Exhibit 99.1

Australia and New Zealand Banking Group Limited

ABN 11 005 357 522

Half Year

31 March 2019

Consolidated Financial Report

Dividend Announcement

and Appendix 4D

The Consolidated Financial Report and Dividend Announcement contains information required by Appendix 4D of the Australian Securities Exchange (ASX) Listing Rules. It should be read in conjunction with ANZ’s 2018 Annual Report, and is lodged with the ASX under listing rule 4.2A.

RESULTS FOR ANNOUNCEMENT TO THE MARKET   APPENDIX 4D  

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

Report for the half year ended 31 March 2019
Operating Results1					AUD million
Statutory operating income from continuing operations	ò		-9%	to		9,293
Statutory profit attributable to shareholders	ò		-5%	to		3,173
Cash profit2	ñ		22%	to		3,514
Cash profit from continuing operations2	ñ		2%	to		3,564
Dividends3		Cents per share			Franked amount4 per share
Proposed interim dividend			80			100%
Record date for determining entitlements to the proposed 2019 interim dividend						14 May 2019
Payment date for the proposed 2019 interim dividend						1 July 2019

Dividend Reinvestment Plan and Bonus Option Plan

Australia and New Zealand Banking Group Limited (ANZ) has a Dividend Reinvestment Plan (DRP) and a Bonus Option Plan (BOP) that will operate in respect of the proposed 2019 interim dividend. For the 2019 interim dividend, ANZ intends to provide shares under the DRP through an on-market purchase and BOP through the issue of new shares. The ‘Acquisition Price’ to be used in determining the number of shares to be provided under the DRP and BOP will be calculated by reference to the arithmetic average of the daily volume weighted average sale price of all fully paid ANZ ordinary shares sold in the ordinary course of trading on the ASX and Chi-X during the ten trading days commencing on 17 May 2019, and then rounded to the nearest whole cent. Shares provided under the DRP and BOP will rank equally in all respects with existing fully paid ANZ ordinary shares. Election notices from shareholders wanting to commence, cease or vary their participation in the DRP or BOP for the 2019 interim dividend must be received by ANZ’s Share Registrar by 5.00pm (Australian Eastern Standard Time) on 15 May 2019. Subject to receiving effective contrary instructions from the shareholder, dividends payable to shareholders with a registered address in the United Kingdom (including the Channel Islands and the Isle of Man) or New Zealand will be converted to Pounds Sterling or New Zealand Dollars respectively at an exchange rate calculated on 17 May 2019.

¹ Unless otherwise noted, all comparisons are to the half year ended 31 March 2018.

² Cash profit excludes non-core items included in statutory profit and is provided to assist readers in understanding the result of the ongoing business activities of the Group. The non-core items are calculated consistently period on period so as not to discriminate between positive and negative adjustments, and fall into one of the three categories: gains or losses included in earnings arising from changes in tax, legal or accounting legislation or other non-core items not associated with the ongoing operations of the Group; treasury shares, revaluation of policy liabilities, economic hedging and similar accounting items that represent timing differences that will reverse through earnings in the future; and accounting reclassifications between individual line items that do not impact reported results, such as policyholders tax gross up. Cash profit is not a measure of cash flow or profit determined on a cash basis. The net after tax adjustment was an increase to statutory profit of $341 million made up of several items. Refer pages 73 to 77 for further details.

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

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

2

AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED   ABN 11 005 357 522  

CONSOLIDATED FINANCIAL REPORT, DIVIDEND ANNOUNCEMENT AND APPENDIX 4D

Half year ended 31 March 2019

CONTENTS	PAGE
Disclosure Summary		5
Summary		7
Group Results		21
Divisional Results		49
Profit Reconciliation		73
Condensed Consolidated Financial Statements		79
Supplementary Information		123
Definitions		135
ASX Appendix 4D Cross Reference Index		138
Alphabetical Index		139

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

All amounts are in Australian dollars unless otherwise stated. The Company has a formally constituted Audit Committee of the Board of Directors. The Condensed Consolidated Financial Statements were approved by resolution of a Committee of the Board of Directors on 30 April 2019.

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

3

AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED   ABN 11 005 357 522  

This page has been left blank intentionally

4

DISCLOSURE SUMMARY

SUMMARY OF 2019 HALF YEAR RESULTS AND ASSOCIATED DISCLOSURE MATERIALS

The following disclosure items were lodged separately with the ASX and NZX and can be accessed via the ANZ Shareholder Centre on the Group website http://www.shareholder.anz.com within the disclosures for 2019 Half Year Results.

• Consolidated Financial Report, Dividend Announcement and Appendix 4D

• Half Year Results Investor Discussion Pack

• News Release

• APS 330 Pillar III Disclosure as at 31 March 2019

• Key Financial Data Summary

• United Kingdom Disclosure and Transparency Rules Submission

5

DISCLOSURE SUMMARY

This page has been left blank intentionally

6

SUMMARY

CONTENTS	Page
Guide to Half Year Results		8
Statutory Profit Results		10
Cash Profit Results		11
Financial Performance Summary – Total and continuing operations		12
Key Balance Sheet Metrics		13
Large/Notable Items – continuing operations		14
Full Time Equivalent Staff		19
Other Non-Financial Information		19

7

SUMMARY

Guide to Half Year Results

ACCOUNTING STANDARDS ADOPTED

During the period, the Group adopted two new Accounting Standards, AASB 9 Financial Instruments (AASB 9) and AASB 15 Revenue from Contracts with Customers (AASB 15):

• AASB 9 - the Group implemented an expected credit loss methodology for impairment of financial assets, and revised the classification and measurement of certain financial assets from 1 October 2018. Consequently, the Group increased its provision for credit impairment by $813 million through opening retained earnings. Comparative information has not been restated.

• AASB 15 - the main impact of adoption is that certain items previously netted are now presented gross in operating income and operating expenses. Comparative information has been restated which increased total operating income for the September 2018 half by $91 million (Mar 18 half: $62 million) and increased total operating expenses by the same amount.

For further details on key requirements and impacts of the changes described above refer to Note 1 and 21 of the Condensed Consolidated Financial Statements.

NON-IFRS INFORMATION

Statutory profit is prepared in accordance with recognition and measurement requirements of Australian Accounting Standards, which comply with International Financial Reporting Standards (IFRS). The Group provides additional measures of performance in the Consolidated Financial Report & Dividend Announcement which are prepared on a basis other than in accordance with accounting standards. The guidance provided in Australian Securities and Investments Commission (ASIC) Regulatory Guide 230 has been followed when presenting this information.

Cash Profit

Cash profit, a non-IFRS measure, represents ANZ’s preferred measure of the result of the ongoing business activities of the Group, enabling readers to assess Group and Divisional performance against prior periods and against peer institutions. The adjustments made in arriving at cash profit are included in statutory profit which is subject to review within the context of the external auditor’s review of the Condensed Consolidated Financial Statements. Cash profit is not subject to review by the external auditor. The external auditor has informed the Audit Committee that cash profit adjustments have been determined on a consistent basis across each period presented.

• Adjustments between statutory profit and cash profit - To calculate cash profit, the Group excludes non-core items from statutory profit. Refer to pages 73 to 77 for adjustments between statutory and cash profit.

• Large/Notable items within cash profit - The Group’s cash profit result from continuing operations includes a number of items collectively referred to as Large/Notable items. While these items form part of cash profit, given their nature and significance, they have been presented separately with comparative information, where relevant, to provide transparency and aid comparison. Refer to pages 14 to 18 for Large/Notable items.

DISCONTINUED OPERATIONS

The financial results of the Wealth Australia businesses being divested and associated Group reclassification and consolidation impacts are treated as discontinued operations from a financial reporting perspective. These businesses qualify as discontinued operations, a subset of assets and liabilities held for sale, as they represent a major line of business.

The Group Income Statement and Statement of Comprehensive Income show discontinued operations separately from continuing operations in a separate line item ‘Profit/(Loss) from discontinued operations’. This impacts the current and comparative financial information for Wealth Australia and Technology, Services & Operations (TSO) and Group Centre divisions.

