uncertainty; or
there has been a deterioration in the customer’s overall credit position, or ability to manage their credit obligations.
ii. Backstop criteria
The Group uses 30 days past due arrears as a backstop criteria 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.
iii. COVID-19 initiatives
For facilities subject to the COVID-19 repayment deferral arrangements noted above, an assessment of SICR has been determined based
on various measures of the customer’s current financial position and earnings capacity from which the facilities are categorised into risk
categories. SICR is then determined based on the resulting risk categorisation. Customers in higher risk categories, and those who have
requested a deferral extension are classified as having a SICR.
FORWARD-LOOKING INFORMATION
Forward-looking information is incorporated into both our assessment of whether a financial asset has experienced a Significant Increase in
Credit Risk (SICR) since its initial recognition 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’s view of the most likely future macro-economic conditions. It reflects management’s 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
The severe downside scenario is fixed by reference to average economic cycle conditions and accounts for the potentially severe impact
of less likely extremely adverse economic conditions. It reflects macro-economic conditions of a downturn economic event with a
probability of occurrence once every 25 years.
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For retail portfolios, a SICR is determined, depending on the type of facility, by either comparing the scenario weighted lifetime probability
For retail portfolios, a SICR is determined, depending on the type of facility, by either comparing the scenario weighted lifetime probability
of default at the reporting date to that at origination, or by reference to customer behavioural score thresholds. The scenario weighted
of default at the reporting date to that at origination, or by reference to customer behavioural score thresholds. The scenario weighted
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ANZ 2020 ANNUAL REPORT
ANZ 2020 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
Notes to the consolidated financial statements (continued)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
13. ALLOWANCE FOR EXPECTED CREDIT LOSSES (continued)
13. ALLOWANCE FOR EXPECTED CREDIT LOSSES (continued)
13. ALLOWANCE FOR EXPECTED CREDIT LOSSES (continued)
RECOGNITION AND MEASUREMENT (continued)
FORWARD-LOOKING INFORMATION (continued)
The four scenarios are described in terms of macro-economic variables used in the PD, LGD and EAD models (collectively the ECL models)
depending on the portfolio and country of the borrower. Examples of the variables include unemployment rates, GDP growth rates, house
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 forecast 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
RECOGNITION AND MEASUREMENT
RECOGNITION AND MEASUREMENT
MODIFIED FINANCIAL ASSETS
MODIFIED FINANCIAL ASSETS
If the terms of a financial asset are modified or an existing financial asset is replaced with a new one for either credit or commercial reasons,
If the 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
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,
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
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
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
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.
also becomes the date of origination used to determine SICR for this new asset.
SIGNIFICANT INCREASE IN CREDIT RISK (SICR)
SIGNIFICANT INCREASE IN CREDIT RISK (SICR)
SICR, the Group considers both qualitative and quantitative information:
SICR, the Group considers both qualitative and quantitative information:
i.
i.
Internal credit rating grade
Internal credit rating grade
Stage 2 assets are those that have experienced a Significant Increase in Credit Risk (SICR) since origination. In determining what constitutes a
Stage 2 assets are those that have experienced a Significant Increase in Credit Risk (SICR) since origination. In determining what constitutes a
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
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.
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
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 probability of default of the borrower and
the CCR at origination of that facility. A CCR is assigned to each borrower which reflects the probability of default of the borrower and
incorporates both borrower and non-borrower specific information, including forward-looking information. CCRs are subject to review
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.
at least annually or more frequently when an event occurs which could affect the credit risk of the customer.
lifetime probability of default may increase significantly if:
lifetime probability of default may increase significantly if:
there has been a deterioration in the economic outlook, or an increase in economic uncertainty; or
there has been a deterioration in the economic outlook, or an increase in economic uncertainty; or
there has been a deterioration in the customer’s overall credit position, or ability to manage their credit obligations.
there has been a deterioration in the customer’s overall credit position, or ability to manage their credit obligations.
The Group uses 30 days past due arrears as a backstop criteria for both non-retail and retail portfolios. For retail portfolios only, facilities are
The Group uses 30 days past due arrears as a backstop criteria 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.
required to demonstrate three to six months of good payment behaviour prior to being allocated back to Stage 1.
ii. Backstop criteria
ii. Backstop criteria
iii. COVID-19 initiatives
iii. COVID-19 initiatives
For facilities subject to the COVID-19 repayment deferral arrangements noted above, an assessment of SICR has been determined based
For facilities subject to the COVID-19 repayment deferral arrangements noted above, an assessment of SICR has been determined based
on various measures of the customer’s current financial position and earnings capacity from which the facilities are categorised into risk
on various measures of the customer’s current financial position and earnings capacity from which the facilities are categorised into risk
categories. SICR is then determined based on the resulting risk categorisation. Customers in higher risk categories, and those who have
categories. SICR is then determined based on the resulting risk categorisation. Customers in higher risk categories, and those who have
requested a deferral extension are classified as having a SICR.
requested a deferral extension are classified as having a SICR.
FORWARD-LOOKING INFORMATION
FORWARD-LOOKING INFORMATION
Forward-looking information is incorporated into both our assessment of whether a financial asset has experienced a Significant Increase in
Forward-looking information is incorporated into both our assessment of whether a financial asset has experienced a Significant Increase in
Credit Risk (SICR) since its initial recognition and in our estimate of ECL. In applying forward-looking information for estimating ECL, the Group
Credit Risk (SICR) since its initial recognition 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:
considers four probability-weighted forecast economic scenarios as follows:
i. Base case scenario
i. Base case scenario
ii. Upside and iii. Downside scenarios
ii. Upside and iii. Downside scenarios
iv. Severe downside scenario
iv. Severe downside scenario
The base case scenario is ANZ’s view of the most likely future macro-economic conditions. It reflects management’s assumptions used for
The base case scenario is ANZ’s view of the most likely future macro-economic conditions. It reflects management’s assumptions used for
strategic planning and budgeting, and also informs the Group Internal Capital Adequacy Assessment Process (ICAAP) which is the process
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;
the Group applies in strategic and capital planning over a 3-year time horizon;
The upside and downside scenarios are fixed by reference to average economic cycle conditions (that is, they are not based on the
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
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
pessimistic (in the case of the downside) economic events and uncertainty over long term horizons; and
The severe downside scenario is fixed by reference to average economic cycle conditions and accounts for the potentially severe impact
The severe downside scenario is fixed by reference to average economic cycle conditions and accounts for the potentially severe impact
of less likely extremely adverse economic conditions. It reflects macro-economic conditions of a downturn economic event with a
of less likely extremely adverse economic conditions. It reflects macro-economic conditions of a downturn economic event with a
probability of occurrence once every 25 years.
probability of occurrence once every 25 years.
The following table summarises the key judgements and assumptions in relation to the ECL 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 impact of COVID-19, 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. In relation to COVID-19, judgements and assumptions include the extent and duration of the pandemic, the
impacts of actions of governments and other authorities, and the responses of businesses and consumers in different industries, along with
the associated impact on the global economy. Accordingly, the Group’s ECL estimates are inherently uncertain and, as a result, actual results
may differ from these estimates.
Judgement/Assumption Description
Determining when a
Significant Increase in
Credit Risk (SICR) has
occurred
In the measurement of ECL, judgement is
involved in setting the rules and trigger points to
determine whether there has been a SICR since
initial recognition of a loan, which would result in
the financial asset 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 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 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.
Considerations for the year ended 30 September 2020
In response to the impacts of COVID-19, various
packages, such as repayment deferrals, have been
offered to eligible retail and commercial customers in
Australia and New Zealand. The Group does not consider
that when a customer is first provided assistance, all
other things being equal, that there has been a
Significant Increase in Credit Risk (SICR) and a
consequent impact on ECL when assessing provisions.
Subsequent to take-up, customers have been contacted
to discuss available options once the packages reach
their end date. This additional information on the
customer’s financial position and ability to recommence
their loan repayments is used to assist in classification of
customers into risk categories. Customers in higher risk
categories, and those who have requested a deferral
extension, have been classified as having a SICR.
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the selection of an estimation technique or modelling methodology, noting that the modelling of the Group’s ECL estimates are
complex; and
the selection of inputs for those models, and the interdependencies between those inputs.
In estimating collectively assessed ECL, the Group makes judgements and assumptions in relation to:
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ANZ 2020 Annual Report
ANZ 2020 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
13. ALLOWANCE FOR EXPECTED CREDIT LOSSES (continued)
KEY JUDGEMENTS AND ESTIMATES (continued)
Judgement/Assumption Description
Considerations for the year ended 30 September 2020
Measuring both 12-
month and lifetime credit
losses
The probability of default (PD), loss given default
(LGD) and exposure at default (EAD) credit risk
parameters 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 variables are relevant
for particular lending portfolios and for determining
each portfolio’s point-in-time sensitivity.
In addition, judgement is required where
behavioural characteristics are applied in estimating
the lifetime of a facility to be used in measuring
ECL.
The PD, EAD and LGD models are subject to the Group’s model risk
policy that stipulates periodic model monitoring, periodic re-
validation and defines approval procedures and authorities
according to model materiality.
There were no material changes to the policies during the year
ended 30 September 2020.
There were no changes to behavioural lifetime estimates during
the year ended 30 September 2020.
Base case economic
forecast
The Group derives a forward-looking “base case”
economic scenario which reflects ANZ’s view of the
most likely future macro-economic conditions.
There have been no changes to the types of forward-looking
variables (key economic drivers) used as model inputs in the
current year.
Probability weighting of
each economic scenario
(base case, upside,
downside and severe
downside scenarios)1,2
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.
As at 30 September 2020, the base case assumptions have been
updated to reflect the rapidly evolving situation with respect to
COVID-19. This includes an assessment of the impact of central
bank policies, governments’ actions, the response of business, and
institution specific responses (such as repayment deferrals). These
are considered in determining the length and severity of the
forecast economic downturn.
The expected outcomes of key economic drivers for the base case
scenario as at 30 September 2020 are described below under the
heading “Base case economic forecast assumptions”.
The key consideration for probability weightings in the current
period is the continuing impact of COVID-19.
The Group considers these weightings in each geography to
provide the best estimate of the possible loss outcomes and has
analysed inter-relationships and correlations (over both the short
and long term) within the Group’s credit portfolios in determining
them.
In addition to the base case forecast which reflects the negative
economic consequences of COVID-19, greater weighting has been
applied to the downside scenario given the Group’s assessment of
downside risks.
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.
1.
2.
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.
The severe downside scenario is fixed by reference to average economic cycle conditions and accounts for the potentially severe downside impact of less likely extremely adverse economic
conditions.
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ANZ 2020 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
Notes to the consolidated financial statements (continued)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
13. ALLOWANCE FOR EXPECTED CREDIT LOSSES (continued)
13. ALLOWANCE FOR EXPECTED CREDIT LOSSES (continued)
13. ALLOWANCE FOR EXPECTED CREDIT LOSSES (continued)
KEY JUDGEMENTS AND ESTIMATES (continued)
KEY JUDGEMENTS AND ESTIMATES (continued)
Judgement/Assumption Description
Judgement/Assumption Description
Considerations for the year ended 30 September 2020
Considerations for the year ended 30 September 2020
Judgement/Assumption Description
Considerations for the year ended 30 September 2020
KEY JUDGEMENTS AND ESTIMATES (continued)
Measuring both 12-
Measuring both 12-
The probability of default (PD), loss given default
The probability of default (PD), loss given default
The PD, EAD and LGD models are subject to the Group’s model risk
The PD, EAD and LGD models are subject to the Group’s model risk
month and lifetime credit
month and lifetime credit
(LGD) and exposure at default (EAD) credit risk
(LGD) and exposure at default (EAD) credit risk
policy that stipulates periodic model monitoring, periodic re-
policy that stipulates periodic model monitoring, periodic re-
losses
losses
parameters used in determining ECL are point-in-
parameters used in determining ECL are point-in-
validation and defines approval procedures and authorities
validation and defines approval procedures and authorities
Management
temporary adjustments
time measures reflecting the relevant forward-
time measures reflecting the relevant forward-
according to model materiality.
according to model materiality.
looking information determined by management.
looking information determined by management.
There were no material changes to the policies during the year
There were no material changes to the policies during the year
Judgement is involved in determining which
Judgement is involved in determining which
ended 30 September 2020.
ended 30 September 2020.
forward-looking information variables are relevant
forward-looking information variables are relevant
for particular lending portfolios and for determining
for particular lending portfolios and for determining
each portfolio’s point-in-time sensitivity.
each portfolio’s point-in-time sensitivity.
the lifetime of a facility to be used in measuring
the lifetime of a facility to be used in measuring
ECL.
ECL.
In addition, judgement is required where
In addition, judgement is required where
There were no changes to behavioural lifetime estimates during
There were no changes to behavioural lifetime estimates during
behavioural characteristics are applied in estimating
behavioural characteristics are applied in estimating
the year ended 30 September 2020.
the year ended 30 September 2020.
Base case economic
Base case economic
The Group derives a forward-looking “base case”
The Group derives a forward-looking “base case”
There have been no changes to the types of forward-looking
There have been no changes to the types of forward-looking
forecast
forecast
economic scenario which reflects ANZ’s view of the
economic scenario which reflects ANZ’s view of the
variables (key economic drivers) used as model inputs in the
variables (key economic drivers) used as model inputs in the
most likely future macro-economic conditions.
most likely future macro-economic conditions.
current year.
current year.
Management have applied a number of adjustments to the
modelled ECL primarily due to the uncertainty associated
with COVID-19.
Management overlays (including COVID-19 overlays) which
add to the modelled ECL provision have been made for risks
particular to small business and commercial banking in
Australia, for retail, commercial and agri banking in New
Zealand, and for tourism in the Pacific.
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, and natural disasters that are not
incorporated into our current parameters, risk
ratings, or forward-looking information are
examples of such circumstances. The use of
management temporary adjustments may
impact the amount of ECL recognised.
The uncertainty associated with the COVID-19
pandemic, and the extent to which the actions
of governments, businesses and consumers
mitigate against potentially adverse credit
outcomes are not fully incorporated into
existing ECL models. Accordingly, management
overlays have been applied to ensure credit
provisions are appropriate.
Probability weighting of
Probability weighting of
each economic scenario
each economic scenario
(base case, upside,
(base case, upside,
downside and severe
downside and severe
downside scenarios)1,2
downside scenarios)1,2
Probability weighting of each economic scenario is
Probability weighting of each economic scenario is
The key consideration for probability weightings in the current
The key consideration for probability weightings in the current
determined by management considering the risks
determined by management considering the risks
period is the continuing impact of COVID-19.
period is the continuing impact of COVID-19.
and uncertainties surrounding the base case
and uncertainties surrounding the base case
economic scenario at each measurement date.
economic scenario at each measurement date.
Base case economic forecast assumptions
The uncertain evolution of the COVID-19 pandemic increases the risk to the economic forecast resulting in an understatement or
overstatement of the ECL balance due to uncertainties around:
the extent and duration of measures to stop or reduce the speed of the spread of COVID-19;
the extent and duration of the economic downturn, along with the time required for economies to recover; and
the effectiveness of government stimulus measures, in particular their impact on the magnitude of economic downturn and the extent
and duration of the recovery.
The economic drivers of the base case economic forecasts at 30 September 2020 are set out below. These reflect ANZ’s view of the most
likely future macro-economic conditions at 30 September 2020. For years beyond the near term forecasts below, the ECL models project
future year economic conditions including an assumption to eventual reversion to mid-cycle economic conditions.
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
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.
combination of more optimistic (in the case of the upside) and pessimistic (in the case of the downside) economic conditions.
The severe downside scenario is fixed by reference to average economic cycle conditions and accounts for the potentially severe downside impact of less likely extremely adverse economic
The severe downside scenario is fixed by reference to average economic cycle conditions and accounts for the potentially severe downside impact of less likely extremely adverse economic
1.
1.
2.
2.
conditions.
conditions.
156
156
Australia
GDP
Unemployment
Residential property prices
Consumer price index
New Zealand
GDP
Unemployment
Residential property prices
Consumer price index
Rest of world
GDP
Consumer price index
Forecast calendar year
2020
2021
2022
-4.3%
7.3%
-2.2%
0.8
-5.6%
5.7%
-0.3%
1.6
-4.5%
1.0
1.6%
8.8%
-4.8%
1.2
2.0%
9.1%
0.9%
1.0
2.5%
1.8
4.0%
7.7%
2.0%
1.3
5.6%
6.5%
4.1%
1.2
2.5%
2.0
157
157
As at 30 September 2020, the base case assumptions have been
As at 30 September 2020, the base case assumptions have been
updated to reflect the rapidly evolving situation with respect to
updated to reflect the rapidly evolving situation with respect to
COVID-19. This includes an assessment of the impact of central
COVID-19. This includes an assessment of the impact of central
bank policies, governments’ actions, the response of business, and
bank policies, governments’ actions, the response of business, and
institution specific responses (such as repayment deferrals). These
institution specific responses (such as repayment deferrals). These
are considered in determining the length and severity of the
are considered in determining the length and severity of the
forecast economic downturn.
forecast economic downturn.
The expected outcomes of key economic drivers for the base case
The expected outcomes of key economic drivers for the base case
scenario as at 30 September 2020 are described below under the
scenario as at 30 September 2020 are described below under the
heading “Base case economic forecast assumptions”.
heading “Base case economic forecast assumptions”.
The Group considers these weightings in each geography to
The Group considers these weightings in each geography to
provide the best estimate of the possible loss outcomes and has
provide the best estimate of the possible loss outcomes and has
analysed inter-relationships and correlations (over both the short
analysed inter-relationships and correlations (over both the short
and long term) within the Group’s credit portfolios in determining
and long term) within the Group’s credit portfolios in determining
them.
them.
In addition to the base case forecast which reflects the negative
In addition to the base case forecast which reflects the negative
economic consequences of COVID-19, greater weighting has been
economic consequences of COVID-19, greater weighting has been
applied to the downside scenario given the Group’s assessment of
applied to the downside scenario given the Group’s assessment of
downside risks.
downside risks.
The assigned probability weightings in Australia, New Zealand and
The assigned probability weightings in Australia, New Zealand and
Rest of world are subject to a high degree of inherent uncertainty
Rest of world are subject to a high degree of inherent uncertainty
and therefore the actual outcomes may be significantly different to
and therefore the actual outcomes may be significantly different to
those projected.
those projected.
ANZ 2020 Annual Report
ANZ 2020 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
13. ALLOWANCE FOR EXPECTED CREDIT LOSSES (continued)
KEY JUDGEMENTS AND ESTIMATES (continued)
The base case economic forecasts as at 30 September 2020 reflect a significant deterioration in current and expected economic conditions from
the forecasts as at 30 September 2019 reflecting the emergence and ongoing impact of the COVID-19 pandemic.
Probability weightings
Probability weighting of each scenario is determined by management considering the risks and uncertainties surrounding the base case
economic scenario. The key consideration for probability weightings in the current period is the continuing impact of COVID-19.
In addition to the base case economic forecast which reflects the negative economic consequences of COVID-19, greater weighting has been
applied to the downside economic scenario given the Group’s assessment of downside risks.
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 the best estimate of the possible loss outcomes and has analysed inter-relationships and correlations (over both the short and long
term) within the Group’s credit portfolios in determining them. The average weightings applied across the Group are set out below:
Group
Base
Upside
Downside
Severe Downside
ECL - Sensitivity analysis
2020
50.0%
10.4%
33.3%
6.3%
2019
50.0%
15.7%
29.3%
5.0%
The uncertainty of the impact of COVID-19 introduces significant estimation uncertainty in relation to the measurement of the Group’s
allowance for expected credit losses. The rapidly evolving consequences of COVID-19 and government, business and consumer responses
could result in significant adjustments to the allowance in future financial years.
Given current economic uncertainties and the judgment 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 2020:
If 1% of Stage 1 facilities were included in Stage 2
If 1% of Stage 2 facilities were included in Stage 1
100% upside scenario
100% base scenario
100% downside scenario
100% severe downside scenario
ECL
$m
5,069
4,998
1,898
4,011
5,144
6,315
Impact
$m
61
(10)
(3,110)
(997)
136
1,307
158
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OverviewHow we create valuePerformance overviewRemuneration reportDirectors’ reportFinancial reportShareholder information
ANZ 2020 ANNUAL REPORT
ANZ 2020 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
Notes to the consolidated financial statements (continued)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
13. ALLOWANCE FOR EXPECTED CREDIT LOSSES (continued)
13. ALLOWANCE FOR EXPECTED CREDIT LOSSES (continued)
FINANCIAL LIABILITIES
Outlined below is a description of how we classify and measure financial liabilities relevant to the subsequent note disclosures.
KEY JUDGEMENTS AND ESTIMATES (continued)
KEY JUDGEMENTS AND ESTIMATES (continued)
CLASSIFICATION AND MEASUREMENT
The base case economic forecasts as at 30 September 2020 reflect a significant deterioration in current and expected economic conditions from
The base case economic forecasts as at 30 September 2020 reflect a significant deterioration in current and expected economic conditions from
Financial liabilities
the forecasts as at 30 September 2019 reflecting the emergence and ongoing impact of the COVID-19 pandemic.
the forecasts as at 30 September 2019 reflecting the emergence and ongoing impact of the COVID-19 pandemic.
Probability weightings
Probability weightings
Probability weighting of each scenario is determined by management considering the risks and uncertainties surrounding the base case
Probability weighting of each scenario is determined by management considering the risks and uncertainties surrounding the base case
economic scenario. The key consideration for probability weightings in the current period is the continuing impact of COVID-19.
economic scenario. The key consideration for probability weightings in the current period is the continuing impact of COVID-19.
In addition to the base case economic forecast which reflects the negative economic consequences of COVID-19, greater weighting has been
In addition to the base case economic forecast which reflects the negative economic consequences of COVID-19, greater weighting has been
applied to the downside economic scenario given the Group’s assessment of downside risks.
applied to the downside economic scenario given the Group’s assessment of downside risks.
The assigned probability weightings in Australia, New Zealand and Rest of world are subject to a high degree of inherent uncertainty and
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
therefore the actual outcomes may be significantly different to those projected. The Group considers these weightings in each geography to
provide the best estimate of the possible loss outcomes and has analysed inter-relationships and correlations (over both the short and long
provide the best estimate of the possible loss outcomes and has analysed inter-relationships and correlations (over both the short and long
term) within the Group’s credit portfolios in determining them. The average weightings applied across the Group are set out below:
term) within the Group’s credit portfolios in determining them. The average weightings applied across the Group are set out below:
Financial liabilities are measured at amortised cost, or fair value through profit or loss (FVTPL) when they are held for trading. Additionally, financial
liabilities can be designated at FVTPL where:
the designation eliminates or significantly reduces an accounting mismatch which would otherwise arise;
a group of financial liabilities are managed and their performance is evaluated on a fair value basis, in accordance with a documented risk
management strategy; or
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’s own credit risk are included in
other comprehensive income, except where doing so would create or enlarge an accounting mismatch in profit or loss.
Group
Group
Base
Base
Upside
Upside
Downside
Downside
Severe Downside
Severe Downside
ECL - Sensitivity analysis
ECL - Sensitivity analysis
2020
2020
50.0%
50.0%
10.4%
10.4%
33.3%
33.3%
6.3%
6.3%
2019
2019
50.0%
50.0%
15.7%
15.7%
29.3%
29.3%
5.0%
5.0%
The uncertainty of the impact of COVID-19 introduces significant estimation uncertainty in relation to the measurement of the Group’s
The uncertainty of the impact of COVID-19 introduces significant estimation uncertainty in relation to the measurement of the Group’s
allowance for expected credit losses. The rapidly evolving consequences of COVID-19 and government, business and consumer responses
allowance for expected credit losses. The rapidly evolving consequences of COVID-19 and government, business and consumer responses
could result in significant adjustments to the allowance in future financial years.
could result in significant adjustments to the allowance in future financial years.
Given current economic uncertainties and the judgment applied to factors used in determining the expected default of borrowers in future
Given current economic uncertainties and the judgment 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.
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 2020:
The table below illustrates the sensitivity of collectively assessed ECL to key factors used in determining it as at 30 September 2020:
If 1% of Stage 1 facilities were included in Stage 2
If 1% of Stage 1 facilities were included in Stage 2
If 1% of Stage 2 facilities were included in Stage 1
If 1% of Stage 2 facilities were included in Stage 1
100% upside scenario
100% upside scenario
100% base scenario
100% base scenario
100% downside scenario
100% downside scenario
100% severe downside scenario
100% severe downside scenario
ECL
ECL
$m
$m
5,069
5,069
4,998
4,998
1,898
1,898
4,011
4,011
5,144
5,144
6,315
6,315
Impact
Impact
$m
$m
61
61
(10)
(10)
(3,110)
(3,110)
(997)
(997)
136
136
1,307
1,307
158
158
159
159
ANZ 2020 Annual Report
ANZ 2020 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
14. DEPOSITS AND OTHER BORROWINGS
9,142
88,337
39,874
315,216
32,491
197,273
2020
11,812
77,526
28,342
256,264
Certificates of deposit
Term deposits
On demand and short term deposits
Deposits not bearing interest
Deposits from banks & securities sold under repurchase agreements1
Commercial paper and other borrowings2
Deposits and other borrowings
Residual contractual maturity:
Within one year
More than one year
Deposits and other borrowings
Carried on Balance Sheet at:
Amortised cost
Fair value through profit or loss (designated on initial recognition)3
Deposits and other borrowings
36,646
Certificates of deposit
Term deposits
On demand and short
term deposits
2019
227,087
Deposits not bearing interest
Deposits from banks &
securities sold under
repurchase agreements1
Commercial paper and
other borrowings2
2020
$m
32,491
197,273
315,216
39,874
88,337
9,142
682,333
665,151
17,182
682,333
679,255
3,078
682,333
2019
$m
36,646
227,087
256,264
28,342
77,526
11,812
637,677
630,373
7,304
637,677
635,376
2,301
637,677
1.
Includes $12 billion of funds drawn under the RBA’s Term Funding Facility (TFF). TFF is initially recognised at fair value and is subsequently measured at amortised cost using the effective interest rate
method. Refer to Note 16 Financial Risk Management for more details.
2. In 2019, Other borrowings related to secured investments issued by the consolidated subsidiary UDC Finance Limited (UDC) of NZD 0.1 billion, which were secured by a security interest over all the assets
of UDC of NZD 3.5 billion. The Group divested of UDC during 2020.
3. From 1 October 2019, the Group changed its accounting treatment for certain gold loan and deposit products which are now designated as at fair value through profit and loss.
RECOGNITION AND MEASUREMENT
For deposits and other borrowings that:
are not designated at fair value through profit or loss on initial recognition, we measure them at amortised cost and recognise their
interest expense using the effective interest rate method; and
are managed on a fair value basis, reduce or eliminate an accounting mismatch or contain an embedded derivative, we designated
them as measured at fair value through profit or loss.
Refer to Note 17 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’s own credit risk in other comprehensive income in retained earnings. Any remaining amount of fair value gain or loss we recognise
directly in profit and loss. Once we have recognised an amount in other comprehensive income, we do not later reclassify it to profit and
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 the profit and loss.
160
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ANZ 2020 ANNUAL REPORT
ANZ 2020 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
Notes to the consolidated financial statements (continued)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
14. DEPOSITS AND OTHER BORROWINGS
14. DEPOSITS AND OTHER BORROWINGS
15. DEBT ISSUANCES
The Group 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 take priority over holders of subordinated debt owed by the
relevant issuer. In the winding up of the relevant issuer, the subordinated debt will be repaid by the relevant issuer only after the repayment of claims
of depositors, other creditors and the senior debt holders.
Senior debt
Covered bonds
Securitisation
Total unsubordinated debt
Subordinated debt
- Additional Tier 1 capital
- Tier 2 capital
Total subordinated debt
Total debt issued
2020
$m
80,835
15,948
1,824
98,607
8,196
12,865
21,061
119,668
TOTAL DEBT ISSUED BY CURRENCY
The table below shows the Group’s issued debt by currency of issue, which broadly represents the debt holders’ base location.
USD
EUR
AUD
NZD
JPY
CHF
GBP
HKD
Other
United States dollars
Euro
Australian dollars
New Zealand dollars
Japanese yen
Swiss francs
Pounds sterling
Hong Kong dollars
Chinese yuan, Norwegian kroner, Singapore dollars, Indonesian rupiah and Canadian dollars
Total debt issued
Residual contractual maturity1:
Within one year
More than one year
No maturity date (instruments in perpetuity)
Total debt issued
1. Based on the final maturity date or, in the case of Additional Tier 1 capital securities, the mandatory conversion date (if any).
2020
$m
41,100
23,038
43,697
3,682
2,131
975
2,387
1,088
1,570
119,668
25,688
92,059
1,921
119,668
2019
$m
89,737
20,957
2,411
113,105
8,171
8,415
16,586
129,691
2019
$m
45,841
26,200
39,273
5,130
3,312
1,501
4,720
1,446
2,268
129,691
20,803
106,963
1,925
129,691
SUBORDINATED DEBT
Subordinated debt qualifies as regulatory capital for the Group and is classified as either Additional Tier 1 (AT1) capital or Tier 2 capital for APRA’s
capital adequacy purposes depending on their terms and conditions:
AT1 capital: perpetual capital instruments:
ANZ Capital Notes (ANZ CN);
ANZ Capital Securities (ANZ CS); and
ANZ NZ Capital Notes (ANZ NZ CN).
Tier 2 capital: perpetual or term subordinated notes.
Tier 2 capital instruments rank ahead of AT1 capital instruments, and AT1 capital instruments only rank ahead of ordinary shares, in any liquidation
event impacting the issuer of the instruments.
9,142
88,337
39,874
315,216
32,491
197,273
11,812
77,526
28,342
256,264
36,646
2020
2019
227,087
Deposits not bearing interest
Certificates of deposit
Term deposits
On demand and short
term deposits
Deposits from banks &
securities sold under
repurchase agreements1
Commercial paper and
other borrowings2
2020
2020
$m
$m
32,491
32,491
197,273
197,273
315,216
315,216
39,874
39,874
88,337
88,337
9,142
9,142
682,333
682,333
665,151
665,151
17,182
17,182
682,333
682,333
679,255
679,255
3,078
3,078
682,333
682,333
2019
2019
$m
$m
36,646
36,646
227,087
227,087
256,264
256,264
28,342
28,342
77,526
77,526
11,812
11,812
637,677
637,677
630,373
630,373
7,304
7,304
637,677
637,677
635,376
635,376
2,301
2,301
637,677
637,677
Deposits from banks & securities sold under repurchase agreements1
Deposits from banks & securities sold under repurchase agreements1
Certificates of deposit
Certificates of deposit
Term deposits
Term deposits
On demand and short term deposits
On demand and short term deposits
Deposits not bearing interest
Deposits not bearing interest
Commercial paper and other borrowings2
Commercial paper and other borrowings2
Deposits and other borrowings
Deposits and other borrowings
Residual contractual maturity:
Residual contractual maturity:
Within one year
Within one year
More than one year
More than one year
Deposits and other borrowings
Deposits and other borrowings
Carried on Balance Sheet at:
Carried on Balance Sheet at:
Amortised cost
Amortised cost
Deposits and other borrowings
Deposits and other borrowings
Fair value through profit or loss (designated on initial recognition)3
Fair value through profit or loss (designated on initial recognition)3
1.
1.
Includes $12 billion of funds drawn under the RBA’s Term Funding Facility (TFF). TFF is initially recognised at fair value and is subsequently measured at amortised cost using the effective interest rate
Includes $12 billion of funds drawn under the RBA’s Term Funding Facility (TFF). TFF is initially recognised at fair value and is subsequently measured at amortised cost using the effective interest rate
2. In 2019, Other borrowings related to secured investments issued by the consolidated subsidiary UDC Finance Limited (UDC) of NZD 0.1 billion, which were secured by a security interest over all the assets
2. In 2019, Other borrowings related to secured investments issued by the consolidated subsidiary UDC Finance Limited (UDC) of NZD 0.1 billion, which were secured by a security interest over all the assets
method. Refer to Note 16 Financial Risk Management for more details.
method. Refer to Note 16 Financial Risk Management for more details.
of UDC of NZD 3.5 billion. The Group divested of UDC during 2020.
of UDC of NZD 3.5 billion. The Group divested of UDC during 2020.
3. From 1 October 2019, the Group changed its accounting treatment for certain gold loan and deposit products which are now designated as at fair value through profit and loss.
3. From 1 October 2019, the Group changed its accounting treatment for certain gold loan and deposit products which are now designated as at fair value through profit and loss.
RECOGNITION AND MEASUREMENT
RECOGNITION AND MEASUREMENT
For deposits and other borrowings that:
For deposits and other borrowings that:
are not designated at fair value through profit or loss on initial recognition, we measure them at amortised cost and recognise their
are not designated at fair value through profit or loss on initial recognition, we measure them at amortised cost and recognise their
interest expense using the effective interest rate method; and
interest expense using the effective interest rate method; and
are managed on a fair value basis, reduce or eliminate an accounting mismatch or contain an embedded derivative, we designated
are managed on a fair value basis, reduce or eliminate an accounting mismatch or contain an embedded derivative, we designated
them as measured at fair value through profit or loss.
them as measured at fair value through profit or loss.
Refer to Note 17 Fair Value of Financial Assets and Financial Liabilities for further details.
Refer to Note 17 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
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’s own credit risk in other comprehensive income in retained earnings. Any remaining amount of fair value gain or loss we recognise
Group’s own credit risk in other comprehensive income in retained earnings. Any remaining amount of fair value gain or loss we recognise
directly in profit and loss. Once we have recognised an amount in other comprehensive income, we do not later reclassify it to profit and
directly in profit and loss. Once we have recognised an amount in other comprehensive income, we do not later reclassify it to profit and
loss.
loss.
Securities sold under repurchase agreements represent a liability to repurchase the financial assets that remain on our balance sheet since
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
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 the profit and loss.
between the sale price and the repurchase price and charge it to interest expense in the profit and loss.
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160
161
161
ANZ 2020 Annual Report
ANZ 2020 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
15. DEBT ISSUANCES (continued)
AT1 CAPITAL
All outstanding AT1 capital instruments are Basel III fully compliant instruments (refer to Note 23 Capital Management for further information about
Basel III). 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’s absolute discretion and certain payment conditions
(including regulatory requirements). Distributions on ANZ CNs are franked in line with the franking applied to ANZ 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’s and, in respect of the ANZ NZ CN, the Reserve Bank of
New Zealand’s (RBNZ) prior written approval.
Each of the AT1 capital instruments will immediately convert into a variable number of ANZ 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 ANZ ordinary shares) if:
ANZ’s or, in the case of the ANZ NZ CN, ANZ Bank New Zealand Limited’s (ANZ NZ) Common Equity Tier 1 capital ratio is equal to or less than
5.125% - known as a Common Equity Capital Trigger Event; or
APRA notifies the Company that, without the conversion or write-off of certain securities or a public sector injection of capital (or equivalent
support), it considers that the Company would become non-viable or, in the case of the ANZ NZ CN, the RBNZ directs ANZ NZ to convert or write-
off the notes or a statutory manager is appointed to ANZ NZ and decides that ANZ NZ must convert or write-off the notes – known as a Non-
Viability Trigger Event.
Where specified, AT1 capital instruments mandatorily convert into a variable number of ANZ ordinary shares (based on the average market price of
the shares immediately prior to conversion less a 1% discount):
on a specified mandatory conversion date; or
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.
The tables below show the key details of the Group’s AT1 capital instruments on issue at 30 September in both the current and prior years:
2020
$m
2019
$m
1,119
1,608
967
1,614
926
1,499
463
8,196
1,118
1,607
966
1,612
925
1,481
462
8,171
ANZ CN1
ANZ CN2
ANZ CN3
ANZ CN4
ANZ CN5
Additional Tier 1 capital (perpetual subordinated securities)1
ANZ Capital Notes (ANZ CN)
AUD
1,120m
AUD
1,610m
AUD
970m
AUD
1,622m
931m
AUD
ANZ Capital Securities (ANZ CS)
USD
1,000m
ANZ NZ Capital Notes (ANZ NZ CN)
NZD
500m
Total Additional Tier 1 capital2
ANZ Capital Securities
ANZ NZ Capital Notes
1. Carrying values net of issue costs.
2. This forms part of qualifying Additional Tier 1 capital (refer to Note 23 Capital Management).
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
Notes to the consolidated financial statements (continued)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
15. DEBT ISSUANCES (continued)
15. DEBT ISSUANCES (continued)
AT1 CAPITAL
AT1 CAPITAL
15. DEBT ISSUANCES (continued)
All outstanding AT1 capital instruments are Basel III fully compliant instruments (refer to Note 23 Capital Management for further information about
All outstanding AT1 capital instruments are Basel III fully compliant instruments (refer to Note 23 Capital Management for further information about
ANZ Capital Notes (ANZ CN)
Basel III). Each of the ANZ CN and ANZ CS rank equally with each other.
Basel III). Each of the ANZ CN and ANZ CS rank equally with each other.
Issuer
Issue date
Issue amount
Face value
Distribution frequency
Distribution rate
CN1
ANZ
CN2
ANZ
7 August 2013
$1,120 million
$100
31 March 2014
$1,610 million
$100
CN3
ANZ, acting through its New
Zealand branch
5 March 2015
$970 million
$100
Semi-annually in arrears
Semi-annually in arrears
Semi-annually in arrears
Floating rate: (180 day Bank
Bill rate +3.4%)x(1-Australian
corporate tax rate)
Floating rate: (180 day Bank
Bill rate +3.25%)x(1-
Australian corporate tax rate)
Floating rate: (180 day Bank
Bill rate +3.6%)x(1-Australian
corporate tax rate)
Issuer’s early redemption or conversion option
1 September 2021
Mandatory conversion date
1 September 2023
24 March 2022
24 March 2024
24 March 2023
24 March 2025
Common equity capital trigger event
Non-viability trigger event
Carrying value 2020 (net of issue costs)
Yes
Yes
Yes
Yes
Yes
Yes
$1,119 million
(2019: $1,118 million)
$1,608 million
(2019: $1,607 million)
$967 million
(2019: $966 million)
2020
2020
$m
$m
2019
2019
$m
$m
1,119
1,119
1,608
1,608
967
967
1,614
1,614
926
926
1,499
1,499
463
463
8,196
8,196
1,118
1,118
1,607
1,607
966
966
1,612
1,612
925
925
1,481
1,481
462
462
8,171
8,171
Issuer
Issue date
Issue amount
Face value
Distribution frequency
Distribution rate
Issuer’s early redemption or conversion option
Mandatory conversion date
Common equity capital trigger event
Non-viability trigger event
Carrying value 2020 (net of issue costs)
CN4
ANZ
CN5
ANZ
27 September 2016
28 September 2017
$1,622 million
$100
$931 million
$100
Quarterly in arrears
Quarterly in arrears
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)
20 March 2024
20 March 2026
20 March 2025
20 March 2027
Yes
Yes
Yes
Yes
$1,614 million
(2019: $1,612 million)
$926 million
(2019: $925 million)
Distributions on the AT1 capital instruments are non-cumulative and subject to the issuer’s absolute discretion and certain payment conditions
Distributions on the AT1 capital instruments are non-cumulative and subject to the issuer’s absolute discretion and certain payment conditions
(including regulatory requirements). Distributions on ANZ CNs are franked in line with the franking applied to ANZ ordinary shares.
(including regulatory requirements). Distributions on ANZ CNs are franked in line with the franking applied to ANZ 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
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’s and, in respect of the ANZ NZ CN, the Reserve Bank of
circumstances (such as a tax or regulatory event). This redemption option is subject to APRA’s and, in respect of the ANZ NZ CN, the Reserve Bank of
New Zealand’s (RBNZ) prior written approval.
New Zealand’s (RBNZ) prior written approval.
Each of the AT1 capital instruments will immediately convert into a variable number of ANZ ordinary shares (based on the average market price of the
Each of the AT1 capital instruments will immediately convert into a variable number of ANZ 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 ANZ ordinary shares) if:
shares immediately prior to conversion less a 1% discount, subject to a maximum conversion number of ANZ ordinary shares) if:
ANZ’s or, in the case of the ANZ NZ CN, ANZ Bank New Zealand Limited’s (ANZ NZ) Common Equity Tier 1 capital ratio is equal to or less than
ANZ’s or, in the case of the ANZ NZ CN, ANZ Bank New Zealand Limited’s (ANZ NZ) Common Equity Tier 1 capital ratio is equal to or less than
5.125% - known as a Common Equity Capital Trigger Event; or
5.125% - known as a Common Equity Capital Trigger Event; or
APRA notifies the Company that, without the conversion or write-off of certain securities or a public sector injection of capital (or equivalent
APRA notifies the Company that, without the conversion or write-off of certain securities or a public sector injection of capital (or equivalent
support), it considers that the Company would become non-viable or, in the case of the ANZ NZ CN, the RBNZ directs ANZ NZ to convert or write-
support), it considers that the Company would become non-viable or, in the case of the ANZ NZ CN, the RBNZ directs ANZ NZ to convert or write-
off the notes or a statutory manager is appointed to ANZ NZ and decides that ANZ NZ must convert or write-off the notes – known as a Non-
off the notes or a statutory manager is appointed to ANZ NZ and decides that ANZ NZ must convert or write-off the notes – known as a Non-
Viability Trigger Event.
