Australia and New Zealand Banking : December 2019 Pillar 3 Chart Pack

20 February 2020

Market Announcements Office

ASX Limited

Level 4

20 Bridge Street

SYDNEY NSW 2000

December 2019 Pillar 3 Chart Pack

Australia and New Zealand Banking Group Limited (ANZ) today releases its December 2019 Pillar 3 Chart Pack.

This has been approved for distribution by ANZ's Continuous Disclosure Committee.

Yours faithfully

Simon Pordage

Company Secretary

Australia and New Zealand Banking Group Limited

Australia and New Zealand Banking Group Limited ABN 11 005 357 522

ANZ Centre Melbourne, Level 9A, 833 Collins Street, Docklands VIC 3008

DECEMBER 2019 BASEL III PILLAR 3 / 1st QUARTER FY20 CHART PACK

-

20 FEBRUARY 2020

A U S T R A L I A & N E W Z E A L A N D B A N K I N G G R O U P L I M I T E D

To be read in conjunction with 'ANZ Basel III Pillar 3 disclosure as at 31 December 2019' Available on the ANZ shareholder website anz.com/shareholder

OVERVIEW

FINANCIAL INFORMATION CURRENT AS AT 31 DECEMBER 2019

• Provision charge and Credit Quality (see slides 3, 4 and 5):

1. The total provision charge of $116 million for 1Q20 was $40 million lower than for the same quarter FY19 (PCP). The total provision charge decreased $77 million compared to the preceding quarter driven by a reduction in collective provision charge including from an improved delinquency profile in the Australian mortgage portfolio in 1Q20.

• 1. The individual provision charge at $165 million was $21 million lower than PCP. The IP Loss Rate of 11bps was 1bps lower than PCP.
  1. CRWA increased $6.1 billion which included $4.2 billion from lending largely in the Corporate asset class and $1.6 billion from balance sheet recognition of leases arising from the implementation of IFRS 16.
  1. Management actions over the past three years to de-risk the portfolio, in particular in Institutional, together with benign market conditions have contributed to low loss rate outcomes.
  1. There have been no material credit impacts observed in the first quarter however, ANZ is maintaining a watching brief on the short to medium term economic impacts arising from unprecedented bushfire activity and more recent flooding together with any emerging impacts from the COVID-19 virus.
• Capital (see slides 6 and 7):
• 1. 1Q20 includes payment of the Final Dividend (impact 53bps). The Group Common Equity Tier 1 Capital ratio on an APRA Level 2 basis was 10.9%. On a pro-forma basis ~11.1%.

• 1. The Group Common Equity Tier 1 Capital ratio on an APRA Level 1 basis was 10.9% at the end of the first quarter FY20.
• Australian Housing (see slides 8 and 9)
• 1. Actions taken in 1H19 to provide greater certainty for customers by improving turnaround times and providing greater clarity to our bankers, mobile lenders and mortgage brokers about our lending policies, followed by a major marketing campaign saw application volumes increase in the second half of FY19 and stabilise at levels well above the first half average. Work continues on

improvements to processes and procedures.

1. The Australian Home Loan balance sheet has stabilised, however there are higher levels of amortisation arising from the low interest rate environment and associated increased paydown by those with Principal and Interest loans1.

1. 90+ delinquency levels have declined from 4Q19, down 8bps to 1.08%, primarily from improvements in WA and NSW.

1. Principal & Interest loans comprised 85% of the Australian home loan portfolio as at 30 September 2019

2

PORTFOLIO MOVEMENT

RISK WEIGHTED ASSETS (RWA)

TOTAL RISK WEIGHTED ASSETS BY CATEGORY

$b						417	424
409
398		396		396
	391	391	47	47
39
39		37		38
	37	38	12	13
18
17		16		13
	17	16
152	143	133	141		144	156	158
139

$19b increase from Sep-18:

• FX

$2b

• SA-CCR$6b2
• Lending $10b
• Other $1b

TOTAL RISK WEIGHTED ASSETS BY DIVISION1

$b

409		398	391		396		391		396	417		424
								9
				8
			24																			10
							22						12
60		57		56	15	58		57	11		60	66	69
												181		184
168		159	159		166		164		167
157		160	161		161		159		159	162		162
	Sep-16	Mar-17	Sep-17		Mar-18	Sep-18	Mar-19	Sep-19	Dec-19
		Australia				Institutional			New Zealand				Other