• Sale to IOOF Holdings Limited (IOOF)

On 17 October 2017, the Group announced it had agreed to sell its OnePath pensions and investments (OnePath P&I) business and aligned dealer groups (ADG) businesses to IOOF. The sale of the aligned dealer groups business completed on 1 October 2018. The completion of the remaining OnePath P&I business, which is dependent on the receipt of all necessary approvals, is expected to occur before the end of the March 2020 half.

• Sale to Zurich Financial Services Australia (Zurich)

On 12 December 2017, ANZ announced that it had agreed to sell its life insurance business to Zurich and regulatory approval was obtained on 10 October 2018. The transaction is subject to closing conditions and ANZ expects it to complete in the first half of the 2019 calendar year.

Included in the ‘Loss from discontinued operations’ is:

• A $632 million loss (pre and post-tax) recognised on the reclassification of Wealth Australia businesses to held for sale in the March 2018 half; and

• Customer remediation for refunds to customers and related remediation costs for receiving inappropriate advice or services not provided including the Group’s former aligned dealer groups.

	Half Year
	Mar 19		Sep 18		Mar 18
	$M		$M		$M
Customer remediation (pre-tax)		75		181		-
Customer remediation (post-tax)		53		127		-

8

SUMMARY

CONTINUING OPERATIONS

Divisional Performance

The presentation of divisional results has been impacted by a number of methodology and structural changes during the period. Prior period comparatives have been restated as follows:

• The methodology for allocating earnings on capital at a business unit level has changed from Economic Capital to Regulatory Capital. While neutral at a Group level, this change has impacted net interest income at the divisional level;

• The residual Asia Retail and Wealth businesses have been transferred from the former Asia Retail and Pacific division to TSO and Group Centre division. The remaining segment has been renamed Pacific division; and

• ANZ’s lenders mortgage insurance, share investing and general insurance distribution businesses which were previously part of the continuing operations of Wealth Australia now form part of the Australia division (ANZ’s financial planning business continues to be part of the continuing operations of the Wealth Australia division).

Other than those described above, there have been no other significant changes impacting divisional performance.

9

SUMMARY

Statutory Profit Results

		Half Year									Movement
		Mar 19 $M			Sep 18 $M			Mar 18 $M			Mar 19 v. Sep 18		Mar 19 v. Mar 18
Net interest income			7,299			7,164			7,350			2%		-1%
Other operating income			1,994			2,583			2,887			-23%		-31%
Operating income			9,293			9,747			10,237			-5%		-9%
Operating expenses			(4,365	)		(4,928	)		(4,473	)		-11%		-2%
Profit before credit impairment and income tax			4,928			4,819			5,764			2%		-15%
Credit impairment charge			(392	)		(280	)		(408	)		40%		-4%
Profit before income tax			4,536			4,539			5,356			0%		-15%
Income tax expense			(1,284	)		(1,358	)		(1,426	)		-5%		-10%
Non-controlling interests			(9	)		(9	)		(7	)		0%		29%
Profit attributable to shareholders of the Company from continuing operations			3,243			3,172			3,923			2%		-17%
Profit/(Loss) from discontinued operations			(70	)		(95	)		(600	)		-26%		-88%
Profit attributable to shareholders of the Company			3,173			3,077			3,323			3%		-5%
Earnings Per Ordinary Share (cents)		Half Year									Movement
	Reference      Page	Mar 19			Sep 18			Mar 18			Mar 19 v. Sep 18		Mar 19 v. Mar 18
Basic	95		111.7			107.3			114.2			4%		-2%
Diluted	95		106.4			103.2			108.6			3%		-2%

			Half Year
	Reference Page		Mar 19		Sep 18			Mar 18
Ordinary Share Dividends (cents)
Interim - 100% franked1		94		80		-			80
Final - 100% franked1		94		-		80			-
Total - 100% franked1		94		80		80			80
Ordinary share dividend payout ratio2		94		71.4%		74.6%			69.7%
Profitability Ratios
Return on average ordinary shareholders’ equity3				10.8%		10.4%			11.3%
Return on average assets4				0.65%		0.64%			0.71%
Net interest margin				1.79%		1.82%			1.93%
Net interest income to average credit RWAs4				4.23%		4.21%			4.35%
Efficiency Ratios
Operating expenses to operating income				48.6%		52.0%			47.1%
Operating expenses to average assets4				0.94%		1.09%			1.01%
Credit Impairment Charge/(Release)
Individually assessed credit impairment charge ($M)				379		343			430
Collectively assessed credit impairment charge/(release) ($M)				13		(63	)		(22	)
Total credit impairment charge ($M)		100		392		280			408
Individually assessed credit impairment charge as a % of average gross loans and advances4,5				0.12%		0.11%			0.15%
Total credit impairment charge as a % of average gross loans and advances4,5				0.13%		0.09%			0.14%

^1.  Fully franked for Australian tax purposes and carry New Zealand imputation credits of NZD 9 cents per ordinary share for the proposed 2019 interim dividend (2018 final dividend: NZD 10 cents; 2018 interim dividend: NZD 9 cents).

^2.  Dividend payout ratio is calculated using the proposed 2019 interim, 2018 final and 2018 interim dividends.

^3.  Average ordinary shareholders’ equity excludes non-controlling interests.

^4.  Average assets, average gross loans and advances and average credit RWAs include assets held for sale.

^5.  Credit impairment charge used in the ratio relates to gross loans and advances and off-balance sheet commitments - undrawn and contingent liabilities.

10

SUMMARY

Cash Profit Results¹

				Half Year						Movement
	Mar 19 $M			Sep 18 $M			Mar 18 $M			Mar 19 v. Sep 18		Mar 19 v. Mar 18
Net interest income		7,299			7,164			7,350			2%		-1%
Other operating income		2,447			2,333			2,520			5%		-3%
Operating income		9,746			9,497			9,870			3%		-1%
Operating expenses		(4,365	)		(4,928	)		(4,473	)		-11%		-2%
Profit before credit impairment and income tax		5,381			4,569			5,397			18%		0%
Credit impairment charge		(393	)		(280	)		(408	)		40%		-4%
Profit before income tax		4,988			4,289			4,989			16%		0%
Income tax expense		(1,415	)		(1,286	)		(1,489	)		10%		-5%
Non-controlling interests		(9	)		(9	)		(7	)		0%		29%
Cash profit from continuing operations		3,564			2,994			3,493			19%		2%
Cash profit/(loss) from discontinued operations		(50	)		(65	)		(617	)		-23%		-92%
Cash profit		3,514			2,929			2,876			20%		22%
Earnings Per Ordinary Share (cents)		Half Year									Movement
		Mar 19			Sep 18			Mar 18			Mar 19 v. Sep 18		Mar 19 v. Mar 18
Basic		123.0			101.6			98.3			21%		25%
Diluted		116.8			97.9			94.2			19%		24%

			Half Year
	Reference Page		Mar 19		Sep 18			Mar 18
Ordinary Share Dividends
Ordinary share dividend payout ratio2				64.5%		78.4%			80.6%
Profitability Ratios
Return on average ordinary shareholders’ equity3				11.9%		9.9%			9.8%
Return on average assets4				0.72%		0.61%			0.62%
Net interest margin				1.79%		1.82%			1.93%
Net interest income to average credit RWAs4				4.23%		4.21%			4.35%
Efficiency Ratios
Operating expenses to operating income				46.4%		54.4%			49.6%
Operating expenses to average assets4				0.94%		1.09%			1.01%
Credit Impairment Charge/(Release)
Individually assessed credit impairment charge ($M)		32		380		343			430
Collectively assessed credit impairment charge/(release) ($M)		32		13		(63	)		(22	)
Total credit impairment charge ($M)		32		393		280			408
Individually assessed credit impairment charge as a % of average gross loans and advances4,5				0.12%		0.11%			0.15%
Total credit impairment charge as a % of average gross loans and advances4,5				0.13%		0.09%			0.14%

Cash Profit/(Loss) By Division	Half Year									Movement
	Mar 19 $M			Sep 18 $M			Mar 18 $M			Mar 19 v. Sep 18		Mar 19 v. Mar 18
Australia		1,733			1,726			1,983			0%		-13%
Institutional		1,012			713			767			42%		32%
New Zealand		753			772			749			-2%		1%
Wealth Australia		(30	)		(57	)		(26	)		-47%		15%
Pacific		33			39			33			-15%		0%
TSO and Group Centre		63			(199	)		(13	)		large		large
Discontinued Operations		(50	)		(65	)		(617	)		-23%		-92%
Cash profit		3,514			2,929			2,876			20%		22%

^1.  Cash profit excludes non-core items included in statutory profit and is provided to assist readers in understanding the results of the ongoing business activities of the Group. Refer to pages 73 to 77 for the reconciliation between statutory and cash profit. Refer to pages 14 to 18 for information on large/notable items included in continuing cash profit.