Viability Trigger Event.
Where specified, AT1 capital instruments mandatorily convert into a variable number of ANZ ordinary shares (based on the average market price of
Where specified, AT1 capital instruments mandatorily convert into a variable number of ANZ ordinary shares (based on the average market price of
the shares immediately prior to conversion less a 1% discount):
the shares immediately prior to conversion less a 1% discount):
on a specified mandatory conversion date; or
on a specified mandatory conversion date; or
on an earlier date under certain circumstances as set out in the terms.
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.
However the mandatory conversion is deferred for a specified period if certain conversion tests are not met.
The tables below show the key details of the Group’s AT1 capital instruments on issue at 30 September in both the current and prior years:
The tables below show the key details of the Group’s AT1 capital instruments on issue at 30 September in both the current and prior years:
Additional Tier 1 capital (perpetual subordinated securities)1
Additional Tier 1 capital (perpetual subordinated securities)1
ANZ Capital Notes (ANZ CN)
ANZ Capital Notes (ANZ CN)
AUD
AUD
AUD
AUD
AUD
AUD
AUD
AUD
AUD
AUD
1,120m
1,120m
1,610m
1,610m
970m
970m
1,622m
1,622m
931m
931m
ANZ CN1
ANZ CN1
ANZ CN2
ANZ CN2
ANZ CN3
ANZ CN3
ANZ CN4
ANZ CN4
ANZ CN5
ANZ CN5
ANZ Capital Securities (ANZ CS)
ANZ Capital Securities (ANZ CS)
USD
USD
1,000m
1,000m
ANZ Capital Securities
ANZ Capital Securities
ANZ NZ Capital Notes (ANZ NZ CN)
ANZ NZ Capital Notes (ANZ NZ CN)
NZD
NZD
500m
500m
ANZ NZ Capital Notes
ANZ NZ Capital Notes
Total Additional Tier 1 capital2
Total Additional Tier 1 capital2
1. Carrying values net of issue costs.
1. Carrying values net of issue costs.
2. This forms part of qualifying Additional Tier 1 capital (refer to Note 23 Capital Management).
2. This forms part of qualifying Additional Tier 1 capital (refer to Note 23 Capital Management).
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
15. DEBT ISSUANCES (continued)
ANZ Capital Securities (ANZ CS)
Issuer
Issue date
Issue amount
Face value
Interest frequency
Interest rate
Issuer’s early redemption option
Common equity capital trigger event
Non-viability trigger event
ANZ, acting through its London branch
15 June 2016
USD 1,000 million
Minimum denomination of USD 200,000 and an integral multiple of USD 1,000 above that
Semi-annually in arrears
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%
15 June 2026 and each 5 year anniversary
Yes
Yes
Carrying value 2020 (net of issue costs)
$1,499 million (2019: $1,481 million)
ANZ NZ Capital Notes (ANZ NZ CN)
Issuer
Issue date
Issue amount
Face value
Interest frequency
Interest rate
ANZ Bank New Zealand Limited (ANZ NZ)
31 March 2015
NZD 500 million
NZD 1
Quarterly in arrears
Fixed at 7.2% p.a. until 25 May 2020. The rate reset in May 2020 to a floating rate: New Zealand 3
month bank bill rate + 3.5%
Interest payments are subject to ANZ NZ’s absolute discretion and certain payment conditions
(including APRA and RBNZ requirements)
Issuer’s early redemption option
The option was not exercised on 25 May 2020 and has expired1
Mandatory conversion date
25 May 2022
Common equity capital trigger event
Non-viability trigger event
Yes
Yes
Carrying value 2020 (net of issue costs)
$463 million (2019: $462 million)
1. The RBNZ has informed New Zealand-incorporated registered banks (including ANZ NZ) that they should not redeem capital instruments at this time. Accordingly, ANZ NZ was not permitted to redeem its
NZ$500 million Capital Notes in May 2020, although it can continue making coupon payments on those Capital Notes. As ANZ NZ did not exercise its option to convert in May 2020, the terms of the Capital
Notes provide for their conversion into a variable number of ANZBGL shares in May 2022 subject to certain conditions.
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ANZ, acting through its London branch
ANZ, acting through its London branch
15 June 2016
15 June 2016
USD 1,000 million
USD 1,000 million
Semi-annually in arrears
Semi-annually in arrears
Minimum denomination of USD 200,000 and an integral multiple of USD 1,000 above that
Minimum denomination of USD 200,000 and an integral multiple of USD 1,000 above that
Fixed at 6.75% p.a. until 15 June 2026. Reset on 15 June 2026 and each 5 year anniversary
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%
to a floating rate: 5 year USD mid-market swap rate + 5.168%
15. DEBT ISSUANCES (continued)
15. DEBT ISSUANCES (continued)
ANZ Capital Securities (ANZ CS)
ANZ Capital Securities (ANZ CS)
ANZ 2020 ANNUAL REPORT
ANZ 2020 ANNUAL REPORT
Issuer
Issuer
Issue date
Issue date
Issue amount
Issue amount
Face value
Face value
Interest frequency
Interest frequency
Interest rate
Interest rate
Issuer’s early redemption option
Issuer’s early redemption option
15 June 2026 and each 5 year anniversary
15 June 2026 and each 5 year anniversary
Common equity capital trigger event
Common equity capital trigger event
Non-viability trigger event
Non-viability trigger event
Yes
Yes
Yes
Yes
Carrying value 2020 (net of issue costs)
Carrying value 2020 (net of issue costs)
$1,499 million (2019: $1,481 million)
$1,499 million (2019: $1,481 million)
ANZ NZ Capital Notes (ANZ NZ CN)
ANZ NZ Capital Notes (ANZ NZ CN)
Issuer
Issuer
Issue date
Issue date
Issue amount
Issue amount
Face value
Face value
Interest frequency
Interest frequency
Interest rate
Interest rate
ANZ Bank New Zealand Limited (ANZ NZ)
ANZ Bank New Zealand Limited (ANZ NZ)
31 March 2015
31 March 2015
NZD 500 million
NZD 500 million
NZD 1
NZD 1
Quarterly in arrears
Quarterly in arrears
Fixed at 7.2% p.a. until 25 May 2020. The rate reset in May 2020 to a floating rate: New Zealand 3
Fixed at 7.2% p.a. until 25 May 2020. The rate reset in May 2020 to a floating rate: New Zealand 3
month bank bill rate + 3.5%
month bank bill rate + 3.5%
Interest payments are subject to ANZ NZ’s absolute discretion and certain payment conditions
Interest payments are subject to ANZ NZ’s absolute discretion and certain payment conditions
(including APRA and RBNZ requirements)
(including APRA and RBNZ requirements)
Issuer’s early redemption option
Issuer’s early redemption option
The option was not exercised on 25 May 2020 and has expired1
The option was not exercised on 25 May 2020 and has expired1
Mandatory conversion date
Mandatory conversion date
25 May 2022
25 May 2022
Common equity capital trigger event
Common equity capital trigger event
Non-viability trigger event
Non-viability trigger event
Yes
Yes
Yes
Yes
Carrying value 2020 (net of issue costs)
Carrying value 2020 (net of issue costs)
$463 million (2019: $462 million)
$463 million (2019: $462 million)
1. The RBNZ has informed New Zealand-incorporated registered banks (including ANZ NZ) that they should not redeem capital instruments at this time. Accordingly, ANZ NZ was not permitted to redeem its
1. The RBNZ has informed New Zealand-incorporated registered banks (including ANZ NZ) that they should not redeem capital instruments at this time. Accordingly, ANZ NZ was not permitted to redeem its
NZ$500 million Capital Notes in May 2020, although it can continue making coupon payments on those Capital Notes. As ANZ NZ did not exercise its option to convert in May 2020, the terms of the Capital
NZ$500 million Capital Notes in May 2020, although it can continue making coupon payments on those Capital Notes. As ANZ NZ did not exercise its option to convert in May 2020, the terms of the Capital
Notes provide for their conversion into a variable number of ANZBGL shares in May 2022 subject to certain conditions.
Notes provide for their conversion into a variable number of ANZBGL shares in May 2022 subject to certain conditions.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
Notes to the consolidated financial statements (continued)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
15. DEBT ISSUANCES (continued)
TIER 2 CAPITAL
The convertible term subordinated notes are Basel III fully compliant instruments. If a Non-Viability Trigger Event occurs, the convertible term
subordinated notes will immediately convert into ANZ 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).
APRA has granted transitional Basel III capital treatment for the USD 300 million perpetual subordinated notes until the end of the transitional
period (December 2021).
The table below shows the Tier 2 capital subordinated notes the Group holds at 30 September in both the current and prior year:
Currency
Face value Maturity
Next optional call date – subject
to APRA’s prior approval
Interest
rate
Non-
Viability
Trigger
Event
Basel III transitional subordinated notes (perpetual)
USD
300m
Perpetual
Each semi-annual interest payment date
Floating
No
Total Basel III transitional subordinated notes
Basel III fully compliant convertible subordinated notes (term)
USD
CNY
SGD
AUD
JPY
AUD
USD
JPY
JPY
AUD
AUD
EUR
AUD
USD
AUD
800m
2,500m
500m
200m
20,000m
700m
1,500m
10,000m
10,000m
225m
1,750m
1,000m
265m
1,250m
1,250m
2024
2025
2027
2027
2026
2026
2026
2026
2028
2032
2029
2029
2039
2030
2031
N/A
2020
2022
2022
N/A
2021
N/A
2021
2023
2027
2024
2024
N/A
2025
2026
Total Basel III fully compliant subordinated notes
Total Tier 2 capital1,2
1. Carrying value net of issuance costs.
2. This forms part of qualifying Tier 2 capital (refer to Note 23 Capital Management)
Fixed
Fixed
Fixed
Fixed
Fixed
Floating
Fixed
Fixed
Fixed
Fixed
Floating
Fixed
Fixed
Fixed
Floating
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
2020
$m
422
422
2019
$m
444
444
1,225
1,250
-
529
200
270
700
519
544
200
281
700
2,253
2,229
133
133
225
1,750
1,657
265
1,859
1,244
12,443
12,865
137
137
224
1,750
-
-
-
-
7,971
8,415
RECOGNITION AND MEASUREMENT
Debt issuances are measured at amortised cost, except where designated at fair value through profit or loss. Where the Group enters into a
fair value hedge accounting relationship, the fair value attributable to the hedge risk is reflected in adjustments to the carrying value of the
debt. Interest expense is recognised using the effective interest rate method.
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 fair value through profit and loss. 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.
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
16. FINANCIAL RISK MANAGEMENT
RISK MANAGEMENT FRAMEWORK AND MODEL
INTRODUCTION
The use of financial instruments is fundamental to the Group’s 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’s key material risks.
We disclose details of all key material risks impacting the Group, and further information on the Group’s risk management activities, in the Governance
and Risk Management section.
This note details the Group’s financial risk management policies, processes and quantitative disclosures in relation to the key financial risks.
Key material financial risks
Overview
Credit risk
The risk of financial loss resulting from:
a counterparty failing to fulfil its obligations; or
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 or by
changes to laws, regulations, or other policies adopted by
governments or regulatory authorities, including carbon pricing
and climate change adaptation or mitigation policies.
Market risk
The risk to the Group’s earnings arising from:
changes in interest rates, foreign exchange rates, credit spreads,
volatility and correlations; or
fluctuations in bond, commodity or equity prices.
Liquidity and funding risk
The risk that the Group is unable to meet payment obligations as
they fall due, including:
repaying depositors or maturing wholesale debt; or
the Group having insufficient capacity to fund increases in
assets.
Key sections applicable to this risk
An overview of our Risk Management Framework
Credit risk overview, management and control responsibilities
Maximum exposure to credit risk
Credit quality
Concentrations of credit risk
Collateral management
Market risk overview, management and control responsibilities
Measurement of market risk
Traded and non-traded market risk
Equity securities designated at FVOCI
Foreign currency risk – structural exposure
Liquidity risk overview, management and control responsibilities
Key areas of measurement for liquidity risk
Liquidity risk outcomes
Residual contractual maturity analysis of the Group’s liabilities
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
Notes to the consolidated financial statements (continued)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
16. FINANCIAL RISK MANAGEMENT
16. FINANCIAL RISK MANAGEMENT
RISK MANAGEMENT FRAMEWORK AND MODEL
RISK MANAGEMENT FRAMEWORK AND MODEL
INTRODUCTION
INTRODUCTION
The use of financial instruments is fundamental to the Group’s businesses of providing banking and other financial services to our customers. The
The use of financial instruments is fundamental to the Group’s 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’s key material risks.
associated financial risks (primarily credit, market, and liquidity risks) are a significant portion of the Group’s key material risks.
We disclose details of all key material risks impacting the Group, and further information on the Group’s risk management activities, in the Governance
We disclose details of all key material risks impacting the Group, and further information on the Group’s risk management activities, in the Governance
and Risk Management section.
and Risk Management section.
16. FINANCIAL RISK MANAGEMENT (continued)
OVERVIEW
AN OVERVIEW OF OUR RISK MANAGEMENT FRAMEWORK
This overview is provided to aid the users of the financial statements to understand the context of the financial disclosures required under AASB 7
Financial Instruments: Disclosures (AASB 7). It should be read in conjunction with the Governance and Risk Management section.
The Board is responsible for establishing and overseeing the Group’s Risk Management Framework (RMF). The Board has delegated authority to the
Board Risk Committee (BRC) to develop and monitor compliance with the Group’s risk management policies. The BRC reports regularly to the Board
on its activities.
This note details the Group’s financial risk management policies, processes and quantitative disclosures in relation to the key financial risks.
This note details the Group’s financial risk management policies, processes and quantitative disclosures in relation to the key financial risks.
The Board approves the strategic objectives of the Group including:
Key material financial risks
Key material financial risks
Key sections applicable to this risk
Key sections applicable to this risk
the Risk Appetite Statement (RAS), which sets out the Board’s expectations regarding the degree of risk that ANZ is prepared to accept in pursuit
An overview of our Risk Management Framework
An overview of our Risk Management Framework
Credit risk overview, management and control responsibilities
Credit risk overview, management and control responsibilities
Maximum exposure to credit risk
Maximum exposure to credit risk
Credit quality
Credit quality
Concentrations of credit risk
Concentrations of credit risk
Collateral management
Collateral management
of its strategic objectives and business plan; and
the Risk Management Strategy (RMS), which describes ANZ’s strategy for managing risks and the key elements of the RMF that gives 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 ANZ 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’s responsibility.
The Group has an independent risk management function, headed by the Chief Risk Officer who:
is responsible for overseeing the risk profile and the risk management framework;
can effectively challenge activities and decisions that materially affect ANZ’s risk profile; and
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:
an independent evaluation of the Group’s RMF annually that seeks to ensure compliance with, and the effectiveness of, the risk management
framework;
facilitation of a comprehensive review every three years that seeks to ensure the appropriateness, effectiveness and adequacy of the risk
management framework; and
recommendations to improve the framework and/or work practices to strengthen the effectiveness of day to day operations.
Overview
Overview
Credit risk
Credit risk
The risk of financial loss resulting from:
The risk of financial loss resulting from:
a counterparty failing to fulfil its obligations; or
a counterparty failing to fulfil its obligations; or
a decrease in credit quality of a counterparty resulting in a
a decrease in credit quality of a counterparty resulting in a
financial loss.
financial loss.
Credit risk incorporates the risks associated with us lending to
Credit risk incorporates the risks associated with us lending to
customers who could be impacted by climate change or by
customers who could be impacted by climate change or by
changes to laws, regulations, or other policies adopted by
changes to laws, regulations, or other policies adopted by
governments or regulatory authorities, including carbon pricing
governments or regulatory authorities, including carbon pricing
and climate change adaptation or mitigation policies.
and climate change adaptation or mitigation policies.
Market risk
Market risk
Market risk overview, management and control responsibilities
Market risk overview, management and control responsibilities
The risk to the Group’s earnings arising from:
The risk to the Group’s earnings arising from:
Measurement of market risk
Measurement of market risk
changes in interest rates, foreign exchange rates, credit spreads,
changes in interest rates, foreign exchange rates, credit spreads,
Traded and non-traded market risk
Traded and non-traded market risk
volatility and correlations; or
volatility and correlations; or
fluctuations in bond, commodity or equity prices.
fluctuations in bond, commodity or equity prices.
Equity securities designated at FVOCI
Equity securities designated at FVOCI
Foreign currency risk – structural exposure
Foreign currency risk – structural exposure
Liquidity and funding risk
Liquidity and funding risk
Liquidity risk overview, management and control responsibilities
Liquidity risk overview, management and control responsibilities
The risk that the Group is unable to meet payment obligations as
The risk that the Group is unable to meet payment obligations as
Key areas of measurement for liquidity risk
Key areas of measurement for liquidity risk
they fall due, including:
they fall due, including:
repaying depositors or maturing wholesale debt; or
repaying depositors or maturing wholesale debt; or
the Group having insufficient capacity to fund increases in
the Group having insufficient capacity to fund increases in
assets.
assets.
Liquidity risk outcomes
Liquidity risk outcomes
Residual contractual maturity analysis of the Group’s liabilities
Residual contractual maturity analysis of the Group’s liabilities
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
16. FINANCIAL RISK MANAGEMENT (continued)
CREDIT RISK
CREDIT RISK OVERVIEW, MANAGEMENT AND CONTROL RESPONSIBILITIES
Granting credit facilities to customers is one of the Group’s 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:
sets the credit risk appetite and credit strategies; and
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)
Exposure at Default (EAD)
Loss Given Default (LGD)
Expressed by a Customer Credit Rating (CCR), reflecting the Group’s assessment of a customer’s ability
to service and repay debt.
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.
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
– and the LGD is assigned at the pool level.
Our specialist credit risk teams develop and validate the Group’s 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 ANZ 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 referred out for manual assessment.
We use the Group’s internal CCRs to manage the credit quality of financial assets. To enable wider comparisons, the Group’s CCRs are mapped to
external rating agency scales as follows:
Credit Quality
Description
Internal CCR
ANZ Customer Requirements
Strong
CCR 0+ to 4-
Satisfactory
CCR 5+ to 6-
Weak
CCR 7+ to 8=
Defaulted
CCR 8- to 10
Demonstrated superior stability in their operating and financial
performance over the long-term, and whose earnings capacity
is not significantly vulnerable to foreseeable events.
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.
Demonstrated some operational and financial instability, with
variability and uncertainty in profitability and liquidity projected
to continue over the short and possibly medium term.
When doubt arises as to the collectability of a credit facility, the
financial instrument (or “the facility”) is classified as defaulted.
Moody’s
Rating
Standard & Poor’s
Rating
Aaa – Baa3
AAA – BBB-
Ba1 – B1
BB+ – B+
B2 - Caa
B - CCC
N/A
N/A
168
168
OverviewHow we create valuePerformance overviewRemuneration reportDirectors’ reportFinancial reportShareholder information
ANZ 2020 ANNUAL REPORT
ANZ 2020 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
Notes to the consolidated financial statements (continued)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
16. FINANCIAL RISK MANAGEMENT (continued)
16. FINANCIAL RISK MANAGEMENT (continued)
16. FINANCIAL RISK MANAGEMENT (continued)
CREDIT RISK
CREDIT RISK
CREDIT RISK (continued)
CREDIT RISK OVERVIEW, MANAGEMENT AND CONTROL RESPONSIBILITIES
CREDIT RISK OVERVIEW, MANAGEMENT AND CONTROL RESPONSIBILITIES
Granting credit facilities to customers is one of the Group’s major sources of income. As this activity is also a principal risk, the Group dedicates
Granting credit facilities to customers is one of the Group’s 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
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
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.
activities around the world.
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.
Our credit risk management framework ensures we apply a consistent approach across the Group when we measure, monitor and manage the credit
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:
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:
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.
sets the credit risk appetite and credit strategies; and
sets the credit risk appetite and credit strategies; and
approves credit transactions beyond the discretion of executive management.
approves credit transactions beyond the discretion of executive management.
For the purpose of this note, assets presented as assets held for sale in the Balance Sheet have been reallocated to their respective Balance Sheet
categories.
We quantify credit risk through an internal credit rating system (masterscales) to ensure consistency across exposure types and to provide a consistent
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:
framework for reporting and analysis. The system uses models and other tools to measure the following for customer exposures:
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.
Probability of Default (PD)
Probability of Default (PD)
Expressed by a Customer Credit Rating (CCR), reflecting the Group’s assessment of a customer’s ability
Expressed by a Customer Credit Rating (CCR), reflecting the Group’s assessment of a customer’s ability
to service and repay debt.
to service and repay debt.
Exposure at Default (EAD)
Exposure at Default (EAD)
The expected balance sheet exposure at default taking into account repayments of principal and
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.
interest, expected additional drawdowns and accrued interest at the time of default.
Loss Given Default (LGD)
Loss Given Default (LGD)
Expressed by a Security Indicator (SI) ranging from A to G. The SI is calculated by reference to the
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
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
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
backing. For retail and some small business lending, we group exposures into large homogenous pools
– and the LGD is assigned at the pool level.
– and the LGD is assigned at the pool level.
Our specialist credit risk teams develop and validate the Group’s PD and LGD rating models. The outputs from these models drive our day-to-day
Our specialist credit risk teams develop and validate the Group’s 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 risk management decisions including origination, pricing, approval levels, regulatory capital adequacy, economic capital allocation, and
credit provisioning.
credit provisioning.
All customers with whom ANZ has a credit relationship are assigned a CCR at origination via either of the following assessment approaches:
All customers with whom ANZ has a credit relationship are assigned a CCR at origination via either of the following assessment approaches:
Large and more complex lending
Large and more complex lending
Retail and some small business lending
Retail and some small business lending
Rating models provide a consistent and structured assessment, with
Rating models provide a consistent and structured assessment, with
Automated assessment of credit applications using a combination of
Automated assessment of credit applications using a combination of
judgement required around the use of out-of-model factors. We
judgement required around the use of out-of-model factors. We
scoring (application and behavioural), policy rules and external credit
scoring (application and behavioural), policy rules and external credit
handle credit approval on a dual approval basis, jointly with the
handle credit approval on a dual approval basis, jointly with the
reporting information. If the application does not meet the automated
reporting information. If the application does not meet the automated
business writer and an independent credit officer.
business writer and an independent credit officer.
assessment criteria, then it is referred out for manual assessment.
assessment criteria, then it is referred out for manual assessment.
We use the Group’s internal CCRs to manage the credit quality of financial assets. To enable wider comparisons, the Group’s CCRs are mapped to
We use the Group’s internal CCRs to manage the credit quality of financial assets. To enable wider comparisons, the Group’s CCRs are mapped to
external rating agency scales as follows:
external rating agency scales as follows:
Credit Quality
Credit Quality
Description
Description
Internal CCR
Internal CCR
ANZ Customer Requirements
ANZ Customer Requirements
Moody’s
Moody’s
Rating
Rating
Standard & Poor’s
Standard & Poor’s
Rating
Rating
Strong
Strong
CCR 0+ to 4-
CCR 0+ to 4-
Demonstrated superior stability in their operating and financial
Demonstrated superior stability in their operating and financial
Aaa – Baa3
Aaa – Baa3
AAA – BBB-
AAA – BBB-
Satisfactory
Satisfactory
CCR 5+ to 6-
CCR 5+ to 6-
Demonstrated sound operational and financial stability over
Demonstrated sound operational and financial stability over
Ba1 – B1
Ba1 – B1
BB+ – B+
BB+ – B+
performance over the long-term, and whose earnings capacity
performance over the long-term, and whose earnings capacity
is not significantly vulnerable to foreseeable events.
is not significantly vulnerable to foreseeable events.
the medium to long-term, even though some may be
the medium to long-term, even though some may be
susceptible to cyclical trends or variability in earnings.
susceptible to cyclical trends or variability in earnings.
variability and uncertainty in profitability and liquidity projected
variability and uncertainty in profitability and liquidity projected
to continue over the short and possibly medium term.
to continue over the short and possibly medium term.
Weak
Weak
CCR 7+ to 8=
CCR 7+ to 8=
Demonstrated some operational and financial instability, with
Demonstrated some operational and financial instability, with
B2 - Caa
B2 - Caa
B - CCC
B - CCC
Defaulted
Defaulted
CCR 8- to 10
CCR 8- to 10
When doubt arises as to the collectability of a credit facility, the
When doubt arises as to the collectability of a credit facility, the
N/A
N/A
N/A
N/A
financial instrument (or “the facility”) is classified as defaulted.
financial instrument (or “the facility”) is classified as defaulted.
On-balance sheet positions
Net loans and advances
Other financial assets:
Cash and cash equivalents
Settlement balances owed to ANZ
Collateral paid
Trading securities
Derivative financial instruments
Investment securities
- debt securities at amortised costs
- debt securities at FVOCI
- equity securities at FVOCI
- debt securities at FVTPL
Regulatory deposits
Other financial assets2
Total other financial assets
Subtotal
Off-balance sheet positions
Undrawn and contingent facilities3
Total
Reported
2020
$m
2019
$m
Excluded1
2020
$m
Maximum exposure
to credit risk
2019
$m
2020
$m
2019
$m
617,093
615,258
-
-
617,093
615,258
107,923
7,541
14,308
50,913
81,621
3,739
15,006
44,088
135,331
120,667
6,816
85,460
1,062
53
801
2,407
412,615
1,029,708
5,999
76,489
1,221
-
879
3,619
353,328
968,586
1,514
7,541
-
5,698
-
-
-
1,186
3,739
-
6,199
-
-
-
1,062
1,221
-
-
-
-
-
-
106,409
80,435
-
14,308
45,215
-
15,006
37,889
135,331
120,667
6,816
85,460
-
53
801
2,407
5,999
76,489
-
-
879
3,619
340,983
956,241
15,815
15,815
12,345
12,345
396,800
1,013,893
266,716
253,123
-
-
266,716
253,123
1,296,424
1,221,709
15,815
12,345
1,280,609
1,209,364
1. Bank notes and coins and cash at bank within Cash and cash equivalents; Trade dated assets within Settlement balances owed to ANZ; Equity securities and precious metal exposures within Trading
securities; 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.
168
168
169
169
ANZ 2020 Annual Report
ANZ 2020 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
16. FINANCIAL RISK MANAGEMENT (continued)
CREDIT RISK (continued)
CREDIT QUALITY
An analysis of the Group’s credit risk exposure is presented in the following tables based on the Group’s internal rating by stage without taking
account of the effects of any collateral or other credit enhancements:
Net loans and advances
2020
Stage 3
Collectively
assessed
$m
Individually
assessed
$m
-
-
-
4,762
4,762
(461)
4,301
-
-
-
2,256
2,256
(851)
1,405
9.68%
37.72%
2019
Stage 3
Collectively
assessed
$m
Individually
assessed
$m
-
-
-
4,699
4,699
(413)
4,286
-
-
-
1,978
1,978
(791)
1,187
8.79%
39.99%
Stage 2
$m
18,262
37,577
16,850
-
72,689
(2,465)
70,224
3.39%
Stage 2
$m
18,597
28,445
10,373
-
57,415
(1,378)
56,037
2.40%
Stage 1
$m
395,608
133,558
8,461
-
537,627
(1,204)
536,423
0.22%
Stage 1
$m
425,113
121,030
7,138
-
553,281
(927)
552,354
0.17%
Total
$m
413,870
171,135
25,311
7,018
617,334
(4,981)
612,353
0.81%
3,938
(66)
868
617,093
Total
$m
443,710
149,475
17,511
6,677
617,373
(3,509)
613,864
0.57%
922
(398)
870
615,258
Strong
Satisfactory
Weak
Defaulted
Gross loans and advances at amortised cost
Allowance for ECL
Net loans and advances at amortised cost
Coverage ratio
Loans and advances at fair value through profit or loss
Unearned income
Capitalised brokerage/mortgage origination fees
Net carrying amount
Strong
Satisfactory
Weak
Defaulted
Gross loans and advances at amortised cost
Allowance for ECL
Net loans and advances at amortised cost
Coverage ratio
Loans and advances at fair value through profit or loss
Unearned income
Capitalised brokerage/mortgage origination fees
Net carrying amount
170
170
OverviewHow we create valuePerformance overviewRemuneration reportDirectors’ reportFinancial reportShareholder information
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
Notes to the consolidated financial statements (continued)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
16. FINANCIAL RISK MANAGEMENT (continued)
16. FINANCIAL RISK MANAGEMENT (continued)
16. FINANCIAL RISK MANAGEMENT (continued)
CREDIT RISK (continued)
An analysis of the Group’s credit risk exposure is presented in the following tables based on the Group’s internal rating by stage without taking
An analysis of the Group’s credit risk exposure is presented in the following tables based on the Group’s internal rating by stage without taking
Investment securities - debt securities at amortised cost
account of the effects of any collateral or other credit enhancements:
account of the effects of any collateral or other credit enhancements:
Strong
Satisfactory
Weak
Defaulted
Gross investment securities - debt securities at amortised cost
Allowance for ECL
Net investment securities - debt securities at amortised cost
Coverage ratio
Strong
Satisfactory
Weak
Defaulted
Gross investment securities - debt securities at amortised cost
Allowance for ECL
Net investment securities - debt securities at amortised cost
Coverage ratio
2020
2020
Stage 3
Stage 3
Stage 1
Stage 1
Stage 2
Stage 2
assessed
assessed
assessed
assessed
Collectively
Collectively
Individually
Individually
$m
$m
$m
$m
$m
$m
395,608
395,608
133,558
133,558
8,461
8,461
-
-
537,627
537,627
(1,204)
(1,204)
536,423
536,423
0.22%
0.22%
$m
$m
425,113
425,113
121,030
121,030
7,138
7,138
-
-
553,281
553,281
(927)
(927)
552,354
552,354
0.17%
0.17%
$m
$m
18,262
18,262
37,577
37,577
16,850
16,850
-
-
72,689
72,689
(2,465)
(2,465)
70,224
70,224
3.39%
3.39%
$m
$m
18,597
18,597
28,445
28,445
10,373
10,373
-
-
57,415
57,415
(1,378)
(1,378)
56,037
56,037
2.40%
2.40%
-
-
-
-
-
-
4,762
4,762
4,762
4,762
(461)
(461)
4,301
4,301
-
-
-
-
-
-
2,256
2,256
2,256
2,256
(851)
(851)
1,405
1,405
9.68%
9.68%
37.72%
37.72%
-
-
-
-
-
-
4,699
4,699
4,699
4,699
(413)
(413)
4,286
4,286
-
-
-
-
-
-
1,978
1,978
1,978
1,978
(791)
(791)
1,187
1,187
8.79%
8.79%
39.99%
39.99%
2019
2019
Stage 3
Stage 3
Stage 1
Stage 1
Stage 2
Stage 2
assessed
assessed
assessed
assessed
Collectively
Collectively
Individually
Individually
$m
$m
$m
$m
Total
Total
$m
$m
413,870
413,870
171,135
171,135
25,311
25,311
7,018
7,018
617,334
617,334
(4,981)
(4,981)
612,353
612,353
0.81%
0.81%
3,938
3,938
(66)
(66)
868
868
617,093
617,093
Total
Total
$m
$m
443,710
443,710
149,475
149,475
17,511
17,511
6,677
6,677
617,373
617,373
(3,509)
(3,509)
613,864
613,864
0.57%
0.57%
922
922
(398)
(398)
870
870
615,258
615,258
2020
Stage 3
Stage 2
$m
Collectively
assessed
$m
Individually
assessed
$m
-
175
-
-
175
-
175
0.00%
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
2019
Stage 3
Stage 2
$m
Collectively
assessed
$m
Individually
assessed
$m
-
507
-
-
507
(1)
506
0.20%
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Stage 1
$m
5,594
1,067
-
-
6,661
(20)
6,641
0.30%
Stage 1
$m
4,798
707
-
-
5,505
(12)
5,493
0.22%
Total
$m
5,594
1,242
-
-
6,836
(20)
6,816
0.29%
Total
$m
4,798
1,214
-
-
6,012
(13)
5,999
0.22%
171
171
ANZ 2020 ANNUAL REPORT
ANZ 2020 ANNUAL REPORT
CREDIT RISK (continued)
CREDIT RISK (continued)
CREDIT QUALITY
CREDIT QUALITY
Net loans and advances
Net loans and advances
Strong
Strong
Satisfactory
Satisfactory
Weak
Weak
Defaulted
Defaulted
Allowance for ECL
Allowance for ECL
Coverage ratio
Coverage ratio
Unearned income
Unearned income
Gross loans and advances at amortised cost
Gross loans and advances at amortised cost
Net loans and advances at amortised cost
Net loans and advances at amortised cost
Loans and advances at fair value through profit or loss
Loans and advances at fair value through profit or loss
Capitalised brokerage/mortgage origination fees
Capitalised brokerage/mortgage origination fees
Net carrying amount
Net carrying amount
Strong
Strong
Satisfactory
Satisfactory
Weak
Weak
Defaulted
Defaulted
Allowance for ECL
Allowance for ECL
Coverage ratio
Coverage ratio
Unearned income
Unearned income
Gross loans and advances at amortised cost
Gross loans and advances at amortised cost
Net loans and advances at amortised cost
Net loans and advances at amortised cost
Loans and advances at fair value through profit or loss
Loans and advances at fair value through profit or loss
Capitalised brokerage/mortgage origination fees
Capitalised brokerage/mortgage origination fees
Net carrying amount
Net carrying amount
170
170
ANZ 2020 Annual Report
ANZ 2020 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
16. FINANCIAL RISK MANAGEMENT (continued)
CREDIT RISK (continued)
Investment securities - debt securities at FVOCI
2020
Stage 3
Stage 2
$m
Collectively
assessed
$m
Individually
assessed
$m
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
2019
Stage 3
Stage 2
$m
Collectively
assessed
$m
Individually
assessed
$m
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Stage 1
$m
85,287
173
-
-
85,460
(10)
0.01%
Stage 1
$m
76,218
271
-
-
76,489
(8)
0.01%
Total
$m
85,287
173
-
-
85,460
(10)
0.01%
Total
$m
76,218
271
-
-
76,489
(8)
0.01%
2020
$m
293,171
10,724
628
1
2019
$m
248,020
10,060
415
-
304,524
258,495
Strong
Satisfactory
Weak
Defaulted
Investment securities - debt securities at FVOCI
Allowance for ECL recognised in other comprehensive income
Coverage ratio
Strong
Satisfactory
Weak
Defaulted
Investment securities - debt securities at FVOCI
Allowance for ECL recognised in other comprehensive income
Coverage ratio
Other financial assets
Strong
Satisfactory
Weak
Defaulted
Total carrying amount
172
172
OverviewHow we create valuePerformance overviewRemuneration reportDirectors’ reportFinancial reportShareholder information
ANZ 2020 ANNUAL REPORT
ANZ 2020 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
Notes to the consolidated financial statements (continued)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
16. FINANCIAL RISK MANAGEMENT (continued)
16. FINANCIAL RISK MANAGEMENT (continued)
16. FINANCIAL RISK MANAGEMENT (continued)
CREDIT RISK (continued)
CREDIT RISK (continued)
CREDIT RISK (continued)
Investment securities - debt securities at FVOCI
Investment securities - debt securities at FVOCI
Off-balance sheet commitments - undrawn and contingent facilities
Investment securities - debt securities at FVOCI
Investment securities - debt securities at FVOCI
Allowance for ECL recognised in other comprehensive income
Allowance for ECL recognised in other comprehensive income
Investment securities - debt securities at FVOCI
Investment securities - debt securities at FVOCI
Allowance for ECL recognised in other comprehensive income
Allowance for ECL recognised in other comprehensive income
Strong
Strong
Satisfactory
Satisfactory
Weak
Weak
Defaulted
Defaulted
Coverage ratio
Coverage ratio
Strong
Strong
Satisfactory
Satisfactory
Weak
Weak
Defaulted
Defaulted
Coverage ratio
Coverage ratio
Other financial assets
Other financial assets
Strong
Strong
Satisfactory
Satisfactory
Weak
Weak
Defaulted
Defaulted
Total carrying amount
Total carrying amount
2020
2020
Stage 3
Stage 3
Stage 1
Stage 1
Stage 2
Stage 2
assessed
assessed
assessed
assessed
Collectively
Collectively
Individually
Individually
$m
$m
$m
$m
$m
$m
$m
$m
85,287
85,287
173
173
-
-
-
-
85,460
85,460
(10)
(10)
0.01%
0.01%
$m
$m
76,218
76,218
271
271
-
-
-
-
76,489
76,489
(8)
(8)
0.01%
0.01%
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
2019
2019
Stage 3
Stage 3
Stage 1
Stage 1
Stage 2
Stage 2
assessed
assessed
assessed
assessed
Collectively
Collectively
Individually
Individually
$m
$m
$m
$m
$m
$m
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Total
Total
$m
$m
85,287
85,287
173
173
-
-
-
-
85,460
85,460
(10)
(10)
0.01%
0.01%
Total
Total
$m
$m
76,218
76,218
271
271
-
-
-
-
76,489
76,489
(8)
(8)
0.01%
0.01%
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
2020
2020
$m
$m
293,171
293,171
10,724
10,724
628
628
1
1
2019
2019
$m
$m
248,020
248,020
10,060
10,060
415
415
-
-
304,524
304,524
258,495
258,495
Strong
Satisfactory
Weak
Defaulted
Gross undrawn and contingent facilities subject to ECL
Allowance for ECL included in Other provisions (refer to Note 21)
Net undrawn and contingent facilities subject to ECL
Coverage ratio
Undrawn and contingent facilities not subject to ECL1
Net undrawn and contingent facilities
Strong
Satisfactory
Weak
Defaulted
Gross undrawn and contingent facilities subject to ECL
Allowance for ECL included in Other provisions (refer to Note 21)
Net undrawn and contingent facilities subject to ECL
Coverage ratio
Undrawn and contingent facilities not subject to ECL1
Net undrawn and contingent facilities
1. Commitments that can be unconditionally cancelled at any time without notice.
2020
Stage 3
Stage 2
$m
Collectively
assessed
$m
Individually
assessed
$m
3,045
3,972
1,132
-
8,149
(239)
7,910
-
-
-
144
144
(23)
121
-
-
-
203
203
(40)
163
2.93%
15.97%
19.70%
2019
Stage 3
Stage 2
$m
Collectively
assessed
$m
Individually
assessed
$m
1,972
3,634
976
-
6,582
(151)
6,431
-
-
-
140
140
(21)
119
-
-
-
51
51
(23)
28
2.29%
15.00%
45.10%
Stage 1
$m
171,979
22,983
1,123
-
196,085
(596)
195,489
0.30%
Stage 1
$m
162,891
23,655
294
-
186,840
(473)
186,367
0.25%
Total
$m
175,024
26,955
2,255
347
204,581
(898)
203,683
0.44%
63,033
266,716
Total
$m
164,863
27,289
1,270
191
193,613
(668)
192,945
0.35%
60,178
253,123
172
172
173
173
ANZ 2020 Annual Report
ANZ 2020 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
16. FINANCIAL RISK MANAGEMENT (continued)
CREDIT RISK (continued)
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 – 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:
Agriculture, forestry, fishing and mining
36,458
38,562
2020
$m
2019
$m
Off-balance sheet
credit related
commitments
2020
$m
2019
$m
17,188
18,424
Loans
and advances
Other financial
assets
2020
$m
1,092
172
44
2,386
600
2019
$m
1,070
168
65
2,008
699
279,468
247,351
98,017
75,066
2,306
1,170
2,044
231
1,280
2,649
5,361
2,932
1,754
1,905
242
1,194
3,141
3,401
6,506
6,679
8,663
4,114
48,537
1,968
41,114
50,433
27,992
9,602
8,587
19,494
16,737
8,642
5,807
5,881
13,179
51,857
4,645
25,163
8,449
6,711
6,599
12,780
55,344
3,388
23,796
361,459
351,894
50,406
10,739
12,657
11,816
22,563
46,721
13,078
13,583
15,177
22,213
Total
2020
$m
54,738
15,320
12,530
16,930
17,893
2019
$m
58,056
15,593
13,473
15,694
16,925
6,976
6,697
7,087
3,446
41,874
379,862
344,569
2,524
104,630
44,091
68,583
80,978
70,819
54,429
413,062
408,077
17,216
7,086
8,269
20,283
15,389
80,442
20,572
22,524
33,959
44,661
65,842
20,406
23,046
38,601
41,003
621,272
618,295
396,820
340,996
267,614
253,791 1,285,706 1,213,082
(4,981)
(3,509)
(20)
(13)
(898)
(668)
(5,899)
(4,190)
616,291
614,786
396,800
340,983
266,716
253,123 1,279,807 1,208,892
(66)
868
(398)
870
-
-
-
-
-
-
-
-
(66)
868
(398)
870
Business services
Construction
Electricity, gas and water supply
Entertainment, leisure and tourism
Financial, investment and insurance
Government and official institutions
Manufacturing
Personal lending
Property services
Retail trade
Transport and storage
Wholesale trade
Other
Gross total
Allowance for ECL
Subtotal
Unearned income
Capitalised brokerage/mortgage origination fees
Maximum exposure to credit risk
617,093
615,258
396,800
340,983
266,716
253,123 1,280,609 1,209,364
174
174
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ANZ 2020 ANNUAL REPORT
ANZ 2020 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
Notes to the consolidated financial statements (continued)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
16. FINANCIAL RISK MANAGEMENT (continued)
16. FINANCIAL RISK MANAGEMENT (continued)
16. FINANCIAL RISK MANAGEMENT (continued)
CREDIT RISK (continued)
CREDIT RISK (continued)
CONCENTRATIONS OF CREDIT RISK
CONCENTRATIONS OF CREDIT RISK
CREDIT RISK (continued)
COLLATERAL MANAGEMENT
Credit risk becomes concentrated when a number of customers are engaged in similar activities, have similar economic characteristics, or have similar
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 – therefore, they may be similarly affected by changes in economic or other conditions. The Group
activities within the same geographic region – 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
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.