TOTAL RWA MOVEMENT DRIVERS

200

199

204

202

198

201

202

206

Sep-16Mar-17Sep-17Mar-18Sep-18Mar-19Sep-19Dec-19

CRWA (ex. Insto) CRWA (Insto) Mkt. & IRRBB RWA Op-RWA

$b
	6.1	0.2	0.5	0.4	424.2
417.0
Sep-19	Credit	Op	IRRBB	Mkt	Dec-19

1.	Institutional RWAs are inclusive of Corporate Banking, transferred from Australia Division to Institutional in October 2017 and backdated to September 2016 for the purposes of chart time series
2.	Change to Standardised Approach for measuring Counterparty Credit Risk	3

PORTFOLIO MOVEMENT

CREDIT RISK WEIGHTED ASSETS (CRWA) & EXPOSURE AT DEFAULT (EAD)

EXPOSURE AT DEFAULT & CRWA/EAD1

$b

					968	977	1,001
		903	930	944			Other
894	899							QRR & Other Retail

Residential Mortgage

39.4

38.0		36.9	36.6	36.4
	37.3
	35.8	35.7

Sovereign & Banks

Corporate

Sep-16Mar-17Sep-17Mar-18Sep-18Mar-19Sep-19Dec-19Dec-19

CRWA/EAD % EAD

CRWA MOVEMENT		Includes $1.6 billion from
	balance sheet recognition of
	$b				leases arising from the
				implementation of IFRS16
358.1		0.1		4.2	2.1			364.2
			-0.3

Sep-19	FX Impact Lending	Methodology	Risk	Dec-19
	Mvmt.	Review

CREDIT RWA & EAD MOVEMENT BY ASSET CLASS

$b (Dec-19 vs Sep-19) FX Adjusted

Includes 'Risk' release of		16.7	Driven by
		seasonal
-$0.5b, mainly from improved
		impacts2
delinquency profile
7.1
				2.5		4.9
0.5			0.7
								-0.1
								-2.4
			Residential	Corporate	Sovereign & Bank	Other
	Mortgage (Housing)
			Credit RWA		EAD

1.	EAD excludes Securitisation and Other assets whereas CRWA is inclusive as per APS 330
2.	Increase in short term deposits held with central banks (including from customers with northern hemisphere year end reporting dates) contributed circa $14b of the total	4

CREDIT QUALITY

TOTAL PROVISION CHARGE

Loss Rate*
IP	15bp
Total	14bp
$m	202		206		159
							121
	220		210	160	183
					-4
		-18						-24
					-39
	1Q18	2Q18	3Q18	4Q18

IP CHARGE BY SEGMENT

Loss Rate*

Loss Rate*

IP 12bp			IP 11bp
Total 10bp		209	Total	7bp
	237				186
							165
156			193
				16	8
		116	14		38
						15
	194	258
	140			148
186						120
			165
-30	43		53						-8
	-49		-49	1Q19		1Q20
1Q19	2Q19	3Q19	4Q19	1Q20	Retail (Adv)			Corporate (Adv)

			Individual Provision charge					Collective Provision charge	* First quarter annualised loss rate												Resi. Mortgage (Adv)		Other
																																		Increase primarily from reduction
GROSS IMPAIRED ASSETS1								90+ DAYS PAST DUE LOANS3				in denominator (FUM reduction in
										Personal lending, Cards, SME)
	$m																	%
3,000																										0.70	0.67	0.79	0.72	0.73	0.77
		2,034	2,013		2,022			2,029	2,052		0.62		0.61	0.62
2,000							0.56
1,000
0
		Mar-18	Sep-18	Mar-19		Sep-19	Dec-19
						Mar-18	Sep-18	Mar-19		Sep-19	Dec-19
			Australia			New Zealand				Institutional			Other2							Total Group Residential Mortgage		Retail (Pillar 3 QRR & Other Retail categories)

1. Excluding unsecured 90+ days past due

2. Other includes Retail Asia & Pacific and Australia Wealth

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3. As a % of Exposure at Default

CAPITAL

Basel III APRA Level 2 CET1	Sep-19	Dec-19
Common Equity Tier 1 Capital (AUD m)	47,355	46,359
Total Risk Weighted Assets (AUD m)	416,961	424,154
Common Equity Tier 1 Capital Ratio	11.4%	10.9%