^2.  Dividend payout ratio is calculated using the proposed 2019 interim, 2018 final and 2018 interim dividends.

^3.  Average ordinary shareholders’ equity excludes non-controlling interests.

^4.  Average assets, average gross loans and advances and average credit RWAs include assets held for sale.

^5.  Credit impairment charge used in the ratio relates to gross loans and advances and off-balance sheet commitments - undrawn and contingent liabilities.

11

SUMMARY

Financial Performance Summary – Total and continuing operations

For financial reporting purposes the results of discontinued operations are shown in a separate line item ‘Profit/(Loss) from discontinued operations’. In the table below, Total cash profit - inclusive of discontinued operations and Cash profit - continuing operations are shown. For the purpose of understanding the impact of discontinued operations across various Income Statement categories, Total cash profit - inclusive of discontinued operations is presented such that each Income Statement line item is inclusive of discontinued operations.

	Total cash profit - inclusive of discontinued
				operations						Movement				Cash profit - continuing operations									Movement
	Mar 19 $M			Sep 18 $M			Mar 18 $M			Mar 19 v. Sep 18		Mar 19 v. Mar 18		Mar 19 $M			Sep 18 $M			Mar 18 $M			Mar 19 v. Sep 18		Mar 19 v. Mar 18
Net interest income		7,242			7,164			7,350			1%		-1%		7,299			7,164			7,350			2%		-1%
Other operating income		2,651			2,449			2,152			8%		23%		2,447			2,333			2,520			5%		-3%
Operating income		9,893			9,613			9,502			3%		4%		9,746			9,497			9,870			3%		-1%
Operating expenses		(4,586	)		(5,229	)		(4,716	)		-12%		-3%		(4,365	)		(4,928	)		(4,473	)		-11%		-2%
Profit before credit impairment and income tax		5,307			4,384			4,786			21%		11%		5,381			4,569			5,397			18%		0%
Credit impairment charge		(392	)		(280	)		(408	)		40%		-4%		(393	)		(280	)		(408	)		40%		-4%
Profit before income tax		4,915			4,104			4,378			20%		12%		4,988			4,289			4,989			16%		0%
Income tax expense		(1,392	)		(1,166	)		(1,495	)		19%		-7%		(1,415	)		(1,286	)		(1,489	)		10%		-5%
Non-controlling interests		(9	)		(9	)		(7	)		0%		29%		(9	)		(9	)		(7	)		0%		29%
Cash Profit		3,514			2,929			2,876			20%		22%		3,564			2,994			3,493			19%		2%
Average interest earning assets		811,528			784,501			765,186			3%		6%		811,528			784,501			765,186			3%		6%
Average deposits and other borrowings		635,822			621,699			612,291			2%		4%		635,822			621,699			612,291			2%		4%
Funds under management1		83,164			81,122			80,178			3%		4%		33,816			30,734			30,596			10%		11%
Earnings per share (basic)		123.0			101.6			98.3			21%		25%		124.8			103.9			119.4			20%		5%
Ordinary share dividend payout ratio		64.5%			78.4%			80.6%							63.6%			76.7%			66.3%
Profitability Ratios
Return on average ordinary shareholders’ equity2		11.9%			9.9%			9.8%							12.0%			10.1%			11.9%
Return on average assets		0.72%			0.61%			0.62%							0.77%			0.66%			0.79%
Net interest margin		1.79%			1.82%			1.93%							1.80%			1.82%			1.93%
Net interest income to average credit RWAs		4.23%			4.21%			4.35%							4.35%			4.21%			4.26%
Efficiency Ratios
Operating expenses to operating income		46.4%			54.4%			49.6%							44.8%			51.9%			45.3%
Operating expenses to average assets		0.94%			1.09%			1.01%							0.94%			1.08%			1.01%
FTE3		39,359			39,924			41,580			-1%		-5%		37,364			37,860			39,655			-1%		-6%

^1. Funds under management for continuing operations relates to New Zealand Wealth and Private Bank in Australia division.

^2. Average ordinary shareholders’ equity excludes non-controlling interests.

^3. The actual FTE that will transfer to IOOF or Zurich on sale completion or at a later date is currently being determined. Discontinued FTE is based on an estimate using an allocation methodology.

12

SUMMARY

Key Balance Sheet Metrics¹

			As at						Movement
	Reference Page		Mar 19		Sep 18		Mar 18		Mar 19 v. Sep 18		Mar 19 v. Mar 18
Capital Management
Common Equity Tier 1
- APRA Basel 3		43		11.5%		11.4%		11.0%
- Internationally Comparable Basel 32		43		16.9%		16.8%		16.3%
Credit risk weighted assets ($B)		126		345.5		337.6		342.8		2%		1%
Total risk weighted assets ($B)		43		396.3		390.8		395.8		1%		0%
APRA Leverage Ratio		45		5.4%		5.5%		5.4%
Balance Sheet: Key Items
Gross loans and advances ($B)				613.8		608.4		595.5		1%		3%
Net loans and advances ($B)				610.1		605.4		592.5		1%		3%
Total assets ($B)				980.2		943.2		935.7		4%		5%
Customer deposits ($B)				493.4		487.3		472.8		1%		4%
Total equity ($B)				60.0		59.4		59.5		1%		1%
			As at						Movement
	Reference								Mar 19		Mar 19
Liquidity Risk		Page		Mar 19		Sep 18		Mar 18		v. Sep 18		v. Mar 18
Liquidity Coverage Ratio3		41		137%		142%		134%		-5%		3%
Net Stable Funding Ratio		42		115%		115%		115%		0%		0%
			As at						Movement
	Reference Page		Mar 19		Sep 18		Mar 18		Mar 19 v. Sep 18		Mar 19 v. Mar 18
Impaired Assets
Gross impaired assets ($M)		34		2,022		2,013		2,034		0%		-1%
Gross impaired assets as a % of gross loans and advances				0.33%		0.33%		0.34%
Net impaired assets ($M)		34		1,131		1,093		1,018		3%		11%
Net impaired assets as a % of shareholders’ equity				1.8%		1.8%		1.7%
Individually assessed provision ($M)		33		891		920		1,016		-3%		-12%
Individually assessed provision as a % of gross impaired assets				44.1%		45.7%		50.0%
Collectively assessed provision ($M)4		33		3,378		2,523		2,579		34%		31%
Collectively assessed provision as a % of credit risk weighted assets				0.98%		0.75%		0.75%
Net Tangible Assets
Net tangible assets attributable to ordinary shareholders ($B)5				53.7		53.1		53.0		1%		1%
Net tangible assets per ordinary share ($)				18.94		18.47		18.28		3%		4%
			As at						Movement
			Mar 19		Sep 18		Mar 18		Mar 19		Mar 19
Net Loans And Advances By Division (Excluding Held for Sale)				$B		$B		$B		v. Sep 18		v. Mar 18
Australia				336.6		341.3		340.4		-1%		-1%
Institutional				151.7		149.1		138.2		2%		10%
New Zealand				118.8		111.3		108.5		7%		9%
Pacific				2.1		2.1		2.2		0%		-5%
TSO and Group Centre				0.1		0.6		0.2		-83%		-50%
Net loans and advances by division				609.3		604.4		589.5		1%		3%

^1. Balance Sheet amounts and metrics include assets and liabilities held for sale unless otherwise stated.

^2. See page 43 for further details regarding the differences between APRA Basel 3 and Internationally Comparable Basel 3 standards.