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:
Composition of financial instruments that give rise to credit risk by industry group are presented below:
Agriculture, forestry, fishing and mining
Agriculture, forestry, fishing and mining
36,458
36,458
38,562
38,562
17,188
17,188
18,424
18,424
Loans
Loans
and advances
and advances
Other financial
Other financial
assets
assets
Off-balance sheet
Off-balance sheet
credit related
credit related
commitments
commitments
2020
2020
$m
$m
2019
2019
$m
$m
8,642
8,642
5,807
5,807
5,881
5,881
13,179
13,179
51,857
51,857
4,645
4,645
25,163
25,163
50,406
50,406
10,739
10,739
12,657
12,657
11,816
11,816
22,563
22,563
8,449
8,449
6,711
6,711
6,599
6,599
12,780
12,780
55,344
55,344
3,388
3,388
23,796
23,796
46,721
46,721
13,078
13,078
13,583
13,583
15,177
15,177
22,213
22,213
361,459
361,459
351,894
351,894
2020
2020
$m
$m
1,092
1,092
172
172
44
44
2,386
2,386
600
600
2,306
2,306
1,170
1,170
2,044
2,044
231
231
1,280
1,280
2,649
2,649
5,361
5,361
2019
2019
$m
$m
1,070
1,070
168
168
65
65
2,008
2,008
699
699
2,932
2,932
1,754
1,754
1,905
1,905
242
242
1,194
1,194
3,141
3,141
3,401
3,401
2020
2020
$m
$m
6,506
6,506
6,679
6,679
8,663
8,663
4,114
4,114
48,537
48,537
1,968
1,968
41,114
41,114
50,433
50,433
27,992
27,992
9,602
9,602
8,587
8,587
19,494
19,494
16,737
16,737
279,468
279,468
247,351
247,351
98,017
98,017
75,066
75,066
Total
Total
2020
2020
$m
$m
54,738
54,738
15,320
15,320
12,530
12,530
16,930
16,930
17,893
17,893
2019
2019
$m
$m
58,056
58,056
15,593
15,593
13,473
13,473
15,694
15,694
16,925
16,925
2019
2019
$m
$m
6,976
6,976
6,697
6,697
7,087
7,087
3,446
3,446
41,874
41,874
379,862
379,862
344,569
344,569
2,524
2,524
104,630
104,630
44,091
44,091
68,583
68,583
80,978
80,978
70,819
70,819
54,429
54,429
413,062
413,062
408,077
408,077
17,216
17,216
7,086
7,086
8,269
8,269
20,283
20,283
15,389
15,389
80,442
80,442
20,572
20,572
22,524
22,524
33,959
33,959
44,661
44,661
65,842
65,842
20,406
20,406
23,046
23,046
38,601
38,601
41,003
41,003
Business services
Business services
Construction
Construction
Electricity, gas and water supply
Electricity, gas and water supply
Entertainment, leisure and tourism
Entertainment, leisure and tourism
Financial, investment and insurance
Financial, investment and insurance
Government and official institutions
Government and official institutions
Manufacturing
Manufacturing
Personal lending
Personal lending
Property services
Property services
Retail trade
Retail trade
Transport and storage
Transport and storage
Wholesale trade
Wholesale trade
Other
Other
Gross total
Gross total
Allowance for ECL
Allowance for ECL
Subtotal
Subtotal
Unearned income
Unearned income
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 that are secured by corresponding
investment for which the margin loans are utilised and for reverse repurchase agreements. For some products, the collateral provided by customers is
fundamental to the product’s 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, for example: guarantees, standby letters
of credit or derivative protection.
Other financial assets
Trading securities,
Investment securities,
Derivatives and Other
financial assets
621,272
621,272
618,295
618,295
396,820
396,820
340,996
340,996
267,614
267,614
253,791 1,285,706 1,213,082
253,791 1,285,706 1,213,082
(4,981)
(4,981)
(3,509)
(3,509)
(20)
(20)
(13)
(13)
(898)
(898)
(668)
(668)
(5,899)
(5,899)
(4,190)
(4,190)
616,291
616,291
614,786
614,786
396,800
396,800
340,983
340,983
266,716
266,716
253,123 1,279,807 1,208,892
253,123 1,279,807 1,208,892
(66)
(66)
868
868
(398)
(398)
870
870
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(66)
(66)
868
868
(398)
(398)
870
870
Off-balance sheet positions
Undrawn and contingent
facilities
Capitalised brokerage/mortgage origination fees
Capitalised brokerage/mortgage origination fees
Maximum exposure to credit risk
Maximum exposure to credit risk
617,093
617,093
615,258
615,258
396,800
396,800
340,983
340,983
266,716
266,716
253,123 1,280,609 1,209,364
253,123 1,280,609 1,209,364
For trading securities, 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).
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:
Credit exposure
Total value of collateral
Unsecured portion of credit
exposure
Net loans and advances
Other financial assets
Off-balance sheet positions
2020
$m
617,093
396,800
266,716
2019
$m
615,258
340,983
253,123
Total
1,280,609
1,209,364
2020
$m
510,995
45,246
51,361
607,602
2019
$m
490,188
31,898
48,225
570,311
2020
$m
106,098
351,554
215,355
673,007
2019
$m
125,070
309,085
204,898
639,053
174
174
175
175
ANZ 2020 Annual Report
ANZ 2020 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
16. FINANCIAL RISK MANAGEMENT (continued)
MARKET RISK
MARKET RISK OVERVIEW, MANAGEMENT AND CONTROL RESPONSIBILITIES
Market risk stems from the Group’s trading and balance sheet management activities and the impact of changes and correlation between interest
rates, foreign exchange rates, credit spreads and volatility in bond, commodity or equity prices.
The BRC delegates responsibility for day-to-day management of both market risks and compliance with market risk policies to the Credit & Market Risk
Committee (CMRC) and the Group Asset & 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 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.
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 – potential loss arising from changes in foreign
exchange rates or their implied volatilities.
2. Interest rate risk – potential loss from changes in market
interest rates or their implied volatilities.
3. Credit spread risk – potential loss arising from a movement in
margin or spread relative to a benchmark.
4. Commodity risk – potential loss arising from changes in
commodity prices or their implied volatilities.
5. Equity risk – potential loss arising from changes in equity
prices.
MEASUREMENT OF MARKET RISK
We primarily manage and control market risk using Value at Risk (VaR), sensitivity analysis and stress testing.
VaR gauges the Group’s possible daily loss based on historical market movements.
The Group’s VaR approach for both traded and non-traded risk is historical simulation. We use historical changes in market rates, prices and
volatilities over:
the previous 500 business days, to calculate standard VaR, and
a 1-year stressed period, to calculate stressed VaR.
We calculate traded and non-traded VaR using one-day and ten-day holding periods. For stressed VaR, we use a ten-day 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.
176
176
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ANZ 2020 ANNUAL REPORT
ANZ 2020 ANNUAL REPORT
MARKET RISK
MARKET RISK
MARKET RISK OVERVIEW, MANAGEMENT AND CONTROL RESPONSIBILITIES
MARKET RISK OVERVIEW, MANAGEMENT AND CONTROL RESPONSIBILITIES
Market risk stems from the Group’s trading and balance sheet management activities and the impact of changes and correlation between interest
Market risk stems from the Group’s trading and balance sheet management activities and the impact of changes and correlation between interest
rates, foreign exchange rates, credit spreads and volatility in bond, commodity or equity prices.
rates, foreign exchange rates, credit spreads and volatility in bond, commodity or equity prices.
The BRC delegates responsibility for day-to-day management of both market risks and compliance with market risk policies to the Credit & Market Risk
The BRC delegates responsibility for day-to-day management of both market risks and compliance with market risk policies to the Credit & Market Risk
Committee (CMRC) and the Group Asset & Liability Committee (GALCO).
Committee (CMRC) and the Group Asset & 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
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
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
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.
and profit and loss limits.
Management, measurement and reporting of market risk is undertaken in two broad categories:
Management, measurement and reporting of market risk is undertaken in two broad categories:
Traded Market Risk
Traded Market Risk
Non-Traded Market Risk
Non-Traded Market Risk
Risk of loss from changes in the value of financial instruments due
Risk of loss from changes in the value of financial instruments due
Risk of loss associated with the management of non-traded interest rate risk,
Risk of loss associated with the management of non-traded interest rate risk,
to movements in price factors for both physical and derivative
to movements in price factors for both physical and derivative
liquidity risk and foreign exchange exposures. This includes interest rate risk
liquidity risk and foreign exchange exposures. This includes interest rate risk
trading positions. Principal risk categories monitored are:
trading positions. Principal risk categories monitored are:
in the banking book. This risk of loss arises from adverse changes in the
in the banking book. This risk of loss arises from adverse changes in the
1. Currency risk – potential loss arising from changes in foreign
1. Currency risk – potential loss arising from changes in foreign
exchange rates or their implied volatilities.
exchange rates or their implied volatilities.
2. Interest rate risk – potential loss from changes in market
2. Interest rate risk – potential loss from changes in market
products.
products.
interest rates or their implied volatilities.
interest rates or their implied volatilities.
overall and relative level of interest rates for different tenors, differences in
overall and relative level of interest rates for different tenors, differences in
the actual versus expected net interest margin, and the potential valuation
the actual versus expected net interest margin, and the potential valuation
risk associated with embedded options in financial instruments and bank
risk associated with embedded options in financial instruments and bank
3. Credit spread risk – potential loss arising from a movement in
3. Credit spread risk – potential loss arising from a movement in
margin or spread relative to a benchmark.
margin or spread relative to a benchmark.
4. Commodity risk – potential loss arising from changes in
4. Commodity risk – potential loss arising from changes in
commodity prices or their implied volatilities.
commodity prices or their implied volatilities.
5. Equity risk – potential loss arising from changes in equity
5. Equity risk – potential loss arising from changes in equity
prices.
prices.
MEASUREMENT OF MARKET RISK
MEASUREMENT OF MARKET RISK
We primarily manage and control market risk using Value at Risk (VaR), sensitivity analysis and stress testing.
We primarily manage and control market risk using Value at Risk (VaR), sensitivity analysis and stress testing.
VaR gauges the Group’s possible daily loss based on historical market movements.
VaR gauges the Group’s possible daily loss based on historical market movements.
The Group’s VaR approach for both traded and non-traded risk is historical simulation. We use historical changes in market rates, prices and
The Group’s VaR approach for both traded and non-traded risk is historical simulation. We use historical changes in market rates, prices and
volatilities over:
volatilities over:
the previous 500 business days, to calculate standard VaR, and
the previous 500 business days, to calculate standard VaR, and
a 1-year stressed period, to calculate stressed VaR.
a 1-year stressed period, to calculate stressed VaR.
We calculate traded and non-traded VaR using one-day and ten-day holding periods. For stressed VaR, we use a ten-day period. Back testing is used to
We calculate traded and non-traded VaR using one-day and ten-day holding periods. For stressed VaR, we use a ten-day period. Back testing is used to
ensure our VaR models remain accurate.
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.
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.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
Notes to the consolidated financial statements (continued)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
16. FINANCIAL RISK MANAGEMENT (continued)
16. FINANCIAL RISK MANAGEMENT (continued)
16. FINANCIAL RISK MANAGEMENT (continued)
MARKET RISK (continued)
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:
Traded value at risk 99% confidence
Foreign exchange
Interest rate
Credit
Commodity
Equity
Diversification benefit1
Total VaR
2020
2019
High for
year
$m
Low for
year
$m
Average
for year
$m
As at
$m
High for
year
$m
Low for
year
$m
Average
for year
$m
As at
$m
2.0
9.6
13.9
3.0
-
(10.9)
17.6
6.1
13.8
17.1
4.7
-
n/a
31.9
1.2
3.3
1.8
1.3
-
n/a
5.7
3.1
7.2
8.6
2.6
-
(8.0)
13.5
1.4
3.6
5.1
1.6
-
(5.5)
6.2
9.5
10.4
5.4
3.9
-
n/a
13.4
1.2
3.6
1.2
1.4
-
n/a
5.1
4.1
5.8
3.1
2.2
-
(7.2)
8.0
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’s 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’s 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 Asia
Pacific, Europe and Americas (APEA) geographies which are calculated separately.
Non-traded value at risk 99% confidence
Australia
New Zealand
Asia Pacific, Europe & America
Diversification benefit1
Total VaR
2020
2019
High for
year
$m
Low for
year
$m
Average
for year
$m
As at
$m
High for
year
$m
Low for
year
$m
Average
for year
$m
As at
$m
60.8
26.3
29.4
(61.4)
55.1
60.8
26.3
30.2
n/a
58.3
18.8
9.4
17.8
33.4
15.2
24.2
n/a
(29.5)
31.5
43.3
22.7
9.6
17.6
(17.8)
32.1
22.7
9.6
17.7
n/a
32.1
16.4
7.1
12.9
n/a
25.2
18.9
8.0
16.1
(14.8)
28.2
1. The diversification benefit reflects the historical correlation between the regions. The high and low VaR figures reported for the region 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.
176
176
177
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ANZ 2020 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
16. FINANCIAL RISK MANAGEMENT (continued)
MARKET RISK (continued)
We undertake scenario analysis to stress test the impact of extreme events on the Group’s 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. A positive number signifies that a rate increase is positive for net interest income over the next 12 months.
Impact of 1% rate shock
As at period end
Maximum exposure
Minimum exposure
Average exposure (in absolute terms)
1. Prior period numbers have been restated to reflect IRR model enhancements
2020
20191
1.25%
1.61%
0.52%
1.01%
1.19%
1.19%
0.33%
0.69%
EQUITY SECURITIES DESIGNATED AT FVOCI
Our investment securities contain equity investment holdings which predominantly comprise investments we hold for longer-term strategic reasons.
The market risk impact on these equity investments is not captured by the Group’s 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 – 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 it is considered appropriate, the Group takes out 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.
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which assumes the parallel shift is reflected in all wholesale and customer rates.
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
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. A positive number signifies that a rate increase is positive for net interest income over the next 12 months.
interest income. A positive number signifies that a rate increase is positive for net interest income over the next 12 months.
Impact of 1% rate shock
Impact of 1% rate shock
As at period end
As at period end
Maximum exposure
Maximum exposure
Minimum exposure
Minimum exposure
Average exposure (in absolute terms)
Average exposure (in absolute terms)
1. Prior period numbers have been restated to reflect IRR model enhancements
1. Prior period numbers have been restated to reflect IRR model enhancements
EQUITY SECURITIES DESIGNATED AT FVOCI
EQUITY SECURITIES DESIGNATED AT FVOCI
Our investment securities contain equity investment holdings which predominantly comprise investments we hold for longer-term strategic reasons.
Our investment securities contain equity investment holdings which predominantly comprise investments we hold for longer-term strategic reasons.
The market risk impact on these equity investments is not captured by the Group’s VaR processes for traded and non-traded market risks. Therefore,
The market risk impact on these equity investments is not captured by the Group’s VaR processes for traded and non-traded market risks. Therefore,
based on the recognition and measurement policies set out in Note 11 Investment securities.
based on the recognition and measurement policies set out in Note 11 Investment securities.
FOREIGN CURRENCY RISK – STRUCTURAL EXPOSURES
FOREIGN CURRENCY RISK – STRUCTURAL EXPOSURES
Our investment of capital in foreign operations - for example, branches, subsidiaries or associates with functional currencies other than the Australian
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
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.
exchange differences are reflected in the foreign currency translation reserve in equity.
Where it is considered appropriate, the Group takes out economic hedges against larger foreign exchange denominated revenue streams (primarily
Where it is considered appropriate, the Group takes out 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
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.
exchange rates on the consolidated capital ratios are minimised.
ANZ 2020 ANNUAL REPORT
ANZ 2020 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
Notes to the consolidated financial statements (continued)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
16. FINANCIAL RISK MANAGEMENT (continued)
16. FINANCIAL RISK MANAGEMENT (continued)
16. FINANCIAL RISK MANAGEMENT (continued)
MARKET RISK (continued)
MARKET RISK (continued)
LIQUIDITY AND FUNDING RISK
We undertake scenario analysis to stress test the impact of extreme events on the Group’s market risk exposures. We model a 1% overnight parallel
We undertake scenario analysis to stress test the impact of extreme events on the Group’s 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
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
LIQUIDITY RISK OVERVIEW, MANAGEMENT AND CONTROL RESPONSIBILITIES
Liquidity risk is the risk that the Group is either:
2020
2020
20191
20191
1.25%
1.25%
1.61%
1.61%
0.52%
0.52%
1.01%
1.01%
1.19%
1.19%
1.19%
1.19%
0.33%
0.33%
0.69%
0.69%
unable to meet its payment obligations (including repaying depositors or maturing wholesale debt) when they fall due; or
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’s liquidity and funding risks are governed by a set of principles
approved by the BRC and include:
maintaining the ability to meet all payment obligations in the immediate term;
ensuring that the Group has the ability to meet ‘survival horizons’ under a range of ANZ specific, and general market, liquidity stress scenarios, at
the site and Group-wide level, to meet cash flow obligations over the short to medium term;
maintaining strength in the Group’s balance sheet structure to ensure long term resilience in the liquidity and funding risk profile;
ensuring the liquidity management framework is compatible with local regulatory requirements;
preparing daily liquidity reports and scenario analysis to quantify the Group’s positions;
targeting a diversified funding base to avoid undue concentrations by investor type, maturity, market source and currency;
holding a portfolio of high quality liquid assets to protect against adverse funding conditions and to support day-to-day operations; and
establishing detailed contingency plans to cover different liquidity crisis events.
the Group regularly reviews the valuations of the investments within the portfolio and assesses whether the investments are appropriately measured
the Group regularly reviews the valuations of the investments within the portfolio and assesses whether the investments are appropriately measured
KEY AREAS OF MEASUREMENT FOR LIQUIDITY RISK
Scenario modelling of funding sources
ANZ’s liquidity risk appetite is defined by a range of regulatory and internal liquidity metrics mandated by the Board. The metrics cover a range of
scenarios of varying duration and level of severity.
A key component of this framework is the Liquidity Coverage Ratio (LCR), which is a severe short term liquidity stress scenario mandated by banking
regulators including APRA. As part of meeting LCR requirements, the Group has a Committed Liquidity Facility (CLF) with the Reserve Bank of Australia
(RBA). The CLF has been established to offset the shortage of available High Quality Liquid Assets (HQLA) in Australia and provides an alternative form
of contingent liquidity. The total amount of the CLF available to a qualifying Australian Deposit-taking Institution is set annually by APRA. From 1
January 2020, ANZ’s CLF is $35.7 billion (2019 calendar year end: $48.0 billion).
Liquid assets
The Group holds a portfolio of high quality (unencumbered) liquid assets to protect the Group’s liquidity position in a severely stressed environment,
to meet regulatory requirements. HQLA comprise three categories consistent with Basel III LCR requirements:
HQLA1- Cash and highest credit quality government, central bank or public sector securities eligible for repurchase with central banks to provide
same-day liquidity.
HQLA2 - High credit quality government, central bank or public sector securities, high quality corporate debt securities and high quality covered
bonds eligible for repurchase with central banks to provide same-day liquidity.
Alternative liquid assets (ALA) - Assets qualifying as collateral for the CLF and eligible securities that the Reserve Bank of New Zealand (RBNZ) will
accept in its domestic market operations.
LIQUIDITY RISK OUTCOMES1
Liquidity Coverage Ratio
ANZ’s Liquidity Coverage Ratio (LCR) averaged 139% for 2020, a decrease from the 2019 average of 140%, and above the regulatory minimum of
100%.
Net Stable Funding Ratio
ANZ’s Net Stable Funding Ratio (NSFR) as at 30 September 2020 was 124% (2019: 116%), 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’s 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.
178
178
179
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ANZ 2020 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
16. FINANCIAL RISK MANAGEMENT (continued)
LIQUIDITY AND FUNDING RISK (continued)
Liquidity crisis contingency planning
The 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
establish crisis/severity levels
monitoring and review
activate contingency funding plans
liquidity limits
early warning indicators
management actions not requiring
management actions for altering asset and liability
business rationalisation
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
The Group monitors the composition and stability of its funding so that it remains within the Group’s funding risk appetite. This approach ensures that
an appropriate proportion of the Group’s 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
3 year strategic plan prepared annually
customer balance sheet growth
annual funding plan as part of budgeting process
forecasting in light of actual results as a calibration to the
annual plan
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%. APRA has determined that the TFF qualifies for
inclusion in determining the Liquidity Coverage Ratio (LCR) and Net Stable Funding Ratio (NSFR). ADIs can obtain initial funding of up to 3% of their
existing credit outstanding to Australian households and businesses, and have access to additional funding if they increase lending to business,
especially to small and medium-sized businesses.
As at 30 September 2020, ANZ had drawn $12 billion from its initial TFF allowance of $12 billion, and drawn $nil from its additional TFF allowance of $6
billion.
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ANZ 2020 ANNUAL REPORT
ANZ 2020 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
Notes to the consolidated financial statements (continued)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
16. FINANCIAL RISK MANAGEMENT (continued)
16. FINANCIAL RISK MANAGEMENT (continued)
16. FINANCIAL RISK MANAGEMENT (continued)
LIQUIDITY AND FUNDING RISK (continued)
LIQUIDITY AND FUNDING RISK (continued)
LIQUIDITY AND FUNDING RISK (continued)
RESIDUAL CONTRACTUAL MATURITY ANALYSIS OF GROUP’S LIABILITIES
The tables below provide residual contractual maturity analysis of financial liabilities, including financial liablities reclassified to held for sale, 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 “Less than 3 months” category. Any other items without a specified maturity
date are included in the “After 5 years” category. The amounts represent principal and interest cash flows - so they may differ from equivalent amounts
reported on balance sheet. For the purpose of this note, liabilities presented as liabilities held for sale in the Balance Sheet have been reallocated to
their respective Balance Sheet categories.
It should be noted that this is not how the Group manages its liquidity risk. The management of this risk is detailed on page 179.
Liquidity crisis contingency planning
Liquidity crisis contingency planning
The Group maintains APRA-endorsed liquidity crisis contingency plans for analysing and responding to a liquidity threatening event at a country and
The 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:
Group-wide level. Key liquidity contingency crisis planning requirements and guidelines include:
Ongoing business management
Ongoing business management
Early signs/ mild stress
Early signs/ mild stress
Severe Stress
Severe Stress
establish crisis/severity levels
establish crisis/severity levels
monitoring and review
monitoring and review
activate contingency funding plans
activate contingency funding plans
liquidity limits
liquidity limits
early warning indicators
early warning indicators
management actions not requiring
management actions not requiring
management actions for altering asset and liability
management actions for altering asset and liability
business rationalisation
business rationalisation
behaviour
behaviour
Assigned responsibility for internal and external communications and the appropriate timing to communicate
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
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.
event with multiple variables able to be accommodated in any plan.
Group funding
Group funding
The Group monitors the composition and stability of its funding so that it remains within the Group’s funding risk appetite. This approach ensures that
The Group monitors the composition and stability of its funding so that it remains within the Group’s funding risk appetite. This approach ensures that
an appropriate proportion of the Group’s assets are funded by stable funding sources, including customer deposits; longer-dated wholesale funding
an appropriate proportion of the Group’s assets are funded by stable funding sources, including customer deposits; longer-dated wholesale funding
(with a remaining term exceeding one year); and equity.
(with a remaining term exceeding one year); and equity.
Funding plans prepared
Funding plans prepared
Considerations in preparing funding plans
Considerations in preparing funding plans
3 year strategic plan prepared annually
3 year strategic plan prepared annually
customer balance sheet growth
customer balance sheet growth
RBA Term Funding Facility
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
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%. APRA has determined that the TFF qualifies for
Australian businesses. The TFF is a three-year secured funding facility to ADIs at a fixed rate of 0.25%. APRA has determined that the TFF qualifies for
inclusion in determining the Liquidity Coverage Ratio (LCR) and Net Stable Funding Ratio (NSFR). ADIs can obtain initial funding of up to 3% of their
inclusion in determining the Liquidity Coverage Ratio (LCR) and Net Stable Funding Ratio (NSFR). ADIs can obtain initial funding of up to 3% of their
existing credit outstanding to Australian households and businesses, and have access to additional funding if they increase lending to business,
existing credit outstanding to Australian households and businesses, and have access to additional funding if they increase lending to business,
especially to small and medium-sized businesses.
especially to small and medium-sized businesses.
As at 30 September 2020, ANZ had drawn $12 billion from its initial TFF allowance of $12 billion, and drawn $nil from its additional TFF allowance of $6
As at 30 September 2020, ANZ had drawn $12 billion from its initial TFF allowance of $12 billion, and drawn $nil from its additional TFF allowance of $6
billion.
billion.
annual funding plan as part of budgeting process
annual funding plan as part of budgeting process
changes in wholesale funding including: targeted funding volumes; markets;
changes in wholesale funding including: targeted funding volumes; markets;
forecasting in light of actual results as a calibration to the
forecasting in light of actual results as a calibration to the
annual plan
annual plan
investors; tenors; and currencies for senior, secured, subordinated, hybrid
investors; tenors; and currencies for senior, secured, subordinated, hybrid
transactions and market conditions
transactions and market conditions
Receive leg
Pay leg
- Other balance sheet management
Receive leg
Pay leg
2019
Settlement balances owed by ANZ
Collateral received
Deposits and other borrowings
2020
Settlement balances owed by ANZ
Collateral received
Deposits and other borrowings
Less than
3 months
$m
22,241
9,304
3 to 12
months
$m
-
-
1 to 5
years
$m
-
-
576,506
90,241
18,025
Liability for acceptances
Debt issuances1
Derivative liabilities (excluding those held for balance sheet management)2
Lease liabilities3
449
5,174
123,865
72
Derivative assets and liabilities (balance sheet management)4
- Funding
-
-
26,642
78,181
16,948
-
248
-
809
-
390
After
5 years
$m
-
-
159
-
Total
$m
22,241
9,304
684,931
449
126,945
123,865
1,519
(11,170)
(21,569)
(69,594)
(18,243)
(120,576)
10,856
20,206
66,455
17,403
114,920
(75,098)
(40,956)
75,226
40,401
(9,738)
10,031
(8,512)
(134,304)
7,271
132,929
10,838
7,929
29
-
530,392
102,731
-
-
-
7,657
-
-
-
100
-
18,985
95,632
17,886
-
-
-
10,867
7,929
640,880
760
140,451
108,501
Liability for acceptances
Debt issuances1
Derivative liabilities (excluding those held for balance sheet management)2
760
7,948
108,501
Derivative assets and liabilities (balance sheet management)4
- Funding
Receive leg
Pay leg
- Other balance sheet management
Receive leg
Pay leg
(27,588)
(29,128)
(82,588)
(22,238)
(161,542)
26,778
26,594
77,686
21,190
152,248
(85,489)
(26,218)
(11,632)
(1,893)
(125,232)
85,887
26,980
13,071
2,311
128,249
1. Any 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,
and perpetual debt instruments after 5 years.
2. The full mark-to-market of derivative liabilities (excluding those held for balance sheet management) is included in the ‘less than 3 months’ category.
3. On adoption of AASB 16 on 1 October 2019, the Group recognised a lease liability of $1.7 billion presented within Payables and other liabilities. Comparative information has not been restated. Refer to Note
1 for further details.
4. Include derivatives designated into hedging relationships of $4,484 million (2019: 4,173 million) and $6,362 million (2019: $8,277 million) categorised as held for trading but form part of Group’s balance
sheet activities.
At 30 September 2020, $227,819 million (2019: $209,341 million) of the Group’s undrawn facilities and $39,795 million (2019: $44,451 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.
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ANZ 2020 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
17. FAIR VALUE OF FINANCIAL ASSETS AND FINANCIAL LIABILITIES
The Group carries a significant number of financial instruments on the balance sheet at fair value. In addition the Group also holds assets
classified as held for sale which are measured at fair value less costs to sell. The 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.
VALUATION
The Group has an established control framework, including appropriate segregation of duties, to ensure that fair values are accurately determined,
reported and controlled. The framework includes the following features:
products are approved for transacting with external customers and counterparties only where fair values can be appropriately determined;
quoted market prices used to value financial instruments are independently verified with information from external pricing providers;
fair value methodologies and inputs are evaluated and approved by a function independent of the party that undertakes the transaction;
movements in fair values are independently monitored and explained by reference to underlying factors relevant to the fair value; and
valuation adjustments (such as funding valuation adjustments, credit valuation adjustments and bid-offer adjustments) are independently
validated and monitored.
If the Group holds offsetting risk positions, then the Group uses 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. We 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
We designate certain loans and advances and certain deposits and other borrowings and debt issuances as fair value through profit or loss:
where they contain a separable embedded derivative which significantly modifies the instruments’ cash flow; or
in order to eliminate an accounting mismatch which would arise if the asset or liabilities were otherwise carried at amortised cost. This mismatch
arises as we measure the derivative financial instruments (which we acquired to mitigate interest rate risk of the 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.
We 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
Financial instruments classified as:
- Trading securities
- Securities sold short
- Derivative financial assets and financial liabilities
- Investment securities
Financial instruments classified as:
- Net loans and advances
- Deposits and other borrowings
- Debt issuances
Fair Value Approach
Valuation techniques are used that incorporate observable market inputs for financial
instruments with similar credit risk, maturity and yield characteristics. Equity
instruments that are not traded in active markets may be measured using
comparable company valuation multiples.
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 with similar maturities or yield curve appropriate for the
remaining term to maturity.
Assets and liabilities held for sale
Valuation based on the expected sale price before transaction costs.
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ANZ 2020 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
Notes to the consolidated financial statements (continued)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
17. FAIR VALUE OF FINANCIAL ASSETS AND FINANCIAL LIABILITIES
17. FAIR VALUE OF FINANCIAL ASSETS AND FINANCIAL LIABILITIES
17. FAIR VALUE OF FINANCIAL ASSETS AND FINANCIAL LIABILITIES (continued)
The Group carries a significant number of financial instruments on the balance sheet at fair value. In addition the Group also holds assets
The Group carries a significant number of financial instruments on the balance sheet at fair value. In addition the Group also holds assets
classified as held for sale which are measured at fair value less costs to sell. The fair value is the best estimate of the price that would be
classified as held for sale which are measured at fair value less costs to sell. The 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.
received to sell an asset, or paid to transfer a liability, in an orderly transaction between market participants at the measurement date.
CLASSIFICATION OF FINANCIAL ASSETS AND FINANCIAL LIABILITIES
The following tables set out the classification of financial asset and liability categories according to measurement bases together with their carrying
amounts as reported on the balance sheet.
VALUATION
VALUATION
The Group has an established control framework, including appropriate segregation of duties, to ensure that fair values are accurately determined,
The Group has an established control framework, including appropriate segregation of duties, to ensure that fair values are accurately determined,
reported and controlled. The framework includes the following features:
reported and controlled. The framework includes the following features:
products are approved for transacting with external customers and counterparties only where fair values can be appropriately determined;
products are approved for transacting with external customers and counterparties only where fair values can be appropriately determined;
quoted market prices used to value financial instruments are independently verified with information from external pricing providers;
quoted market prices used to value financial instruments are independently verified with information from external pricing providers;
fair value methodologies and inputs are evaluated and approved by a function independent of the party that undertakes the transaction;
fair value methodologies and inputs are evaluated and approved by a function independent of the party that undertakes the transaction;
movements in fair values are independently monitored and explained by reference to underlying factors relevant to the fair value; and
movements in fair values are independently monitored and explained by reference to underlying factors relevant to the fair value; and
valuation adjustments (such as funding valuation adjustments, credit valuation adjustments and bid-offer adjustments) are independently
valuation adjustments (such as funding valuation adjustments, credit valuation adjustments and bid-offer adjustments) are independently
validated and monitored.
validated and monitored.
If the Group holds offsetting risk positions, then the Group uses the portfolio exception in AASB 13 Fair Value Measurement (AASB 13) to measure the
If the Group holds offsetting risk positions, then the Group uses 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. We measure the portfolio based on the price that would be received to sell a net
fair value of such groups of financial assets and financial liabilities. We 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.
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
Fair value designation
through profit or loss.
through profit or loss.
the associated derivatives.
the associated derivatives.
We designate certain loans and advances and certain deposits and other borrowings and debt issuances as fair value through profit or loss:
We designate certain loans and advances and certain deposits and other borrowings and debt issuances as fair value through profit or loss:
where they contain a separable embedded derivative which significantly modifies the instruments’ cash flow; or
where they contain a separable embedded derivative which significantly modifies the instruments’ cash flow; or
in order to eliminate an accounting mismatch which would arise if the asset or liabilities were otherwise carried at amortised cost. This mismatch
in order to eliminate an accounting mismatch which would arise if the asset or liabilities were otherwise carried at amortised cost. This mismatch
arises as we measure the derivative financial instruments (which we acquired to mitigate interest rate risk of the assets or liabilities) at fair value
arises as we measure the derivative financial instruments (which we acquired to mitigate interest rate risk of the assets or liabilities) at fair value
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
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
We may also designate certain loans and advances, certain deposits and other borrowings and debt issuances as fair value through profit or loss
We 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.
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
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
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:
price in an active market exists for that asset or liability. This includes the following:
- Trading securities
- Trading securities
- Securities sold short
- Securities sold short
- Investment securities
- Investment securities
- Derivative financial assets and financial liabilities
- Derivative financial assets and financial liabilities
- Net loans and advances
- Net loans and advances
- Deposits and other borrowings
- Deposits and other borrowings
- Debt issuances
- Debt issuances
instruments with similar credit risk, maturity and yield characteristics. Equity
instruments with similar credit risk, maturity and yield characteristics. Equity
instruments that are not traded in active markets may be measured using
instruments that are not traded in active markets may be measured using
comparable company valuation multiples.
comparable company valuation multiples.
the instrument are discounted using wholesale market interest rates, or market
the instrument are discounted using wholesale market interest rates, or market
borrowing rates for debt with similar maturities or yield curve appropriate for the
borrowing rates for debt with similar maturities or yield curve appropriate for the
remaining term to maturity.
remaining term to maturity.
Assets and liabilities held for sale
Assets and liabilities held for sale
Valuation based on the expected sale price before transaction costs.
Valuation based on the expected sale price before transaction costs.
Financial assets
Cash and cash equivalents
Settlement balances owed to ANZ
Collateral paid
Trading securities
Derivative financial instruments
Investment securities
Net loans and advances
Regulatory deposits
Assets held for sale1
Other financial assets
Total
Financial liabilities
Settlement balances owed by ANZ
Collateral received
Deposits and other borrowings
Derivative financial instruments
Liabilities held for sale1
Payables and other liabilities
Debt issuances
Total
At
amortised
cost
$m
2020
At
fair
value
$m
Note
At
amortised
cost
$m
Total
$m
8
107,923
-
-
-
50,913
107,923
7,541
14,308
50,913
135,331
135,331
81,621
3,739
15,006
-
-
7,541
14,308
-
-
2019
At
fair
value
$m
-
-
-
43,169
Total
$m
81,621
3,739
15,006
43,169
120,667
120,667
6,816
86,575
93,391
5,999
77,710
83,709
613,155
3,938
617,093
614,336
922
615,258
801
-
2,407
-
-
-
801
-
2,407
879
-
3,118
-
1,420
-
879
1,420
3,118
752,951
276,757 1,029,708
724,698
243,888
968,586
22,241
9,304
-
-
22,241
9,304
10,867
7,929
-
-
10,867
7,929
679,255
3,078
682,333
635,376
2,301
637,677
-
-
5,285
134,711
134,711
-
-
3,843
2,159
9,128
5,377
119,668
127,102
-
-
120,951
120,951
1,914
2,591
2,589
1,914
7,968
129,691
15
117,509
833,594
143,791
977,385
786,651
130,346
916,997
9
10
11
12
14
10
Asset or Liability
Asset or Liability
Fair Value Approach
Fair Value Approach
Financial instruments classified as:
Financial instruments classified as:
Valuation techniques are used that incorporate observable market inputs for financial
Valuation techniques are used that incorporate observable market inputs for financial
FAIR VALUE HIERARCHY
1. Assets held for sale and liabilities held for sale include only the components of assets or liabilities held for sale which are financial instruments.
Financial instruments classified as:
Financial instruments classified as:
Discounted cash flow techniques are used whereby contractual future cash flows of
Discounted cash flow techniques are used whereby contractual future cash flows of
Level 3 - valuations where significant unobservable inputs are used to measure the fair value of the asset or liability.
The Group categorises assets and liabilities carried at fair value into a fair value hierarchy as required by AASB 13 based on the observability of inputs
used to measure the fair value:
Level 1 - valuations based on quoted prices (unadjusted) in active markets for identical assets or liabilities;
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
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
17. FAIR VALUE OF FINANCIAL ASSETS AND FINANCIAL LIABILITIES (continued)
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
2020
$m
2019
$m
2020
$m
2019
$m
2020
$m
2019
$m
2020
$m
2019
$m
44,004
37,768
6,909
5,401
681
365 134,588
120,241
-
62
-
50,913
43,169
61
135,331
120,667
85,330
76,000
-
-
-
-
137
3,925
499
922
-
1,952
1,108
1,211
86,575
77,710
13
-
-
-
3,938
-
922
1,952
130,015
114,133 145,559
129,015
1,183
1,272
276,757
244,420
-
1,120
3,830
-
-
-
3,078
2,301
881 133,536
120,018
2,553
-
-
13
2,159
-
38
2,589
2,121
-
55
-
-
-
-
3,078
2,301
52
134,711
120,951
-
-
-
3,843
2,159
-
2,591
2,589
2,121
4,950
3,434 138,786
127,067
55
52
143,791
130,553
Assets
Trading securities1
Derivative financial instruments
Investment securities1
Net loans and advances2
Assets held for sale3
Total
Liabilities
Deposits and other borrowings2
Derivative financial instruments
Payables and other liabilities4
Debt issuances (designated at fair value)
Liabilities held for sale3
Total
1. During the year, $127 million of assets were transferred from Level 2 to Level1 (2019: nil) following increased trading activity to support quoted prices. 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.
2. From 1 October 2019, Group changed its accounting treatment for certain gold loan and deposit products which are now designated as at fair value through profit and loss.
3. The amount classified as Assets and Liabilities held for sale relates to assets and liabilities measured at fair value less cost to sell in accordance with AASB 5 Non-current Assets Held for Sale and Discontinued
Operations. The amount presented reflects fair value excluding cost to sell but including intercompany eliminations.
4. Payables and other liabilities relates to securities sold short, which we classify as held for trading and measured at fair value through profit or loss.
FAIR VALUE MEASUREMENT INCORPORATING UNOBSERVABLE MARKET DATA
Level 3 fair value measurements
The net balance of Level 3 is an asset of $1,128 million (2019: $1,220 million). The assets and liabilities which incorporate significant unobservable
inputs primarily include:
equities for which there is no active market or traded prices cannot be observed;
structured credit products for which credit spreads and default probabilities relating to the reference assets and derivative counterparties cannot
be observed;
net loans and advances that are required to be measured at fair value for which there is no observable market data; and
other derivatives referencing market rates that cannot be observed primarily due to lack of market activity.
Movement in Level 3 balance is mainly due to the revaluation of the Group’s investment in Bank of Tianjin.
There were no material transfers in or out of Level 3 during the period.