Basel III APRA Level 1 Extended licensed CET1	Sep-19	Dec-19
Common Equity Tier 1	Capital (AUD m)	43,095	41,849
Total Risk Weighted Assets (AUD m)	379,539	383,575
Common Equity Tier 1	Capital Ratio	11.4%	10.9%

APRA LEVEL 2 CET1 RATIO - CAPITAL MOVEMENT

%
11.36				~11.1
		0.10	10.93
	-0.53
Sep-19	Dividend	Organic Cap	Dec-19	Pro-Forma
	(DRP	Gen & Other1		Dec-192
	Neutralised)

1. Includes capital deductions increases such as Investments in Associates and Deferred Tax Assets and Non Cash items

2. Taking into consideration announced divestment benefits (P&I ~20bps)

6

CAPITAL FRAMEWORK

CURRENT REGULATORY PROPOSALS AND RECENT FINALISATION1

	2019		1H20	2H20	1H21	Expected
		Implementation date
RBNZ capital framework			Transition to 2027			2027
Leverage ratio			Finalise			2022
Standardised approach to credit risk	Consultation			Finalise		2022
Internal Ratings-based Approach to			Consultation		Finalise		2022
Credit Risk
Operational risk			Finalise			2021
Fundamental Review of the Trading
		Consultation			2023
Book
Interest Rate Risk in the Banking
Consultation			Finalise		2022
Book
Loss Absorbing Capacity (LAC)2							2024
		Transition to 2024
Capital treatment for investments in
		Consultation		Finalise		2022
subsidiaries (Level 1)

1. Timeline is based on APRA's 2020 Policy Agenda (published January 2020)

2. Only in relation to the 3% of RWA increase in Total Capital requirements announced in July 2019

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AUSTRALIA HOME LOANS

PORTFOLIO

ANZ HOME LOAN APPLICATIONS (FUM)	ANZ TOTAL HOUSING LOAN GROWTH1
3 month rolling average (Index Dec 2017 = 100)	3 month annualised (%)

										8.6	7.4
										5.5
100												3.3	2.0
																0.5
90													-0.2	-0.8
																-2.6
80															-3.0	-2.7
									Jun-17Sep-17Dec-17Mar-18Jun-18Sep-18Dec-18Mar-19	Jun-19	Sep-19	Dec-19
70									12 mth avg							APRA Monthly Authorised Deposit-
								to Dec-19		APRA Monthly Banking Statistics (MBS)
											taking Institution Statistics (MADIS)
60										ANZ TOTAL HOUSING LOAN GROWTH BY TYPE1
50										3 month annualised (%)
40										11.3	10.5
										9.2
30												6.6
									4.2			4.4
										2.0						2.5
20												1.8	1.5			0.3
										-1.0			-2.5		-1.3	-0.3
10											-3.1				-3.3
													-4.2	-5.5	-6.5
														-6.8	-7.7
0Dec-
Mar-	Jun-	Sep-	Dec-	Mar-	Jun-	Sep-	Dec-	Jun-17Sep-17	Dec-17	Mar-18	Jun-18Sep-18	Dec-18	Mar-19	Jun-19	Sep-19	Dec-19
	17	18	18	18	18	19	19	19	19							APRA Monthly Authorised Deposit-
											APRA Monthly Banking Statistics (MBS)
										Owner Occupied	Investor				taking Institution Statistics (MADIS)
1.	Source: APRA Monthly Banking Statistics (MBS) and Monthly Authorised Deposit-taking Institution Statistics (MADIS)

8

AUSTRALIA HOME LOANS

CREDIT QUALITY

HOME LOANS - 90+ DAYS PAST DUE1 (BY VINTAGE)

HOME LOANS - 30+ DAYS & 90+ DAYS PAST DUE2,3,4

%
2.5
2.0
1.5
1.0
0.5
0.0
6	8	10	12	14	16	18	20	22	24	26	28	30	32	34	36

Month on book

FY15 FY16 FY17 FY18 FY19

30+ DPD %		90+ Investor

90+ Owner Occupied

2.5
2.0
1.5
1.0
0.5
0.0	Sep	Sep	Sep	Sep	Sep	Sep	Dec
Sep
12	13	14	15	16	17	18	19

HOME LOANS - 90+ DAYS PAST DUE2,3 (BY STATE)