^3. Liquidity Coverage Ratio is calculated on a half year average basis.

^4. On adoption of AASB 9 on 1 October 2018, the Group increased the collectively assessed provision by $813 million. Comparative information has not been restated

^5. Equals total shareholders’ equity less total non-controlling interests, goodwill and other intangible assets.

13

SUMMARY

Large/Notable Items – continuing operations

Large/notable items included in cash profit from continuing operations are described below.

Divestment impacts (continuing operations)

The Group announced the following divestments in line with the Group’s strategy to create a simpler, better capitalised, better balanced and more agile bank. As these divestments do not qualify as discontinued operations under accounting standards they form part of continuing operations. The financial impacts from these divestments are summarised below including the business results for those divestments that have completed:

	Gain/(Loss) on sale from divestments									Completed divestment business results
				Half Year									Half Year
	Mar 19			Sep 18			Mar 18			Mar 19			Sep 18			Mar 18
Cash Profit Impact		$M			$M			$M			$M			$M			$M
Asia Retail and Wealth businesses		-			-			99			-			-			30
SRCB		-			-			2			-			-			-
UDC		-			(7	)		18			-			-			-
MCC		-			121			119			-			10			-
Paymark		37			-			-			4			4			1
Cambodia JV		-			(42	)		-			-			-			-
OPL NZ		197			(3	)		-			14			43			47
PNG Retail, Commercial and SME		-			(19	)		-			-			-			-
Profit/(Loss) before income tax		234			50			238			18			57			78
Income tax benefit/(expense) and non-controlling interests		(47	)		3			(100	)		(4	)		(12	)		(19	)
Cash profit/(loss) from continuing operations		187			53			138			14			45			59

• Asia Retail and Wealth businesses

The Group completed the sale of Retail and Wealth businesses in Singapore, Hong Kong, China, Taiwan and Indonesia to Singapore’s DBS Bank in 2017. The Group completed the sale of its Retail business in Vietnam to Shinhan Bank Vietnam during the March 2018 half and recognised a $99 million gain, net of costs associated with the sale.

• Shanghai Rural Commercial Bank (SRCB)

On 3 January 2017, the Group announced it had agreed to sell its 20% stake in Shanghai Rural Commercial Bank (SRCB). The sale was completed in the March 2018 half and the Group recognised a net gain of $2 million.

• UDC Finance (UDC)

On 11 January 2017, the Group announced that it had entered into a conditional agreement to sell UDC to HNA Group (HNA). On 21 December 2017, the Group announced that it had been informed that New Zealand’s Overseas Investment Office had declined HNA’s application to acquire UDC. The agreement with HNA was terminated in January 2018 and an $18 million cost recovery was recognised in respect of the terminated transaction process. The Group incurred transaction costs of $7 million in the September 2018 half. The assets and liabilities of UDC ceased being classified as held for sale in the September 2018 half.

• Metrobank Card Corporation (MCC)

On 18 October 2017, the Group announced it had entered into a sale agreement with its joint venture partner Metropolitan Bank & Trust Company (Metrobank) in relation to its 40% stake in the Philippines based Metrobank Card Corporation (MCC). The Group sold its 40% stake in two equal tranches in January and September 2018. The Group recognised a net gain on sale of $119 million and $121 million during the March and September 2018 halves respectively, and a dividend of $10 million during the September 2018 half.

• Paymark Limited (Paymark)

On 17 January 2018, the Group entered into an agreement to sell its 25% shareholding in Paymark Limited to Ingenico Group. The transaction was completed on 11 January 2019. The Group recognised a net gain on sale of $37 million during the March 2019 half.

• ANZ Royal Bank (Cambodia) Ltd (Cambodia JV)

On 17 May 2018, the Group announced it had reached an agreement to sell its 55% stake in Cambodia JV to J Trust, a Japanese diversified financial holding company listed on the Tokyo Stock Exchange. The transaction is subject to closing conditions and regulatory approval and ANZ expects it to close in the 2019 financial year. During the September 2018 half, the Group recognised a $42 million loss on the reclassification of assets and liabilities to held for sale.

• OnePath Life (NZ) Ltd (OPL NZ)

On 30 May 2018, the Group announced that it had agreed to sell OPL NZ to Cigna Corporation. During the September 2018 half, the Group incurred transaction costs of $3 million. The transaction completed on 30 November 2018 and the Group recognised a $197 million net gain on sale in the March 2019 half, comprising a $115 million gain on the reversal of the life-to-date cash profit adjustments on the revaluation of policy liabilities sold, a $56 million gain on sale, and a $26 million of release from the foreign currency translation reserve.

14

SUMMARY

• Papua New Guinea Retail, Commercial and Small-Medium Sized Enterprise businesses (PNG Retail, Commercial and SME)

On 25 June 2018, the Group announced it had entered into an agreement to sell its Retail, Commercial and Small-Medium Sized Enterprise (SME) banking businesses in Papua New Guinea to Kina Bank. The transaction is subject to closing conditions and ANZ expects it to close by late 2019 calendar year. During the September 2018 half, the Group recognised a $19 million loss on the reclassification of assets and liabilities to held for sale.

Other large/notable items (continuing operations)

• Customer remediation

Customer remediation charges of $100 million have been recognised in the March 2019 half (Sep 18 half: $352 million; Mar 18 half: $67 million) for expected refunds to customers and related remediation costs. $64 million relates to customer remediation impacting operating income (Sep 18 half: $196 million; Mar 18 half: $32 million), and $36 million relates to customer remediation and remediation project costs impacting operating expenses (Sep 18 half: $156 million; Mar 18 half: $35 million). These impacts were primarily identified from product reviews in the Australia division. These reviews remain ongoing.

• Accelerated software amortisation

During the September 2018 half, the Group accelerated the amortisation of certain software assets, predominantly relating to the Institutional division following a review of the International business in light of divestments. An accelerated amortisation expense of $251 million was recognised in the September 2018 half.

• Royal Commission legal costs

External legal costs associated with responding to the Royal Commission were $13 million for the March 2019 half (Sep 18 half: $39 million; Mar 18 half: $16 million).

• Restructuring

The Group recognised restructuring expenses of $51 million in the March 2019 half (Sep 18 half: $149 million; Mar 18 Half: $78 million) largely relating to changes to the Group’s enablement functions announced during the period. The prior period largely related to the move of the Australia division and technology to agile ways of working in the September and March 2018 halves.