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ANZ 2020 ANNUAL REPORT
ANZ 2020 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
Notes to the consolidated financial statements (continued)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
17. FAIR VALUE OF FINANCIAL ASSETS AND FINANCIAL LIABILITIES (continued)
17. FAIR VALUE OF FINANCIAL ASSETS AND FINANCIAL LIABILITIES (continued)
17. FAIR VALUE OF FINANCIAL ASSETS AND FINANCIAL LIABILITIES (continued)
The following table presents assets and liabilities carried at fair value in accordance with the fair value hierarchy:
The following table presents assets and liabilities carried at fair value in accordance with the fair value hierarchy:
Fair value measurements
Fair value measurements
Quoted price in
Quoted price in
active markets
active markets
(Level 1)
(Level 1)
Using observable
Using observable
Using unobservable
Using unobservable
inputs (Level 2)
inputs (Level 2)
inputs (Level 3)
inputs (Level 3)
Total
Total
2020
2020
$m
$m
2019
2019
$m
$m
2020
2020
$m
$m
2019
2019
$m
$m
2020
2020
$m
$m
2019
2019
$m
$m
2020
2020
$m
$m
2019
2019
$m
$m
44,004
44,004
37,768
37,768
6,909
6,909
5,401
5,401
681
681
365 134,588
365 134,588
120,241
120,241
-
-
50,913
50,913
43,169
43,169
61
61
135,331
135,331
120,667
120,667
85,330
85,330
76,000
76,000
1,108
1,108
1,211
1,211
86,575
86,575
77,710
77,710
130,015
130,015
114,133 145,559
114,133 145,559
129,015
129,015
1,183
1,183
1,272
1,272
276,757
276,757
244,420
244,420
3,078
3,078
2,301
2,301
3,078
3,078
2,301
2,301
881 133,536
881 133,536
120,018
120,018
55
55
52
52
134,711
134,711
120,951
120,951
137
137
3,925
3,925
499
499
922
922
-
-
1,952
1,952
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,120
1,120
3,830
3,830
2,553
2,553
13
13
2,159
2,159
-
-
38
38
2,589
2,589
2,121
2,121
-
-
-
-
-
-
-
-
-
-
-
-
3,938
3,938
-
-
922
922
1,952
1,952
3,843
3,843
2,159
2,159
-
-
2,591
2,591
2,589
2,589
2,121
2,121
-
-
62
62
13
13
-
-
-
-
-
-
-
-
-
-
Bank of Tianjin (BoT)
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
are non-observable inputs which have resulted in the Level 3 classification.
Sensitivity to Level 3 data inputs
When we make assumptions due to significant inputs not being directly observable in the market place (Level 3 inputs), then changing these
assumptions changes the Group’s estimate of the instrument’s fair value. Favourable and unfavourable changes are determined by changing the
primary unobservable parameter used to derive the valuation.
Bank of Tianjin (BoT)
The valuation of the BoT investment is sensitive to the selected unobservable input, being the P/B multiple. If the P/B multiple was increased or
decreased by 10% it would result in a $93 million (2019: $111 million) increase or decrease to the fair value of the investment, which would be
recognised in shareholders’ equity.
Other
The remaining Level 3 balance is immaterial and changes in the Level 3 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.
The day one gains and losses deferred are not material.
1. During the year, $127 million of assets were transferred from Level 2 to Level1 (2019: nil) following increased trading activity to support quoted prices. There were no other material transfers during the year.
1. During the year, $127 million of assets were transferred from Level 2 to Level1 (2019: nil) following increased trading activity to support quoted prices. 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.
Transfers into and out of levels are measured at the beginning of the reporting period in which the transfer occurred.
2. From 1 October 2019, Group changed its accounting treatment for certain gold loan and deposit products which are now designated as at fair value through profit and loss.
2. From 1 October 2019, Group changed its accounting treatment for certain gold loan and deposit products which are now designated as at fair value through profit and loss.
3. The amount classified as Assets and Liabilities held for sale relates to assets and liabilities measured at fair value less cost to sell in accordance with AASB 5 Non-current Assets Held for Sale and Discontinued
3. The amount classified as Assets and Liabilities held for sale relates to assets and liabilities measured at fair value less cost to sell in accordance with AASB 5 Non-current Assets Held for Sale and Discontinued
Operations. The amount presented reflects fair value excluding cost to sell but including intercompany eliminations.
Operations. The amount presented reflects fair value excluding cost to sell but including intercompany eliminations.
4. Payables and other liabilities relates to securities sold short, which we classify as held for trading and measured at fair value through profit or loss.
4. Payables and other liabilities relates to securities sold short, which we classify as held for trading and measured at fair value through profit or loss.
4,950
4,950
3,434 138,786
3,434 138,786
127,067
127,067
55
55
52
52
143,791
143,791
130,553
130,553
FINANCIAL ASSETS AND FINANCIAL LIABILITIES NOT MEASURED AT FAIR VALUE
The following table sets out the Group’s basis of estimating fair values of financial instruments carried at amortised cost:
Financial Asset and Liability
Fair Value Approach
Assets
Assets
Trading securities1
Trading securities1
Derivative financial instruments
Derivative financial instruments
Investment securities1
Investment securities1
Net loans and advances2
Net loans and advances2
Assets held for sale3
Assets held for sale3
Total
Total
Liabilities
Liabilities
Deposits and other borrowings2
Deposits and other borrowings2
Derivative financial instruments
Derivative financial instruments
Payables and other liabilities4
Payables and other liabilities4
Debt issuances (designated at fair value)
Debt issuances (designated at fair value)
Liabilities held for sale3
Liabilities held for sale3
Total
Total
FAIR VALUE MEASUREMENT INCORPORATING UNOBSERVABLE MARKET DATA
FAIR VALUE MEASUREMENT INCORPORATING UNOBSERVABLE MARKET DATA
Investment securities - debt securities at amortised cost
Net loans and advances to banks
Net loans and advances to customers
Deposit liability without a specified maturity or at call
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.
The fair value reflects adjustments to credit spreads applicable for that instrument.
Discounted cash flows using prevailing market rates for loans with similar
credit quality.
Present value of future cash flows, discounted using a curve that incorporates
changes in wholesale market rates, the Group’s cost of wholesale funding and the
customer margin, as appropriate.
The 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.
The fair value reflects adjustments to credit spreads applicable to ANZ for that
instrument.
Level 3 fair value measurements
Level 3 fair value measurements
inputs primarily include:
inputs primarily include:
be observed;
be observed;
The net balance of Level 3 is an asset of $1,128 million (2019: $1,220 million). The assets and liabilities which incorporate significant unobservable
The net balance of Level 3 is an asset of $1,128 million (2019: $1,220 million). The assets and liabilities which incorporate significant unobservable
equities for which there is no active market or traded prices cannot be observed;
equities for which there is no active market or traded prices cannot be observed;
structured credit products for which credit spreads and default probabilities relating to the reference assets and derivative counterparties cannot
structured credit products for which credit spreads and default probabilities relating to the reference assets and derivative counterparties cannot
net loans and advances that are required to be measured at fair value for which there is no observable market data; and
net loans and advances that are required to be measured at fair value for which there is no observable market data; and
other derivatives referencing market rates that cannot be observed primarily due to lack of market activity.
other derivatives referencing market rates that cannot be observed primarily due to lack of market activity.
Movement in Level 3 balance is mainly due to the revaluation of the Group’s investment in Bank of Tianjin.
Movement in Level 3 balance is mainly due to the revaluation of the Group’s investment in Bank of Tianjin.
There were no material transfers in or out of Level 3 during the period.
There were no material transfers in or out of Level 3 during the period.
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ANZ 2020 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
17. FAIR VALUE OF FINANCIAL ASSETS AND FINANCIAL LIABILITIES (continued)
The financial assets and financial liabilities listed in the table below are carried at amortised cost on the Group’s 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 table below.
Categorised into fair value hierarchy
At amortised cost
Quoted price
active markets
(Level 1)
Using observable
inputs (Level 2)
With significant non-
observable inputs
(Level 3)
Fair value (total)
2020
$m
2019
$m
2020
$m
2019
$m
2020
$m
2019
$m
2020
$m
2019
$m
2020
$m
2019
$m
Financial assets
Net loans and advances
613,155
614,336
Investment securities
Total
Financial liabilities
6,816
5,999
619,971
620,335
Deposits and other borrowings
679,255
635,376
-
-
-
-
-
16,161
22,629
597,997
592,704
614,158
615,333
-
-
6,816
5,997
-
-
6,816
5,997
22,977
28,626
597,997
592,704
620,974
621,330
Debt issuances
Total
117,509
127,102
26,107
43,304
93,187
85,484
796,764
762,478
26,107
43,304 772,731
721,144
- 679,544
635,660
-
-
-
-
-
-
679,544 635,660
119,294 128,788
798,838
764,448
KEY JUDGEMENTS AND ESTIMATES
The Group evaluates the material accuracy of the valuations incorporated in the financial statements as they can involve a high degree
of judgement and estimation in determining the carrying values of financial assets and financial liabilities at the balance sheet date.
The majority of valuation models the Group uses employ only observable market data as inputs. This has not changed as a result of
COVID-19, however the Group has considered the impact of related economic and market disruptions on fair value measurement
assumptions and the appropriateness of valuation inputs, notably valuation adjustments, as well as the impact of COVID-19 on the
classification of exposures in the fair value hierarchy.
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 considers valuation adjustments in
determining the fair value. We may apply adjustments (such as bid/offer spreads, credit valuation adjustments and funding valuation
adjustments – refer Note 10 Derivative Financial Instruments) to reflect the Group’s assessment of factors that market participants
would consider in setting fair value.
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
18. 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.
ASSETS CHARGED AS SECURITY FOR LIABILITIES
Assets charged as security for liabilities include the following types of instruments:
securities provided as collateral for repurchase transactions. These transactions are governed by standard industry agreements;
specified residential mortgages provided as security for notes and bonds issued to investors as part of ANZ’s covered bond programs;
collateral provided to central banks; and
collateral provided to clearing houses.
The carrying amount of assets pledged as security are as follows:
Securities sold under arrangements to repurchase1
Assets pledged as collateral for UDC Secured Investments2
Residential mortgages provided as security for covered bonds
Other
1. The amounts disclosed as securities sold under arrangements to repurchase include both:
assets pledged as security which continue to be recognised on the Group's balance sheet; and
assets repledged, which are included in the disclosure below.
2020
$m
61,415
-
28,559
4,990
2019
$m
43,213
3,228
30,799
4,927
2. UDC Secured Investments were secured by a security interest over all of UDC’s assets. The Group divested of UDC during 2020 and, therefore, there are no longer any associated collateral balances requiring
disclosure by the Group.
COLLATERAL ACCEPTED AS SECURITY FOR ASSETS
ANZ has received collateral associated with various financial instruments. Under certain transactions ANZ has the right to sell, or to repledge, the
collateral received. These transactions are governed by standard industry agreements.
classification of exposures in the fair value hierarchy.
classification of exposures in the fair value hierarchy.
The fair value of collateral we have received and that which we have sold or repledged is as follows:
Fair value of assets which can be sold or repledged
Fair value of assets sold or repledged
2020
$m
54,242
32,578
2019
$m
37,990
29,460
ANZ 2020 ANNUAL REPORT
ANZ 2020 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
17. FAIR VALUE OF FINANCIAL ASSETS AND FINANCIAL LIABILITIES (continued)
17. FAIR VALUE OF FINANCIAL ASSETS AND FINANCIAL LIABILITIES (continued)
The financial assets and financial liabilities listed in the table below are carried at amortised cost on the Group’s Balance Sheet. While this is the value at
The financial assets and financial liabilities listed in the table below are carried at amortised cost on the Group’s 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
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 table below.
financial liabilities at balance date in the table below.
Categorised into fair value hierarchy
Categorised into fair value hierarchy
Quoted price
Quoted price
With significant non-
With significant non-
active markets
active markets
Using observable
Using observable
observable inputs
observable inputs
At amortised cost
At amortised cost
(Level 1)
(Level 1)
inputs (Level 2)
inputs (Level 2)
(Level 3)
(Level 3)
Fair value (total)
Fair value (total)
2020
2020
$m
$m
2019
2019
$m
$m
2020
2020
$m
$m
2019
2019
$m
$m
2020
2020
$m
$m
2019
2019
$m
$m
2020
2020
$m
$m
2019
2019
$m
$m
2020
2020
$m
$m
2019
2019
$m
$m
Net loans and advances
Net loans and advances
613,155
613,155
614,336
614,336
-
-
16,161
16,161
22,629
22,629
597,997
597,997
592,704
592,704
614,158
614,158
615,333
615,333
6,816
6,816
5,999
5,999
619,971
619,971
620,335
620,335
-
-
-
-
6,816
6,816
5,997
5,997
6,816
6,816
5,997
5,997
22,977
22,977
28,626
28,626
597,997
597,997
592,704
592,704
620,974
620,974
621,330
621,330
Financial assets
Financial assets
Investment securities
Investment securities
Total
Total
Financial liabilities
Financial liabilities
Deposits and other borrowings
Deposits and other borrowings
679,255
679,255
635,376
635,376
- 679,544
- 679,544
635,660
635,660
Debt issuances
Debt issuances
Total
Total
117,509
117,509
127,102
127,102
26,107
26,107
43,304
43,304
93,187
93,187
85,484
85,484
796,764
796,764
762,478
762,478
26,107
26,107
43,304 772,731
43,304 772,731
721,144
721,144
679,544 635,660
679,544 635,660
119,294 128,788
119,294 128,788
798,838
798,838
764,448
764,448
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
KEY JUDGEMENTS AND ESTIMATES
KEY JUDGEMENTS AND ESTIMATES
The Group evaluates the material accuracy of the valuations incorporated in the financial statements as they can involve a high degree
The Group evaluates the material accuracy of the valuations incorporated in the financial statements as they can involve a high degree
of judgement and estimation in determining the carrying values of financial assets and financial liabilities at the balance sheet date.
of judgement and estimation in determining the carrying values of financial assets and financial liabilities at the balance sheet date.
The majority of valuation models the Group uses employ only observable market data as inputs. This has not changed as a result of
The majority of valuation models the Group uses employ only observable market data as inputs. This has not changed as a result of
COVID-19, however the Group has considered the impact of related economic and market disruptions on fair value measurement
COVID-19, however the Group has considered the impact of related economic and market disruptions on fair value measurement
assumptions and the appropriateness of valuation inputs, notably valuation adjustments, as well as the impact of COVID-19 on the
assumptions and the appropriateness of valuation inputs, notably valuation adjustments, as well as the impact of COVID-19 on the
For certain financial instruments, we may use data that is not readily observable in current markets. If we use unobservable market
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
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
the overall valuation. Generally, we derive unobservable inputs from other relevant market data and compare them to observed
transaction prices where available.
transaction prices where available.
When establishing the fair value of a financial instrument using a valuation technique, the Group considers valuation adjustments in
When establishing the fair value of a financial instrument using a valuation technique, the Group considers valuation adjustments in
determining the fair value. We may apply adjustments (such as bid/offer spreads, credit valuation adjustments and funding valuation
determining the fair value. We may apply adjustments (such as bid/offer spreads, credit valuation adjustments and funding valuation
adjustments – refer Note 10 Derivative Financial Instruments) to reflect the Group’s assessment of factors that market participants
adjustments – refer Note 10 Derivative Financial Instruments) to reflect the Group’s assessment of factors that market participants
would consider in setting fair value.
would consider in setting fair value.
186
186
187
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ANZ 2020 Annual Report ANZ 2020 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
19. OFFSETTING
We offset financial assets and financial liabilities on the balance sheet (in accordance with AASB 132 Financial Instruments: Presentation) when there is:
a current legally enforceable right to set off the recognised amounts in all circumstances; and
an intention to settle the asset and liability on a net basis, or to realise the asset and settle the liability simultaneously.
If the above conditions are not met, the financial assets and financial liabilities are presented on a gross basis.
The Group does not have any arrangements that satisfy the conditions necessary to offset financial assets and financial liabilities within the balance
sheet. 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
$m
Amounts not
subject to
master netting
agreement or
similar
$m
Total
$m
Financial
instruments
$m
Financial
collateral
(received)/
pledged
$m
Net
amount
$m
2020
Derivative financial assets
135,331
(3,862)
131,469
(117,982)
(6,397)
7,090
Reverse repurchase, securities borrowing and
similar agreements1
53,434
(5,922)
47,512
(1,566)
(45,946)
-
Total financial assets
188,765
(9,784)
178,981
(119,548)
(52,343)
Derivative financial liabilities
(134,711)
2,824
(131,887)
117,982
10,059
7,090
(3,846)
Repurchase, securities lending and similar
agreements2
(55,716)
14,354
(41,362)
1,566
39,796
-
Total financial liabilities
(190,427)
17,178
(173,249)
119,548
49,855
(3,846)
Amount subject to master netting agreement or similar
Total amounts
recognised in
the
Balance Sheet
$m
Amounts not
subject to
master netting
agreement or
similar
$m
Total
$m
Financial
instruments
$m
Financial
collateral
(received)/
pledged
$m
Net
amount
$m
2019
Derivative financial assets
120,667
(4,019)
116,648
(103,247)
(6,378)
7,023
Reverse repurchase, securities borrowing and
similar agreements1
Total financial assets
Derivative financial liabilities
Repurchase, securities lending and similar
agreements2
Total financial liabilities
1. Reverse repurchase agreements:
37,102
(5,299)
31,803
(1,414)
(30,389)
157,769
(120,951)
(9,318)
148,451
(104,661)
3,145
(117,806)
103,247
(41,367)
17,781
(23,586)
1,414
(162,318)
20,926
(141,392)
104,661
(36,767)
10,970
22,172
33,142
-
7,023
(3,589)
-
(3,589)
with less than 90 days to maturity are presented in the Balance Sheet within cash and cash equivalents; or
with 90 days or more to maturity are presented in the Balance Sheet within net loans and advances.
2. Repurchase agreements are presented on the Balance Sheet within deposits and other borrowings.
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ANZ 2020 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
Notes to the consolidated financial statements (continued)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
19. OFFSETTING
19. OFFSETTING
20. GOODWILL AND OTHER INTANGIBLE ASSETS
We offset financial assets and financial liabilities on the balance sheet (in accordance with AASB 132 Financial Instruments: Presentation) when there is:
We offset financial assets and financial liabilities on the balance sheet (in accordance with AASB 132 Financial Instruments: Presentation) when there is:
Goodwill1
Software
Other Intangibles
a current legally enforceable right to set off the recognised amounts in all circumstances; and
a current legally enforceable right to set off the recognised amounts in all circumstances; and
an intention to settle the asset and liability on a net basis, or to realise the asset and settle the liability simultaneously.
an intention to settle the asset and liability on a net basis, or to realise the asset and settle the liability simultaneously.
If the above conditions are not met, the financial assets and financial liabilities are presented on a gross basis.
If the above conditions are not met, the financial assets and financial liabilities are presented on a gross basis.
The Group does not have any arrangements that satisfy the conditions necessary to offset financial assets and financial liabilities within the balance
The Group does not have any arrangements that satisfy the conditions necessary to offset financial assets and financial liabilities within the balance
sheet. The following table identifies financial assets and financial liabilities which have not been offset but are subject to enforceable master netting
sheet. 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-
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.
collateralisation.
Balance at start of year
Additions
Amortisation expense2
Impairment expense
Written off on disposal
Amount subject to master netting agreement or similar
Amount subject to master netting agreement or similar
Foreign currency exchange difference
2020
$m
2019
$m
2020
$m
2019
$m
3,467
3,440
1,323
1,421
-
-
(77)
(124)
(2)
-
-
-
-
27
375
(657)
(2)
-
-
421
(517)
(4)
-
2
$m
71
6
(1)
-
-
-
2020
2019
Amounts not
Amounts not
Total amounts
Total amounts
subject to
subject to
recognised in
recognised in
master netting
master netting
the
the
agreement or
agreement or
Balance Sheet
Balance Sheet
$m
$m
similar
similar
$m
$m
Total
Total
$m
$m
Financial
Financial
instruments
instruments
$m
$m
Financial
Financial
collateral
collateral
(received)/
(received)/
pledged
pledged
$m
$m
Balance at end of year
3,264
3,467
1,039
1,323
76
Cost3
3,341
3,467
7,300
7,068
Accumulated amortisation/impairment
(77) n/a
(6,261)
(5,745)
Carrying amount
3,264
3,467
1,039
1,323
77
(1)
76
Total
2020
$m
2019
$m
4,861
4,930
381
(658)
(79)
(124)
(2)
421
(517)
(4)
-
31
4,379
4,861
10,718
10,610
(6,339)
(5,749)
4,379
4,861
$m
69
-
-
-
-
2
71
75
(4)
71
1. Goodwill excludes notional goodwill in equity accounted investments.
2. During the second half of the 2020 financial year, the Group amended the application of its software amortisation policy. The Group recognised accelerated amortisation of $197 million.
3.
Includes impact of foreign currency translation differences.
IMPAIRMENT TESTING FOR CASH GENERATING UNITS (CGUs) CONTAINING GOODWILL
During the year ended September 2020, $124 million of goodwill was written off in relation to completed divestments. In addition, as a result of
changes in economic outlook, the Group announced its intention to begin winding up the Bonus Bonds business, a managed investment product in
New Zealand and the Group wrote off the associated goodwill of $27 million. The balance of goodwill was subject to impairment assessment as set
out below which resulted in $50 million of goodwill impairment in the Pacific division.
An assessment as to whether the current carrying value of goodwill is impaired is undertaken annually or where there are indicators of potential
impairment. For the purpose of impairment testing, goodwill acquired in a business combination is allocated at the date of acquisition to the cash
generating units (CGUs) that are expected to benefit from the synergies of the related business combination. These CGUs are ANZ’s reportable
segments. Goodwill is considered to be impaired if the carrying amount of the relevant CGU exceeds its recoverable amount.
In determining the carrying amount of the CGUs to which goodwill is allocated, we include all direct assets and liabilities and an allocation, on a
reasonable and consistent basis, of corporate assets and liabilities that are recorded outside those CGUs to which goodwill is allocated.
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.
As the Group’s market capitalisation was below the Group’s net asset value at 30 September 2020, and considering uncertainties surrounding COVID-
19, the Group assessed the carrying value of goodwill as at 30 September 2020. Based on this assessment:
no impairment was identified in the Australia Retail and Commercial, New Zealand and Institutional CGUs under the FVLCOD approach;
the Pacific CGU’s recoverable amount measured on a VIU basis (being higher than its FVLCOD) indicated a shortfall in recoverable amount
relative to carrying amount. Accordingly an impairment loss of $50 million has been recognised at 30 September 2020, reducing the carrying
amount of goodwill to nil.
Fair Value Less Cost of Disposal
The recoverable amount of each CGU to which goodwill is allocated is estimated on a FVLCOD basis, calculated using a market multiple approach.
Under this approach, we determine the estimated fair value of each of our CGUs by applying observable price earnings multiples of appropriate
comparator 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.
189
189
Derivative financial assets
Derivative financial assets
135,331
135,331
(3,862)
(3,862)
131,469
131,469
(117,982)
(117,982)
(6,397)
(6,397)
7,090
7,090
Reverse repurchase, securities borrowing and
Reverse repurchase, securities borrowing and
similar agreements1
similar agreements1
Total financial assets
Total financial assets
53,434
53,434
(5,922)
(5,922)
47,512
47,512
(1,566)
(1,566)
(45,946)
(45,946)
188,765
188,765
(9,784)
(9,784)
178,981
178,981
(119,548)
(119,548)
(52,343)
(52,343)
Derivative financial liabilities
Derivative financial liabilities
(134,711)
(134,711)
2,824
2,824
(131,887)
(131,887)
117,982
117,982
10,059
10,059
Repurchase, securities lending and similar
Repurchase, securities lending and similar
agreements2
agreements2
(55,716)
(55,716)
14,354
14,354
(41,362)
(41,362)
1,566
1,566
39,796
39,796
Total financial liabilities
Total financial liabilities
(190,427)
(190,427)
17,178
17,178
(173,249)
(173,249)
119,548
119,548
49,855
49,855
(3,846)
(3,846)
Amount subject to master netting agreement or similar
Amount subject to master netting agreement or similar
Amounts not
Amounts not
Total amounts
Total amounts
subject to
subject to
recognised in
recognised in
master netting
master netting
the
the
agreement or
agreement or
Balance Sheet
Balance Sheet
$m
$m
similar
similar
$m
$m
Total
Total
$m
$m
Financial
Financial
instruments
instruments
$m
$m
Financial
Financial
collateral
collateral
(received)/
(received)/
pledged
pledged
$m
$m
Derivative financial assets
Derivative financial assets
120,667
120,667
(4,019)
(4,019)
116,648
116,648
(103,247)
(103,247)
(6,378)
(6,378)
7,023
7,023
Reverse repurchase, securities borrowing and
Reverse repurchase, securities borrowing and
similar agreements1
similar agreements1
Total financial assets
Total financial assets
Derivative financial liabilities
Derivative financial liabilities
Repurchase, securities lending and similar
Repurchase, securities lending and similar
agreements2
agreements2
Total financial liabilities
Total financial liabilities
1. Reverse repurchase agreements:
1. Reverse repurchase agreements:
37,102
37,102
(5,299)
(5,299)
31,803
31,803
(1,414)
(1,414)
(30,389)
(30,389)
157,769
157,769
(120,951)
(120,951)
(9,318)
(9,318)
148,451
148,451
(104,661)
(104,661)
3,145
3,145
(117,806)
(117,806)
103,247
103,247
(41,367)
(41,367)
17,781
17,781
(23,586)
(23,586)
1,414
1,414
(162,318)
(162,318)
20,926
20,926
(141,392)
(141,392)
104,661
104,661
(36,767)
(36,767)
10,970
10,970
22,172
22,172
33,142
33,142
with less than 90 days to maturity are presented in the Balance Sheet within cash and cash equivalents; or
with less than 90 days to maturity are presented in the Balance Sheet within cash and cash equivalents; or
with 90 days or more to maturity are presented in the Balance Sheet within net loans and advances.
with 90 days or more to maturity are presented in the Balance Sheet within net loans and advances.
2. Repurchase agreements are presented on the Balance Sheet within deposits and other borrowings.
2. Repurchase agreements are presented on the Balance Sheet within deposits and other borrowings.
Net
Net
amount
amount
$m
$m
7,090
7,090
(3,846)
(3,846)
-
-
-
-
Net
Net
amount
amount
$m
$m
-
-
-
-
7,023
7,023
(3,589)
(3,589)
(3,589)
(3,589)
2020
2020
2019
2019
188
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ANZ 2020 Annual Report ANZ 2020 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
20. GOODWILL AND OTHER INTANGIBLE ASSETS (continued)
Management’s approach and the key assumptions used to determine FVLCOD, for those CGUs where recoverable amount was determined on the
basis of FVLCOD were as follows:
Key assumption
Future maintainable earnings
Price/Earnings (P/E) multiple
applied (including control
premium)
Approach to determining the value (or values) for each key assumption
Future maintainable earnings for each CGU have been estimated as the sum of:
The financial year 2021 financial plan results for each CGU, which incorporates management
estimates of the impacts of COVID-19; plus
An allocation of the central costs recorded outside of the CGU’s to which goodwill is allocated.
Adjustments have been made to the financial year 2021 plan results to:
reflect longer term expected credit losses; and
normalise certain other operating expenditure where specific factors result in financial year 2021
planned expenditure exceeding longer term maintainable levels with the higher operating
expenditure treated as a one-off adjustment in the valuations.
Trading multiples:
The P/E multiples used have been derived from valuations of comparable publicly traded companies as at
30 September 2020 and are the median P/E multiple (2021 earnings multiple) of the comparator group:
For the Australia Retail and Commercial and New Zealand CGUs, the comparator group is the four
major banking groups headquartered in Australia;
For the Institutional CGU, the comparator group includes the four major banking groups
headquartered in Australia plus certain major financial institutions who compete with the Group in
international markets.
In the case of the New Zealand and Institutional CGUs, management has made downwards adjustments
to comparator group multiples to address specific factors relevant to those CGUs.
For each of ANZ’s CGUs where the recoverable amount was determined on the basis of FVLCOD, the P/E
multiples applied (including a 30% control premium discussed below) were as follows:
Division
Australia Retail and Commercial
New Zealand
Institutional
2020
16.0
12.7
13.4
2019
17.9
17.8
14.7
Control premium:
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 input from historical
and recent transactions.
FVLCOD assessment outcomes
For those CGUs where recoverable amount was determined on the basis of FVLCOD, the surplus of the recoverable amount over the carrying amount
was as follows:
Cash generating unit:
Australia Retail and Commercial
New Zealand
Institutional
Sensitivity analysis
Surplus
30 September 2020
$m
4,539
1,201
516
The surpluses disclosed above are sensitive to judgements and estimates in respect of:
for recoverable amount – The future maintainable earnings and the P/E multiple applied (including the control premium applied in
determining the P/E multiple); and
for carrying amount - The allocation of corporate assets and liabilities recorded outside those CGUs to which goodwill is allocated.
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ANZ 2020 ANNUAL REPORT
ANZ 2020 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
Notes to the consolidated financial statements (continued)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
20. GOODWILL AND OTHER INTANGIBLE ASSETS (continued)
20. GOODWILL AND OTHER INTANGIBLE ASSETS (continued)
Management’s approach and the key assumptions used to determine FVLCOD, for those CGUs where recoverable amount was determined on the
Management’s approach and the key assumptions used to determine FVLCOD, for those CGUs where recoverable amount was determined on the
20. GOODWILL AND OTHER INTANGIBLE ASSETS (continued)
The FVLCOD estimates for the respective CGUs would continue to show a surplus in recoverable amount over carrying amount if:
either the P/E multiple applied or the future maintainable earnings estimates were reduced (in isolation) by 13.6% in Australia Retail and
Commercial; 8.6% in New Zealand or 2.6% in Institutional; or
the 30% control premium applied was reduced by 59.5% in Australia Retail and Commercial (resulting in a control premium applied of
12.1%), by 38.1% in New Zealand (resulting in a control premium applied of 18.6%) or by 11.4% in Institutional (resulting in a control
premium applied of 26.6%); or
the share of corporate assets and liabilities was increased (in isolation) by 17.3% to Australia Retail and Commercial; 10.1% to New Zealand
or 3.2% to Institutional.
As the recoverable amounts estimated on the basis of FVLCOD show a surplus of recoverable amount over carrying amount for the Australia Retail
and Commercial, New Zealand and Institutional CGUs, such adverse movements would not necessarily trigger an impairment, rather they would
trigger the need for a VIU assessment to be performed with any impairment determined on the basis of the higher of FVLCOD and VIU.
Value In Use
The Pacific CGU’s recoverable amount was measured on the basis of its VIU (as this was higher than the FVLCOD). Recoverable amount under the VIU
assessment was estimated at $466 million using a post-tax discount rate of 13%, which resulted in a shortfall relative to carrying amount. Accordingly
an impairment loss of $50 million has been recognised at 30 September 2020, reducing the carrying amount of goodwill to nil. In addition, an
associated assessment of the carrying values of the other assets in the Pacific was completed and no impairment (apart from goodwill) was recorded.
The goodwill applicable to each CGU before and after impairment charges and other adjustments is shown below:
Cash generating unit:
Australia
New Zealand
Institutional
Pacific
Total
Balance as at
1 October 2019
$m
409
1,937
1,071
50
3,467
Impairment
expense
$m
-
(27)
-
(50)
(77)
Disposal
on sale
$m
(6)
(118)
-
-
(124)
Foreign exchange
difference
$m
-
1
(3)
-
(2)
Balance at
30 September 2020
$m
403
1,793
1,068
-
3,264
191
191
basis of FVLCOD were as follows:
basis of FVLCOD were as follows:
Key assumption
Key assumption
Approach to determining the value (or values) for each key assumption
Approach to determining the value (or values) for each key assumption
Future maintainable earnings
Future maintainable earnings
Future maintainable earnings for each CGU have been estimated as the sum of:
Future maintainable earnings for each CGU have been estimated as the sum of:
The financial year 2021 financial plan results for each CGU, which incorporates management
The financial year 2021 financial plan results for each CGU, which incorporates management
estimates of the impacts of COVID-19; plus
estimates of the impacts of COVID-19; plus
An allocation of the central costs recorded outside of the CGU’s to which goodwill is allocated.
An allocation of the central costs recorded outside of the CGU’s to which goodwill is allocated.
Adjustments have been made to the financial year 2021 plan results to:
Adjustments have been made to the financial year 2021 plan results to:
reflect longer term expected credit losses; and
reflect longer term expected credit losses; and
normalise certain other operating expenditure where specific factors result in financial year 2021
normalise certain other operating expenditure where specific factors result in financial year 2021
planned expenditure exceeding longer term maintainable levels with the higher operating
planned expenditure exceeding longer term maintainable levels with the higher operating
expenditure treated as a one-off adjustment in the valuations.
expenditure treated as a one-off adjustment in the valuations.
Price/Earnings (P/E) multiple
Price/Earnings (P/E) multiple
Trading multiples:
Trading multiples:
applied (including control
applied (including control
The P/E multiples used have been derived from valuations of comparable publicly traded companies as at
The P/E multiples used have been derived from valuations of comparable publicly traded companies as at
premium)
premium)
30 September 2020 and are the median P/E multiple (2021 earnings multiple) of the comparator group:
30 September 2020 and are the median P/E multiple (2021 earnings multiple) of the comparator group:
For the Australia Retail and Commercial and New Zealand CGUs, the comparator group is the four
For the Australia Retail and Commercial and New Zealand CGUs, the comparator group is the four
major banking groups headquartered in Australia;
major banking groups headquartered in Australia;
For the Institutional CGU, the comparator group includes the four major banking groups
For the Institutional CGU, the comparator group includes the four major banking groups
headquartered in Australia plus certain major financial institutions who compete with the Group in
headquartered in Australia plus certain major financial institutions who compete with the Group in
international markets.
international markets.
In the case of the New Zealand and Institutional CGUs, management has made downwards adjustments
In the case of the New Zealand and Institutional CGUs, management has made downwards adjustments
to comparator group multiples to address specific factors relevant to those CGUs.
to comparator group multiples to address specific factors relevant to those CGUs.
For each of ANZ’s CGUs where the recoverable amount was determined on the basis of FVLCOD, the P/E
For each of ANZ’s CGUs where the recoverable amount was determined on the basis of FVLCOD, the P/E
multiples applied (including a 30% control premium discussed below) were as follows:
multiples applied (including a 30% control premium discussed below) were as follows:
Division
Division
Australia Retail and Commercial
Australia Retail and Commercial
New Zealand
New Zealand
Institutional
Institutional
Control premium:
Control premium:
2020
2020
16.0
16.0
12.7
12.7
13.4
13.4
2019
2019
17.9
17.9
17.8
17.8
14.7
14.7
A control premium has been applied which recognises the increased consideration a potential acquirer
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
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
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.
multiple based on historical transactions.
Costs of disposal
Costs of disposal
Costs of disposal have been estimated as 2% of the fair value of the CGU based on input from historical
Costs of disposal have been estimated as 2% of the fair value of the CGU based on input from historical
and recent transactions.
and recent transactions.
For those CGUs where recoverable amount was determined on the basis of FVLCOD, the surplus of the recoverable amount over the carrying amount
For those CGUs where recoverable amount was determined on the basis of FVLCOD, the surplus of the recoverable amount over the carrying amount
Surplus
Surplus
30 September 2020
30 September 2020
$m
$m
4,539
4,539
1,201
1,201
516
516
The surpluses disclosed above are sensitive to judgements and estimates in respect of:
The surpluses disclosed above are sensitive to judgements and estimates in respect of:
for recoverable amount – The future maintainable earnings and the P/E multiple applied (including the control premium applied in
for recoverable amount – The future maintainable earnings and the P/E multiple applied (including the control premium applied in
determining the P/E multiple); and
determining the P/E multiple); and
for carrying amount - The allocation of corporate assets and liabilities recorded outside those CGUs to which goodwill is allocated.
for carrying amount - The allocation of corporate assets and liabilities recorded outside those CGUs to which goodwill is allocated.
FVLCOD assessment outcomes
FVLCOD assessment outcomes
was as follows:
was as follows:
Cash generating unit:
Cash generating unit:
Australia Retail and Commercial
Australia Retail and Commercial
New Zealand
New Zealand
Institutional
Institutional
Sensitivity analysis
Sensitivity analysis
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
20. GOODWILL AND OTHER INTANGIBLE ASSETS (continued)
RECOGNITION AND MEASUREMENT
The table below details how we recognise and measure different intangible assets:
Goodwill
Software
Other Intangible Assets
Definition
Excess amount the Group has
paid in acquiring a business over
the fair value of the identifiable
assets and liabilities acquired.
Carrying value
Cost less any accumulated
impairment losses.
Allocated to the cash generating
unit to which the
acquisition relates.
Management fee rights arising from
acquisition of funds management
business and an intangible asset
arising from contractual rights.
Purchases of “off the shelf” software
assets are capitalised as assets.
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.
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
amortisation and impairment losses.
Costs incurred in planning or evaluating
software proposals or in maintaining
systems after implementation are
not capitalised.
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 up to 7
years subject to approval by the Audit
Committee.
Management fee rights with an
indefinite life are reviewed for
impairment at least annually or when
there is an indication of impairment.
The contractual rights intangible asset
has a useful life of 3 years.
Purchased software is amortised over 2
years unless it is considered integral to
other assets with a longer useful life.
Depreciation
method
Not applicable.
Straight-line method.
Not applicable to indefinite life
intangible assets. Straight line for
those with a limited life.
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
Notes to the consolidated financial statements (continued)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
20. GOODWILL AND OTHER INTANGIBLE ASSETS (continued)
20. GOODWILL AND OTHER INTANGIBLE ASSETS (continued)
20. GOODWILL AND OTHER INTANGIBLE ASSETS (continued)
RECOGNITION AND MEASUREMENT
RECOGNITION AND MEASUREMENT
The table below details how we recognise and measure different intangible assets:
The table below details how we recognise and measure different intangible assets:
Goodwill
Goodwill
Software
Software
Other Intangible Assets
Other Intangible Assets
Definition
Definition
Excess amount the Group has
Excess amount the Group has
Purchases of “off the shelf” software
Purchases of “off the shelf” software
Management fee rights arising from
Management fee rights arising from
paid in acquiring a business over
paid in acquiring a business over
assets are capitalised as assets.
assets are capitalised as assets.
acquisition of funds management
acquisition of funds management
the fair value of the identifiable
the fair value of the identifiable
assets and liabilities acquired.
assets and liabilities acquired.
business and an intangible asset
business and an intangible asset
arising from contractual rights.
arising from contractual rights.
Carrying value
Carrying value
Cost less any accumulated
Cost less any accumulated
Initially, measured at cost.
Initially, measured at cost.
Initially, measured at fair value at
Initially, measured at fair value at
impairment losses.
impairment losses.
Subsequently, carried at cost less
Subsequently, carried at cost less
acquisition.
acquisition.
Allocated to the cash generating
Allocated to the cash generating
accumulated amortisation and
accumulated amortisation and
Subsequently, carried at cost less
Subsequently, carried at cost less
impairment losses.
impairment losses.
amortisation and impairment losses.
amortisation and impairment losses.
unit to which the
unit to which the
acquisition relates.
acquisition relates.
Useful life
Useful life
Indefinite.
Indefinite.
Goodwill is reviewed for
Goodwill is reviewed for
impairment at least annually or
impairment at least annually or
when there is an indication of
when there is an indication of
impairment.
impairment.
Except for major core infrastructure,
Except for major core infrastructure,
Management fee rights with an
Management fee rights with an
amortised over periods between
amortised over periods between
indefinite life are reviewed for
indefinite life are reviewed for
2-5 years; however major core
2-5 years; however major core
impairment at least annually or when
impairment at least annually or when
infrastructure may be amortised up to 7
infrastructure may be amortised up to 7
there is an indication of impairment.
there is an indication of impairment.
years subject to approval by the Audit
years subject to approval by the Audit
The contractual rights intangible asset
The contractual rights intangible asset
Committee.
Committee.
has a useful life of 3 years.
has a useful life of 3 years.
Internal and external costs incurred in
Internal and external costs incurred in
building software and computer
building software and computer
systems costing greater than $20 million
systems costing greater than $20 million
are capitalised as assets. Those less than
are capitalised as assets. Those less than
$20 million are expensed in the year in
$20 million are expensed in the year in
which the costs are incurred.
which the costs are incurred.
Costs incurred in planning or evaluating
Costs incurred in planning or evaluating
software proposals or in maintaining
software proposals or in maintaining
systems after implementation are
systems after implementation are
not capitalised.
not capitalised.
Purchased software is amortised over 2
Purchased software is amortised over 2
years unless it is considered integral to
years unless it is considered integral to
other assets with a longer useful life.
other assets with a longer useful life.
Depreciation
Depreciation
Not applicable.
Not applicable.
Straight-line method.
Straight-line method.
method
method
Not applicable to indefinite life
Not applicable to indefinite life
intangible assets. Straight line for
intangible assets. Straight line for
those with a limited life.
those with a limited 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
if 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:
the level at which goodwill is allocated – consistent with prior periods the CGUs to which goodwill is allocated are the Group’s four
revenue generating segments that benefit from relevant historical business combinations generating goodwill.
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.
assessment of the recoverable amount of each CGU used to determine whether the carrying amount of goodwill is supported is
based on judgements including:
o
o
selection of the model used to determine the fair value – the Group has used the market multiple approach to estimate the
fair value; and
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.