%

3.0

2.5

2.0

1.5

1.0

0.5

0.0	QLD	WA	SA & NT	Portfolio
VIC & TAS NSW & ACT

Mar-12Mar-14Mar-16Mar-18Jun-19

Mar-13Mar-15Mar-17Mar-19Dec-19

1.	Home loans 90+ dpd vintages % ratio of ever delinquent (measured by # accounts) contains at least 6 application months of that fiscal year contributing to each data point.
2.	Includes Non Performing Loans
3.	ANZ delinquencies calculated on a missed payment basis	9
4.	The current classification of Investor vs Owner Occupier, is based on ANZ's product category, determined at origination as advised by the customer and the ongoing precision relies primarily on the customer's obligation to advise

ANZ of any change in circumstances

MARGIN ENVIRONMENT

LOW RATE ENVIRONMENT

AS AT SEPTEMBER 2019

$b~110

~53

Low rate deposits <25bps	Capital (excluding intangibles) and
	other non interest bearing liabilities

SWITCHING INTEREST ONLY TO PRINCIPAL & INTEREST1

$b
	8		4			1Q20
		4		3
				3
2
					3
6	7	7	9	8	6	1	8	6					6
				4			4	4	3
									2
1H17 2H17	1H18 2H18	1H19 2H19	1H20	2H20 1H21	2H21 1H22	2H22 1H23 2H23+
	Contractual conversions	Early conversions		Contractual (still to convert)

BUSINESS MIX - AVERAGE INTEREST EARNING ASSETS

BILLS/OIS SPREAD

AS AT SEPTEMBER 2019 (FULL YEAR AVERAGE, EXCLUDING MARKETS)	bps					Date	90 day avg Bills/OIS
%		70
					1H19 (average)	48bps
		60
						2H19 (average)	27bps
		50
22.3%	Australia Retail & Commercial					1Q20 (average)	19bps
40
	Institutional (excluding Markets)2
	30
55.2%	New Zealand	20
Other	10
20.8%
0
1.7%		Sep-18	Nov-18	Jan-19	Mar-19	May-19	Jul-19	Sep-19	Nov-19	Jan-20
		Spot Bills-OIS Spread (bps)	90 day rolling average of Bills-OIS (bps)

1. Total portfolio including new flows

2. Note: Institutional AIEA excluding Markets are $126.0b. Markets AIEA (Markets/Liquid assets) are $247.9b

10

FURTHER INFORMATION

Our Shareholder information		anz.com/shareholder/centre/
Equity Investors
Jill Campbell	Cameron Davis	Harsh Vardhan
Group General Manager	Executive Manager	Manager
Investor Relations	Investor Relations	Investor Relations
[phone]		[phone]	[phone]
[phone]		[phone]	[phone]
[e-mail]	[e-mail]	[e-mail]
Retail Investors		Debt Investors
Michelle Weerakoon	Scott Gifford	Mary Makridis
Manager Shareholder	Head of Debt Investor	Associate Director
Services & Events	Relations	Debt Investor Relations
[phone]		[phone]	[phone]
[phone]		[phone]
[e-mail]	[e-mail]	[e-mail]

DISCLAIMER & IMPORTANT NOTICE: The material in this presentation is general background information about the Bank's activities current at the date of the presentation. It is information given in summary form and does not purport to be complete. It is not intended to be relied upon as advice to investors or potential investors and does not take into account the investment objectives, financial situation or needs of any particular investor. These should be considered, with or without professional advice when deciding if an investment is appropriate

This presentation may contain forward-looking statements including statements regarding our intent, belief or current expectations with respect to ANZ's business and operations, market conditions, results of operations and financial condition, capital adequacy, specific provisions and risk management practices. When used in this presentation, the words "estimate", "project", "intend", "anticipate", "believe", "expect", "should" and similar expressions, as they relate to ANZ and its management, are intended to identify forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. Such statements constitute "forward-looking statements" for the purposes of the United States Private Securities Litigation Reform Act of 1995. ANZ does not undertake any obligation to publicly release the result of any revisions to these forward-looking statements to reflect events or circumstances after the date hereof to reflect the occurrence of unanticipated events.

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