15

SUMMARY

Large/Notable items - continuing operations

Cash Profit Results	March 2019 Half Year vs March 2018 Half Year														March 2019 Half Year vs September 2018 Half Year
						Mar 19						Mar 18		Movt						Mar 19						Sep 18		Movt
				Large/		ex. Large/				Large/		ex. Large/		ex. Large/				Large/		ex. Large/				Large/		ex. Large/		ex. Large/
		Mar 19		notables		notables		Mar 18		notables	1	notables		notables		Mar 19		notables		notables		Sep 18		notables	1	notables		notables
		$M		$M		$M		$M		$M		$M		%		$M		$M		$M		$M		$M		$M		%
Net interest income		7,299		(21	)	7,320		7,350		36		7,314		0%		7,299		(21	)	7,320		7,164		(84	)	7,248		1%
Other operating income		2,447		214		2,233		2,520		324		2,196		2%		2,447		214		2,233		2,333		20		2,313		-3%
Operating income		9,746		193		9,553		9,870		360		9,510		0%		9,746		193		9,553		9,497		(64	)	9,561		0%
Operating expenses		(4,365	)	(105	)	(4,260	)	(4,473	)	(179	)	(4,294	)	-1%		(4,365	)	(105	)	(4,260	)	(4,928	)	(620	)	(4,308	)	-1%
Profit before credit impairment and income tax		5,381		88		5,293		5,397		181		5,216		1%		5,381		88		5,293		4,569		(684	)	5,253		1%
Credit impairment charge		(393	)	-		(393	)	(408	)	(26	)	(382	)	3%		(393	)	-		(393	)	(280	)	-		(280	)	40%
Profit/(Loss) before income tax		4,988		88		4,900		4,989		155		4,834		1%		4,988		88		4,900		4,289		(684	)	4,973		-1%
Income tax benefit/(expense) and non-controlling interests		(1,424	)	(2	)	(1,422	)	(1,496	)	(69	)	(1,427	)	0%		(1,424	)	(2	)	(1,422	)	(1,295	)	195		(1,490	)	-5%
Cash profit/(loss) from continuing operations		3,564		86		3,478		3,493		86		3,407		2%		3,564		86		3,478		2,994		(489	)	3,483		0%
Cash Profit/(Loss) By Division	March 2019 Half Year vs March 2018 Half Year														March 2019 Half Year vs September 2018 Half Year
						Mar 19						Mar 18		Movt						Mar 19						Sep 18		Movt
				Large/		ex. Large/				Large/		ex. Large/		ex. Large/				Large/		ex. Large/				Large/		ex. Large/		ex. Large/
		Mar 19		notables		notables		Mar 18		notables	1	notables		notables		Mar 19		notables		notables		Sep 18		notables	1	notables		notables
		$M		$M		$M		$M		$M		$M		%		$M		$M		$M		$M		$M		$M		%
Australia		1,733		(76	)	1,809		1,983		(75	)	2,058		-12%		1,733		(76	)	1,809		1,726		(233	)	1,959		-8%
Institutional		1,012		(5	)	1,017		767		-		767		33%		1,012		(5	)	1,017		713		(210	)	923		10%
New Zealand		753		14		739		749		34		715		3%		753		14		739		772		21		751		-2%
Wealth Australia		(30	)	(7	)	(23	)	(26	)	(14	)	(12	)	92%		(30	)	(7	)	(23	)	(57	)	(43	)	(14	)	64%
Pacific		33		-		33		33		-		33		0%		33		-		33		39		-		39		-15%
TSO and Group Centre 2		63		160		(97	)	(13	)	141		(154	)	-37%		63		160		(97	)	(199	)	(24	)	(175	)	-45%
Cash profit/(loss) from continuing operations		3,564		86		3,478		3,493		86		3,407		2%		3,564		86		3,478		2,994		(489	)	3,483		0%

^1.  Where applicable, comparative information has been restated for large/notable items included in the March 2019 half.

^2.  TSO and Group Centre includes the Gain/(Loss) on sale from divestments including SRCB, Paymark, UDC, MCC, Asia Retail and Wealth businesses, Cambodia JV, OPL NZ, PNG Retail, Commercial and SME. It also includes the divested business results for the completed sales of Paymark, MCC and Asia Retail and Wealth businesses.

16

SUMMARY

Large/Notable items - continuing operations

Within continuing cash profit, the Group has recognised some large/notable items. These items are shown in the tables below.

	March 2019 Half Year																		March 2018 Half Year1
	Large/notable items included in continuing cash profit																		Large/notable items included in continuing cash profit
	Gain/(Loss)			Divested						Royal									Gain(Loss) on						Divested						Royal
	on sale from			business			Customer			Commission									sale from						business			Customer			Commission
	divestments			results2			remediation			legal costs			Restructuring			Total			divestments						results2			remediation			legal costs			Restructuring			Total
	$M			$M			$M			$M			$M			$M			$M						$M			$M			$M			$M			$M
Cash Profit
Net interest income		-			1			(22	)		-			-			(21	)		-						55			(19	)		-			-			36
Other operating income		234			22			(42	)		-			-			214			238						99			(13	)		-			-			324
Operating income		234			23			(64	)		-			-			193			238						154			(32	)		-			-			360
Operating expenses		-			(5	)		(36	)		(13	)		(51	)		(105	)		-						(50	)		(35	)		(16	)		(78	)		(179	)
Profit before credit impairment and income tax		234			18			(100	)		(13	)		(51	)		88			238						104			(67	)		(16	)		(78	)		181
Credit impairment charge		-			-			-			-			-			-			-						(26	)		-			-			-			(26	)
Profit before income tax		234			18			(100	)		(13	)		(51	)		88			238						78			(67	)		(16	)		(78	)		155
Income tax benefit/(expense) and non-controlling interests		(47	)		(4	)		30			4			15			(2	)		(100	)					(19	)		22			5			23			(69	)
Cash profit from continuing operations		187			14			(70	)		(9	)		(36	)		86			138						59			(45	)		(11	)		(55	)		86
	March 2019 Half Year																		September 2018 Half Year1
		Large/notable items included in continuing cash profit																		Large/notable items included in continuing cash profit
	Gain/(Loss)			Divested						Royal									Gain/(Loss)			Divested						Accelerated			Royal
	on sale from			business			Customer			Commission									on sale from			business			Customer			software			Commission
	divestments			results2			remediation			legal costs			Restructuring			Total			divestments			results2			remediation			amortisation			legal costs			Restructuring			Total
	$M			$M			$M			$M			$M			$M			$M			$M			$M			$M			$M			$M			$M
Cash Profit
Net interest income		-			1			(22	)		-			-			(21	)		-			2			(86	)		-			-			-			(84	)
Other operating income		234			22			(42	)		-			-			214			60			70			(110	)		-			-			-			20
Operating income		234			23			(64	)		-			-			193			60			72			(196	)		-			-			-			(64	)
Operating expenses		-			(5	)		(36	)		(13	)		(51	)		(105	)		(10	)		(15	)		(156	)		(251	)		(39	)		(149	)		(620	)
Profit before credit impairment and income tax		234			18			(100	)		(13	)		(51	)		88			50			57			(352	)		(251	)		(39	)		(149	)		(684	)
Credit impairment charge		-			-			-			-			-			-			-			-			-			-			-			-			-
Profit before income tax		234			18			(100	)		(13	)		(51	)		88			50			57			(352	)		(251	)		(39	)		(149	)		(684	)
Income tax benefit/(expense) and non-controlling interests		(47	)		(4	)		30			4			15			(2	)		3			(12	)		102			45			12			45			195
Cash profit from continuing operations		187			14			(70	)		(9	)		(36	)		86			53			45			(250	)		(206	)		(27	)		(104	)		(489	)

^1.  Where applicable, comparative information has been restated for large/notable items included in the March 2019 half.

^2.  Relates to business results for completed divestments.

17

SUMMARY

Large/Notable items - continuing operations

Within continuing cash profit, the Group has recognised some large/notable items. The impact of these items on the divisional results are shown in the tables below.

	March 2019 Half Year																		March 2018 Half Year1
	Large/notable items included in continuing cash profit																		Large/notable items included in continuing cash profit
	Gain/(Loss)			Divested						Royal									Gain/(Loss)						Divested						Royal
	on sale from			business			Customer			Commission									on sale from						business			Customer			Commission
	divestments			results2			remediation			legal costs			Restructuring			Total			divestments						results2			remediation			legal costs			Restructuring			Total
	$M			$M			$M			$M			$M			$M			$M						$M			$M			$M			$M			$M
Profit before income tax
Australia		-			-			(92	)		-			(17	)		(109	)		-						-			(50	)		-			(57	)		(107	)
Institutional		-			-			-			-			(7	)		(7	)		-						-			5			-			(8	)		(3	)
New Zealand		-			20			-			-			(2	)		18			-						55			(3	)		-			(5	)		47
Wealth Australia		-			-			(8	)		-			(2	)		(10	)		-						-			(19	)		-			(1	)		(20	)
Pacific		-			-			-			-			-			-			-						-			-			-			-			-
TSO and Group Centre3		234			(2	)		-			(13	)		(23	)		196			238						23			-			(16	)		(7	)		238
Profit before income tax		234			18			(100	)		(13	)		(51	)		88			238						78			(67	)		(16	)		(78	)		155
Income tax benefit/(expense) and non- controlling interests		(47	)		(4	)		30			4			15			(2	)		(100	)					(19	)		22			5			23			(69	)
Cash profit from continuing operations		187			14			(70	)		(9	)		(36	)		86			138						59			(45	)		(11	)		(55	)		86
	March 2019 Half Year																		September 2018 Half Year1
	Large/notable items included in continuing cash profit																		Large/notable items included in continuing cash profit
	Gain/(Loss)			Divested						Royal									Gain/(Loss)			Divested						Accelerated			Royal
	on sale from			business			Customer			Commission									on sale from			business			Customer			software			Commission
	divestments			results2			remediation			legal costs			Restructuring			Total			divestments			results2			remediation			amortisation			legal costs			Restructuring			Total
	$M			$M			$M			$M			$M			$M			$M			$M			$M			$M			$M			$M			$M
Profit before income tax
Australia		-			-			(92	)		-			(17	)		(109	)		-			-			(254	)		(29	)		-			(53	)		(336	)
Institutional		-			-			-			-			(7	)		(7	)		-			-			(12	)		(222	)		-			(17	)		(251	)
New Zealand		-			20			-			-			(2	)		18			-			54			(24	)		-			-			(4	)		26
Wealth Australia		-			-			(8	)		-			(2	)		(10	)		-			-			(62	)		-			-			-			(62	)
Pacific		-			-			-			-			-			-			-			-			-			-			-						-
TSO and Group Centre3		234			(2	)		-			(13	)		(23	)		196			50			3			-			-			(39	)		(75	)		(61	)
Profit before income tax		234			18			(100	)		(13	)		(51	)		88			50			57			(352	)		(251	)		(39	)		(149	)		(684	)
Income tax benefit/(expense) and non-controlling interests		(47	)		(4	)		30			4			15			(2	)		3			(12	)		102			45			12			45			195
Cash profit from continuing operations		187			14			(70	)		(9	)		(36	)		86			53			45			(250	)		(206	)		(27	)		(104	)		(489	)