The assessment of the recoverable amount of each CGU has been made within the context of the ongoing impact of COVID-19 on both earnings
and asset prices, and reflects expectations of future events that are believed to be reasonable under the circumstances. The rapidly evolving
consequences of COVID-19 and government, business and consumer responses create heightened uncertainty in these estimates and any
variations could have a positive or adverse impact on the determination of recoverable amounts.
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’s 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 underlying pace of technological change.
During the Financial year the Group amended the application of the software policy to reflect the shorter useful lives of various types of software,
including regulatory and compliance focused assets and purchased assets. These changes better reflect the Group’s rapidly changing technology
and business needs and ongoing reinvestment in purchased and internally developed software to ensure assets remain fit for purpose.
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
21. OTHER PROVISIONS
ECL allowance on undrawn and contingent facilities1
Customer remediation
Restructuring costs
Non-lending losses, frauds and forgeries
Other
Total other provisions (including liabilities reclassified as held for sale)
Less: Other provisions reclassified as held for sale
Total other provisions
1. Refer to Note 13 Allowance for Expected Credit Losses for movement analysis.
2020
$m
898
1,109
105
79
388
2,579
-
2,579
Balance at 1 October 2018
New and increased provisions made during the year
Provisions used during the year
Unused amounts reversed during the year
Balance at 30 September 2019 (including liabilities reclassified as held
for sale)
New and increased provisions made during the year
Provisions used during the year
Unused amounts reversed during the year1
Balance at end of year
Customer
remediation
$m
Restructuring
costs
$m
Non-lending
losses, frauds
and forgeries
$m
602
857
(186)
(134)
1,139
773
(381)
(422)
1,109
105
97
(117)
(21)
64
124
(74)
(9)
105
100
18
(5)
(19)
94
4
(12)
(7)
79
2019
$m
668
1,139
64
94
349
2,314
(91)
2,223
Other
$m
191
338
(71)
(109)
349
400
(215)
(146)
388
1. Customer remediation includes a $99 million transfer to the purchaser on completion of divestment of part of Wealth Australia discontinued operations.
Customer remediation
Customer remediation includes provisions for expected refunds to customers, remediation project costs and related customer and regulatory
claims, penalties and litigation 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.
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ANZ 2020 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
Notes to the consolidated financial statements (continued)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
21. OTHER PROVISIONS
21. OTHER PROVISIONS
21. OTHER PROVISIONS (continued)
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, fraud 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’s 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.
Consequently, the appropriateness of the underlying assumptions is reviewed on a regular basis against actual experience and other
relevant evidence including expert legal advices and adjustments are made to the provisions where appropriate.
2020
2020
$m
$m
898
898
1,109
1,109
105
105
79
79
388
388
2,579
2,579
-
-
2,579
2,579
$m
$m
100
100
18
18
(5)
(5)
(19)
(19)
94
94
4
4
(12)
(12)
(7)
(7)
79
79
2019
2019
$m
$m
668
668
1,139
1,139
64
64
94
94
349
349
2,314
2,314
(91)
(91)
2,223
2,223
Other
Other
$m
$m
191
191
338
338
(71)
(71)
(109)
(109)
349
349
400
400
(215)
(215)
(146)
(146)
388
388
ECL allowance on undrawn and contingent facilities1
ECL allowance on undrawn and contingent facilities1
Customer remediation
Customer remediation
Restructuring costs
Restructuring costs
Non-lending losses, frauds and forgeries
Non-lending losses, frauds and forgeries
Other
Other
Total other provisions (including liabilities reclassified as held for sale)
Total other provisions (including liabilities reclassified as held for sale)
Less: Other provisions reclassified as held for sale
Less: Other provisions reclassified as held for sale
Total other provisions
Total other provisions
1. Refer to Note 13 Allowance for Expected Credit Losses for movement analysis.
1. Refer to Note 13 Allowance for Expected Credit Losses for movement analysis.
Balance at 30 September 2019 (including liabilities reclassified as held
Balance at 30 September 2019 (including liabilities reclassified as held
Balance at 1 October 2018
Balance at 1 October 2018
New and increased provisions made during the year
New and increased provisions made during the year
Provisions used during the year
Provisions used during the year
Unused amounts reversed during the year
Unused amounts reversed during the year
for sale)
for sale)
New and increased provisions made during the year
New and increased provisions made during the year
Provisions used during the year
Provisions used during the year
Unused amounts reversed during the year1
Unused amounts reversed during the year1
Balance at end of year
Balance at end of year
Customer
Customer
Restructuring
Restructuring
remediation
remediation
Non-lending
Non-lending
losses, frauds
losses, frauds
and forgeries
and forgeries
$m
$m
602
602
857
857
(186)
(186)
(134)
(134)
1,139
1,139
773
773
(381)
(381)
(422)
(422)
1,109
1,109
costs
costs
$m
$m
105
105
97
97
(117)
(117)
(21)
(21)
64
64
124
124
(74)
(74)
(9)
(9)
105
105
1. Customer remediation includes a $99 million transfer to the purchaser on completion of divestment of part of Wealth Australia discontinued operations.
1. Customer remediation includes a $99 million transfer to the purchaser on completion of divestment of part of Wealth Australia discontinued operations.
Customer remediation includes provisions for expected refunds to customers, remediation project costs and related customer and regulatory
Customer remediation includes provisions for expected refunds to customers, remediation project costs and related customer and regulatory
Customer remediation
Customer remediation
claims, penalties and litigation outcomes.
claims, penalties and litigation outcomes.
Restructuring costs
Restructuring costs
for and are expensed as incurred.
for and are expensed as incurred.
Non-lending losses, frauds and forgeries
Non-lending losses, frauds and forgeries
events and circumstances that affect the provision.
events and circumstances that affect the provision.
Other
Other
Provisions for restructuring costs arise from activities related to material changes in the scope of business undertaken by the Group or the
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
manner in which that business is undertaken and include employee termination benefits. Costs relating to on-going activities are not provided
Non-lending losses include losses arising from certain legal actions not directly related to amounts of principal outstanding for loans and
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
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
consideration required to settle the present obligation at the reporting date, taking into account the risks and uncertainties that surround the
Other provisions comprise various other provisions including workers compensation, make-good provisions associated with leased premises,
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
warranties and indemnities provided in connection with various disposals of businesses and assets, and contingent liabilities recognised as part
of a business combination.
of a business combination.
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
22. SHAREHOLDERS’ EQUITY
SHAREHOLDERS' EQUITY
Ordinary share capital
Reserves
Foreign currency translation reserve
Share option reserve
FVOCI reserve
Cash flow hedge reserve
Transactions with non-controlling interests reserve
Total reserves
Retained earnings
Share capital and reserves attributable to shareholders of the Company
Non-controlling interests
Total shareholders’ equity
ORDINARY SHARE CAPITAL
The table below details the movement in ordinary shares and share capital for the period.
2020
$m
26,531
155
85
245
1,038
(22)
1,501
33,255
61,287
10
61,297
2019
$m
26,490
705
89
126
731
(22)
1,629
32,664
60,783
11
60,794
Balance at start of the year
Dividend reinvestment plan ('DRP') Issuances1
Bonus option plan2
Group employee share acquisition scheme
Share buy-back3
Treasury shares in Wealth Australia discontinued operations4
2020
Number of
shares
2019
Number of
shares
$m
$m
2,834,584,923
26,490
2,873,618,118
27,205
3,373,022
2,412,280
-
-
-
61
-
(20)
-
-
-
2,999,796
-
(42,032,991)
-
-
-
-
(1,120)
405
26,490
Balance at end of year
2,840,370,225
26,531
2,834,584,923
1. 3.4 million shares were issued under the Dividend Reinvestment Plan (DRP) for the 2020 interim dividend (nil shares for the 2019 final and interim dividend as the shares were purchased on-market and
provided directly to shareholders participating in the DRP).
2. The Company issued 0.8 million shares under the Bonus Option Plan (BOP) for the 2020 interim dividend and 1.6 million shares for the 2019 final dividend (1.4 million shares for the 2019 interim dividend
and 1.6 million shares for the 2018 final dividend).
3. The Company completed a $3.0 billion on-market share buy-back of ANZ ordinary shares purchasing $1,120 million in the September 2019 full year resulting in 42.0 million ANZ ordinary shares being
cancelled in the September 2019 full year.
4. The successor fund transfer performed in preparation for the sale of the Group’s wealth business to Zurich and IOOF completed on 13 April 2019. As a result the Group no longer eliminates the ANZ shares
previously held in Wealth Australia discontinued operations.
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22. SHAREHOLDERS’ EQUITY
22. SHAREHOLDERS’ EQUITY
SHAREHOLDERS' EQUITY
SHAREHOLDERS' EQUITY
Ordinary share capital
Ordinary share capital
Reserves
Reserves
Foreign currency translation reserve
Foreign currency translation reserve
Share option reserve
Share option reserve
FVOCI reserve
FVOCI reserve
Cash flow hedge reserve
Cash flow hedge reserve
Total reserves
Total reserves
Retained earnings
Retained earnings
Non-controlling interests
Non-controlling interests
Total shareholders’ equity
Total shareholders’ equity
Share capital and reserves attributable to shareholders of the Company
Share capital and reserves attributable to shareholders of the Company
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
Notes to the consolidated financial statements (continued)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
22. SHAREHOLDERS’ EQUITY (continued)
RECOGNITION AND MEASUREMENT
Transactions with non-controlling interests reserve
Transactions with non-controlling interests reserve
Treasury shares
Ordinary shares
ORDINARY SHARE CAPITAL
ORDINARY SHARE CAPITAL
The table below details the movement in ordinary shares and share capital for the period.
The table below details the movement in ordinary shares and share capital for the period.
Balance at start of the year
Balance at start of the year
Dividend reinvestment plan ('DRP') Issuances1
Dividend reinvestment plan ('DRP') Issuances1
Bonus option plan2
Bonus option plan2
Share buy-back3
Share buy-back3
Group employee share acquisition scheme
Group employee share acquisition scheme
Treasury shares in Wealth Australia discontinued operations4
Treasury shares in Wealth Australia discontinued operations4
2,834,584,923
2,834,584,923
26,490
26,490
2,873,618,118
2,873,618,118
27,205
27,205
2020
2020
Number of
Number of
shares
shares
3,373,022
3,373,022
2,412,280
2,412,280
-
-
-
-
-
-
2019
2019
Number of
Number of
shares
shares
2,999,796
2,999,796
(42,032,991)
(42,032,991)
-
-
-
-
-
-
$m
$m
61
61
(20)
(20)
-
-
-
-
-
-
Balance at end of year
Balance at end of year
2,840,370,225
2,840,370,225
26,531
26,531
2,834,584,923
2,834,584,923
1. 3.4 million shares were issued under the Dividend Reinvestment Plan (DRP) for the 2020 interim dividend (nil shares for the 2019 final and interim dividend as the shares were purchased on-market and
1. 3.4 million shares were issued under the Dividend Reinvestment Plan (DRP) for the 2020 interim dividend (nil shares for the 2019 final and interim dividend as the shares were purchased on-market and
2. The Company issued 0.8 million shares under the Bonus Option Plan (BOP) for the 2020 interim dividend and 1.6 million shares for the 2019 final dividend (1.4 million shares for the 2019 interim dividend
2. The Company issued 0.8 million shares under the Bonus Option Plan (BOP) for the 2020 interim dividend and 1.6 million shares for the 2019 final dividend (1.4 million shares for the 2019 interim dividend
3. The Company completed a $3.0 billion on-market share buy-back of ANZ ordinary shares purchasing $1,120 million in the September 2019 full year resulting in 42.0 million ANZ ordinary shares being
3. The Company completed a $3.0 billion on-market share buy-back of ANZ ordinary shares purchasing $1,120 million in the September 2019 full year resulting in 42.0 million ANZ ordinary shares being
provided directly to shareholders participating in the DRP).
provided directly to shareholders participating in the DRP).
and 1.6 million shares for the 2018 final dividend).
and 1.6 million shares for the 2018 final dividend).
cancelled in the September 2019 full year.
cancelled in the September 2019 full year.
previously held in Wealth Australia discontinued operations.
previously held in Wealth Australia discontinued operations.
4. The successor fund transfer performed in preparation for the sale of the Group’s wealth business to Zurich and IOOF completed on 13 April 2019. As a result the Group no longer eliminates the ANZ shares
4. The successor fund transfer performed in preparation for the sale of the Group’s wealth business to Zurich and IOOF completed on 13 April 2019. As a result the Group no longer eliminates the ANZ shares
Reserves:
Foreign currency translation reserve
Cash flow hedge reserve
FVOCI reserve
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 in person, or by proxy, is entitled to:
on a show of hands, one vote; and
on a poll, one vote, for each share held.
Treasury shares are shares in the Company which:
the ANZ Employee Share Acquisition Plan purchases on market and have not yet
distributed, or
the Company issues to the ANZ Employee Share Acquisition Plan and have not yet
been distributed, or
the life insurance business purchased and held to back policy liabilities in the
statutory funds prior to the successor fund transfer performed in preparation for the sale of
the Group’s wealth business to Zurich and IOOF which completed on 13 April 2019.
Treasury shares are deducted from share capital and excluded from the weighted average
number of ordinary shares used in the earnings per share calculations.
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.
Includes fair value gains and losses associated with the effective portion of designated cash
flow hedging instruments together with any tax effect.
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.
2020
2020
$m
$m
26,531
26,531
155
155
85
85
245
245
1,038
1,038
(22)
(22)
1,501
1,501
33,255
33,255
61,287
61,287
10
10
61,297
61,297
2019
2019
$m
$m
26,490
26,490
705
705
89
89
126
126
731
731
(22)
(22)
1,629
1,629
32,664
32,664
60,783
60,783
11
11
60,794
60,794
$m
$m
-
-
-
-
-
-
(1,120)
(1,120)
405
405
26,490
26,490
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
Company does not own directly or indirectly.
196
196
197
197
ANZ 2020 Annual Report
ANZ 2020 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
23. CAPITAL MANAGEMENT
CAPITAL MANAGEMENT STRATEGY
ANZ’s 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:
forecasting economic variables, financial performance of ANZ’s divisions and the financial impact of new strategic initiatives to be implemented
during the planning period;
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;
reviewing capital ratios and targets across various classes of capital against ANZ’s risk profile; and
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’s
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 ANZ is an Authorised Deposit-taking Institution (ADI) in Australia, it is primarily regulated by APRA under the Banking Act 1959 (Cth). ANZ 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 (“BCBS”). APRA requirements are summarised below:
Regulatory Capital Definition
Common Equity Tier 1 (CET1) Capital
Tier 1 Capital
Tier 2 Capital
Total Capital
Shareholders’ 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%.
Reporting Levels
Level 1
Level 2
Level 3
The ADI on a stand-alone basis (that is
the Company and specified subsidiaries
which are consolidated to form the
ADI’s Extended Licensed Entity).
The consolidated Group less
certain subsidiaries and associates
that are excluded under
prudential standards.
APRA also requires the ADI to hold additional CET1 buffers as follows:
A conglomerate Group at the widest level.
a capital conservation buffer (CCB) of 3.5% which is inclusive of the additional 1% surcharge for domestically systemically important banks (D-SIBs).
APRA has determined that ANZ is a D-SIB.
a countercyclical capital buffer which is set on a jurisdictional basis. The requirement is currently set to zero for Australia.
ANZ reports to APRA on a Level 1 and Level 2 basis, and measures capital adequacy monthly on a Level 1 and Level 2 basis, and is not yet required to
maintain capital on a Level 3 basis (APRA have yet to conclude required timing for Level 3 reporting).
Life Insurance and Funds Management
As required by APRA’s Prudential Standards, insurance and funds management activities are:
de-consolidated for the purposes of calculating capital adequacy; and
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 Group’s results,
then we exclude them from the determination of CET1 capital to the extent they have not been remitted to the Company.
198
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OverviewHow we create valuePerformance overviewRemuneration reportDirectors’ reportFinancial reportShareholder information
Notes to the consolidated financial statements (continued)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
23. CAPITAL MANAGEMENT (continued)
Outside Australia
In addition to APRA, the Company’s 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.
performing stress tests under different economic scenarios to determine the level of additional capital (‘stress capital buffer’) needed to absorb
performing stress tests under different economic scenarios to determine the level of additional capital (‘stress capital buffer’) needed to absorb
CAPITAL ADEQUACY1
The following table provides details of the Group’s capital adequacy ratios at 30 September:
Qualifying capital
Tier 1
Shareholders' equity and non-controlling interests
Prudential adjustments to shareholders' equity
Gross Common Equity Tier 1 capital
Deductions
Common Equity Tier 1 capital
Additional Tier 1 capital2
Tier 1 capital
Tier 2 capital3
Total qualifying capital
Capital adequacy ratios (Level 2)
Common Equity Tier 1
Tier 1
Tier 2
Total capital ratio
Risk weighted assets
2020
$m
2019
$m
61,297
(205)
61,092
(12,390)
48,702
7,779
56,481
13,957
70,438
11.3%
13.2%
3.3%
16.4%
60,794
120
60,914
(13,559)
47,355
7,866
55,221
8,549
63,770
11.4%
13.2%
2.1%
15.3%
429,384
416,961
1. This information is not within the scope of the external audit of the Group Financial Report by the Group’s 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 $8,196 million (2019: $8,171 million) (refer to Note 15 Debt issuances), reduced for regulatory adjustments and deductions of $417 million (2019: $305 million).
3. This includes Tier 2 capital of $12,865 million (2019: $8,415 million) (refer to Note 15 Debt issuances), general reserve for impairment of financial assets of $1,813 million (2019: $296 million) and deductions
for regulatory adjustments of $721 million (2019: $162 million).
ANZ 2020 ANNUAL REPORT
ANZ 2020 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
23. CAPITAL MANAGEMENT
23. CAPITAL MANAGEMENT
CAPITAL MANAGEMENT STRATEGY
CAPITAL MANAGEMENT STRATEGY
The process involves:
The process involves:
during the planning period;
during the planning period;
ANZ’s capital management strategy aims to protect the interests of depositors, creditors and shareholders. We achieve this through an Internal
ANZ’s 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.
Capital Adequacy Assessment Process (ICAAP) whereby ANZ conducts detailed strategic and capital planning over a 3 year time horizon.
forecasting economic variables, financial performance of ANZ’s divisions and the financial impact of new strategic initiatives to be implemented
forecasting economic variables, financial performance of ANZ’s divisions and the financial impact of new strategic initiatives to be implemented
losses that may be experienced under an economic downturn;
losses that may be experienced under an economic downturn;
reviewing capital ratios and targets across various classes of capital against ANZ’s risk profile; and
reviewing capital ratios and targets across various classes of capital against ANZ’s risk profile; and
developing a capital plan, taking into account capital ratio targets, current and future capital issuances requirements and options around capital
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.
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’s
The capital plan is approved by the Board and updated as required. The Board and senior management are provided with regular updates of ANZ’s
capital position. Any material actions required to ensure ongoing prudent capital management are submitted to the Board for approval. Throughout
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.
the year, the Group maintained compliance with all the regulatory requirements related to Capital Adequacy in the jurisdictions in which it operates.
REGULATORY ENVIRONMENT
REGULATORY ENVIRONMENT
Australia
Australia
As ANZ is an Authorised Deposit-taking Institution (ADI) in Australia, it is primarily regulated by APRA under the Banking Act 1959 (Cth). ANZ must
As ANZ is an Authorised Deposit-taking Institution (ADI) in Australia, it is primarily regulated by APRA under the Banking Act 1959 (Cth). ANZ must
comply with the minimum regulatory capital requirements, prudential capital ratios and specific reporting levels that APRA sets and which are
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
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 (“BCBS”). APRA requirements are summarised below:
as set by the Basel Committee on Banking Supervision (“BCBS”). APRA requirements are summarised below:
Regulatory Capital Definition
Regulatory Capital Definition
Common Equity Tier 1 (CET1) Capital
Common Equity Tier 1 (CET1) Capital
Tier 1 Capital
Tier 1 Capital
Tier 2 Capital
Tier 2 Capital
Total Capital
Total Capital
Shareholders’ equity adjusted for
Shareholders’ equity adjusted for
CET1 Capital plus certain securities
CET1 Capital plus certain securities
Subordinated debt instruments
Subordinated debt instruments
Tier 1 plus Tier 2 Capital.
Tier 1 plus Tier 2 Capital.
specific items.
specific items.
with complying loss absorbing
with complying loss absorbing
which have a minimum term of 5
which have a minimum term of 5
characteristics known as
characteristics known as
Additional Tier 1 Capital.
Additional Tier 1 Capital.
years at issue date.
years at issue date.
Minimum Prudential Capital Ratios (PCRs)
Minimum Prudential Capital Ratios (PCRs)
CET1 Ratio
CET1 Ratio
Tier 1 Ratio
Tier 1 Ratio
Total Capital Ratio
Total Capital Ratio
CET1 Capital divided by total risk
CET1 Capital divided by total risk
Tier 1 Capital divided by total risk
Tier 1 Capital divided by total risk
Total Capital divided by total risk weighted
Total Capital divided by total risk weighted
weighted assets must be at least 4.5%.
weighted assets must be at least 4.5%.
weighted assets must be at least
weighted assets must be at least
assets must be at least 8.0%.
assets must be at least 8.0%.
Reporting Levels
Reporting Levels
Level 1
Level 1
6.0%.
6.0%.
Level 2
Level 2
Level 3
Level 3
The ADI on a stand-alone basis (that is
The ADI on a stand-alone basis (that is
The consolidated Group less
The consolidated Group less
A conglomerate Group at the widest level.
A conglomerate Group at the widest level.
the Company and specified subsidiaries
the Company and specified subsidiaries
certain subsidiaries and associates
certain subsidiaries and associates
which are consolidated to form the
which are consolidated to form the
that are excluded under
that are excluded under
ADI’s Extended Licensed Entity).
ADI’s Extended Licensed Entity).
prudential standards.
prudential standards.
APRA also requires the ADI to hold additional CET1 buffers as follows:
APRA also requires the ADI to hold additional CET1 buffers as follows:
a capital conservation buffer (CCB) of 3.5% which is inclusive of the additional 1% surcharge for domestically systemically important banks (D-SIBs).
a capital conservation buffer (CCB) of 3.5% which is inclusive of the additional 1% surcharge for domestically systemically important banks (D-SIBs).
APRA has determined that ANZ is a D-SIB.
APRA has determined that ANZ is a D-SIB.
a countercyclical capital buffer which is set on a jurisdictional basis. The requirement is currently set to zero for Australia.
a countercyclical capital buffer which is set on a jurisdictional basis. The requirement is currently set to zero for Australia.
ANZ reports to APRA on a Level 1 and Level 2 basis, and measures capital adequacy monthly on a Level 1 and Level 2 basis, and is not yet required to
ANZ reports to APRA on a Level 1 and Level 2 basis, and measures capital adequacy monthly on a Level 1 and Level 2 basis, and is not yet required to
maintain capital on a Level 3 basis (APRA have yet to conclude required timing for Level 3 reporting).
maintain capital on a Level 3 basis (APRA have yet to conclude required timing for Level 3 reporting).
Life Insurance and Funds Management
Life Insurance and Funds Management
As required by APRA’s Prudential Standards, insurance and funds management activities are:
As required by APRA’s Prudential Standards, insurance and funds management activities are:
de-consolidated for the purposes of calculating capital adequacy; and
de-consolidated for the purposes of calculating capital adequacy; and
excluded from the risk based capital adequacy framework.
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 Group’s results,
We deduct the investment in these controlled entities 100% from CET1 capital, and if we include any profits from these activities in the Group’s results,
then we exclude them from the determination of CET1 capital to the extent they have not been remitted to the Company.
then we exclude them from the determination of CET1 capital to the extent they have not been remitted to the Company.
198
198
199
199
ANZ 2020 Annual Report
ANZ 2020 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
24. PARENT ENTITY FINANCIAL INFORMATION
Australia and New Zealand Banking Group Limited (the Company) has prepared a separate set of financial statements to satisfy the requirements of
the Australian Financial Services Licence it holds with ASIC. These separate Company financial statements are available on the ANZ website at anz.com
and have been lodged with ASIC.
Selected financial information of the Company is provided below:
SUMMARY FINANCIAL INFORMATION
Income statement information for the financial year
Profit after tax for the year
Total comprehensive income for the year
Balance sheet information as at the end of the financial year
Cash and cash equivalents
Net loans and advances
Total assets
Deposits and other borrowings
Total liabilities
Shareholders' equity
Ordinary share capital
Reserves
Retained earnings
Total shareholders' equity
CREDIT RELATED COMMITMENTS AND CONTINGENCIES
Contract amount of:
Undrawn facilities
Guarantees and letters of credit
Performance related contingencies
Total
2020
$m
2,806
3,007
98,083
488,002
979,078
558,136
925,806
26,454
1,018
25,800
53,272
2020
$m
191,300
20,640
15,505
227,445
2019
$m
4,447
5,413
77,949
484,655
914,832
524,241
861,618
26,413
840
25,961
53,214
2019
$m
171,881
20,375
20,097
212,353
The contingent liabilities of the Group described under Other contingent liabilities in Note 33 are contingent liabilities of the parent entity (some are
also contingent liabilities of other Group companies).
200
200
OverviewHow we create valuePerformance overviewRemuneration reportDirectors’ reportFinancial reportShareholder information
ANZ 2020 ANNUAL REPORT
ANZ 2020 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
Notes to the consolidated financial statements (continued)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
24. PARENT ENTITY FINANCIAL INFORMATION
24. PARENT ENTITY FINANCIAL INFORMATION
25. CONTROLLED ENTITIES
Australia and New Zealand Banking Group Limited (the Company) has prepared a separate set of financial statements to satisfy the requirements of
Australia and New Zealand Banking Group Limited (the Company) has prepared a separate set of financial statements to satisfy the requirements of
the Australian Financial Services Licence it holds with ASIC. These separate Company financial statements are available on the ANZ website at anz.com
the Australian Financial Services Licence it holds with ASIC. These separate Company financial statements are available on the ANZ website at anz.com
The ultimate parent of the Group is Australia and New Zealand Banking Group Limited
Incorporated in
Australia
Nature of Business
Banking
All controlled entities are 100% owned, unless otherwise noted.
The material controlled entities of the Group are:
ANZ Bank (Vietnam) Limited1
ANZ Capel Court Limited
ANZ Funds Pty. Ltd.
ANZ Bank (Kiribati) Limited1 (75% ownership)
ANZ Bank (Samoa) Limited1
ANZ Bank (Thai) Public Company Limited1
ANZ Holdings (New Zealand) Limited1
ANZ Bank New Zealand Limited1
ANZ Investment Services (New Zealand) Limited1
ANZ New Zealand (Int’l) Limited1
ANZ Wealth New Zealand Limited1
ANZ New Zealand Investments Limited1
ANZNZ Covered Bond Trust1,4
ANZ International Private Limited1
ANZ Singapore Limited1
ANZ International (Hong Kong) Limited1
ANZ Asia Limited1
ANZ Bank (Vanuatu) Limited2
ANZcover Insurance Private Ltd1
ANZ Lenders Mortgage Insurance Pty. Limited
ANZ Residential Covered Bond Trust4
Australia and New Zealand Bank (China) Company Limited1
Australia and New Zealand Banking Group (PNG) Limited1
Chongqing Liangping ANZ Rural Bank Company Limited1
Citizens Bancorp3
ANZ Guam Inc3
PT Bank ANZ Indonesia1 (99% ownership)
Vietnam
Australia
Australia
Kiribati
Samoa
Thailand
New Zealand
New Zealand
New Zealand
New Zealand
New Zealand
New Zealand
New Zealand
Singapore
Singapore
Hong Kong
Hong Kong
Vanuatu
Singapore
Australia
Australia
China
Papua New Guinea
China
Guam
Guam
Indonesia
Banking
Securitisation Manager
Holding Company
Banking
Banking
Banking
Holding Company
Banking
Funds Management
Finance
Holding Company
Funds Management
Finance
Holding Company
Merchant Banking
Holding Company
Banking
Banking
Captive-Insurance
Mortgage Insurance
Finance
Banking
Banking
Banking
Holding Company
Banking
Banking
The contingent liabilities of the Group described under Other contingent liabilities in Note 33 are contingent liabilities of the parent entity (some are
The contingent liabilities of the Group described under Other contingent liabilities in Note 33 are contingent liabilities of the parent entity (some are
also contingent liabilities of other Group companies).
also contingent liabilities of other Group companies).
1. Audited by overseas KPMG firms — 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.
and have been lodged with ASIC.
and have been lodged with ASIC.
Selected financial information of the Company is provided below:
Selected financial information of the Company is provided below:
SUMMARY FINANCIAL INFORMATION
SUMMARY FINANCIAL INFORMATION
Income statement information for the financial year
Income statement information for the financial year
Profit after tax for the year
Profit after tax for the year
Total comprehensive income for the year
Total comprehensive income for the year
Balance sheet information as at the end of the financial year
Balance sheet information as at the end of the financial year
Cash and cash equivalents
Cash and cash equivalents
Net loans and advances
Net loans and advances
Total assets
Total assets
Deposits and other borrowings
Deposits and other borrowings
Total liabilities
Total liabilities
Shareholders' equity
Shareholders' equity
Ordinary share capital
Ordinary share capital
Reserves
Reserves
Retained earnings
Retained earnings
Total shareholders' equity
Total shareholders' equity
Contract amount of:
Contract amount of:
Undrawn facilities
Undrawn facilities
Guarantees and letters of credit
Guarantees and letters of credit
Performance related contingencies
Performance related contingencies
Total
Total
CREDIT RELATED COMMITMENTS AND CONTINGENCIES
CREDIT RELATED COMMITMENTS AND CONTINGENCIES
2020
2020
$m
$m
2,806
2,806
3,007
3,007
98,083
98,083
488,002
488,002
979,078
979,078
558,136
558,136
925,806
925,806
26,454
26,454
1,018
1,018
25,800
25,800
53,272
53,272
2020
2020
$m
$m
191,300
191,300
20,640
20,640
15,505
15,505
227,445
227,445
2019
2019
$m
$m
4,447
4,447
5,413
5,413
77,949
77,949
484,655
484,655
914,832
914,832
524,241
524,241
861,618
861,618
26,413
26,413
840
840
25,961
25,961
53,214
53,214
2019
2019
$m
$m
171,881
171,881
20,375
20,375
20,097
20,097
212,353
212,353
200
200
201
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
25. CONTROLLED ENTITIES (continued)
CHANGES TO MATERIAL CONTROLLED ENTITIES
The following changes to our material entities have occurred during the year ended 30 September 2020.
In January 2020, OnePath Funds Management Limited and OnePath Custodians Pty Limited was sold to IOOF Holdings Limited. The
holding company of these entities, ANZ Wealth Australia Limited, is no longer considered to be a material entity.
In September 2020, UDC Finance Limited was sold to Shinsei Bank Limited.
RECOGNITION AND MEASUREMENT
The Group’s subsidiaries are those entities it controls through:
being exposed to, or having rights to, variable returns from the entity; and
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’s 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’s control ceases, it derecognises the assets and liabilities of the subsidiary, any related non-
controlling interest and other components of equity.
When the Group ceases to control a subsidiary, it:
measures any retained interest in the entity at fair value; and
recognises any resulting gain or loss in profit or loss.
If the Group’s 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.
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
25. CONTROLLED ENTITIES (continued)
25. CONTROLLED ENTITIES (continued)
CHANGES TO MATERIAL CONTROLLED ENTITIES
CHANGES TO MATERIAL CONTROLLED ENTITIES
The following changes to our material entities have occurred during the year ended 30 September 2020.
The following changes to our material entities have occurred during the year ended 30 September 2020.
In January 2020, OnePath Funds Management Limited and OnePath Custodians Pty Limited was sold to IOOF Holdings Limited. The
In January 2020, OnePath Funds Management Limited and OnePath Custodians Pty Limited was sold to IOOF Holdings Limited. The
holding company of these entities, ANZ Wealth Australia Limited, is no longer considered to be a material entity.
holding company of these entities, ANZ Wealth Australia Limited, is no longer considered to be a material entity.
In September 2020, UDC Finance Limited was sold to Shinsei Bank Limited.
In September 2020, UDC Finance Limited was sold to Shinsei Bank Limited.
RECOGNITION AND MEASUREMENT
RECOGNITION AND MEASUREMENT
The Group’s subsidiaries are those entities it controls through:
The Group’s subsidiaries are those entities it controls through:
being exposed to, or having rights to, variable returns from the entity; and
being exposed to, or having rights to, variable returns from the entity; and
being able to affect those returns through its power over the entity.
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’s existing rights to direct the relevant activities of
The Group assesses whether it has power over those entities by examining the Group’s existing rights to direct the relevant activities of
the entity.
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
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’s control ceases, it derecognises the assets and liabilities of the subsidiary, any related non-
from the date of acquisition. When the Group’s control ceases, it derecognises the assets and liabilities of the subsidiary, any related non-
controlling interest and other components of equity.
controlling interest and other components of equity.
When the Group ceases to control a subsidiary, it:
When the Group ceases to control a subsidiary, it:
measures any retained interest in the entity at fair value; and
measures any retained interest in the entity at fair value; and
recognises any resulting gain or loss in profit or loss.
recognises any resulting gain or loss in profit or loss.
If the Group’s ownership interest in a subsidiary changes in a way that does not result in a loss of control, then the Group accounts for
If the Group’s 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.
that as a transaction with equity holders in their capacity as equity holders.
All transactions between Group entities are eliminated on consolidation.
All transactions between Group entities are eliminated on consolidation.
Notes to the consolidated financial statements (continued)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
26. INVESTMENTS IN ASSOCIATES
Significant associates of the Group are:
Name of entity
AMMB Holdings Berhad ('AmBank')
PT Bank Pan Indonesia ('PT Panin')
Aggregate other individually immaterial associates
Total carrying value of associates1
Principal activity
Banking and insurance
Consumer and business bank
1. Includes the impact of foreign currency translation recognised in the foreign currency translation reserve.
FINANCIAL INFORMATION ON SIGNIFICANT ASSOCIATES
Ordinary share
interest
Carrying amount
$m
2020
24%
39%
n/a
2019
24%
39%
n/a
2020
1,056
1,084
24
2,164
2019
1,586
1,350
21
2,957
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’ IFRS financial information and may require the use of unaudited financial information as both associates have different financial
years to the Group (PT Panin 31 December, AmBank 31 March).
Principal place of business and country of incorporation
Summarised results
Operating income
Profit for the year
Other comprehensive income/(loss)
Total comprehensive income
Less: Total comprehensive (income)/loss attributable to non–controlling interests
Total comprehensive income attributable to owners of associate
Summarised financial position
Total assets1
Total liabilities1
Total Net assets1
Less: Non–controlling interests of associate
Net assets attributable to owners of associate
Reconciliation to carrying amount of Group's interest in associate
Carrying amount at the beginning of the year
Group's share of total comprehensive income
Dividends received from associate
Group's share of other reserve movements of associate and foreign currency translation
reserve adjustments2
Group's equity accounted share of AASB 9 transition adjustment3
Impairment charges4
Carrying amount at the end of the year
Market value of Group's investment in associate
AMMB Holdings Berhad
Malaysia
PT Bank Pan Indonesia
Indonesia
2020
$m
2019
$m
2020
$m
2019
$m
3,156
3,298
1,105
1,109
456
105
561
(26)
535
53,301
48,530
4,771
(343)
4,428
569
69
638
(25)
613
55,740
48,718
7,022
(368)
6,654
1,586
1,427
126
(32)
(29)
-
(595)
1,056
727
146
(50)
63
-
-
1,586
1,050
319
72
391
(11)
380
19,669
16,599
3,070
(294)
2,776
1,350
150
-
(128)
(68)
(220)
1,084
653
349
24
373
(12)
361
22,518
18,743
3,775
(309)
3,466
1,103
140
-
107
-
-
1,350
1,303
1. Includes market value adjustments (including goodwill) the Group made at the time of acquisition (and adjustments for any differences in accounting policies).
2. In 2019, the Group recognised a decrease of $32m and $33m to the carrying value of AMMB Holdings Berhad and PT Bank Pan Indonesia respectively with a corresponding decrease to retained earnings
reflecting the Group's share of the estimated initial application impact of IFRS 9 (the international equivalent of AASB 9).
3. In 2020, the Group recognised an adjustment of $68 million to the equity accounted earnings of PT Panin. When the Group adopted AASB 9 Financial Instruments on 1 October 2018, an estimate of PT
Panin’s transition adjustment was recognised through opening retained earnings to align accounting policies. PT Panin adopted AASB 9 during the current financial year recognising a transition adjustment
in retained earnings. The adjustment of $68 million represents the Group’s equity accounted share of the transition adjustment net of amounts previously recognised by the Group on 1 October 2018.
4. The Group recorded an impairment charge of $815 million in other operating income based on impairment assessments performed as part of the Group 31 March 2020 half year results with AmBank
impaired by $595 million and PT Panin impaired by $220 million.
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
26. INVESTMENTS IN ASSOCIATES (continued)
IMPAIRMENT ASSESSMENT
The Group assesses the carrying value of its associate investments for impairment indicators.
During the year the Group identified an indicator of impairment as neither the market values of the investments in AMMB Holdings Berhad
(AmBank) and PT Bank Pan Indonesia (PT Panin) (based on share price) nor the value-in-use (VIU) calculation supported the carrying value of
either investment. Accordingly, the Group recorded an impairment charge of $815 million ($595 million for AmBank and $220 million for PT
Panin).
VIU assessments were also conducted as at 30 September 2020 given the market values were below their carrying values. The assumptions used
in the VIU were updated to reflect the ongoing impact of COVID-19 and the uncertainty of the future performance of these investments. The VIU
assessments supported the carrying value of both Ambank and PT Panin as at 30 September 2020, however did not indicate the recoverable
amount of either investments had increased sufficiently to reverse any of the impairment recorded during the year.
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’s 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 relating to 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:
the associate’s fair value less cost of disposal; and
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.
KEY JUDGEMENTS AND ESTIMATES
The ongoing impact of COVID-19 on the valuation of AmBank and PT Panin is uncertain. Significant management judgment is required to
determine the key assumptions underpinning the VIU calculations. 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 value-in-use calculation are outlined below:
As at 30 September 2020
Post-tax discount rate
Terminal growth rate
Expected earnings growth (compound annual growth rate – 5 years)
AmBank
PT Panin
11.3%
4.8%
2.8%
15.2%
5.3%
4.2%
Common Equity Tier 1 ratio (5 year average)
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.
12.8%
12.9%
A change in the September 2020 post-tax discount rate by +/- 50bps would impact the VIU outcome for PT Panin by $(46 million) /
$50 million, and $(87 million) / $99 million for AmBank.
A change in the September 2020 terminal growth rate by +/- 25bps would impact the VIU outcome for PT Panin by $8 million / ($8
million) and $47 million / ($44 million) for Ambank.
Neither investment would be impaired if the discount rate were increased or the terminal growth rate reduced by the reasonably
possible changes above.
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
Notes to the consolidated financial statements (continued)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
26. INVESTMENTS IN ASSOCIATES (continued)
26. INVESTMENTS IN ASSOCIATES (continued)
IMPAIRMENT ASSESSMENT
IMPAIRMENT ASSESSMENT
The Group assesses the carrying value of its associate investments for impairment indicators.
The Group assesses the carrying value of its associate investments for impairment indicators.
During the year the Group identified an indicator of impairment as neither the market values of the investments in AMMB Holdings Berhad
During the year the Group identified an indicator of impairment as neither the market values of the investments in AMMB Holdings Berhad
(AmBank) and PT Bank Pan Indonesia (PT Panin) (based on share price) nor the value-in-use (VIU) calculation supported the carrying value of
(AmBank) and PT Bank Pan Indonesia (PT Panin) (based on share price) nor the value-in-use (VIU) calculation supported the carrying value of
either investment. Accordingly, the Group recorded an impairment charge of $815 million ($595 million for AmBank and $220 million for PT
either investment. Accordingly, the Group recorded an impairment charge of $815 million ($595 million for AmBank and $220 million for PT
Panin).
Panin).
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’s involvement with SEs is as follows:
VIU assessments were also conducted as at 30 September 2020 given the market values were below their carrying values. The assumptions used
VIU assessments were also conducted as at 30 September 2020 given the market values were below their carrying values. The assumptions used
in the VIU were updated to reflect the ongoing impact of COVID-19 and the uncertainty of the future performance of these investments. The VIU
in the VIU were updated to reflect the ongoing impact of COVID-19 and the uncertainty of the future performance of these investments. The VIU
assessments supported the carrying value of both Ambank and PT Panin as at 30 September 2020, however did not indicate the recoverable
assessments supported the carrying value of both Ambank and PT Panin as at 30 September 2020, however did not indicate the recoverable
amount of either investments had increased sufficiently to reverse any of the impairment recorded during the year.
amount of either investments had increased sufficiently to reverse any of the impairment recorded during the year.
