Australia and New Zealand Banking : June 2018 Basel III Pillar 3 chart pack

BASEL III PILLAR 3

DISCLOSURE

AS AT 30 JUNE 2018

JUNE 2018 PILLAR 3 /

2018 THIRD QUARTER CHART PACK

AUSTRALIA AND NEW ZEALAND BANKING

GROUP LIMITED

14 AUGUST 2018

To be read in conjunction with ANZ 2018 Basel III Pillar 3 disclosure as at 30 June 2018

SUMMARY

Capital

•Level 2 Common Equity Tier 1 (CET1) ratio of 11.07% at Jun-18. 3bps increase from Mar-18 largely driven by: organic capitalgeneration (+50bps) and receipt of reinsurance proceeds from the One Path Life (OPL) sale (+25bps); offset by the FY18 Interim Dividend (-59bps) and the share buyback (-8bps). 2018 interim DRP was neutralised. •~$1.5bn of the announced $3bn on-market share buyback had been completed as at 30-Jun 2018.

Portfolio movement

•Total RWA decreased $2bn to $394bn driven by a $2bn reduction in CRWA. •$2bn reduction in CRWAs from net risk improvement across both Institutional and Retail businesses in Australia & New Zealand.

Credit Quality

•Total provision charge was $121m in 3Q18 with individual provision (IP) charge of $160m. The IP charge in 3Q18 was the lowest quarter since 2014, reflecting both the ongoing benign environment and improved quality of the portfolio. •While typically Q1 and Q3 provision charges are lower than Q2 and Q4 (see slide 7), 3Q18 was substantially lower than the average for the past four years, reflecting in part a high level of write backs and recoveries in the Institutional loan book. •ANZ has retained an overlay initially taken at 30 Sep 2017 in relation to the Retail Trade book which remains on watch. •Australian Residential Mortgage 90+ day past due loans (as a % of Residential Mortgage EAD) was flat vs prior quarter. There are some pockets of stress in the mortgage book, primarily in Western Australia, more particularly in Perth itself.

Australia Housingupdate

•Throughout FY18 the Australian housing system has been characterised by slowing credit system growth, increased price competition, increased capital intensity and tighter credit conditions. As at end June 2018, YTD APRA System has grown 4.1%, down 18% vs. prior comparable period 5.3%. •ANZ's ongoing focus is on the Owner Occupier Principal & Interest segment, with Owner Occupier loan growth of 4.4%annualised in the June quarter1. Investor segment growth in the June quarter was -2.5% annualised1. • ANZ's total Australian home lending portfolio grew at 0.4 times system in the June quarter (2% annualised growth). •ANZ Interest Only home loan flows in the June quarter represented 13% of total home loan flows. •$6.5bn of Interest Only loans switched to Principal & Interest in the June quarter (3Q18), compared with $5.2bn in 2Q18, $5.7bn in 1Q18 and $5.6bn per quarter on average across FY17. •The Bills/OIS spread has remained elevated.

Regulatory Impacts

•The combined impact of prudential responses over the past 3 financial years including various regulatory changes, together with subsequent policy changes by the banks, has been a meaningful reduction in the average maximum borrowing capacity for home loan borrowers. •Banks2home loan growth over the period Sep-16 to Jun-18 has been circa 11% compared with a circa 28% increase in Non-Banks2home loan growth (refer slide 8).

June quarter growth refers to June 2018 vs March 2018 unless otherwise stated

• 1. Source: ANZ analysis of Home Loans Market Share-APRA Banking statistics. June 2018 report. The current classification of Investor vs Owner Occupier, as reported to regulators and the market, is based on the classification at origination (as advised by the customer) and the ongoing precision relies on the customers obligation to advise ANZ, and ANZ targeted activity to identify, any change in circumstances

• 2. Total Housing Lending sourced from RBA Statistical Table D2 - Lending and Credit Aggregates. Bank Housing Lending sourced from RBA Statistical Table D5 - Bank Lending Classified by Sector and APRA Monthly Banking Statistics. Non-Bank defined as difference between Total Housing Lending and Bank Housing Lending. Data includes securitisation

2

CAPITAL, LIQUIDITY & FUNDING

APRA CET1 CAPITAL MOVEMENT

%

Equivalent to ~11.5% on a pro forma basis taking into consideration announced asset divestments yet to settle (80bps) and $1.5b (~40bps) 2ndtranche of share buy back announced in June 2018 and commenced in July 2018

11.04

0.45

11.07

0.25

-0.08

-0.59

APRA COMMON EQUITY TIER 1 (CET1)

%

10.8

11.0

11.1

10.1

10.6

Sep-15

Dec- Mar- Jun- Sep- Dec- Mar- Jun- Sep- Dec- Mar- Jun-15 16 16 16 16 17 17 17 17 18 18

9.6

9.4

9.8

9.7

9.6

LEVERAGE RATIO%

9.5

9.8

Mar-18

DividendsOPL Reinsurance proceedsShare Buy

BacksOrganic Cap Gen & OtherJun-18

Sep- Dec- Mar- Jun- Sep- Dec- Mar- Jun- Sep- Dec- Mar- Jun-15 15 16 16 16 16 17 17 17 17 18 18

Leverage RatioAPRA Proposed Minimum 4%

RISK WEIGHTED ASSETS

TOTAL RISK WEIGHTED ASSETS (RWA)

(Note: Corporate Banking included in Institutional1)$b

402

388

409

398

391

394

396

394

39 18

37 16

37 17

37 16

Sep-15

Mar-16

CRWA (ex. Insto)Sep-16

Mar-17

CRWA (Insto)Sep-17

Dec-17

Mar-18

Mkt. & IRRBB RWA

CREDIT RWA MOVEMENT DRIVERS$b

342.8

0.1

0.0

0.0

340.9

-2.0

Mar-18

FX

RiskLending Mvmt.

Data / Methodologychanges

CREDIT RWA MOVEMENT BY SEGMENT$b

342.8

Jun-18

0.2

340.9

-0.3

Jun-18

Mar-18

Residential Mortgage

Sovereign & Banks

-1.4

-0.4

Corporate

OtherJun-18

Op-RWA

Institutional RWAs are inclusive of Corporate Banking, transferred from Australia Division to Institutional in October 2017 and backdated to September 2015 for the purposes of chart time series

RISK WEIGHTED ASSETS & EXPOSURE AT DEFAULT (EAD)

EXPOSURE AT DEFAULT (EAD) & CRWA/EAD1$b

%

CREDIT RWA MOVEMENT DRIVERS$b (Jun-18 vs Mar-18)

Sep-15

Mar-16

CRWA/EAD %

Sep-16

Mar-17

Sep-17

Dec-17

Mar-18

Jun-18

EAD

EAD excludes Securitisation and Other assets whereas CRWA is inclusive as per APS 330

Increase in Bank EAD ($3.1bn) and Sovereign exposures ($5.4bn)

8.6

3.1

0.5

0.2

0.4

-0.3

Residential Mortgage (Housing)Credit RWA

-1.4

-0.4

CorporateSovereign & Bank

OtherEAD