^1.  Where applicable, comparative information has been restated for large/notable items included in the March 2019 half.

^2.  Relates to business results for completed divestments.

^3.  TSO and Group Centre includes the Gain/(Loss) on sale from divestments including SRCB, Paymark, UDC, MCC, Asia Retail and Wealth businesses, Cambodia JV, OPL NZ, PNG Retail, Commercial and SME. It also includes the divested business results for the completed sales of Paymark, MCC and Asia Retail and Wealth businesses.

18

SUMMARY

Full Time Equivalent Staff

As at 31 March 2019, ANZ employed 39,359 staff (Sep 18: 39,924; Mar 18: 41,580) on a full-time equivalent (FTE) basis.

Division	As at						Movement
							Mar 19		Mar 19
	Mar 19		Sep 18		Mar 18		v. Sep 18		v. Mar 18
Australia		13,020		13,039		13,914		0%		-6%
Institutional		6,085		6,188		6,505		-2%		-6%
New Zealand		6,003		6,165		6,319		-3%		-5%
Wealth Australia		1,991		2,161		2,175		-8%		-8%
Pacific		1,096		1,125		1,172		-3%		-6%
TSO and Group Centre		11,164		11,246		11,495		-1%		-3%
Total FTE		39,359		39,924		41,580		-1%		-5%
Continuing operations1		37,364		37,860		39,655		-1%		-6%
Discontinued operations1		1,995		2,064		1,925		-3%		4%
Average FTE		39,571		40,760		44,029		-3%		-10%
Geography	As at						Movement
							Mar 19		Mar 19
	Mar 19		Sep 18		Mar 18		v. Sep 18		v. Mar 18
Australia		18,652		18,671		19,351		0%		-4%
Asia, Pacific, Europe & America		13,396		13,742		14,511		-3%		-8%
New Zealand		7,311		7,511		7,718		-3%		-5%
Total FTE		39,359		39,924		41,580		-1%		-5%
1.   The actual FTE that will transfer to IOOF and Zurich on sale completion or at a later date is currently being determined. The discontinued operations FTE is an estimate based on an allocation methodology.
Other Non-Financial Information
	Half Year						Movement
	Mar 19		Sep 18		Mar 18		Mar 19		Mar 19
							v. Sep 18		v. Mar 18
Shareholder value - ordinary shares
Share price ($)
- high		28.36		30.39		30.80		-7%		-8%
- low		22.98		26.08		26.81		-12%		-14%
- closing		26.03		28.18		26.86		-8%		-3%
Closing market capitalisation of ordinary shares ($B)		73.7		81.0		77.9		-9%		-5%
Total shareholder returns (TSR)		-4.8%		8.0%		-6.8%		large		-29%

	As at Mar 19
	Short-		Long-
Credit Ratings	Term		Term		Outlook
Moody’s Investor Services		P-1		Aa3		Stable
Standard & Poor’s		A-1+		AA-		Negative
Fitch Ratings		F1+		AA-		Stable

19

SUMMARY

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20

GROUP RESULTS

CONTENTS	Page
Cash Profit		22
Group Performance – continuing operations		23
Net Interest Income - continuing operations		24
Other Operating Income - continuing operations		26
Operating Expenses - continuing operations		29
Software Capitalisation - continuing operations		31
Credit Risk - continuing operations		32
Income Tax Expense - continuing operations		36
Impact of Foreign Currency Translation - continuing operations		37
Earnings Related Hedges - continuing operations		38
Earnings per Share - continuing operations		38
Dividends - continuing operations		39
Economic Profit - continuing operations		39
Condensed Balance Sheet - including discontinued operations		40
Liquidity Risk - including discontinued operations		41
Funding - including discontinued operations		42
Capital Management - including discontinued operations		43
Leverage Ratio - including discontinued operations		45
Capital Management - Other Regulatory Developments		46

21

GROUP RESULTS

Non-IFRS Information

Statutory profit is prepared in accordance with recognition and measurement requirements of Australian Accounting Standards, which comply with International Financial Reporting Standards (IFRS). The Group provides additional measures of performance in the Consolidated Financial Report & Dividend Announcement which are prepared on a basis other than in accordance with accounting standards. The guidance provided in Australian Securities and Investments Commission (ASIC) Regulatory Guide 230 has been followed when presenting this information.

Cash Profit

Cash profit, a non-IFRS measure, represents ANZ’s preferred measure of the result of the ongoing business activities of the Group, enabling readers to assess Group and Divisional performance against prior periods and against peer institutions. To calculate cash profit, the Group excludes non-core items from statutory profit (refer to Definitions on pages 135 to 136 for further details). The adjustments made in arriving at cash profit are included in statutory profit which is subject to review within the context of the external auditor’s review of the Condensed Consolidated Financial Statements. Cash profit is not subject to review by the external auditor. The external auditor has informed the Audit Committee that cash profit adjustments have been determined on a consistent basis across each period presented.

The Group Results section is reported on a cash profit basis for continuing operations unless otherwise stated. For information on discontinued operations please refer to the Guide to Half Year Results on page 8.

	Half Year									Movement
	Mar 19			Sep 18			Mar 18			Mar 19		Mar 19
	$M			$M			$M			v. Sep 18		v. Mar 18
Statutory profit attributable to shareholders of the Company from continuing operations		3,243			3,172			3,923			2%		-17%
Adjustments between statutory profit and cash profit1
Revaluation of policy liabilities		77			(4	)		(10	)		large		large
Economic hedges		185			(124	)		(124	)		large		large
Revenue and expense hedges		60			(49	)		40			large		50%
Structured credit intermediation trades		(1	)		(1	)		(3	)		0%		-67%
Sale of SRCB		-			-			(333	)		n/a		-100%
Total adjustments between statutory profit and cash profit for continuing operations		321			(178	)		(430	)		large		large
Cash profit from continuing operations		3,564			2,994			3,493			19%		2%
1.   Refer to pages 73 to 77 for analysis of the adjustments between statutory profit and cash profit.
Group performance - cash profit	Half Year									Movement
	Mar 19			Sep 18			Mar 18			Mar 19		Mar 19
	$M			$M			$M			v. Sep 18		v. Mar 18
Net interest income		7,299			7,164			7,350			2%		-1%
Other operating income		2,447			2,333			2,520			5%		-3%
Operating income		9,746			9,497			9,870			3%		-1%
Operating expenses		(4,365	)		(4,928	)		(4,473	)		-11%		-2%
Profit before credit impairment and income tax		5,381			4,569			5,397			18%		0%
Credit impairment charge		(393	)		(280	)		(408	)		40%		-4%
Profit before income tax		4,988			4,289			4,989			16%		0%
Income tax expense		(1,415	)		(1,286	)		(1,489	)		10%		-5%
Non-controlling interests		(9	)		(9	)		(7	)		0%		29%
Cash profit from continuing operations		3,564			2,994			3,493			19%		2%
	Half Year									Movement
	Mar 19			Sep 18			Mar 18			Mar 19		Mar 19
Cash profit/(loss) by Division	$M			$M			$M			v. Sep 18		v. Mar 18
Australia		1,733			1,726			1,983			0%		-13%
Institutional		1,012			713			767			42%		32%
New Zealand		753			772			749			-2%		1%
Wealth Australia		(30	)		(57	)		(26	)		-47%		15%
Pacific		33			39			33			-15%		0%
TSO and Group Centre		63			(199	)		(13	)		large		large
Cash profit from continuing operations		3,564			2,994			3,493			19%		2%

22

GROUP RESULTS

Group Performance – continuing operations

Group Cash Profit - March 2019 Half Year v March 2018 Half Year

• March 2019 v March 2018

Cash profit from continuing operations increased $71 million (+2%) compared with the March 2018 half. Excluding foreign currency translation movements, cash profit increased $42 million (+1%).