Type
Securitisation
RECOGNITION AND MEASUREMENT
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
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
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’s net assets less accumulated impairments. Dividends the Group receives from associates are recognised as a
changes in the associate’s 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 relating to the associate in the carrying amount of the
reduction in the carrying amount of the investment. The Group includes goodwill relating to the associate in the carrying amount of the
investment. It does not individually test the goodwill incorporated in the associates carrying amount for impairment.
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
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:
exists, then the Group determines the recoverable amount of the associate using the higher of:
the associate’s fair value less cost of disposal; and
the associate’s fair value less cost of disposal; and
its value-in use.
its value-in use.
to determine the recoverable amount.
to determine the recoverable amount.
We use a discounted cash flow methodology, and when applicable, other methodologies (such as capitalisation of earnings methodology),
We use a discounted cash flow methodology, and when applicable, other methodologies (such as capitalisation of earnings methodology),
Covered bond issuances
Structured finance
arrangements
KEY JUDGEMENTS AND ESTIMATES
KEY JUDGEMENTS AND ESTIMATES
Funds management activities
Details
The Group controls SEs established to securitise customer loans and advances that it has originated, in order to
diversify sources of funding for liquidity management. Such transactions involve transfers to an internal
securitisation (bankruptcy remote) vehicle used to create assets that are eligible for repurchase under agreements
with the applicable central bank. These internal securitisation SEs 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.
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.
The Group is involved with SEs established:
in connection with structured lending transactions to facilitate debt syndication and/or to ring-fence
collateral; and
to own assets that are leased to customers in structured leasing transactions.
The Group may manage the SE, hold minor amounts of the SE’s 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.
The Group conducts investment management and other fiduciary activities as a responsible entity, trustee,
custodian or manager for investment funds and trusts – including superannuation funds and wholesale and retail
trusts (collectively ‘Investment Funds’). The Investment Funds are financed through the issuance of puttable units
to investors. The Group’s exposure to Investment Funds is limited to receiving fees for services and derivatives
entered into for risk management purposes. These interests do not create significant exposures to the funds that
would allow the Group to control the funds. Therefore, the funds are not consolidated.
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The ongoing impact of COVID-19 on the valuation of AmBank and PT Panin is uncertain. Significant management judgment is required to
The ongoing impact of COVID-19 on the valuation of AmBank and PT Panin is uncertain. Significant management judgment is required to
determine the key assumptions underpinning the VIU calculations. Factors that may change in subsequent periods and lead to potential
determine the key assumptions underpinning the VIU calculations. 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,
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
increases to required levels of regulatory capital and an increase in the post-tax discount rate arising from an increase in the risk premium
The key assumptions used in the value-in-use calculation are outlined below:
The key assumptions used in the value-in-use calculation are outlined below:
or risk-free rates.
or risk-free rates.
As at 30 September 2020
As at 30 September 2020
Post-tax discount rate
Post-tax discount rate
Terminal growth rate
Terminal growth rate
AmBank
AmBank
PT Panin
PT Panin
11.3%
11.3%
4.8%
4.8%
2.8%
2.8%
12.9%
12.9%
15.2%
15.2%
5.3%
5.3%
4.2%
4.2%
12.8%
12.8%
Expected earnings growth (compound annual growth rate – 5 years)
Expected earnings growth (compound annual growth rate – 5 years)
Common Equity Tier 1 ratio (5 year average)
Common Equity Tier 1 ratio (5 year average)
The VIU calculations are sensitive to changes in the underlying assumptions with reasonably possible changes in key assumptions having a
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.
positive or negative impact on the VIU outcome, and as such the recoverable amount of the investment.
A change in the September 2020 post-tax discount rate by +/- 50bps would impact the VIU outcome for PT Panin by $(46 million) /
A change in the September 2020 post-tax discount rate by +/- 50bps would impact the VIU outcome for PT Panin by $(46 million) /
$50 million, and $(87 million) / $99 million for AmBank.
$50 million, and $(87 million) / $99 million for AmBank.
A change in the September 2020 terminal growth rate by +/- 25bps would impact the VIU outcome for PT Panin by $8 million / ($8
A change in the September 2020 terminal growth rate by +/- 25bps would impact the VIU outcome for PT Panin by $8 million / ($8
million) and $47 million / ($44 million) for Ambank.
million) and $47 million / ($44 million) for Ambank.
Neither investment would be impaired if the discount rate were increased or the terminal growth rate reduced by the reasonably
Neither investment would be impaired if the discount rate were increased or the terminal growth rate reduced by the reasonably
possible changes above.
possible changes above.
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
27. STRUCTURED ENTITIES (continued)
CONSOLIDATED STRUCTURED ENTITIES
FINANCIAL OR OTHER SUPPORT PROVIDED TO CONSOLIDATED STRUCTURED ENTITIES
The Group provides financial support to consolidated SEs as outlined below. As these are intra-group transactions, they are eliminated
on consolidation:
Securitisation and covered
bond issuances
The Group provides lending facilities, derivatives and commitments to these SEs and/or holds debt instruments
that 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’s 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 (2019: 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’S INTEREST IN UNCONSOLIDATED STRUCTURED ENTITIES
An ‘interest’ 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:
no disclosure is made if the Group’s involvement is not more than a passive interest - for example: when the Group’s 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’s returns).
‘interests’ 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’s interests in unconsolidated SEs together with the maximum exposure to loss that could arise from
those interests:
On-balance sheet interests
Investment securities
Gross loans and advances
Total on-balance sheet
Off-balance sheet interests
Commitments (facilities undrawn)
Guarantees
Total off-balance sheet
Maximum exposure to loss
Securitisation
Structured finance
Total
2020
$m
2,280
8,479
10,759
2,072
40
2,112
12,871
2019
$m
1,923
7,679
9,602
1,531
67
1,598
11,200
2020
$m
2019
$m
2020
$m
-
74
74
22
-
22
96
-
110
110
9
-
9
119
2,280
8,553
10,833
2,094
40
2,134
12,967
2019
$m
1,923
7,789
9,712
1,540
67
1,607
11,319
In addition to the interests above, the Group earned funds management fees from unconsolidated investment funds of $285 million (2019: $509
million) during the year.
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on consolidation:
on consolidation:
bond issuances
bond issuances
Structured finance
Structured finance
arrangements
arrangements
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
Notes to the consolidated financial statements (continued)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
27. STRUCTURED ENTITIES (continued)
27. STRUCTURED ENTITIES (continued)
CONSOLIDATED STRUCTURED ENTITIES
CONSOLIDATED STRUCTURED ENTITIES
FINANCIAL OR OTHER SUPPORT PROVIDED TO CONSOLIDATED STRUCTURED ENTITIES
FINANCIAL OR OTHER SUPPORT PROVIDED TO CONSOLIDATED STRUCTURED ENTITIES
The Group provides financial support to consolidated SEs as outlined below. As these are intra-group transactions, they are eliminated
The Group provides financial support to consolidated SEs as outlined below. As these are intra-group transactions, they are eliminated
27. STRUCTURED ENTITIES (continued)
The Group’s 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’s exposure to loss.
Securitisation and covered
Securitisation and covered
The Group provides lending facilities, derivatives and commitments to these SEs and/or holds debt instruments
The Group provides lending facilities, derivatives and commitments to these SEs and/or holds debt instruments
that they have issued.
that they have issued.
The assets held by these SEs are normally pledged as collateral for financing provided. Certain consolidated SEs
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
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’s exposure is limited
participant. The financing provided by the Group includes lending facilities where the Group’s exposure is limited
to the amount of the loan and any undrawn amount. Additionally, the Group has provided Letters of Support to
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
these consolidated SEs confirming that the Group will not demand repayment of the financing provided for the
ensuing 12 month period.
ensuing 12 month period.
The Group did not provide any non-contractual support to consolidated SEs during the year (2019: nil). Other than as disclosed above, the Group does
The Group did not provide any non-contractual support to consolidated SEs during the year (2019: nil). Other than as disclosed above, the Group does
not have any current intention to provide financial or other support to consolidated SEs.
not have any current intention to provide financial or other support to consolidated SEs.
UNCONSOLIDATED STRUCTURED ENTITIES
UNCONSOLIDATED STRUCTURED ENTITIES
GROUP’S INTEREST IN UNCONSOLIDATED STRUCTURED ENTITIES
GROUP’S INTEREST IN UNCONSOLIDATED STRUCTURED ENTITIES
The maximum exposure to loss has been determined as:
the carrying amount of Investment securities measured at amortised cost; and
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 a maximum value of approximately $5.1 billion.
The Group did not provide any non-contractual support to unconsolidated SEs during the year (2019: 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 ‘sponsor’ of an unconsolidated SE if it is the primary party involved in the design and
establishment of that SE and:
the Group is the major user of that SE; or
An ‘interest’ in an unconsolidated SE is any form of contractual or non-contractual involvement with a SE that exposes the Group to variability of
An ‘interest’ in an unconsolidated SE is any form of contractual or non-contractual involvement with a SE that exposes the Group to variability of
the Group’s name appears in the name of that SE, or on its products; or
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
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.
risks specific to the performance of the SE; lending; loan commitments; financial guarantees; and fees from funds management activities.
the Group provides implicit or explicit guarantees of that SE’s performance.
The Group has sponsored the ANZ PIE Fund in New Zealand, which invests only in deposits with ANZ Bank New Zealand Limited. 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:
power over the relevant activities (being those that significantly affect the entity’s returns);
exposure to variable returns of the entity; and
the ability to use its power over the entity to affect the Group’s returns.
207
207
For the purpose of disclosing interests in unconsolidated SEs:
For the purpose of disclosing interests in unconsolidated SEs:
no disclosure is made if the Group’s involvement is not more than a passive interest - for example: when the Group’s involvement constitutes a
no disclosure is made if the Group’s involvement is not more than a passive interest - for example: when the Group’s involvement constitutes a
typical customer-supplier relationship. On this basis, exposures to unconsolidated SEs that arise from lending, trading and investing activities are
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
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’s returns).
activities (being those that significantly affect the entity’s returns).
‘interests’ do not include derivatives intended to expose the Group to market-risk (rather than performance risk specific to the SE) or derivatives
‘interests’ 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
through which the Group creates, rather than absorbs, variability of the unconsolidated SE (such as purchase of credit protection under a credit
The table below sets out the Group’s interests in unconsolidated SEs together with the maximum exposure to loss that could arise from
The table below sets out the Group’s interests in unconsolidated SEs together with the maximum exposure to loss that could arise from
Securitisation
Securitisation
Structured finance
Structured finance
Total
Total
2020
2020
$m
$m
2,280
2,280
8,479
8,479
10,759
10,759
2,072
2,072
40
40
2,112
2,112
12,871
12,871
2019
2019
$m
$m
1,923
1,923
7,679
7,679
9,602
9,602
1,531
1,531
67
67
1,598
1,598
11,200
11,200
2020
2020
$m
$m
2019
2019
$m
$m
2020
2020
$m
$m
-
-
74
74
74
74
22
22
-
-
22
22
96
96
-
-
110
110
110
110
9
9
-
-
9
9
119
119
2,280
2,280
8,553
8,553
10,833
10,833
2,094
2,094
40
40
2,134
2,134
12,967
12,967
2019
2019
$m
$m
1,923
1,923
7,789
7,789
9,712
9,712
1,540
1,540
67
67
1,607
1,607
11,319
11,319
In addition to the interests above, the Group earned funds management fees from unconsolidated investment funds of $285 million (2019: $509
In addition to the interests above, the Group earned funds management fees from unconsolidated investment funds of $285 million (2019: $509
default swap).
default swap).
those interests:
those interests:
On-balance sheet interests
On-balance sheet interests
Investment securities
Investment securities
Gross loans and advances
Gross loans and advances
Total on-balance sheet
Total on-balance sheet
Off-balance sheet interests
Off-balance sheet interests
Commitments (facilities undrawn)
Commitments (facilities undrawn)
Guarantees
Guarantees
Total off-balance sheet
Total off-balance sheet
Maximum exposure to loss
Maximum exposure to loss
million) during the year.
million) during the year.
206
206
ANZ 2020 Annual Report
ANZ 2020 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
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 give rise to the Group fully, or partially, derecognising those financial assets - depending on the Group’s 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’s balance sheet in its entirety.
SECURITISATIONS
Net loans and advances include residential mortgages securitised under the Group’s 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. 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 obligation to pay this amount to the SE is recognised as a financial liability of the Group.
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. The mortgages provide security for the obligations
payable on the issued covered bonds.
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 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 obligation to pay this amount to the SEs is recognised as a financial
liability of the Group.
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 and commodity prepayment arrangements. These
transactions are recognised on Group’s 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 or financed commodity 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 table below sets out the balance of assets transferred that do not qualify for derecognition, along with the associated liabilities:
Current carrying amount of assets transferred
Carrying amount of associated liabilities
Securitisations1,2
Covered bonds
Repurchase
agreements
Structured finance
arrangements
2020
$m
1,831
1,824
2019
$m
2,422
2,411
2020
$m
28,559
15,948
2019
$m
30,799
20,957
2020
$m
61,415
55,716
2019
$m
43,213
41,367
2020
$m
67
67
2019
$m
81
81
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.
208
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ANZ 2020 ANNUAL REPORT
ANZ 2020 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
Notes to the consolidated financial statements (continued)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
28. TRANSFERS OF FINANCIAL ASSETS
28. TRANSFERS OF FINANCIAL ASSETS
29. DISCONTINUED OPERATIONS AND ASSETS AND LIABILITIES HELD FOR SALE
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
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
DISCONTINUED OPERATIONS
may give rise to the Group fully, or partially, derecognising those financial assets - depending on the Group’s exposure to the risks and rewards or
may give rise to the Group fully, or partially, derecognising those financial assets - depending on the Group’s 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
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’s balance sheet in its entirety.
derecognition and the asset remains on the Group’s balance sheet in its entirety.
SECURITISATIONS
SECURITISATIONS
Net loans and advances include residential mortgages securitised under the Group’s securitisation programs which are assigned to bankruptcy
Net loans and advances include residential mortgages securitised under the Group’s 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
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.
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. In addition, the Group is entitled to any residual income of the SEs and
In some instances the Group is also the holder of the securitised notes. 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
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 obligation to pay this amount to the SE is recognised as a financial liability of the Group.
mortgages as financial assets. The obligation to pay this amount to the SE is recognised as a financial liability of the Group.
The Group is exposed to variable returns from its involvement with these securitisation SEs and has the ability to affect those returns through its
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.
power over the SEs activities. The SEs are therefore consolidated by the Group.
COVERED BONDS
COVERED BONDS
payable on the issued covered bonds.
payable on the issued covered bonds.
The Group operates various global covered bond programs to raise funding in its primary markets. Net loans and advances include residential
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. The mortgages provide security for the obligations
mortgages assigned to bankruptcy remote SEs associated with these covered bond programs. The mortgages provide security for the obligations
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
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.
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
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 and enters into derivatives with the SEs. The Group retains the majority of the risks and rewards of the residential
income of the covered bond SEs 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 obligation to pay this amount to the SEs is recognised as a financial
mortgages and continues to recognise the mortgages as financial assets. The obligation to pay this amount to the SEs is recognised as a financial
liability of the Group.
liability of the Group.
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
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.
over the SEs activities. The SEs are therefore consolidated by the Group. The covered bonds issued externally are included within debt issuances.
In October 2017, the Group announced it had agreed to sell its OnePath pensions and investments (OnePath P&I) business and Aligned Dealer Groups
(ADGs) businesses to IOOF. The sale of the ADG business completed on 1 October 2018 and the sale of OnePath P&I business was completed on 31
January 2020.
In December 2017, the Group announced that it had agreed to the sale of its life insurance business to Zurich Financial Services Australia (Zurich) and
the transaction was completed on 31 May 2019.
As a result of the sale transactions outlined above, the financial results of the businesses to be divested and associated Group reclassification and
consolidation impacts are treated as discontinued operations from a financial reporting perspective.
Details of the financial performance and cash flows of discontinued operations are shown below.
Income Statement
Net interest income
Other operating income1
Operating income
Operating expenses1
Profit/(Loss) before credit impairment and income tax
Credit impairment (charge)/release
Profit/(Loss) before income tax
Income tax expense1
Profit/(Loss) for the period attributable to shareholders of the Company1,2
2020
$m
(5)
(46)
(51)
(200)
(251)
-
(251)
153
(98)
2019
$m
(76)
245
169
(449)
(280)
1
(279)
(64)
(343)
1. Includes customer remediation of $96 million post-tax recognised in the September 2020 financial year (2019: $207 million) comprising $128 million customer remediation recognised in other operating
income (2019: $161 million), -$2 million of remediation costs recognised in Operating expenses (2019: $80 million), and $30 million income tax benefit (2019: $34 million).
2. Includes the results of the OnePath P&I business up to the sale completion in January 2020 and the life insurance business up to the sale completion in May 2019.
REPURCHASE AGREEMENTS
REPURCHASE AGREEMENTS
When the Group sells securities subject to repurchase agreements under which we retain substantially all the risks and rewards of ownership, then
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.
those assets do not qualify for derecognition. An associated liability is recognised for the consideration received from the counterparty.
Cash Flow Statement
STRUCTURED FINANCE ARRANGEMENTS
STRUCTURED FINANCE ARRANGEMENTS
Net cash provided by/(used in) operating activities
The Group arranges funding for certain customer transactions through structured leasing and commodity prepayment arrangements. These
The Group arranges funding for certain customer transactions through structured leasing and commodity prepayment arrangements. These
Net cash provided by/(used in) investing activities
Net cash provided by/(used in) financing activities
Net increase/(decrease) in cash and cash equivalents
2020
$m
(25)
-
25
-
2019
$m
(552)
837
(290)
(5)
ASSETS AND LIABILITIES HELD FOR SALE
Assets and liabilities held for sale are re-measured at the lower of their existing carrying amount and fair value less costs to sell, except for assets such
as deferred tax assets, financial assets and contractual rights under insurance contracts, which are specifically exempt from this requirement and
continue to be recognised at their existing carrying value.
transactions are recognised on Group’s balance sheet as lease receivables or loans. At times, other financial institutions participate in the funding of
transactions are recognised on Group’s 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
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 or financed commodity and related proceeds. Where the Group continues to be exposed to some of the
have limited recourse to the leased assets or financed commodity 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.
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.
Instead, the Group recognises an associated liability representing its obligations to the participating financial institutions.
The table below sets out the balance of assets transferred that do not qualify for derecognition, along with the associated liabilities:
The table below sets out the balance of assets transferred that do not qualify for derecognition, along with the associated liabilities:
Current carrying amount of assets transferred
Current carrying amount of assets transferred
Carrying amount of associated liabilities
Carrying amount of associated liabilities
Securitisations1,2
Securitisations1,2
Covered bonds
Covered bonds
Repurchase
Repurchase
agreements
agreements
Structured finance
Structured finance
arrangements
arrangements
2020
2020
$m
$m
1,831
1,831
1,824
1,824
2019
2019
$m
$m
2,422
2,422
2,411
2,411
2020
2020
$m
$m
28,559
28,559
15,948
15,948
2019
2019
$m
$m
30,799
30,799
20,957
20,957
2020
2020
$m
$m
61,415
61,415
55,716
55,716
2019
2019
$m
$m
43,213
43,213
41,367
41,367
2020
2020
$m
$m
67
67
67
67
2019
2019
$m
$m
81
81
81
81
1. Does not include transfers to internal structured entities where there are no external investors.
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
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.
fair value.
208
208
209
209
ANZ 2020 Annual Report
ANZ 2020 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
29. DISCONTINUED OPERATIONS AND ASSETS AND LIABILITIES HELD FOR SALE
(continued)
As at 30 September 1
Trading securities
Deferred tax assets
Goodwill and other intangible assets
Premises and equipment
Other assets
Total assets held for sale
Current tax liabilities
Deferred tax liabilities
Payables and other liabilities
Provisions2
Total liabilities held for sale
2019
Discontinued
Operations
$m
919
16
394
1
501
1,831
3
105
1,914
99
2,121
1. Amounts in the table above are shown net of intercompany balances.
2.
Includes employee entitlements of $8 million and other provisions of $91 million.
INCOME STATEMENT IMPACT RELATING TO ASSETS AND LIABILITIES HELD FOR SALE
During the 2020 financial year, the Group recognised the following impacts in relation to assets and liabilities held for sale that were recognised in
discontinued operations:
$13 million loss after tax recorded in operating income attributable to sale completion costs.
$126 million of customer remediation charges ($128 million recorded in operating income and a release of $2 million recorded in operating
expenses) and an associated $30 million tax benefit.
$101 million charge was recorded in operating income offset by a $101 million tax benefit within income tax expense relating to the finalisation of
the policyholder tax position associated with the sale of the life insurance business to Zurich.
During the 2019 financial year, the Group recognised the following impacts in relation to assets and liabilities held for sale:
$65 million loss after tax on discontinued operations, comprising a net loss of $1 million from sale related adjustments and write-downs, partially
offset by the recycling of gains previously deferred in equity reserves on sale completion, and a $64 million income tax expense. This loss was
recognised in discontinued operations.
$10 million gain after tax relating to the sale of Cambodia JV, comprising a $30 million release from the foreign currency translation reserve, a $17
million dividend withholding tax associated with the sale completion and $3 million of asset write-offs. The gain was recognised in continuing
operations.
$1 million gain after tax relating to the sale of PNG Retail, Commercial and SME, net of costs associated with the sale. The gain was recognised in
continuing operations.
$76 million gain after tax relating to the sale of the OPL NZ business, comprising a $56 million gain on sale, a $26 million release from the foreign
currency translation reserve, a $7 million provision release and a $13 million income tax expense. The gain was recognised in continuing
operations.
$37 million gain after tax relating to the sale of the Paymark. The gain was recognised in continuing operations.
210
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
Notes to the consolidated financial statements (continued)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
29. DISCONTINUED OPERATIONS AND ASSETS AND LIABILITIES HELD FOR SALE
29. DISCONTINUED OPERATIONS AND ASSETS AND LIABILITIES HELD FOR SALE
29. DISCONTINUED OPERATIONS AND ASSETS AND LIABILITIES HELD FOR SALE
(continued)
2019
2019
Discontinued
Discontinued
Operations
Operations
$m
$m
919
919
16
16
394
394
1
1
501
501
1,831
1,831
3
3
105
105
1,914
1,914
99
99
2,121
2,121
RECOGNITION AND MEASUREMENT
LIFE INSURANCE CONTRACT LIABILITIES AND LIABILITIES CEDED UNDER REINSURANCE CONTRACTS
We calculate Life insurance contract Liabilities under the Margin on Service (MoS) model using a projection method based on actuarial
principles and standards.
We discount the expected future cash flows of these contracts at the risk-free discount rate.
LIFE INVESTMENT CONTRACT LIABILITIES
A life investment contract liability is measured at fair value and is directly linked to the fair value of the assets that back it. For guaranteed
policies, we determine the liability as the net present value of expected cash flows, subject to a minimum of current surrender value.
KEY JUDGEMENTS AND ESTIMATES
A significant level of judgement is used by the Group to determine:
whether an asset or group of assets is classified and presented as held for sale or as a discontinued operation; and
the fair value of the assets and liabilities classified as being held for sale.
Management is required to exercise significant judgement when assessing the fair value less costs to sell for assets and liabilities held for
sale. The judgemental factors include determining: costs to sell, allocation of goodwill, indemnities provided under the sale contract and
consideration received - particularly where elements of consideration are contingent in nature. Any impairment we record is based on the
best available evidence of fair value compared to the carrying value before the impairment. The final sale price may be different to the fair
value we estimate when recording the impairment. Management regularly assess the appropriateness of the underlying assumptions
against actual outcomes and other relevant evidence and adjustments are made to fair value where appropriate. We expect that the sales
will complete within 12 months after balance date, subject to the relevant regulatory approvals and customary terms of sale for
such assets.
ANZ 2020 ANNUAL REPORT
ANZ 2020 ANNUAL REPORT
(continued)
(continued)
As at 30 September 1
As at 30 September 1
Trading securities
Trading securities
Deferred tax assets
Deferred tax assets
Goodwill and other intangible assets
Goodwill and other intangible assets
Premises and equipment
Premises and equipment
Other assets
Other assets
Total assets held for sale
Total assets held for sale
Current tax liabilities
Current tax liabilities
Deferred tax liabilities
Deferred tax liabilities
Payables and other liabilities
Payables and other liabilities
Provisions2
Provisions2
Total liabilities held for sale
Total liabilities held for sale
1. Amounts in the table above are shown net of intercompany balances.
1. Amounts in the table above are shown net of intercompany balances.
2.
2.
Includes employee entitlements of $8 million and other provisions of $91 million.
Includes employee entitlements of $8 million and other provisions of $91 million.
INCOME STATEMENT IMPACT RELATING TO ASSETS AND LIABILITIES HELD FOR SALE
INCOME STATEMENT IMPACT RELATING TO ASSETS AND LIABILITIES HELD FOR SALE
During the 2020 financial year, the Group recognised the following impacts in relation to assets and liabilities held for sale that were recognised in
During the 2020 financial year, the Group recognised the following impacts in relation to assets and liabilities held for sale that were recognised in
discontinued operations:
discontinued operations:
$13 million loss after tax recorded in operating income attributable to sale completion costs.
$13 million loss after tax recorded in operating income attributable to sale completion costs.
$126 million of customer remediation charges ($128 million recorded in operating income and a release of $2 million recorded in operating
$126 million of customer remediation charges ($128 million recorded in operating income and a release of $2 million recorded in operating
expenses) and an associated $30 million tax benefit.
expenses) and an associated $30 million tax benefit.
$101 million charge was recorded in operating income offset by a $101 million tax benefit within income tax expense relating to the finalisation of
$101 million charge was recorded in operating income offset by a $101 million tax benefit within income tax expense relating to the finalisation of
the policyholder tax position associated with the sale of the life insurance business to Zurich.
the policyholder tax position associated with the sale of the life insurance business to Zurich.
During the 2019 financial year, the Group recognised the following impacts in relation to assets and liabilities held for sale:
During the 2019 financial year, the Group recognised the following impacts in relation to assets and liabilities held for sale:
$65 million loss after tax on discontinued operations, comprising a net loss of $1 million from sale related adjustments and write-downs, partially
$65 million loss after tax on discontinued operations, comprising a net loss of $1 million from sale related adjustments and write-downs, partially
offset by the recycling of gains previously deferred in equity reserves on sale completion, and a $64 million income tax expense. This loss was
offset by the recycling of gains previously deferred in equity reserves on sale completion, and a $64 million income tax expense. This loss was
recognised in discontinued operations.
recognised in discontinued operations.
$10 million gain after tax relating to the sale of Cambodia JV, comprising a $30 million release from the foreign currency translation reserve, a $17
$10 million gain after tax relating to the sale of Cambodia JV, comprising a $30 million release from the foreign currency translation reserve, a $17
million dividend withholding tax associated with the sale completion and $3 million of asset write-offs. The gain was recognised in continuing
million dividend withholding tax associated with the sale completion and $3 million of asset write-offs. The gain was recognised in continuing
operations.
operations.
continuing operations.
continuing operations.
operations.
operations.
$1 million gain after tax relating to the sale of PNG Retail, Commercial and SME, net of costs associated with the sale. The gain was recognised in
$1 million gain after tax relating to the sale of PNG Retail, Commercial and SME, net of costs associated with the sale. The gain was recognised in
$76 million gain after tax relating to the sale of the OPL NZ business, comprising a $56 million gain on sale, a $26 million release from the foreign
$76 million gain after tax relating to the sale of the OPL NZ business, comprising a $56 million gain on sale, a $26 million release from the foreign
currency translation reserve, a $7 million provision release and a $13 million income tax expense. The gain was recognised in continuing
currency translation reserve, a $7 million provision release and a $13 million income tax expense. The gain was recognised in continuing
$37 million gain after tax relating to the sale of the Paymark. The gain was recognised in continuing operations.
$37 million gain after tax relating to the sale of the Paymark. The gain was recognised in continuing operations.
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
30. 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:
Defined benefit obligation and scheme assets
Present value of funded defined benefit obligation
Fair value of scheme assets
Net defined benefit asset
As represented in the Balance Sheet
Net liabilities arising from defined benefit obligations included in payables and other liabilities
Net assets arising from defined benefit obligations included in other assets
Net defined benefit asset
Weighted average duration of the benefit payments reflected in the defined benefit obligation (years)
2020
$m
(1,478)
1,693
215
(59)
274
215
14.9
2019
$m
(1,538)
1,739
201
(54)
255
201
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 $104 million (2019 surplus of $48 million). In 2020, the Group made defined benefit contributions totaling $4 million (2019: $3
million). It expects to make contributions of around $3 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’ 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:
a defined benefit liability if the obligation is greater than the fair value of the schemes assets; and
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:
the net movement relating to the current period’s 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;
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
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’s contributions to these
schemes are recognised as personnel expenses when they are incurred.
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ANZ 2020 ANNUAL REPORT
ANZ 2020 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
Notes to the consolidated financial statements (continued)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
30. SUPERANNUATION AND POST EMPLOYMENT BENEFIT OBLIGATIONS
30. SUPERANNUATION AND POST EMPLOYMENT BENEFIT OBLIGATIONS
30. SUPERANNUATION AND POST EMPLOYMENT BENEFIT OBLIGATIONS (continued)
Set out below is a summary of amounts recognised in the Balance Sheet in respect of the defined benefit superannuation schemes:
Set out below is a summary of amounts recognised in the Balance Sheet in respect of the defined benefit superannuation schemes:
Defined benefit obligation and scheme assets
Defined benefit obligation and scheme assets
Present value of funded defined benefit obligation
Present value of funded defined benefit obligation
Fair value of scheme assets
Fair value of scheme assets
Net defined benefit asset
Net defined benefit asset
As represented in the Balance Sheet
As represented in the Balance Sheet
Net liabilities arising from defined benefit obligations included in payables and other liabilities
Net liabilities arising from defined benefit obligations included in payables and other liabilities
Net assets arising from defined benefit obligations included in other assets
Net assets arising from defined benefit obligations included in other assets
Net defined benefit asset
Net defined benefit asset
Weighted average duration of the benefit payments reflected in the defined benefit obligation (years)
Weighted average duration of the benefit payments reflected in the defined benefit obligation (years)
2020
2020
$m
$m
(1,478)
(1,478)
1,693
1,693
215
215
(59)
(59)
274
274
215
215
14.9
14.9
2019
2019
$m
$m
(1,538)
(1,538)
1,739
1,739
201
201
(54)
(54)
255
255
201
201
14.9
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
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 $104 million (2019 surplus of $48 million). In 2020, the Group made defined benefit contributions totaling $4 million (2019: $3
funding basis was $104 million (2019 surplus of $48 million). In 2020, the Group made defined benefit contributions totaling $4 million (2019: $3
million). It expects to make contributions of around $3 million next financial year.
million). It expects to make contributions of around $3 million next financial year.
GOVERNANCE OF THE SCHEMES AND FUNDING OF THE DEFINED BENEFIT SECTIONS
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
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
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
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
of the Group, and are responsible for setting investment policy and agreeing funding requirements with the employer through the triennial actuarial
valuation process.
valuation process.
The Group has defined benefit arrangements in Australia, Japan, New Zealand, Philippines, Taiwan and United Kingdom. The defined benefit section
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
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,
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’ trust deeds to fund a deficit (measured on a
or surplus, at the last funding valuation. The Group has no present liability under any of the schemes’ 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.
funding basis). A contingent liability of the Group may arise if any of the schemes were wound up.
RECOGNITION AND MEASUREMENT
RECOGNITION AND MEASUREMENT
Defined benefit superannuation schemes
Defined benefit superannuation schemes
The Group operates a small number of defined benefit schemes. Independent actuaries calculate the liability and expenses related to
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
providing benefits to employees under each defined benefit scheme. They use the Projected Unit Credit Method to value the liabilities. The
balance sheet includes:
balance sheet includes:
a defined benefit liability if the obligation is greater than the fair value of the schemes assets; and
a defined benefit liability if the obligation is greater than the fair value of the schemes assets; and
an asset (capped to its recoverable amount) if the fair value of the assets is greater than the obligation.
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:
In each reporting period, the movements in the net defined benefit liability are recognised as follows:
the net movement relating to the current period’s service cost, net interest on the defined benefit liability, past service costs and other
the net movement relating to the current period’s 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;
costs (such as the effects of any curtailments and settlements) as operating expenses;
remeasurements of the net defined benefit liability (which comprise actuarial gains and losses and return on scheme assets, excluding
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
interest income included in net interest) directly in retained earnings through other comprehensive income; and
contributions of the Group directly against the net defined benefit position.
contributions of the Group directly against the net defined benefit position.
Defined contribution superannuation schemes
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
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’s contributions to these
it operates) to Government and other plans that have the characteristics of defined contribution plans. The Group’s contributions to these
schemes are recognised as personnel expenses when they are incurred.
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 affect on the Statement of Other Comprehensive Income and Balance Sheet.
Assumptions
Discount rate (% p.a.)
Future salary increases (% p.a.)
Future pension indexation
Sensitivity analysis
change in significant
assumptions
0.5% increase
2020
0.5 - 1.7
1.6 - 3.0
2019
1.1 - 2.0
1.7 - 3.2
In payment (% p.a.)/In deferment (% p.a)
1.1 - 2.8/2.2 1.7 - 3.0/2.3
0.5% increase
Life expectancy at age 60 for current pensioners
1 year increase
– Males (years)
– Females (years)
26.0 - 28.7
25.6 - 28.6
28.9 - 30.4
28.8 - 30.3
Increase/(decrease) in
defined benefit obligation
2020
$m
(103)
85
73
2019
$m
(107)
80
70
31. EMPLOYEE SHARE AND OPTION PLANS
ANZ operates a number of employee share and option schemes under the ANZ Employee Share Acquisition Plan and the ANZ Share Option Plan.
ANZ EMPLOYEE SHARE ACQUISITION PLAN
ANZ Employee Share Acquisition Plan schemes that operated during the 2020 and 2019 years were the Employee Share Offer and the Deferred
Share Plan.
Employee Share Offer
Eligibility
Grant
Allocation value
Australia
New Zealand
Expensing value
(fair value)
2020 and 2019 grants
Most permanent employees employed in either Australia or New Zealand with three years continuous service for the
most recent financial year.
Up to AUD 1,000 in Australia (and AUD 800 in New Zealand) of ANZ shares, subject to Board approval.
One week Volume Weighted Average Price (VWAP) of ANZ shares traded on the ASX in the week leading up to and
including the date of grant.
ANZ ordinary shares are granted to eligible employees for nil consideration. The shares vest on grant and are held in
trust for three years from grant date, after which time they may remain in trust, be transferred to the employee’s name
or sold. Dividends are automatically reinvested in the Dividend Reinvestment Plan.
Shares are granted to eligible employees on payment of NZD one cent per share. Shares vest subject to satisfaction of
a three-year service period, after which they may remain in trust, be transferred to the employee’s name or sold.
Unvested shares are forfeited if the employee resigns or is dismissed for serious misconduct. Dividends are either paid
in cash or reinvested into the Dividend Reinvestment Plan.
In Australia, the fair value of the shares is expensed in the year shares are granted, as they are not subject to forfeiture.
In New Zealand, the fair value is expensed on a straight-line basis over the three year vesting period.
The expense is recognised as a share-based compensation expense with a corresponding increase in equity.
698,862 shares were granted on 2 December 2019 at an issue price of $24.96, noting this is the final Employee Share
Offer in its current form following changes to variable remuneration (effective financial year 2020) as part of the
Reimagining Reward initiative.
656,738 shares were granted on 3 December 2018 at an issue price of $26.91.
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ANZ 2020 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
31. EMPLOYEE SHARE AND OPTION PLANS (continued)
Deferred Share Plan
i) ANZ Incentive Plan (ANZIP) - Chief Executive Officer (CEO), Group Executive Committee (ExCo) and other Banking Executive Accountability
Regime (BEAR) Accountable Executives
Eligibility
Grant
Group CEO, ExCo and Group General Manager Internal Audit (GGM IA).
50% of the CEO’s Annual Variable Remuneration (AVR), 25% of ExCo’s Variable Remuneration (VR) (except for the
Chief Risk Officer (CRO)), and 33% of the CRO and GGM IA’s VR, is received as deferred shares.
Conditions
ii) ANZIP (all employees excluding the CEO, ExCo and other BEAR Accountable Executives1) and Business Unit Incentive Plans (BUIPs)
Deferred over at least one to four years from the date the Board approved the variable remuneration award.
Eligibility
Grant
Conditions
All employees excluding the CEO, ExCo and GGM IA (i.e. other BEAR Accountable Executive).
If VR is at or exceeds AUD 150,000, then 60% of VR amounts exceeding AUD 80,000 (subject to a minimum deferral
amount of AUD 42,000) is deferred as shares.
Deferred over three years from grant date.
iii) Long Term Incentives (LTIs)
Eligibility
Grant
Conditions
iv) Exceptional circumstances
Remuneration foregone
Retention
v) Further information
Cessation
Dividends
Instrument
Allocation value
Selected employees (excludes the CEO, ExCo and GGM IA (i.e. other BEAR Accountable Executive).
100% deferred shares.
Vest three years from grant date.
In exceptional circumstances, we grant deferred shares to certain employees when they start with ANZ to
compensate them for remuneration they have foregone from their previous employer. The vesting period generally
aligns with the remaining vesting period of the remuneration they have foregone, and therefore varies
between grants.
We may grant deferred shares to high performing employees who are regarded as a significant retention risk
to ANZ.
Unless the Board 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 are paid in cash or reinvested in the Dividend Reinvestment Plan.
Deferred share rights may be granted instead of deferred shares in some countries as locally appropriate (see
deferred share rights section).
All deferred shares are issued based on the VWAP of ANZ shares traded on the ASX in the week leading up to and
including the date of grant.
Expensing value (fair value) We expense the fair value of deferred shares on a straight-line basis over the relevant vesting period and we
2020 and 2019 grants
Malus (downward
adjustment)
recognise the expense as a share-based compensation expense with a corresponding increase in equity.
During the 2020 year, we granted 2,259,897 deferred shares (2019: 1,945,668) with a weighted average grant price
of $24.94 (2019: $25.39).
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. ANZ’s malus (downward adjustment) provisions
are detailed in section 5.3 of the 2020 Remuneration Report.
Board discretion was not exercised to adjust downward any deferred shares in 2020 (2019: 9,810).
1. Specific deferral arrangements also exist under ANZIP for roles defined as United Kingdom Material Risk Takers and China Material Risk Takers, in line with local regulatory requirements.
Expensing of the ANZ Employee Share Acquisition Plan
Expensing value
(fair value)
The fair value of shares we granted during 2020 under the Employee Share Offer and the Deferred Share Plan,
measured as at the date of grant of the shares, is $73.4 million (2019: $67.7 million) based on 2,958,759 shares (2019:
2,602,406) at VWAP of $24.81 (2019: $26.01).
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ANZ 2020 ANNUAL REPORT
ANZ 2020 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
Notes to the consolidated financial statements (continued)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
31. EMPLOYEE SHARE AND OPTION PLANS (continued)
31. EMPLOYEE SHARE AND OPTION PLANS (continued)
31. EMPLOYEE SHARE AND OPTION PLANS (continued)
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:
Issue 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;
Pro-rata share offer - We will adjust the exercise price of the option in the manner set out in the ASX Listing
Selected employees (excludes the CEO, ExCo and GGM IA (i.e. other BEAR Accountable Executive).
Selected employees (excludes the CEO, ExCo and GGM IA (i.e. other BEAR Accountable Executive).
Rules; and
Reorganisation - In respect of rights, if there is a bonus issue or reorganisation of ANZ’s 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:
in any new issue of ANZ securities before they exercise their options/rights; or
in a share issue of a body corporate other than ANZ (such as a subsidiary).
Any portion of the award which vests may, at the Board’s discretion, be satisfied by a cash equivalent payment rather
than shares.
Expensing
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.
Cessation
The provisions that apply if the employee’s employment ends are in section 8.2.3 of the 2020 Remuneration Report.
Malus (downward
adjustment)
ANZ’s malus (downward adjustment) provisions are detailed in section 5.3 of the 2020 Remuneration Report.
Deferred share rights may be granted instead of deferred shares in some countries as locally appropriate (see
Deferred share rights may be granted instead of deferred shares in some countries as locally appropriate (see
Option Plans that operated during 2020 and 2019
Allocation value
Allocation value
All deferred shares are issued based on the VWAP of ANZ shares traded on the ASX in the week leading up to and
All deferred shares are issued based on the VWAP of ANZ shares traded on the ASX in the week leading up to and
i) Performance Rights
Allocation
Expensing value (fair value) We expense the fair value of deferred shares on a straight-line basis over the relevant vesting period and we
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.
recognise the expense as a share-based compensation expense with a corresponding increase in equity.
2020 and 2019 grants
2020 and 2019 grants
During the 2020 year, we granted 2,259,897 deferred shares (2019: 1,945,668) with a weighted average grant price
During the 2020 year, we granted 2,259,897 deferred shares (2019: 1,945,668) with a weighted average grant price
Satisfying vesting
We grant performance rights to the CEO and ExCo, and have granted performance rights to selected employees, as
part of ANZ’s variable remuneration plans. Performance rights provide the holder with the right to acquire ANZ shares
at nil cost, subject to a four-year vesting period1 and Total Shareholder Return (TSR) performance hurdles. Further
details on the performance hurdles are in section 5.2.3a of the 2020 Remuneration Report.
Any portion of the award of performance rights (that have met the performance hurdles) may be satisfied by a cash
equivalent payment rather than shares at the Board’s discretion. In 2020, all performance rights lapsed due to not
meeting the performance hurdles. In 2019, the performance rights that vested were satisfied through a share
allocation, other than 47,195 performance rights for which a cash payment was made.
2020 and 2019 grants
During the 2020 year, we granted 520,172 performance rights (2019: 885,810).
Malus (downward
adjustment)
1. Three years for grants during 2019.
Board discretion was not exercised to adjust downward any performance rights in 2020 (2019: 59,012).
Deferred Share Plan
Deferred Share Plan
Regime (BEAR) Accountable Executives
Regime (BEAR) Accountable Executives
i) ANZ Incentive Plan (ANZIP) - Chief Executive Officer (CEO), Group Executive Committee (ExCo) and other Banking Executive Accountability
i) ANZ Incentive Plan (ANZIP) - Chief Executive Officer (CEO), Group Executive Committee (ExCo) and other Banking Executive Accountability
Group CEO, ExCo and Group General Manager Internal Audit (GGM IA).
Group CEO, ExCo and Group General Manager Internal Audit (GGM IA).
50% of the CEO’s Annual Variable Remuneration (AVR), 25% of ExCo’s Variable Remuneration (VR) (except for the
50% of the CEO’s Annual Variable Remuneration (AVR), 25% of ExCo’s Variable Remuneration (VR) (except for the
Chief Risk Officer (CRO)), and 33% of the CRO and GGM IA’s VR, is received as deferred shares.
Chief Risk Officer (CRO)), and 33% of the CRO and GGM IA’s VR, is received as deferred shares.
Conditions
Conditions
Deferred over at least one to four years from the date the Board approved the variable remuneration award.
Deferred over at least one to four years from the date the Board approved the variable remuneration award.
ii) ANZIP (all employees excluding the CEO, ExCo and other BEAR Accountable Executives1) and Business Unit Incentive Plans (BUIPs)
ii) ANZIP (all employees excluding the CEO, ExCo and other BEAR Accountable Executives1) and Business Unit Incentive Plans (BUIPs)
All employees excluding the CEO, ExCo and GGM IA (i.e. other BEAR Accountable Executive).
All employees excluding the CEO, ExCo and GGM IA (i.e. other BEAR Accountable Executive).
If VR is at or exceeds AUD 150,000, then 60% of VR amounts exceeding AUD 80,000 (subject to a minimum deferral
If VR is at or exceeds AUD 150,000, then 60% of VR amounts exceeding AUD 80,000 (subject to a minimum deferral
Eligibility
Eligibility
Grant
Grant
Eligibility
Eligibility
Grant
Grant
Eligibility
Eligibility
Grant
Grant
Conditions
Conditions
Conditions
Conditions
Deferred over three years from grant date.
Deferred over three years from grant date.
amount of AUD 42,000) is deferred as shares.
amount of AUD 42,000) is deferred as shares.
iii) Long Term Incentives (LTIs)
iii) Long Term Incentives (LTIs)
100% deferred shares.
100% deferred shares.
Vest three years from grant date.
Vest three years from grant date.
iv) Exceptional circumstances
iv) Exceptional circumstances
Remuneration foregone
Remuneration foregone
In exceptional circumstances, we grant deferred shares to certain employees when they start with ANZ to
In exceptional circumstances, we grant deferred shares to certain employees when they start with ANZ to
compensate them for remuneration they have foregone from their previous employer. The vesting period generally
compensate them for remuneration they have foregone from their previous employer. The vesting period generally
aligns with the remaining vesting period of the remuneration they have foregone, and therefore varies
aligns with the remaining vesting period of the remuneration they have foregone, and therefore varies
Retention
Retention
We may grant deferred shares to high performing employees who are regarded as a significant retention risk
We may grant deferred shares to high performing employees who are regarded as a significant retention risk
Cessation
Cessation
Unless the Board decides otherwise, employees forfeit their unvested deferred shares if they resign, are terminated
Unless the Board 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
on notice, or are dismissed for serious misconduct. The deferred shares may be held in trust beyond the deferral
Dividends are paid in cash or reinvested in the Dividend Reinvestment Plan.
Dividends are paid in cash or reinvested in the Dividend Reinvestment Plan.
v) Further information
v) Further information
Dividends
Dividends
Instrument
Instrument
between grants.
between grants.
to ANZ.
to ANZ.
period.
period.
deferred share rights section).
deferred share rights section).
including the date of grant.
including the date of grant.
of $24.94 (2019: $25.39).
of $24.94 (2019: $25.39).
Malus (downward
Malus (downward
adjustment)
adjustment)
Deferred shares remain at risk and the Board has the discretion to adjust the number of deferred shares
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. ANZ’s malus (downward adjustment) provisions
downwards, including to zero at any time before the vesting date. ANZ’s malus (downward adjustment) provisions
are detailed in section 5.3 of the 2020 Remuneration Report.
are detailed in section 5.3 of the 2020 Remuneration Report.
Board discretion was not exercised to adjust downward any deferred shares in 2020 (2019: 9,810).
Board discretion was not exercised to adjust downward any deferred shares in 2020 (2019: 9,810).
1. Specific deferral arrangements also exist under ANZIP for roles defined as United Kingdom Material Risk Takers and China Material Risk Takers, in line with local regulatory requirements.
1. Specific deferral arrangements also exist under ANZIP for roles defined as United Kingdom Material Risk Takers and China Material Risk Takers, in line with local regulatory requirements.
Expensing of the ANZ Employee Share Acquisition Plan
Expensing of the ANZ Employee Share Acquisition Plan
Expensing value
Expensing value
(fair value)
(fair value)
The fair value of shares we granted during 2020 under the Employee Share Offer and the Deferred Share Plan,
The fair value of shares we granted during 2020 under the Employee Share Offer and the Deferred Share Plan,
measured as at the date of grant of the shares, is $73.4 million (2019: $67.7 million) based on 2,958,759 shares (2019:
measured as at the date of grant of the shares, is $73.4 million (2019: $67.7 million) based on 2,958,759 shares (2019:
2,602,406) at VWAP of $24.81 (2019: $26.01).
2,602,406) at VWAP of $24.81 (2019: $26.01).
214
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ANZ 2020 Annual Report
ANZ 2020 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
31. EMPLOYEE SHARE AND OPTION PLANS (continued)
ii) Deferred Share Rights (no performance hurdles)
Allocation
Satisfying vesting
2020 and 2019 grants
Deferred share rights provide the holder with the right to acquire ANZ shares at nil cost after a specified
vesting period. We adjust the fair value of rights for the absence of dividends during the restriction period.
Any portion of the award of share rights may be satisfied by a cash equivalent payment rather than shares at
the Board’s discretion. All share rights were satisfied through a share allocation, other than 99,891 deferred
share rights (2019: 68,357) for which a cash payment was made.
During the 2020 year, 2,393,424 deferred share rights (no performance hurdles) were granted
(2019: 2,078,427).
Malus (downward adjustment)
Board discretion was not exercised to adjust downward any deferred share rights in 2020 (2019: 11,824).
Options, Deferred Share Rights and Performance Rights on Issue
As at 4 November 2020, there were 543 holders of 4,489,045 deferred share rights on issue and 125 holders of 2,216,062 performance rights 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
2020 and the movements during 2020:
Number of options/rights
WA exercise price
WA closing share price
WA remaining contractual life
WA exercise price of all exercisable
options/rights outstanding
Outstanding exercisable options/rights
Opening
balance
1 Oct 2019
6,688,538
$0.00
Options/
rights
granted
2,913,596
$0.00
Options/
rights
forfeited1
(976,468)
$0.00
Options/
rights
expired
Options/
rights
exercised
Closing
balance
30 Sep 2020
0
(1,901,109)
6,724,557
$0.00
$0.00
$0.00
$19.94
1.9 years
$0.00
151,829
This table shows the options/rights over unissued ANZ shares and their related weighted average exercise prices as at the beginning and end of 2019
and the movements during 2019:
Opening
balance
1 Oct 2018
Options/
rights
granted
Options/
rights
forfeited1
Options/
rights
expired
Options/
rights
exercised
Closing
balance
30 Sep 2019
Number of options/rights
7,148,573
2,964,237
(1,589,109)
0
(1,835,163)
6,688,538
WA exercise price
WA closing share price
WA remaining contractual life
WA exercise price of all exercisable
options/rights outstanding
Outstanding exercisable options/rights
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$26.66
1.9 years
$0.00
181,581
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 2020 and 2019, were issued at a nil exercise price.
As at the date of the signing of the Directors’ Report on 4 November 2020:
no options/rights over ordinary shares have been granted since the end of 2020; and
15,592 shares issued as a result of the exercise of options/rights since the end of 2020, all with nil exercise prices.
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ANZ 2020 ANNUAL REPORT
ANZ 2020 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
Notes to the consolidated financial statements (continued)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
31. EMPLOYEE SHARE AND OPTION PLANS (continued)
31. EMPLOYEE SHARE AND OPTION PLANS (continued)
31. EMPLOYEE SHARE AND OPTION PLANS (continued)
ii) Deferred Share Rights (no performance hurdles)
ii) Deferred Share Rights (no performance hurdles)
Allocation
Allocation
Deferred share rights provide the holder with the right to acquire ANZ shares at nil cost after a specified
Deferred share rights provide the holder with the right to acquire ANZ shares at nil cost after a specified
vesting period. We adjust the fair value of rights for the absence of dividends during the restriction period.
vesting period. We adjust the fair value of rights for the absence of dividends during the restriction period.
Satisfying vesting
Satisfying vesting
Any portion of the award of share rights may be satisfied by a cash equivalent payment rather than shares at
Any portion of the award of share rights may be satisfied by a cash equivalent payment rather than shares at
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 Board’s discretion. All share rights were satisfied through a share allocation, other than 99,891 deferred
the Board’s discretion. All share rights were satisfied through a share allocation, other than 99,891 deferred
share rights (2019: 68,357) for which a cash payment was made.
share rights (2019: 68,357) for which a cash payment was made.
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.
2020 and 2019 grants
2020 and 2019 grants
During the 2020 year, 2,393,424 deferred share rights (no performance hurdles) were granted
During the 2020 year, 2,393,424 deferred share rights (no performance hurdles) were granted
(2019: 2,078,427).
(2019: 2,078,427).
Malus (downward adjustment)
Malus (downward adjustment)
Board discretion was not exercised to adjust downward any deferred share rights in 2020 (2019: 11,824).
Board discretion was not exercised to adjust downward any deferred share rights in 2020 (2019: 11,824).
Options, Deferred Share Rights and Performance Rights on Issue
Options, Deferred Share Rights and Performance Rights on Issue
As at 4 November 2020, there were 543 holders of 4,489,045 deferred share rights on issue and 125 holders of 2,216,062 performance rights on issue.
As at 4 November 2020, there were 543 holders of 4,489,045 deferred share rights on issue and 125 holders of 2,216,062 performance rights on issue.
Options/Rights Movements
Options/Rights Movements
2020 and the movements during 2020:
2020 and the movements during 2020:
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
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
Opening
Opening
balance
balance
1 Oct 2019
1 Oct 2019
6,688,538
6,688,538
$0.00
$0.00
Options/
Options/
rights
rights
granted
granted
2,913,596
2,913,596
$0.00
$0.00
Options/
Options/
rights
rights
forfeited1
forfeited1
(976,468)
(976,468)
$0.00
$0.00
Options/
Options/
rights
rights
expired
expired
Options/
Options/
rights
rights
Closing
Closing
balance
balance
exercised
exercised
30 Sep 2020
30 Sep 2020
Exercise price ($)
Share closing price at grant date ($)
Expected volatility of ANZ share price (%)1
Equity term (years)
Vesting period (years)
Expected life (years)
Expected dividend yield (%)
Risk free interest rate (%)
0
0
(1,901,109)
(1,901,109)
6,724,557
6,724,557
Fair value ($)
2020
Deferred
share
rights
Performance
rights
2019
Deferred
share
rights
Performance
rights
0.00
24.78
20.0
2.5
2.1
2.1
6.0
0.77
21.95
0.00
24.93
20.0
6.0
4.0
4.0
6.0
0.74
9.07
0.00
25.83
20.0
2.5
2.1
2.1
6.0
1.96
22.87
0.00
25.52
20.0
4.8
3.0
3.0
6.0
2.05
9.40
$0.00
$0.00
$0.00
$0.00
1. Expected volatility represents a measure of the amount by which ANZ’s 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 deferred 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 2020 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 4,882,936 shares at an average price of $25.06 per share (2019: 4,317,094 shares at
an average price of $25.99 per share).
This table shows the options/rights over unissued ANZ shares and their related weighted average exercise prices as at the beginning and end of 2019
This table shows the options/rights over unissued ANZ shares and their related weighted average exercise prices as at the beginning and end of 2019
and the movements during 2019:
and the movements during 2019:
Opening
Opening
balance
balance
1 Oct 2018
1 Oct 2018
Options/
Options/
rights
rights
granted
granted
Options/
Options/
rights
rights
forfeited1
forfeited1
Options/
Options/
rights
rights
expired
expired
Options/
Options/
rights
rights
exercised
exercised
Closing
Closing
balance
balance
30 Sep 2019
30 Sep 2019
Number of options/rights
Number of options/rights
7,148,573
7,148,573
2,964,237
2,964,237
(1,589,109)
(1,589,109)
0
0
(1,835,163)
(1,835,163)
6,688,538
6,688,538
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
Number of options/rights
Number of options/rights
WA exercise price
WA exercise price
WA closing share price
WA closing share price
WA remaining contractual life
WA remaining contractual life
WA exercise price of all exercisable
WA exercise price of all exercisable
options/rights outstanding
options/rights outstanding
Outstanding exercisable options/rights
Outstanding exercisable options/rights
WA exercise price
WA exercise price
WA closing share price
WA closing share price
WA remaining contractual life
WA remaining contractual life
WA exercise price of all exercisable
WA exercise price of all exercisable
options/rights outstanding
options/rights outstanding
Outstanding exercisable options/rights
Outstanding exercisable options/rights
$0.00
$0.00
$19.94
$19.94
1.9 years
1.9 years
$0.00
$0.00
151,829
151,829
$0.00
$0.00
$26.66
$26.66
1.9 years
1.9 years
$0.00
$0.00
181,581
181,581
1. Refers to any circumstance where equity can be forfeited (for example on cessation, downward adjustment or performance conditions not met).
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 2020 and 2019, were issued at a nil exercise price.
All of the shares issued as a result of the exercise of options/rights during 2020 and 2019, were issued at a nil exercise price.
As at the date of the signing of the Directors’ Report on 4 November 2020:
As at the date of the signing of the Directors’ Report on 4 November 2020:
no options/rights over ordinary shares have been granted since the end of 2020; and
no options/rights over ordinary shares have been granted since the end of 2020; and
15,592 shares issued as a result of the exercise of options/rights since the end of 2020, all with nil exercise prices.
15,592 shares issued as a result of the exercise of options/rights since the end of 2020, all with nil exercise prices.
216
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ANZ 2020 Annual Report
ANZ 2020 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
32. RELATED PARTY DISCLOSURES
KEY MANAGEMENT PERSONNEL COMPENSATION
Key Management Personnel (KMP) are defined as all directors of the Group and those personnel with a key responsibility for the strategic direction
and management of the Group and report directly to the CEO. KMP compensation included within total personnel expenses in Note 3 Operating
Expenses is as follows:
Short-term benefits
Post-employment benefits
Other long-term benefits
Termination benefits
Share-based payments
Total
2020
$000
19,260
414
397
-
8,198
28,269
2019
$0001
15,784
415
213
2,112
6,184
24,708
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 provision raised in respect of these balances. Details of the terms and conditions of lending products can be found
on ANZ.com. The aggregate of loans (including credit card balances) made, guaranteed or secured, and undrawn facilities to KMP including their
related parties, were as follows:
Loans advanced1,2
Undrawn facilities
Interest charged3
1. Prior period balance has been restated to reflect minor timing variances and omissions.
2. 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.
3.
Interest charged is for all KMP’s during the period.
KEY MANAGEMENT PERSONNEL HOLDINGS OF ANZ SECURITIES
2020
$000
31,808
1,028
888
2019
$000
26,884
513
739
KMP, including their related parties, held subordinated debt, shares, share rights and options over shares in the Company directly, indirectly or
beneficially as shown below:
Shares, options and rights
Subordinated debt
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.
2020
Number
2,211,879
21,052
2019
Number1
1,892,754
11,802
218
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OverviewHow we create valuePerformance overviewRemuneration reportDirectors’ reportFinancial reportShareholder information ANZ 2020 ANNUAL REPORT
ANZ 2020 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
Notes to the consolidated financial statements (continued)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
32. RELATED PARTY DISCLOSURES
32. RELATED PARTY DISCLOSURES
KEY MANAGEMENT PERSONNEL COMPENSATION
KEY MANAGEMENT PERSONNEL COMPENSATION
32. RELATED PARTY DISCLOSURES (continued)
OTHER TRANSACTIONS OF KEY MANAGEMENT PERSONNEL AND THEIR RELATED PARTIES
Key Management Personnel (KMP) are defined as all directors of the Group and those personnel with a key responsibility for the strategic direction
Key Management Personnel (KMP) are defined as all directors of the Group and those personnel with a key responsibility for the strategic direction
The aggregate of deposits of KMP and their related parties with the Group were $48.4 million (2019: $60 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.
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’s length basis:
Amounts receivable from associates
Amounts payable to associates
Interest income from associates
Other revenue from associates
Other expenses paid to associates
Dividend income from associates
2020
$000
354
1,354
-
500
7,706
32,465
2019
$000
664
697
93
-
11,561
50,014
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.
and management of the Group and report directly to the CEO. KMP compensation included within total personnel expenses in Note 3 Operating
and management of the Group and report directly to the CEO. KMP compensation included within total personnel expenses in Note 3 Operating
Expenses is as follows:
Expenses is as follows:
Short-term benefits
Short-term benefits
Post-employment benefits
Post-employment benefits
Other long-term benefits
Other long-term benefits
Termination benefits
Termination benefits
Share-based payments
Share-based payments
Total
Total
Loans advanced1,2
Loans advanced1,2
Undrawn facilities
Undrawn facilities
Interest charged3
Interest charged3
beneficially as shown below:
beneficially as shown below:
Shares, options and rights
Shares, options and rights
Subordinated debt
Subordinated debt
1.
1.
Includes former disclosed KMP until the end of their employment.
Includes former disclosed KMP until the end of their employment.
KEY MANAGEMENT PERSONNEL LOAN TRANSACTIONS
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
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
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 provision raised in respect of these balances. Details of the terms and conditions of lending products can be found
off during the period, or individual provision raised in respect of these balances. Details of the terms and conditions of lending products can be found
on ANZ.com. The aggregate of loans (including credit card balances) made, guaranteed or secured, and undrawn facilities to KMP including their
on ANZ.com. The aggregate of loans (including credit card balances) made, guaranteed or secured, and undrawn facilities to KMP including their
related parties, were as follows:
related parties, were as follows:
1. Prior period balance has been restated to reflect minor timing variances and omissions.
1. Prior period balance has been restated to reflect minor timing variances and omissions.
2. 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.
2. 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.
3.
3.
Interest charged is for all KMP’s during the period.
Interest charged is for all KMP’s during the period.
KEY MANAGEMENT PERSONNEL HOLDINGS OF ANZ SECURITIES
KEY MANAGEMENT PERSONNEL HOLDINGS OF ANZ SECURITIES
KMP, including their related parties, held subordinated debt, shares, share rights and options over shares in the Company directly, indirectly or
KMP, including their related parties, held subordinated debt, shares, share rights and options over shares in the Company directly, indirectly or
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.
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.
2020
2020
$000
$000
19,260
19,260
414
414
397
397
-
-
8,198
8,198
28,269
28,269
2019
2019
$0001
$0001
15,784
15,784
415
415
213
213
2,112
2,112
6,184
6,184
24,708
24,708
2020
2020
$000
$000
31,808
31,808
1,028
1,028
888
888
2019
2019
$000
$000
26,884
26,884
513
513
739
739
2020
2020
Number
Number
2,211,879
2,211,879
21,052
21,052
2019
2019
Number1
Number1
1,892,754
1,892,754
11,802
11,802
218
218
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ANZ 2020 Annual Report
ANZ 2020 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
33. COMMITMENTS, CONTINGENT LIABILITIES AND CONTINGENT ASSETS
CREDIT RELATED COMMITMENTS AND CONTINGENCIES
Contract amount of:
Undrawn facilities
Guarantees and letters of credit
Performance related contingencies
Total
2020
$m
227,819
22,778
17,017
267,614
2019
$m
209,340
22,339
22,112
253,791
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 may be required to pay, the total
undrawn facilities of $227,819 million (2019: $209,341 million) 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 – 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 may be required to pay, the total guarantees and letters of credit of $22,778 million (2019: $22,339 million)
and total performance related contingencies of $17,017 million (2019: $22,112 million) mature within 12 months.
220
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ANZ 2020 ANNUAL REPORT
ANZ 2020 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
Notes to the consolidated financial statements (continued)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
33. COMMITMENTS, CONTINGENT LIABILITIES AND CONTINGENT ASSETS
33. COMMITMENTS, CONTINGENT LIABILITIES AND CONTINGENT ASSETS
33. COMMITMENTS, CONTINGENT LIABILITIES AND CONTINGENT ASSETS (continued)
CREDIT RELATED COMMITMENTS AND CONTINGENCIES
CREDIT RELATED COMMITMENTS AND CONTINGENCIES
Contract amount of:
Contract amount of:
Undrawn facilities
Undrawn facilities
Guarantees and letters of credit
Guarantees and letters of credit
Performance related contingencies
Performance related contingencies
Total
Total
UNDRAWN FACILITIES
UNDRAWN FACILITIES
2020
2020
$m
$m
227,819
227,819
22,778
22,778
17,017
17,017
267,614
267,614
2019
2019
$m
$m
209,340
209,340
22,339
22,339
22,112
22,112
253,791
253,791
The majority of undrawn facilities are subject to customers maintaining specific credit and other requirements or conditions. Many of these 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
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 may be required to pay, the total
representative of future liquidity risks or future cash requirements. Based on the earliest date on which the Group may be required to pay, the total
undrawn facilities of $227,819 million (2019: $209,341 million) mature within 12 months.
undrawn facilities of $227,819 million (2019: $209,341 million) mature within 12 months.
GUARANTEES, LETTERS OF CREDIT AND PERFORMANCE RELATED CONTINGENCIES
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 – including:
Guarantees, letters of credit and performance related contingencies relate to transactions that the Group has entered into as principal – including:
guarantees, standby letters of credit and documentary letters of credit.
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
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.
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
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.
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
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
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
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 may be required to pay, the total guarantees and letters of credit of $22,778 million (2019: $22,339 million)
on the earliest date on which the Group may be required to pay, the total guarantees and letters of credit of $22,778 million (2019: $22,339 million)
and total performance related contingencies of $17,017 million (2019: $22,112 million) mature within 12 months.
and total performance related contingencies of $17,017 million (2019: $22,112 million) mature within 12 months.
OTHER CONTINGENT LIABILITIES
As at 30 September 2020, the Group had contingent liabilities in respect of the matters outlined below. Where relevant, expert legal advice has been
obtained and, in the light of such advice, provisions (refer to note 21) 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.
REGULATORY AND CUSTOMER EXPOSURES
In recent years there has been an increase in the number of matters on which the Group engages with its regulators. There have also been significant
increases in the nature and scale of regulatory investigations, surveillance and reviews, civil and criminal enforcement actions (whether by court action
or otherwise), formal and informal inquiries, regulatory supervisory activities and the quantum of fines issued by regulators, particularly against
financial institutions both 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, currently include 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, 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.
BENCHMARK/RATE ACTIONS
In July and August 2016, class action complaints were brought in the United States District Court against local and international banks, including the
Company – one action relating to the bank bill swap rate (BBSW), and one action relating to the Singapore Interbank Offered Rate (SIBOR) and the
Singapore Swap Offer Rate (SOR). The class actions are expressed to apply to persons and entities that engaged in US-based transactions in financial
instruments that were priced, benchmarked, and/or settled based on BBSW or SIBOR. The claimants seek damages or compensation in amounts not
specified, and allege that the defendant banks, including the Company, violated US anti-trust laws and (in the BBSW case only) anti-racketeering laws,
the Commodity Exchange Act, and unjust enrichment principles. The Company is defending the proceedings.
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 ACTIONS
In June 2018, the Commonwealth Director of Public Prosecutions commenced criminal proceedings against the Company and a senior employee
alleging that they were knowingly concerned in cartel conduct by the joint lead managers of the Company’s August 2015 underwritten institutional
equity placement of approximately 80.8 million ordinary shares. The Company and its senior employee are defending the allegations.
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’s August 2015 underwritten institutional equity placement.
ASIC alleges the Company should have advised the market that the joint lead managers took up approximately 25.5 million ordinary shares of the
placement. The Company is defending the allegations.
CONSUMER CREDIT INSURANCE LITIGATION
In February 2020, a class action was brought against the Company alleging breaches of financial advice obligations, misleading or deceptive conduct
and unconscionable conduct in relation to the distribution of consumer credit insurance products. The issuers of the insurance products, QBE and
OnePath Life, are also defendants to the claim. The Company is defending the allegations.
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.
ROYAL COMMISSION
The Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry released its final report on 4 February 2019.
The findings and recommendations of the Commission are resulting in additional costs and may lead to 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.
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
33. COMMITMENTS, CONTINGENT LIABILITIES AND CONTINGENT ASSETS (continued)
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 AND INDEMNITIES
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.
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’s 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
The Company has issued letters of comfort and guarantees in respect of certain subsidiaries in the normal course of business. Under these letters and
guarantees, the Company undertakes to ensure that those subsidiaries continue to meet their financial obligations, subject to certain conditions
including that the entity remains a controlled entity of the Company.
SALE OF GRINDLAYS BUSINESSES
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.
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
Notes to the consolidated financial statements (continued)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
33. COMMITMENTS, CONTINGENT LIABILITIES AND CONTINGENT ASSETS (continued)
33. COMMITMENTS, CONTINGENT LIABILITIES AND CONTINGENT ASSETS (continued)
34. AUDITOR FEES
Various claims have been made or are anticipated, arising from security recovery actions taken to resolve impaired assets. These claims will be
Various claims have been made or are anticipated, arising from security recovery actions taken to resolve impaired assets. These claims will be
The Group has provided warranties, indemnities and other commitments in favour of the purchaser and other persons in connection with various
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,
disposals of businesses and assets and other transactions, covering a range of matters and risks. It is exposed to claims under those warranties,
SECURITY RECOVERY ACTIONS
SECURITY RECOVERY ACTIONS
defended.
defended.
WARRANTIES AND INDEMNITIES
WARRANTIES AND INDEMNITIES
indemnities and commitments.
indemnities and commitments.
CLEARING AND SETTLEMENT OBLIGATIONS
CLEARING AND SETTLEMENT OBLIGATIONS
KPMG Australia
Audit or review of financial reports
Audit-related services1
Non-audit services2
Total3
Certain group companies have a commitment to comply with rules governing various clearing and settlement arrangements which could result in a
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’s potential exposure arising from
credit risk exposure and loss if another member institution fails to settle its payment clearing activities. The Group’s potential exposure arising from
these arrangements is unquantifiable in advance.
these arrangements is unquantifiable in advance.
Overseas related practices of KPMG Australia
Audit or review of financial reports
Audit-related services1
Non-audit services2
Total
Total auditor fees
2020
$’000
8,059
3,693
25
11,777
6,049
1,677
98
7,824
19,601
2019
$’000
9,036
3,392
114
12,542
5,691
2,316
2
8,009
20,551
1. Comprises prudential and regulatory services of $3.61 million (2019: $4.47 million), comfort letters $0.75 million (2019: $0.48 million) and other services $1.01 million (2019: $0.76 million).
2. The nature of the non-audit services includes training and methodology and procedural reviews. Further details are provided in the Directors’ Report.
3. Inclusive of goods and services tax.
The Group’s 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.
Certain group companies hold memberships of central clearing houses, including ASX Clear (Futures), London Clearing House (LCH) SwapClear and
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
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
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,
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.
the relevant group company could potentially be required to commit additional default fund contributions which are unquantifiable in advance.
PARENT ENTITY GUARANTEES
PARENT ENTITY GUARANTEES
The Company has issued letters of comfort and guarantees in respect of certain subsidiaries in the normal course of business. Under these letters and
The Company has issued letters of comfort and guarantees in respect of certain subsidiaries in the normal course of business. Under these letters and
guarantees, the Company undertakes to ensure that those subsidiaries continue to meet their financial obligations, subject to certain conditions
guarantees, the Company undertakes to ensure that those subsidiaries continue to meet their financial obligations, subject to certain conditions
including that the entity remains a controlled entity of the Company.
including that the entity remains a controlled entity of the Company.
SALE OF GRINDLAYS BUSINESSES
SALE OF GRINDLAYS BUSINESSES
On 31 July 2000, the Company completed the sale to Standard Chartered Bank (SCB) of ANZ Grindlays Bank Limited (Grindlays) and certain other
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.
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
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.
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.
Civil penalties were imposed in 2007 which are the subject of appeals. The criminal prosecutions are being defended.
CONTINGENT ASSETS
CONTINGENT ASSETS
NATIONAL HOUSING BANK
NATIONAL HOUSING BANK
the early 1990s.
the early 1990s.
the cheques were resolved in early 2002.
the cheques were resolved in early 2002.
shared between the Company and NHB.
shared between the Company and NHB.
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 Company is pursuing recovery of the proceeds of certain disputed cheques which were credited to the account of a former Grindlays customer in
The disputed cheques were drawn on the National Housing Bank (NHB) in India. Proceedings between Grindlays and NHB concerning the proceeds of
The disputed cheques were drawn on the National Housing Bank (NHB) in India. Proceedings between Grindlays and NHB concerning the proceeds of
Recovery is now being pursued from the estate of the Grindlays customer who received the cheque proceeds. Any amounts recovered are to be
Recovery is now being pursued from the estate of the Grindlays customer who received the cheque proceeds. Any amounts recovered are to be
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
35. EVENTS SINCE THE END OF THE FINANCIAL YEAR
There have been no significant events from 30 September 2020 to the date of signing this report.
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
Notes to the consolidated financial statements (continued)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
35. EVENTS SINCE THE END OF THE FINANCIAL YEAR
35. EVENTS SINCE THE END OF THE FINANCIAL YEAR
Directors’ Declaration
There have been no significant events from 30 September 2020 to the date of signing this report.
There have been no significant events from 30 September 2020 to the date of signing this report.
The Directors of Australia and New Zealand Banking Group Limited declare that:
a)
in the Directors’ opinion, the financial statements and notes of the Consolidated Entity are in accordance with the Corporations Act 2001,
including:
i)
section 296, that they comply with the Australian Accounting Standards and any further requirements of the Corporations Regulations 2001;
and
ii) section 297, that they give a true and fair view of the financial position of the Consolidated Entity as at 30 September 2020 and of its
performance for the year ended on that date;
b) the notes to the financial statements of the Consolidated Entity include a statement that the financial statements and notes of the Consolidated
Entity comply with International Financial Reporting Standards;
c)
the Directors have been given the declarations required by section 295A of the Corporations Act 2001; and
d)
in the Directors’ opinion, there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due
and payable.
Signed in accordance with a resolution of the Directors.
Paul D O’Sullivan
Chairman
4 November 2020
Shayne C Elliott
Managing Director
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CONSOLIDATED GROUP DIRECTORS’ DECLARATION
TO THE SHAREHOLDERS OF AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED
REPORT ON THE AUDIT OF THE FINANCIAL REPORT
OPINION
We have audited the Financial Report of Australia and New Zealand Banking Group Limited (the Company) and the entities it controlled at the year
end and from time to time during the financial year (together, the Group).
In our opinion, the accompanying Financial Report of the Group is in accordance with the Corporations Act 2001, including:
giving a true and fair view of the Group’s financial position as at 30 September 2020 and of its financial performance for the year ended on that
date; and
complying with Australian Accounting Standards and the Corporations Regulations 2001.
The Financial Report comprises the:
consolidated balance sheet as at 30 September 2020;
consolidated income statement, consolidated statement of comprehensive income, consolidated statement of changes in equity, and
consolidated statement of cash flows for the year then ended;
notes 1 to 35 including a summary of significant accounting policies; and
Directors’ Declaration.
BASIS FOR OPINION
We conducted our audit in accordance with Australian Auditing Standards. We believe that the audit evidence we have obtained is sufficient and
appropriate to provide a basis for our opinion.
Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the Financial Report section of
our report.
We are independent of the Group in accordance with the Corporations Act 2001 and the ethical requirements of the Accounting Professional and
Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (the Code) that are relevant to our audit of the Financial Report in
Australia. We have fulfilled our other ethical responsibilities in accordance with the Code.
KEY AUDIT MATTERS
The Key Audit Matters we identified are:
Allowance for expected credit losses;
Subjective and complex valuation of Financial Instruments held at Fair Value;
Carrying value of goodwill;
Carrying value of investment in Asian associates;
Provisions for Customer Remediation; and
IT Systems and controls.
Key Audit Matters are those matters that, in our professional judgement, were of most significance in our audit of the Financial Report of the
current period.
These matters were addressed in the context of our audit of the Financial Report as a whole, and in forming our opinion thereon, and we do not
provide a separate opinion on these matters.
©2020 KPMG, an Australian partnership and a member firm of the KPMG global organisation of independent member firms affiliated with KPMG International
Limited, a private English company limited by guarantee. All rights reserved. The KPMG name and logo are trademarks used under license.
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CONSOLIDATED GROUP DIRECTORS’ DECLARATION
CONSOLIDATED GROUP DIRECTORS’ DECLARATION
TO THE SHAREHOLDERS OF AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED
TO THE SHAREHOLDERS OF AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED
REPORT ON THE AUDIT OF THE FINANCIAL REPORT
REPORT ON THE AUDIT OF THE FINANCIAL REPORT
OPINION
OPINION
date; and
date; and
We have audited the Financial Report of Australia and New Zealand Banking Group Limited (the Company) and the entities it controlled at the year
We have audited the Financial Report of Australia and New Zealand Banking Group Limited (the Company) and the entities it controlled at the year
end and from time to time during the financial year (together, the Group).
end and from time to time during the financial year (together, the Group).
In our opinion, the accompanying Financial Report of the Group is in accordance with the Corporations Act 2001, including:
In our opinion, the accompanying Financial Report of the Group is in accordance with the Corporations Act 2001, including:
giving a true and fair view of the Group’s financial position as at 30 September 2020 and of its financial performance for the year ended on that
giving a true and fair view of the Group’s financial position as at 30 September 2020 and of its financial performance for the year ended on that
complying with Australian Accounting Standards and the Corporations Regulations 2001.
complying with Australian Accounting Standards and the Corporations Regulations 2001.
The Financial Report comprises the:
The Financial Report comprises the:
consolidated balance sheet as at 30 September 2020;
consolidated balance sheet as at 30 September 2020;
consolidated income statement, consolidated statement of comprehensive income, consolidated statement of changes in equity, and
consolidated income statement, consolidated statement of comprehensive income, consolidated statement of changes in equity, and
consolidated statement of cash flows for the year then ended;
consolidated statement of cash flows for the year then ended;
notes 1 to 35 including a summary of significant accounting policies; and
notes 1 to 35 including a summary of significant accounting policies; and
Directors’ Declaration.
Directors’ Declaration.
BASIS FOR OPINION
BASIS FOR OPINION
appropriate to provide a basis for our opinion.
appropriate to provide a basis for our opinion.
our report.
our report.
We conducted our audit in accordance with Australian Auditing Standards. We believe that the audit evidence we have obtained is sufficient and
We conducted our audit in accordance with Australian Auditing Standards. We believe that the audit evidence we have obtained is sufficient and
Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the Financial Report section of
Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the Financial Report section of
We are independent of the Group in accordance with the Corporations Act 2001 and the ethical requirements of the Accounting Professional and
We are independent of the Group in accordance with the Corporations Act 2001 and the ethical requirements of the Accounting Professional and
Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (the Code) that are relevant to our audit of the Financial Report in
Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (the Code) that are relevant to our audit of the Financial Report in
Australia. We have fulfilled our other ethical responsibilities in accordance with the Code.
Australia. We have fulfilled our other ethical responsibilities in accordance with the Code.
Subjective and complex valuation of Financial Instruments held at Fair Value;
Subjective and complex valuation of Financial Instruments held at Fair Value;
KEY AUDIT MATTERS
KEY AUDIT MATTERS
The Key Audit Matters we identified are:
The Key Audit Matters we identified are:
Allowance for expected credit losses;
Allowance for expected credit losses;
Carrying value of goodwill;
Carrying value of goodwill;
Carrying value of investment in Asian associates;
Carrying value of investment in Asian associates;
Provisions for Customer Remediation; and
Provisions for Customer Remediation; and
IT Systems and controls.
IT Systems and controls.
current period.
current period.
provide a separate opinion on these matters.
provide a separate opinion on these matters.
Key Audit Matters are those matters that, in our professional judgement, were of most significance in our audit of the Financial Report of the
Key Audit Matters are those matters that, in our professional judgement, were of most significance in our audit of the Financial Report of the
These matters were addressed in the context of our audit of the Financial Report as a whole, and in forming our opinion thereon, and we do not
These matters were addressed in the context of our audit of the Financial Report as a whole, and in forming our opinion thereon, and we do not
©2020 KPMG, an Australian partnership and a member firm of the KPMG global organisation of independent member firms affiliated with KPMG International
©2020 KPMG, an Australian partnership and a member firm of the KPMG global organisation of independent member firms affiliated with KPMG International
Limited, a private English company limited by guarantee. All rights reserved. The KPMG name and logo are trademarks used under license.
Limited, a private English company limited by guarantee. All rights reserved. The KPMG name and logo are trademarks used under license.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Independent auditor's report (continued)
KEY AUDIT MATTERS (continued)
ALLOWANCE FOR EXPECTED CREDIT LOSSES ($5,899m)
Refer to the critical accounting estimates and judgements disclosures in relation to the allowance for expected credit losses in Note 13 to the Financial Report.
The Key Audit Matter
Allowance for expected credit losses is a key audit matter due to the significance of the loans and advances balance to the financial statements and
the inherent complexity of the Group’s Expected Credit Loss (ECL) models (ECL models) used to measure ECL allowances. These models are reliant on
data and a number of estimates including the impact of multiple economic scenarios and other assumptions such as defining a significant increase in
credit risk (SICR).
AASB 9 Financial Instruments requires the Group to measure ECLs on a forward-looking basis reflecting a range of economic conditions, of which GDP
and unemployment levels are considered key assumptions. Post-model adjustments are made by the Group to address known ECL model limitations
or emerging trends in the loan portfolios. We exercise significant judgement in challenging the economic scenarios used and the judgemental post
model adjustments the Group applies to the ECL results.
The Group’s criteria selected to identify a SICR, such as a decrease in customer credit rating (CCR), are key areas of judgement within the Group’s ECL
methodology as these criteria determine if a forward-looking 12 month or lifetime allowance is recorded.
The COVID-19 pandemic has meant that assumptions regarding the economic outlook are more uncertain which, combined with varying
government responses, increases the level of judgement required by the Group in calculating the ECL, and the associated audit risk.
Additionally, allowances for individually assessed wholesale loans exceeding specific thresholds are individually assessed by the Group. We exercise
significant judgment in challenging the assessment of specific allowances based on the expected future cash repayments and estimated proceeds
from the value of the collateral held by the Group in respect of the loans.
How the matter was addressed in our audit
Our audit procedures for the allowance for ECL and disclosures included assessing the Group’s significant accounting policies against the
requirements of the accounting standard. Additionally, our procedures covered:
Testing key controls of the Group in relation to:
The ECL model governance and validation processes which involved assessment of model performance;
The assessment and approval of the forward-looking macroeconomic assumptions and scenario weightings through challenge applied by the
Group’s internal governance processes;
Reconciliation of the data used in the ECL calculation process to gross balances recorded within the general ledger as well as source systems;
Counterparty risk grading for wholesale loans (larger customer exposures are monitored individually). This covered elements such as: approval of
new lending facilities against the Group’s lending policies, monitoring of counterparty credit quality against the Group’s exposure criteria for
internal factors specific to the counterparty or external macroeconomic factors, and accuracy and timeliness of counterparty risk assessments and
risk grading against the requirements of the Group’s lending policies and regulatory requirements; and
IT system controls which record retail loans lending arrears, group exposures into delinquency buckets, and re-calculate individual allowances. We
tested automated calculation and change management controls and evaluated the Group’s oversight of the portfolios, with a focus on controls
over delinquency monitoring.