• Net interest income decreased $51 million (-1%) largely due to 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 growth in lower margin Markets Balance Sheet trading activities, higher funding costs, changes in asset mix, asset price competition, and the sale of the Asia Retail and Wealth businesses. This was partially offset by higher deposit margins and home loans re-pricing. The increase in average interest earning assets reflects growth in ANZ’s home loans and Institutional banking portfolios, partially offset by the sale of Asia Retail and Wealth businesses. Refer to pages 24 and 25 for further details on key movements.

• Other operating income decreased $73 million (-3%) largely as the result of net divestment impacts of $81 million, a $64 million decrease in net fee and commission income, $60 million reduction in other, and a $29 million increase in customer remediation. This was partially offset by higher Markets other operating income of $120 million and a $43 million increase in share of associate’s profit. Refer to pages 26 to 28 for further details on key movements.

• Operating expenses decreased $108 million (-2%) primarily due to lower FTE, a reduction in expenses following the sale of OnePath Life (NZ) and Asia Retail and Wealth businesses of $45 million, lower restructuring expenses of $27 million and software amortisation charges. This was partially offset by inflation. Refer to pages 29 to 30 for further details on key movements.

• Credit impairment charges decreased $15 million (-4%) largely due to lower individually assessed credit impairment charges, partially offset by higher collectively assessed credit impairment charges. Refer to pages 32 and 33 for further details on key movements.

Excluding large/notable items, cash profit increased $71 million (+2%).

• March 2019 v September 2018

Cash profit from continuing operations increased $570 million (+19%) compared with the September 2018 half. Excluding foreign currency translation movements, cash profit increased $566 million (+19%).

• Net interest income increased $135 million (+2%) largely due to 3% growth in average interest earning assets, partially offset by a 2 basis point decrease in the net interest margin. The lower net interest margin reflects growth in lower margin Markets Balance Sheet trading activities, changes in asset mix, and asset price competition. This was partially offset by higher deposit margins, home loans re-pricing and lower customer remediation charges of $64 million. The increase in average interest earning assets reflects growth in ANZ’s home loans in New Zealand and growth in Institutional banking portfolios. This was partially offset by a reduction in lending in the Australia division. Refer to pages 24 and 25 for further details on key movements.

• Other operating income increased $114 million (+5%) largely the result of net divestment impacts of $126 million, higher Markets other operating income of $79 million, lower customer remediation of $68 million, and a $36 million increase in share of associate’s profit. This is partially offset by a $105 million reduction in net fee and commission income and a $71 million reduction in other primarily due to lower dividend income. Refer to pages 26 to 28 for further details on key movements.

• Operating expenses decreased $563 million (-11%) primarily due to an accelerated software amortisation charge in the prior period of $251 million, lower customer remediation of $120 million, restructuring expenses of $98 million, Royal Commission legal costs of $26 million, and lower FTE. This was partially offset by inflation. Refer to pages 29 to 30 for further details on key movements.

• Credit impairment charges increased $113 million (+40%) largely due to higher individually assessed and collectively assessed credit impairment charges. Refer to pages 32 and 33 for further details on key movements.

Excluding large/notable items, cash profit decreased $5 million (flat).

23

GROUP RESULTS

Net Interest Income - continuing operations

	Half Year						Movement
	Mar 19		Sep 18		Mar 18		Mar 19		Mar 19
Group		$M		$M		$M		v. Sep 18		v. Mar 18
Cash net interest income1		7,299		7,164		7,350		2%		-1%
Average interest earning assets2		811,528		784,501		765,186		3%		6%
Average deposits and other borrowings2		635,822		621,699		612,291		2%		4%
Net interest margin (%) - cash		1.80		1.82		1.93		-2 bps		-13 bps
Group (excluding Markets business unit)
Cash net interest income1,3		7,019		6,861		6,995		2%		0%
Average interest earning assets2		563,579		549,398		538,968		3%		5%
Average deposits and other borrowings2		459,478		456,936		455,946		1%		1%
Net interest margin (%) - cash3		2.50		2.49		2.60		1 bps		-10 bps
	Half Year						Movement
	Mar 19		Sep 18		Mar 18		Mar 19		Mar 19
Cash profit net interest margin by major division1		$M		$M		$M		v. Sep 18		v. Mar 18
Australia
Net interest margin (%) - cash3		2.61		2.60		2.78		1 bps		-17 bps
Average interest earning assets		314,215		315,614		312,473		0%		1%
Average deposits and other borrowings		202,765		202,530		203,239		0%		0%
Institutional
Net interest margin (%) - cash3		0.85		0.86		0.89		-1 bps		-4 bps
Average interest earning assets2		372,270		349,090		333,919		7%		11%
Average deposits and other borrowings2		281,770		269,578		257,874		5%		9%
New Zealand
Net interest margin (%) - cash3		2.39		2.41		2.43		-2 bps		-4 bps
Average interest earning assets2		116,201		111,092		108,008		5%		8%
Average deposits and other borrowings2		86,244		81,214		79,669		6%		8%

^1.  Includes large/notable items of -$21 million for the March 2019 half (Sep 18 half: -$84 million; Mar 18 half: $36 million). Refer to pages 14 to 18 for further details on large/notable items. Also includes the major bank levy of -$178 million for the March 2019 half (Sep 18 half: -$178 million; Mar 18 half: -$177 million).

^2. Average balance sheet amounts include assets and liabilities reclassified as held for sale from continuing operations.

^3.  In the March 2019 half, the methodology for allocating earnings on capital at a business unit level has changed from being based on Economic Capital to Regulatory Capital. While neutral at a Group level, this change has impacted net interest income at the divisional level and comparative information has been restated accordingly.

Group net interest margin - March 2019 Half Year v March 2018 Half Year

^1.  Markets Balance Sheet activities includes the impact of growth in discretionary liquid assets and other Balance Sheet activities.

• March 2019 v March 2018

Net interest margin (-13 bps)

• Asset mix and funding mix (-4 bps): unfavourable asset mix from the impacts of customer switching from interest only to principal and interest home loans in the Australia division, customer switching from variable to fixed home loans in the New Zealand division and unfavourable mix impacts from a lower proportion of lending in the Australia division.

• Funding costs (-3 bps): unfavourable basis risk and broadly flat spreads on wholesale funding.

• Deposits (+2 bps): improved deposit margins in the Australia and Institutional divisions.

• Assets (-1 bps): adverse impact of home loan competition in the Australia division, partially offset by favourable impact of home loans re-pricing.

24

GROUP RESULTS

• Treasury (0 bps): broadly flat earnings on capital.

• Markets Balance Sheet activities (-6 bps): growth in lower margin Markets Balance Sheet trading activities.

• Asia Retail and Wealth (-1 bps): adverse margin impact following the sale of Asia Retail and Wealth businesses.

Average interest earning assets (+$46.3 billion or +6%)

• Average net loans and advances (+$24.5 billion or +4%): increase driven by growth in Institutional lending, home loan growth in the Australia and New Zealand divisions, and foreign currency translation movements.

• Average trading and investment securities/available-for-sale assets (+$2.4 billion or +2%): increase driven mostly by the impact of foreign currency translation movements.