We tested relevant General Information Technology Controls (GITCs) over the key IT applications used by the Group in measuring ECL allowances as
detailed in the IT Systems and Controls key audit matter below.
In addition to controls testing, our procedures included:
Re-performing credit assessments of a sample of wholesale loans controlled by the Group’s specialist workout and recovery team assessed as
higher risk or impaired, and a sample of other loans, focusing on larger exposures assessed by the Group as showing signs of deterioration, or in
areas of emerging risk (assessed against external market conditions and in particular considering the impacts of COVID-19 and climate change).
For each loan sampled, we challenged the Group’s CCR and Security Indicator (SI), taking into account our assessment of the customer’s financial
position and, where relevant, the risk of stranded assets, and our overall assessment of loan recoverability, the valuation of security, and the impact
on the credit allowance. To do this, we used the information on the Group’s loan file, discussed the facts and circumstances of the case with the
loan officer, and performed our own assessment of recoverability. Exercising our judgment, our procedures included using our understanding of
relevant industries and the macroeconomic environment and comparing data and assumptions used by the Group in recoverability assessments
to externally sourced evidence, such as commodity prices, publicly available audited financial statements and comparable external valuations of
collateral held. Where relevant we assessed the forecast timing of future cash flows in the context of underlying valuations and approved business
plans and challenged key assumptions in the valuations;
Obtaining an understanding of the Group’s processes to determine ECL allowances, evaluating the Group’s ECL model methodologies against
established market practices and criteria in the accounting standards;
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INDEPENDENT AUDITOR’S REPORT (continued)
KEY AUDIT MATTERS (continued)
Working with KPMG risk consulting specialists, we assessed the accuracy of the Group’s ECL model estimates by re-performing, for a sample of
loans, the ECL allowance using our independently derived calculation tools and comparing this to the amount recorded by the Group;
Working with KPMG economic specialists, we challenged the Group’s forward-looking macroeconomic assumptions and scenarios incorporated in
the Group’s ECL models. We compared the Group’s forecast GDP, unemployment rates, CPI and property price indices to relevant publicly
available macro-economic information, and considered other known variables and information obtained through our other audit procedures to
identify contradictory indicators;
Testing the implementation of the Group’s SICR methodology by re-performing the staging calculation for a sample of loans taking into
consideration movements in the CCR from loan origination CCR and comparing our expectation to actual staging applied on an individual
account level in the Group’s ECL model; and
Assessing the accuracy of the data used in the ECL models by confirming a sample of data fields such as account balance and CCR to relevant
source systems.
We challenged key assumptions in the components of the Group’s post-model adjustments to the ECL allowance balance. This included:
Assessing the requirement for additional allowances considering the Group’s ECL model and data deficiencies identified by the Group’s ECL
model validation processes, particularly in light of the extreme volatility in economic scenarios caused by the current COVID-19 pandemic and
government responses;
Evaluating underlying data used in concentration risk and economic cycle allowances by comparing underlying loan portfolio characteristics to
recent loss experience, current market conditions and specific risks in the Group’s loan portfolios;
Assessing the impacts on the modelled ECL and the requirement for out of model adjustments to account for the portion of customers on loan
deferral packages that are not aged. We also assessed assumptions used to determine whether a SICR event has occurred; and
Assessing the completeness of additional allowance overlays by checking the consistency of risks we identified in the loan portfolios against the
Group’s assessment.
We assessed the appropriateness of the Group’s disclosures in the financial report using our understanding obtained from our testing and against the
requirements of the accounting standard.
SUBJECTIVE AND COMPLEX VALUATION OF FINANCIAL INSTRUMENTS HELD AT FAIR VALUE:
- FAIR VALUE OF LEVEL 3 ASSET POSITIONS $1,183m
- FAIR VALUE OF LEVEL 2 ASSET POSITIONS $145,559m
- FAIR VALUE OF LEVEL 3 LIABILITY POSITIONS $55m
- FAIR VALUE OF LEVEL 2 LIABILITY POSITIONS $138,786m
Refer to the critical accounting estimates, judgements and disclosures of fair values in Note 17 to the Financial Report.
The Key Audit Matter
The fair value of the Group’s Level 2 and 3 financial instruments is determined by the Group through the application of valuation techniques which
often involve the exercise of judgement and the use of assumptions and estimates.
The valuation of Level 3 and level 2 financial instruments held at fair value is considered a Key Audit Matter due to:
The high degree of estimation uncertainty and potentially significant range of reasonable outcomes associated with the valuation of financial
instruments classified as Level 3 where significant pricing inputs used in the valuation methodology and models are not observable; and
The complexity associated with the valuation methodology and models of certain more complex Level 2 financial instruments leading to an
increase in subjectivity and estimation uncertainty. Level 2 financial instruments represented 53% of the Group’s financial assets carried at fair
value and 97% of the Group’s financial liabilities carried at fair value.
Level 3 financial instruments represented 0.4% of the Group’s financial assets carried at fair value and 0.04% of the Group’s financial liabilities carried
at fair value. This population is made up of:
Investment securities at fair value through other comprehensive income;
Derivative assets and liabilities; and
Net loans and advances.
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INDEPENDENT AUDITOR’S REPORT (continued)
INDEPENDENT AUDITOR’S REPORT (continued)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Independent auditor's report (continued)
KEY AUDIT MATTERS (continued)
KEY AUDIT MATTERS (continued)
KEY AUDIT MATTERS (continued)
Working with KPMG risk consulting specialists, we assessed the accuracy of the Group’s ECL model estimates by re-performing, for a sample of
Working with KPMG risk consulting specialists, we assessed the accuracy of the Group’s ECL model estimates by re-performing, for a sample of
loans, the ECL allowance using our independently derived calculation tools and comparing this to the amount recorded by the Group;
loans, the ECL allowance using our independently derived calculation tools and comparing this to the amount recorded by the Group;
How the matter was addressed in our audit
Our audit procedures for the valuation of financial instruments held at fair value included:
Working with KPMG economic specialists, we challenged the Group’s forward-looking macroeconomic assumptions and scenarios incorporated in
Working with KPMG economic specialists, we challenged the Group’s forward-looking macroeconomic assumptions and scenarios incorporated in
We performed an assessment of the population of Financial instruments held at fair value to identify portfolios that have a higher risk of
the Group’s ECL models. We compared the Group’s forecast GDP, unemployment rates, CPI and property price indices to relevant publicly
the Group’s ECL models. We compared the Group’s forecast GDP, unemployment rates, CPI and property price indices to relevant publicly
available macro-economic information, and considered other known variables and information obtained through our other audit procedures to
available macro-economic information, and considered other known variables and information obtained through our other audit procedures to
identify contradictory indicators;
identify contradictory indicators;
Testing the implementation of the Group’s SICR methodology by re-performing the staging calculation for a sample of loans taking into
Testing the implementation of the Group’s SICR methodology by re-performing the staging calculation for a sample of loans taking into
consideration movements in the CCR from loan origination CCR and comparing our expectation to actual staging applied on an individual
consideration movements in the CCR from loan origination CCR and comparing our expectation to actual staging applied on an individual
account level in the Group’s ECL model; and
account level in the Group’s ECL model; and
source systems.
source systems.
Assessing the accuracy of the data used in the ECL models by confirming a sample of data fields such as account balance and CCR to relevant
Assessing the accuracy of the data used in the ECL models by confirming a sample of data fields such as account balance and CCR to relevant
We challenged key assumptions in the components of the Group’s post-model adjustments to the ECL allowance balance. This included:
We challenged key assumptions in the components of the Group’s post-model adjustments to the ECL allowance balance. This included:
Assessing the requirement for additional allowances considering the Group’s ECL model and data deficiencies identified by the Group’s ECL
Assessing the requirement for additional allowances considering the Group’s ECL model and data deficiencies identified by the Group’s ECL
model validation processes, particularly in light of the extreme volatility in economic scenarios caused by the current COVID-19 pandemic and
model validation processes, particularly in light of the extreme volatility in economic scenarios caused by the current COVID-19 pandemic and
government responses;
government responses;
Evaluating underlying data used in concentration risk and economic cycle allowances by comparing underlying loan portfolio characteristics to
Evaluating underlying data used in concentration risk and economic cycle allowances by comparing underlying loan portfolio characteristics to
recent loss experience, current market conditions and specific risks in the Group’s loan portfolios;
recent loss experience, current market conditions and specific risks in the Group’s loan portfolios;
Assessing the impacts on the modelled ECL and the requirement for out of model adjustments to account for the portion of customers on loan
Assessing the impacts on the modelled ECL and the requirement for out of model adjustments to account for the portion of customers on loan
deferral packages that are not aged. We also assessed assumptions used to determine whether a SICR event has occurred; and
deferral packages that are not aged. We also assessed assumptions used to determine whether a SICR event has occurred; and
Assessing the completeness of additional allowance overlays by checking the consistency of risks we identified in the loan portfolios against the
Assessing the completeness of additional allowance overlays by checking the consistency of risks we identified in the loan portfolios against the
Group’s assessment.
Group’s assessment.
requirements of the accounting standard.
requirements of the accounting standard.
We assessed the appropriateness of the Group’s disclosures in the financial report using our understanding obtained from our testing and against the
We assessed the appropriateness of the Group’s disclosures in the financial report using our understanding obtained from our testing and against the
SUBJECTIVE AND COMPLEX VALUATION OF FINANCIAL INSTRUMENTS HELD AT FAIR VALUE:
SUBJECTIVE AND COMPLEX VALUATION OF FINANCIAL INSTRUMENTS HELD AT FAIR VALUE:
- FAIR VALUE OF LEVEL 3 ASSET POSITIONS $1,183m
- FAIR VALUE OF LEVEL 3 ASSET POSITIONS $1,183m
- FAIR VALUE OF LEVEL 2 ASSET POSITIONS $145,559m
- FAIR VALUE OF LEVEL 2 ASSET POSITIONS $145,559m
- FAIR VALUE OF LEVEL 3 LIABILITY POSITIONS $55m
- FAIR VALUE OF LEVEL 3 LIABILITY POSITIONS $55m
- FAIR VALUE OF LEVEL 2 LIABILITY POSITIONS $138,786m
- FAIR VALUE OF LEVEL 2 LIABILITY POSITIONS $138,786m
Refer to the critical accounting estimates, judgements and disclosures of fair values in Note 17 to the Financial Report.
Refer to the critical accounting estimates, judgements and disclosures of fair values in Note 17 to the Financial Report.
The Key Audit Matter
The Key Audit Matter
The fair value of the Group’s Level 2 and 3 financial instruments is determined by the Group through the application of valuation techniques which
The fair value of the Group’s Level 2 and 3 financial instruments is determined by the Group through the application of valuation techniques which
often involve the exercise of judgement and the use of assumptions and estimates.
often involve the exercise of judgement and the use of assumptions and estimates.
The valuation of Level 3 and level 2 financial instruments held at fair value is considered a Key Audit Matter due to:
The valuation of Level 3 and level 2 financial instruments held at fair value is considered a Key Audit Matter due to:
The high degree of estimation uncertainty and potentially significant range of reasonable outcomes associated with the valuation of financial
The high degree of estimation uncertainty and potentially significant range of reasonable outcomes associated with the valuation of financial
instruments classified as Level 3 where significant pricing inputs used in the valuation methodology and models are not observable; and
instruments classified as Level 3 where significant pricing inputs used in the valuation methodology and models are not observable; and
The complexity associated with the valuation methodology and models of certain more complex Level 2 financial instruments leading to an
The complexity associated with the valuation methodology and models of certain more complex Level 2 financial instruments leading to an
increase in subjectivity and estimation uncertainty. Level 2 financial instruments represented 53% of the Group’s financial assets carried at fair
increase in subjectivity and estimation uncertainty. Level 2 financial instruments represented 53% of the Group’s financial assets carried at fair
value and 97% of the Group’s financial liabilities carried at fair value.
value and 97% of the Group’s financial liabilities carried at fair value.
Level 3 financial instruments represented 0.4% of the Group’s financial assets carried at fair value and 0.04% of the Group’s financial liabilities carried
Level 3 financial instruments represented 0.4% of the Group’s financial assets carried at fair value and 0.04% of the Group’s financial liabilities carried
at fair value. This population is made up of:
at fair value. This population is made up of:
Investment securities at fair value through other comprehensive income;
Investment securities at fair value through other comprehensive income;
Derivative assets and liabilities; and
Derivative assets and liabilities; and
Net loans and advances.
Net loans and advances.
misstatement arising from significant judgements over valuation either due to unobservable inputs or complex models.
We tested the design and operating effectiveness of key controls relating specifically to these financial instruments, including:
Controls in relation to Independent Price Verification (IPV), including completeness of portfolios and valuation inputs subject to IPV;
Controls in relation to model validation at inception and periodically, including assessment of model limitation and assumptions;
Controls in relation to the review and challenge of daily profit and loss (P&L) by a control function;
Controls over the collateral management process, including review of margin reconciliations with clearing houses; and
Controls over fair value adjustments (FVAs), including exit price and portfolio level adjustments.
With the assistance of KPMG valuation experts, we independently re-valued a selection of financial instruments and FVAs. This involved sourcing
independent inputs from markets data providers or external sources and using our own valuation models. We challenged the Group where our
revaluations significantly differed from the Group’s.
In relation to the subjective valuation of Level 3 Investment Securities, with our valuation specialists, we:
Assessed the reasonableness of key inputs and assumptions using comparable data in the market and available alternatives; and
Compared the Group’s valuation methodology to industry practice and the criteria in the accounting standards.
We assessed the Group’s financial statements disclosures, including key judgements and assumptions using our understanding obtained from our
testing and against the relevant accounting standard requirements.
CARRYING VALUE OF GOODWILL ($3,264m)
Refer to the critical accounting estimates, judgements and disclosures in Notes 20 to the Financial Report.
The Key Audit Matter
Carrying value of goodwill is a key audit matter as:
The Group’s net assets exceeded its market capitalisation at year-end. This increased the potential for impairment and our audit effort in this area.
We focussed on the significant forward-looking assumptions the Group applied in their value in use (VIU) and fair value less costs of disposal
(FVLCOD) models, including:
Growth rates, and terminal growth rates in the VIU model, and future maintainable earnings and price earnings multiples applied in the
FVLCOD model. The Group’s models are highly sensitive to small changes in these assumptions, reducing available headroom or indicating
possible impairment. This drives additional audit effort specific to their feasibility and consistency of application to the Group’s strategy; and
Discount rates in the VIU model and the control premium in the FVLCOD. These are complicated in nature and vary according to the
conditions and environment the specific Cash Generating Unit (CGU) is subject to from time to time.
Significant judgement was required by the Group as a result of the current COVID-19 environment. COVID-19 has caused significant estimation
uncertainty and as a result there is increased judgement in forecasting cash flows and assumptions used in the discounted cash flow models and
future maintainable earnings and market multiples used in its fair value calculations. These conditions and the uncertainty of their continuation
increase the possibility of goodwill being impaired, plus the risk of inaccurate forecasts or a significantly wider range of possible outcomes, for us
to consider.
The Group recorded an impairment charge of $50m against goodwill in the Pacific CGU further increasing our audit effort in this key audit area.
We involved valuation specialists to supplement our senior team members in assessing this key audit matter.
How the matter was addressed in our audit
Working with our valuation specialists, our procedures included:
We considered the appropriateness of the valuation method (value in use or fair value less costs of disposal) applied by the Group to perform their
annual test for impairment against the requirements of the accounting standards;
We assessed the integrity of the value in use and fair value less costs of disposal models used, including the accuracy of the underlying calculation
formulas;
We assessed the accuracy of previous Group forecasts to inform our evaluation of forecasts incorporated in the models;
We assessed the Group’s key assumptions used in the fair value less costs of disposal model, such as, future maintainable earnings, the control
premium and compared the implied multiples from comparable market transactions to the implied multiple used in the model;
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INDEPENDENT AUDITOR’S REPORT (continued)
KEY AUDIT MATTERS (continued)
We assessed the Group’s key assumptions used in the discounted cash flow model, such as, discount rates, growth rates, forecast earnings and
terminal growth rate by comparing to external observable metrics, historical experience, our knowledge of the markets and current market
practice;
We independently developed a discount rate range considered comparable using publicly available market data for comparable entities, adjusted
for factors specific to the Group and industry it operates in;
We compared the forecast cash flows contained in the models to revised Strategic Plan reflecting the Group’s COVID-19 impacts;
We considered and challenged the Group’s assessment of the impact of COVID-19 on cash flows and assumptions as well as its assessment of the
likely recovery period;
We considered the sensitivity of the models by varying key assumptions, such as market multiples, terminal growth rates and discount rates,
within a reasonable possible range and included specific analysis of reasonable possible impacts of COVID-19;
We recalculated the impairment charge against the recorded amount disclosed; and
We assessed the disclosures in the financial report using our understanding obtained from our testing and against the requirements of the
accounting standards.
CARRYING VALUE OF INVESTMENT IN ASIAN ASSOCIATES ($2,140M)
Refer to the critical accounting estimates, judgements and disclosures in Notes 26 to the Financial Report.
The Key Audit Matter
Carrying value of investment in Asian associates (PT Panin and AmBank) is a key audit matter as:
The Group’s impairment assessment of non-lending assets identified that two of the Group’s associate investments (PT Panin and AmBank) had
indicators of impairment.
Significant judgement was required by the Group as a result of the business disruption and economic impacts of COVID-19 pandemic, raising
estimation uncertainty. These conditions and the uncertainty of their continuation increase the possibility of the associates being impaired, plus
the risk of inaccurate forecasts or a significantly wider range of possible outcomes in the cash flow models.
Our evaluation of potential impairment involves critically evaluating the Group’s judgement in relation to the Group’s Asian associates key
forward-looking assumptions. Instances where the Group’s judgement is evaluated include:
Forecast earnings and terminal growth rates – The Group’s models are highly sensitive to small changes in these assumptions, reducing
available headroom or indicating possible impairment. This drives additional audit effort specific to their feasibility and consistency of
application to the Group’s strategy; and
Discount rates – These are complicated in nature and vary according to the conditions and environment the specific associate investments
operate in.
The Group recorded impairment charges in relation to the investment in Ambank of $595m and PT Panin of $220m further increasing our audit
effort in this key audit area.
We involved valuation specialists to supplement our senior team members in assessing this key audit matter.
How the matter was addressed in our audit
Working with our valuation specialists, our procedures included:
We considered the appropriateness of the value in use valuation method applied by the Group to perform their annual test for impairment
against the requirements of the accounting standards;
We assessed the integrity of the models used, including the accuracy of the underlying calculation formulas;
We assessed the Group’s key assumptions used in the discounted cash flow model, such as, discount rates, growth rates, forecast earnings and
terminal growth rate by comparing to external observable metrics, historical experience, our knowledge of the markets and current market
practice;
We independently developed a discount rate estimate or range considered comparable using publicly available market data for comparable
entities, adjusted for factors specific to the Asian associates and the market and industry they operate in;
We compared the forecast cash flows contained in the models to recent broker consensus reports, reflecting the COVID-19 impacts;
We considered and challenged the Group’s assessment of the impact of COVID-19 on cash flows and assumptions as well as its assessment of the
likely recovery period;
We considered the sensitivity of the models by varying key assumptions, such as, forecast growth rates, terminal growth rates and discount rates,
within a reasonable possible range and included specific analysis of reasonable possible impacts of COVID-19;
We recalculated the impairment charge against the recorded amount disclosed; and
We assessed the disclosures in the financial report using our understanding obtained from our testing and against the requirements of the
accounting standards.
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KEY AUDIT MATTERS (continued)
KEY AUDIT MATTERS (continued)
KEY AUDIT MATTERS (continued)
We assessed the Group’s key assumptions used in the discounted cash flow model, such as, discount rates, growth rates, forecast earnings and
We assessed the Group’s key assumptions used in the discounted cash flow model, such as, discount rates, growth rates, forecast earnings and
terminal growth rate by comparing to external observable metrics, historical experience, our knowledge of the markets and current market
terminal growth rate by comparing to external observable metrics, historical experience, our knowledge of the markets and current market
PROVISIONS FOR CUSTOMER REMEDIATION ($1,109m)
Refer to the critical accounting estimates, judgements and disclosures in Notes 21 and 33 to the Financial Report.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Independent auditor's report (continued)
The Key Audit Matter
The Group has assessed the need to recognise provisions in relation to certain customer remediation activities arising from both internal and external
investigations and reviews.
The provision for customer remediation activities is a Key Audit Matter due to the number of investigations, the quantum of amounts involved,
and the judgements required by us in assessing the Group’s determination of:
The existence of a present legal or constructive obligation arising from a past event using the conditions of the event against the criteria in the
accounting standards;
The number of investigations and the quantum of amounts being paid arising from the present obligation;
Reliable estimates of the amounts which may be paid arising from investigations, including estimates of related costs; and
The potential for legal proceedings, further investigations, and reviews from its regulators leading to a wider range of estimation outcomes for us
to consider.
How the matter was addressed in our audit
Our audit procedures for customer remediation provisions included:
Obtaining an understanding of the Group’s processes and controls for identifying and assessing the potential impact of the investigations into
customer remediation activities;
The Group’s impairment assessment of non-lending assets identified that two of the Group’s associate investments (PT Panin and AmBank) had
The Group’s impairment assessment of non-lending assets identified that two of the Group’s associate investments (PT Panin and AmBank) had
Enquiring with the Group regarding ongoing legal, regulatory and other investigation into remediation activities;
Conducting independent discussions on significant matters with external legal counsel;
Reading the minutes and other relevant documentation of the Group’s Board of Directors, Board Committees, various management committees,
and attending the Group’s Audit and Risk Committee meetings;
Inspecting correspondence with relevant regulatory bodies;
For a sample of individual customer remediation matters, assessing the basis for recognition of a provision and associated costs against the
requirements of the accounting standards. We did this by understanding and challenging the provisioning methodologies and underlying
assumptions;
Testing completeness by evaluating where exposures may have arisen based upon our knowledge and experience of broader industry matters,
the Group's documentation and the current regulatory environment. We also checked the features of these exposures against the criteria defining
a provision or a contingency in the accounting standards;
Assessing the appropriateness of the Group’s conclusions against the requirements of Australian Accounting Standards where estimates were
unable to be reliably made for a provision to be recognised; and
Evaluating the related disclosures using our understanding obtained from our testing and against the requirements of Australian Accounting
Standards.
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practice;
practice;
We independently developed a discount rate range considered comparable using publicly available market data for comparable entities, adjusted
We independently developed a discount rate range considered comparable using publicly available market data for comparable entities, adjusted
for factors specific to the Group and industry it operates in;
for factors specific to the Group and industry it operates in;
We compared the forecast cash flows contained in the models to revised Strategic Plan reflecting the Group’s COVID-19 impacts;
We compared the forecast cash flows contained in the models to revised Strategic Plan reflecting the Group’s COVID-19 impacts;
We considered and challenged the Group’s assessment of the impact of COVID-19 on cash flows and assumptions as well as its assessment of the
We considered and challenged the Group’s assessment of the impact of COVID-19 on cash flows and assumptions as well as its assessment of the
likely recovery period;
likely recovery period;
We considered the sensitivity of the models by varying key assumptions, such as market multiples, terminal growth rates and discount rates,
We considered the sensitivity of the models by varying key assumptions, such as market multiples, terminal growth rates and discount rates,
within a reasonable possible range and included specific analysis of reasonable possible impacts of COVID-19;
within a reasonable possible range and included specific analysis of reasonable possible impacts of COVID-19;
We recalculated the impairment charge against the recorded amount disclosed; and
We recalculated the impairment charge against the recorded amount disclosed; and
We assessed the disclosures in the financial report using our understanding obtained from our testing and against the requirements of the
We assessed the disclosures in the financial report using our understanding obtained from our testing and against the requirements of the
accounting standards.
accounting standards.
CARRYING VALUE OF INVESTMENT IN ASIAN ASSOCIATES ($2,140M)
CARRYING VALUE OF INVESTMENT IN ASIAN ASSOCIATES ($2,140M)
Refer to the critical accounting estimates, judgements and disclosures in Notes 26 to the Financial Report.
Refer to the critical accounting estimates, judgements and disclosures in Notes 26 to the Financial Report.
The Key Audit Matter
The Key Audit Matter
Carrying value of investment in Asian associates (PT Panin and AmBank) is a key audit matter as:
Carrying value of investment in Asian associates (PT Panin and AmBank) is a key audit matter as:
indicators of impairment.
indicators of impairment.
Significant judgement was required by the Group as a result of the business disruption and economic impacts of COVID-19 pandemic, raising
Significant judgement was required by the Group as a result of the business disruption and economic impacts of COVID-19 pandemic, raising
estimation uncertainty. These conditions and the uncertainty of their continuation increase the possibility of the associates being impaired, plus
estimation uncertainty. These conditions and the uncertainty of their continuation increase the possibility of the associates being impaired, plus
the risk of inaccurate forecasts or a significantly wider range of possible outcomes in the cash flow models.
the risk of inaccurate forecasts or a significantly wider range of possible outcomes in the cash flow models.
Our evaluation of potential impairment involves critically evaluating the Group’s judgement in relation to the Group’s Asian associates key
Our evaluation of potential impairment involves critically evaluating the Group’s judgement in relation to the Group’s Asian associates key
forward-looking assumptions. Instances where the Group’s judgement is evaluated include:
forward-looking assumptions. Instances where the Group’s judgement is evaluated include:
Forecast earnings and terminal growth rates – The Group’s models are highly sensitive to small changes in these assumptions, reducing
Forecast earnings and terminal growth rates – The Group’s models are highly sensitive to small changes in these assumptions, reducing
available headroom or indicating possible impairment. This drives additional audit effort specific to their feasibility and consistency of
available headroom or indicating possible impairment. This drives additional audit effort specific to their feasibility and consistency of
application to the Group’s strategy; and
application to the Group’s strategy; and
Discount rates – These are complicated in nature and vary according to the conditions and environment the specific associate investments
Discount rates – These are complicated in nature and vary according to the conditions and environment the specific associate investments
The Group recorded impairment charges in relation to the investment in Ambank of $595m and PT Panin of $220m further increasing our audit
The Group recorded impairment charges in relation to the investment in Ambank of $595m and PT Panin of $220m further increasing our audit
operate in.
operate in.
effort in this key audit area.
effort in this key audit area.
We involved valuation specialists to supplement our senior team members in assessing this key audit matter.
We involved valuation specialists to supplement our senior team members in assessing this key audit matter.
How the matter was addressed in our audit
How the matter was addressed in our audit
Working with our valuation specialists, our procedures included:
Working with our valuation specialists, our procedures included:
We considered the appropriateness of the value in use valuation method applied by the Group to perform their annual test for impairment
We considered the appropriateness of the value in use valuation method applied by the Group to perform their annual test for impairment
against the requirements of the accounting standards;
against the requirements of the accounting standards;
We assessed the integrity of the models used, including the accuracy of the underlying calculation formulas;
We assessed the integrity of the models used, including the accuracy of the underlying calculation formulas;
We assessed the Group’s key assumptions used in the discounted cash flow model, such as, discount rates, growth rates, forecast earnings and
We assessed the Group’s key assumptions used in the discounted cash flow model, such as, discount rates, growth rates, forecast earnings and
terminal growth rate by comparing to external observable metrics, historical experience, our knowledge of the markets and current market
terminal growth rate by comparing to external observable metrics, historical experience, our knowledge of the markets and current market
practice;
practice;
We independently developed a discount rate estimate or range considered comparable using publicly available market data for comparable
We independently developed a discount rate estimate or range considered comparable using publicly available market data for comparable
entities, adjusted for factors specific to the Asian associates and the market and industry they operate in;
entities, adjusted for factors specific to the Asian associates and the market and industry they operate in;
We compared the forecast cash flows contained in the models to recent broker consensus reports, reflecting the COVID-19 impacts;
We compared the forecast cash flows contained in the models to recent broker consensus reports, reflecting the COVID-19 impacts;
We considered and challenged the Group’s assessment of the impact of COVID-19 on cash flows and assumptions as well as its assessment of the
We considered and challenged the Group’s assessment of the impact of COVID-19 on cash flows and assumptions as well as its assessment of the
likely recovery period;
likely recovery period;
We considered the sensitivity of the models by varying key assumptions, such as, forecast growth rates, terminal growth rates and discount rates,
We considered the sensitivity of the models by varying key assumptions, such as, forecast growth rates, terminal growth rates and discount rates,
within a reasonable possible range and included specific analysis of reasonable possible impacts of COVID-19;
within a reasonable possible range and included specific analysis of reasonable possible impacts of COVID-19;
We recalculated the impairment charge against the recorded amount disclosed; and
We recalculated the impairment charge against the recorded amount disclosed; and
We assessed the disclosures in the financial report using our understanding obtained from our testing and against the requirements of the
We assessed the disclosures in the financial report using our understanding obtained from our testing and against the requirements of the
accounting standards.
accounting standards.
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INDEPENDENT AUDITOR’S REPORT (continued)
KEY AUDIT MATTERS (continued)
IT SYSTEMS AND CONTROLS
The Key Audit Matter
As a major Australian bank, the Group’s businesses utilise many complex, interdependent Information Technology (IT) systems to process and record a
high volume of transactions. Controls over access and changes to IT systems are critical to the recording of financial information and the preparation
of a financial report which provides a true and fair view of the Group’s financial position and performance.
The IT systems and controls, as they impact the financial recording and reporting of transactions, is a key audit matter as our audit approach could
significantly differ depending on the effective operation of the Group’s IT controls. We work with our KPMG IT specialists as a core part of our audit
team.
How the matter was addressed in our audit
We tested the technology control environment for key IT applications (systems) used in processing significant transactions and recording balances in
the general ledger. We also tested automated controls embedded within these systems which link the technology-enabled business processes. Our
further audit procedures included:
Assessing the governance and higher-level controls across the IT Environment, including those regarding Group policy design, review and
awareness, and IT Risk Management practices;
Design and operating effectiveness testing of controls across the User Access Management Lifecycle, including how users are on-boarded,
reviewed, and removed on a timely basis from critical IT applications and supporting infrastructure. We also examined how privileged roles and
functions are managed across each IT Application and the supporting infrastructure;
Design and operating effectiveness testing of controls to enable Change Management including how changes are initiated, documented,
approved, tested and authorised prior to migration into the production environment of critical IT Applications. We assessed the appropriateness
of users with access to release changes to IT application production environments across the Group;
Design and operating effectiveness testing of controls used by the Group’s technology teams to schedule system jobs and monitor system
integrity;
Design and operating effectiveness testing of controls related to significant IT application programs delivered per the ANZ Delivery Framework;
Design and operating effectiveness testing of automated business process controls including those relating to enforcing segregation of duties to
avoid conflicts from inappropriate role combinations within IT applications. We tested:
Configurations in place to perform calculations, mappings and flagging of financial transactions, and automated reconciliation controls (both
between systems and intra-system); and
Data integrity of critical system reporting used by us in our audit to select samples and analyse data used by management to generate
financial reporting.
OTHER INFORMATION
Other Information is both financial and non-financial information in Australia and New Zealand Banking Group Limited’s annual reporting which
is provided in addition to the Financial Report and the Auditor's Report. The Directors are responsible for the Other Information.
Our opinion on the Financial Report does not cover the Other Information and, accordingly, we do not express an audit opinion or any form of
assurance conclusion thereon, with the exception of the Remuneration Report and our related assurance opinion.
In connection with our audit of the Financial Report, our responsibility is to read the Other Information. In doing so, we consider whether the
Other Information is materially inconsistent with the Financial Report or our knowledge obtained in the audit, or otherwise appears to be
materially misstated.
We are required to report if we conclude that there is a material misstatement of this Other Information, and based on the work we have
performed on the Other Information that we obtained prior to the date of this Auditor’s Report, we have nothing to report.
RESPONSIBILITIES OF DIRECTORS FOR THE FINANCIAL REPORT
The Directors are responsible for:
preparing a Financial Report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001
implementing necessary internal control to enable the preparation of a Financial Report that gives a true and fair view and is free from material
misstatement, whether due to fraud or error
assessing the Group’s ability to continue as a going concern and whether the use of the going concern basis of accounting is appropriate. This
includes disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless they either intend to
liquidate the Group or to cease operations or have no realistic alternative but to do so.
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INDEPENDENT AUDITOR’S REPORT (continued)
INDEPENDENT AUDITOR’S REPORT (continued)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Independent auditor's report (continued)
As a major Australian bank, the Group’s businesses utilise many complex, interdependent Information Technology (IT) systems to process and record a
As a major Australian bank, the Group’s businesses utilise many complex, interdependent Information Technology (IT) systems to process and record a
Our objective is:
high volume of transactions. Controls over access and changes to IT systems are critical to the recording of financial information and the preparation
high volume of transactions. Controls over access and changes to IT systems are critical to the recording of financial information and the preparation
to obtain reasonable assurance about whether the Financial Report as a whole is free from material misstatement, whether due to fraud or error;
of a financial report which provides a true and fair view of the Group’s financial position and performance.
of a financial report which provides a true and fair view of the Group’s financial position and performance.
and
The IT systems and controls, as they impact the financial recording and reporting of transactions, is a key audit matter as our audit approach could
The IT systems and controls, as they impact the financial recording and reporting of transactions, is a key audit matter as our audit approach could
significantly differ depending on the effective operation of the Group’s IT controls. We work with our KPMG IT specialists as a core part of our audit
significantly differ depending on the effective operation of the Group’s IT controls. We work with our KPMG IT specialists as a core part of our audit
to issue an Auditor’s Report that includes our opinion.
Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with Australian Auditing Standards will
always detect a material misstatement when it exists. Misstatements can arise from fraud or error. They are considered material if, individually or in the
aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the Financial Report.
We tested the technology control environment for key IT applications (systems) used in processing significant transactions and recording balances in
We tested the technology control environment for key IT applications (systems) used in processing significant transactions and recording balances in
the general ledger. We also tested automated controls embedded within these systems which link the technology-enabled business processes. Our
the general ledger. We also tested automated controls embedded within these systems which link the technology-enabled business processes. Our
A further description of our responsibilities for the audit of the Financial Report is located at the Auditing and Assurance Standards Board website at:
https://www.auasb.gov.au/admin/file/content102/c3/ar1_2020.pdf. This description forms part of our Auditor’s Report.
KEY AUDIT MATTERS (continued)
AUDITOR’S RESPONSIBILITIES FOR THE AUDIT OF THE FINANCIAL REPORT
Design and operating effectiveness testing of controls used by the Group’s technology teams to schedule system jobs and monitor system
Design and operating effectiveness testing of controls used by the Group’s technology teams to schedule system jobs and monitor system
OUR RESPONSIBILITIES
We have audited the Remuneration Report included in the Directors’ report for the year ended 30 September 2020.
Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing
Standards.
REPORT ON THE REMUNERATION REPORT
In our opinion, the Remuneration Report of Australia and New Zealand Banking Group Limited for the year ended 30 September 2020, complies with
Section 300A of the Corporations Act 2001.
DIRECTORS’ RESPONSIBILITIES
The Directors of the Company are responsible for the preparation and presentation of the Remuneration Report in accordance with Section 300A of
the Corporations Act 2001.
Other Information is both financial and non-financial information in Australia and New Zealand Banking Group Limited’s annual reporting which
Other Information is both financial and non-financial information in Australia and New Zealand Banking Group Limited’s annual reporting which
is provided in addition to the Financial Report and the Auditor's Report. The Directors are responsible for the Other Information.
is provided in addition to the Financial Report and the Auditor's Report. The Directors are responsible for the Other Information.
KPMG
Alison Kitchen
Partner
Melbourne
4 November 2020
KEY AUDIT MATTERS (continued)
KEY AUDIT MATTERS (continued)
IT SYSTEMS AND CONTROLS
IT SYSTEMS AND CONTROLS
The Key Audit Matter
The Key Audit Matter
team.
team.
How the matter was addressed in our audit
How the matter was addressed in our audit
further audit procedures included:
further audit procedures included:
awareness, and IT Risk Management practices;
awareness, and IT Risk Management practices;
Assessing the governance and higher-level controls across the IT Environment, including those regarding Group policy design, review and
Assessing the governance and higher-level controls across the IT Environment, including those regarding Group policy design, review and
Design and operating effectiveness testing of controls across the User Access Management Lifecycle, including how users are on-boarded,
Design and operating effectiveness testing of controls across the User Access Management Lifecycle, including how users are on-boarded,
reviewed, and removed on a timely basis from critical IT applications and supporting infrastructure. We also examined how privileged roles and
reviewed, and removed on a timely basis from critical IT applications and supporting infrastructure. We also examined how privileged roles and
functions are managed across each IT Application and the supporting infrastructure;
functions are managed across each IT Application and the supporting infrastructure;
Design and operating effectiveness testing of controls to enable Change Management including how changes are initiated, documented,
Design and operating effectiveness testing of controls to enable Change Management including how changes are initiated, documented,
approved, tested and authorised prior to migration into the production environment of critical IT Applications. We assessed the appropriateness
approved, tested and authorised prior to migration into the production environment of critical IT Applications. We assessed the appropriateness
of users with access to release changes to IT application production environments across the Group;
of users with access to release changes to IT application production environments across the Group;
integrity;
integrity;
Design and operating effectiveness testing of controls related to significant IT application programs delivered per the ANZ Delivery Framework;
Design and operating effectiveness testing of controls related to significant IT application programs delivered per the ANZ Delivery Framework;
Design and operating effectiveness testing of automated business process controls including those relating to enforcing segregation of duties to
Design and operating effectiveness testing of automated business process controls including those relating to enforcing segregation of duties to
avoid conflicts from inappropriate role combinations within IT applications. We tested:
avoid conflicts from inappropriate role combinations within IT applications. We tested:
Configurations in place to perform calculations, mappings and flagging of financial transactions, and automated reconciliation controls (both
Configurations in place to perform calculations, mappings and flagging of financial transactions, and automated reconciliation controls (both
between systems and intra-system); and
between systems and intra-system); and
Data integrity of critical system reporting used by us in our audit to select samples and analyse data used by management to generate
Data integrity of critical system reporting used by us in our audit to select samples and analyse data used by management to generate
financial reporting.
financial reporting.
OTHER INFORMATION
OTHER INFORMATION
Our opinion on the Financial Report does not cover the Other Information and, accordingly, we do not express an audit opinion or any form of
Our opinion on the Financial Report does not cover the Other Information and, accordingly, we do not express an audit opinion or any form of
assurance conclusion thereon, with the exception of the Remuneration Report and our related assurance opinion.
assurance conclusion thereon, with the exception of the Remuneration Report and our related assurance opinion.
In connection with our audit of the Financial Report, our responsibility is to read the Other Information. In doing so, we consider whether the
In connection with our audit of the Financial Report, our responsibility is to read the Other Information. In doing so, we consider whether the
Other Information is materially inconsistent with the Financial Report or our knowledge obtained in the audit, or otherwise appears to be
Other Information is materially inconsistent with the Financial Report or our knowledge obtained in the audit, or otherwise appears to be
materially misstated.
materially misstated.
We are required to report if we conclude that there is a material misstatement of this Other Information, and based on the work we have
We are required to report if we conclude that there is a material misstatement of this Other Information, and based on the work we have
performed on the Other Information that we obtained prior to the date of this Auditor’s Report, we have nothing to report.
performed on the Other Information that we obtained prior to the date of this Auditor’s Report, we have nothing to report.
RESPONSIBILITIES OF DIRECTORS FOR THE FINANCIAL REPORT
RESPONSIBILITIES OF DIRECTORS FOR THE FINANCIAL REPORT
The Directors are responsible for:
The Directors are responsible for:
preparing a Financial Report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001
preparing a Financial Report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001
implementing necessary internal control to enable the preparation of a Financial Report that gives a true and fair view and is free from material
implementing necessary internal control to enable the preparation of a Financial Report that gives a true and fair view and is free from material
misstatement, whether due to fraud or error
misstatement, whether due to fraud or error
assessing the Group’s ability to continue as a going concern and whether the use of the going concern basis of accounting is appropriate. This
assessing the Group’s ability to continue as a going concern and whether the use of the going concern basis of accounting is appropriate. This
includes disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless they either intend to
includes disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless they either intend to
liquidate the Group or to cease operations or have no realistic alternative but to do so.
liquidate the Group or to cease operations or have no realistic alternative but to do so.
232
232
233
233
ANZ 2020 Annual Report
Shareholder information – unaudited
Ordinary shares
At 6 October 2020, the 20 largest holders of ANZ ordinary shares held 1,627,664,599 ordinary shares, equal to 57.30% of the total issued
ordinary capital. At 6 October 2020 the issued ordinary capital was 2,840,370,225 ordinary shares.
Name
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
J P MORGAN NOMINEES AUSTRALIA PTY LIMITED
CITICORP NOMINEES PTY LIMITED
NATIONAL NOMINEES LIMITED
BNP PARIBAS NOMINEES PTY LTD
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