• Average cash and other liquids (+$19.4 billion or +21%): increase driven by higher central bank cash balances and reverse repurchase agreements, and the impact of foreign currency translation movements.

Average deposits and other borrowings (+$23.5 billion or +4%)

• Average deposits and other borrowings (+$23.5 billion or +4%): increase driven by growth in the Institutional and New Zealand divisions, and the impact of foreign currency translation movements. This has been partly offset by the loss of deposits following the sale of Asia Retail and Wealth businesses.

Group net interest margin - March 2019 Half Year v September 2018 Half Year

^1.  Markets Balance Sheet activities includes the impact of growth in discretionary liquid assets and other Balance Sheet activities.

• March 2019 v September 2018

Net interest margin (-2 bps)

• Asset mix and funding mix (-2 bps): unfavourable asset mix from the impacts of customer switching from interest only to principal and interest home loans, lower unsecured lending, and a higher proportion of Institutional lending.

• Funding costs (0 bps): broadly flat basis risk, and broadly flat wholesale funding spreads.

• Deposits (+1 bps): improved deposit margins in the Institutional division from rising US rates and deposit optimisation.

• Assets (+1 bps): impact of re-pricing of home loans in the Australia division, partially offset by increased competition in all divisions.

• Treasury (0 bps): broadly flat earnings on capital.

• Markets Balance Sheet activities (-4 bps): growth in lower margin Markets Balance Sheet trading activities.

• Customer remediation (+2 bps): the impact of higher customer remediation in the September 2018 half.

Average interest earning assets (+$27.0 billion or +3%)

• Average net loans and advances (+$13.4 billion or +2%): increase driven by growth in Institutional lending, home loans in the New Zealand division, and the impact of foreign currency translation movements. This was partially offset by a reduction in lending in the Australia division.

• Average trading and investment securities/available-for-sale assets (+$5.1 billion or +5%): increase is mainly driven by an increase in investment and trading securities, and by the impact of foreign currency translation movements.

• Average cash and other liquids (+$8.5 billion or +8%): increase driven by higher central bank cash balances, and the impact of foreign currency translation movements.

Average deposits and other borrowings (+$14.1 billion or +2%)

• Average deposits and other borrowings (+$14.1 billion or +2%): increase driven by growth in the Institutional and New Zealand divisions, and the impact of foreign currency translation movements.

25

GROUP RESULTS

Other Operating Income - continuing operations

	Half Year1						Movement
	Mar 19		Sep 18		Mar 18		Mar 19		Mar 19
	$M		$M		$M		v. Sep 18		v. Mar 18
Net fee and commission income2		1,218		1,289		1,335		-6%		-9%
Net income from insurance business2		70		127		126		-45%		-44%
Markets other operating income		667		577		552		16%		21%
Share of associates’ profit2		131		95		88		38%		49%
Other2,3		361		245		419		47%		-14%
Total cash other operating income from continuing operations4		2,447		2,333		2,520		5%		-3%
	Half Year1						Movement
	Mar 19		Sep 18		Mar 18		Mar 19		Mar 19
Markets income	$M		$M		$M		v. Sep 18		v. Mar 18
Net interest income		280		303		355		-8%		-21%
Other operating income		667		577		552		16%		21%
Total cash Markets income from continuing operations		947		880		907		8%		4%
	Half Year1						Movement
	Mar 19		Sep 18		Mar 18		Mar 19		Mar 19
Other operating income by division	$M		$M		$M		v. Sep 18		v. Mar 18
Australia		625		722		728		-13%		-14%
Institutional		1,126		1,035		1,031		9%		9%
New Zealand		302		328		343		-8%		-12%
Wealth Australia		26		12		48		large		-46%
Pacific		50		53		47		-6%		6%
TSO and Group Centre		318		183		323		74%		-2%
Total cash other operating income from continuing operations4		2,447		2,333		2,520		5%		-3%

Other operating income - March 2019 Half Year v March 2018 Half Year

Other operating income (excluding large/notable items)	Half Year1						Movement
	Mar 19		Sep 18		Mar 18		Mar 19		Mar 19
	$M		$M		$M		v. Sep 18		v. Mar 18
Net fee and commission income2		1,258		1,363		1,322		-8%		-5%
Net income from insurance business2		52		71		54		-27%		-4%
Markets other operating income		667		588		547		13%		22%
Share of associates’ profit2		131		95		88		38%		49%
Other2,3		125		196		185		-36%		-32%
Total cash other operating income from continuing operations		2,233		2,313		2,196		-3%		2%

^1.  On adoption of AASB 15, the Group reclassified certain items previously netted which are now presented gross in operating income and operating expenses. Comparative information has been restated accordingly which increased total operating income by $91 million for the September 2018 half and $62 million for the March 2018 half.

^2.  Excluding Markets.

^3.  Includes foreign exchange earnings and net funds management income previously reported under net funds management and insurance income.

^4.  Includes large/notable items of $214 million for the March 2019 half (Sep 18 half: $20 million; Mar 18 half: $324 million). Refer to items on pages 14 to 18 for further details on large/notable items.

26

GROUP RESULTS

• March 2019 v March 2018

Other operating income decreased by $73 million (-3%). Excluding foreign currency translation movements, other operating income decreased $93 million (-4%).

Net fee and commission income (-$117 million or -9%)

• $85 million decrease in the Australia division primarily as the result of lower fee income due to the removal of fees, lower volume, and higher customer remediation ($20 million).

• $21 million decrease in the Wealth Australia division primarily due to lower financial planning volumes, and higher customer remediation ($9 million).

• $20 million decrease in the TSO and Group Centre division primarily due to the loss of income following the sale of Asia Retail and Wealth businesses.

• $14 million increase in the New Zealand division as the result of higher funds under management income, credit card incentives/rebates, and favourable foreign currency translation movements.

Net income from insurance business (-$56 million or -44%)

• $42 million decrease in the New Zealand division primarily due to the sale of the OnePath Life (NZ) business.

• $10 million decrease in the TSO and Group Centre division due to the loss of income following the sale Asia Retail and Wealth businesses.

• $5 million decrease in the Australia division primarily due to a reduction in lenders mortgage insurance net premium income as the result of lower volumes ($8 million).

Markets income (+$40 million or +4%)

• $49 million increase in Franchise Trading primarily attributable to favourable market conditions in international rate markets and a more favourable trading environment in Australia and New Zealand rates ($70 million). This was partially offset by adverse derivative valuation adjustments ($21 million).

• $27 million increase in Franchise Sales due to growth initiatives in North East Asia and improved Institutional client flow in Asia on the back of US China trade tensions sparking volatility in the region.

• $36 million decrease in Balance Sheet trading driven by reduced net interest income from Australia and Asia liquidity desks on reduced average holdings.

Share of associates’ profit (+$43 million or +49%)

• $43 million increase in profits from associates of which $25 million relates to P.T. Bank Pan Indonesia and $14 million relates to AmBank.

Other (-$58 million or -14%)

• $14 million decrease in the Australia division primarily due to lower brokerage income from ANZ share investing.

• $16 million decrease in the New Zealand division largely as the result of a one-off insurance recovery in the March 2018 half.

• $12 million decrease in the Institutional division primarily driven by fair value losses on loans measured at fair value through profit and loss.

• $14 million decrease in the TSO and Group Centre division primarily due to realised losses on economic hedges against larger foreign exchange denominated revenue streams as the result of the NZD strengthening against the AUD. These offset foreign currency translation gains elsewhere in the Group.

• Net $4 million decrease as the result of the Asia Retail and Wealth gain on sale ($99 million), MCC gain on sale ($119 million), UDC cost recovery in respect of the terminated transaction process ($18 million) and SRCB ($2 million) recognised in the March 2018 half, offset against OnePath Life (NZ) business divestment impacts ($197 million) and Paymark gain on sale ($37 million) recognised in the March 2019 half.

Excluding large/notable items, other operating income increased $37 million (+2%).

• March 2019 v September 2018

Other operating income increased by $114 million (+5%). Excluding foreign currency translation movements, other operating income increased $115 million (+5%).

Net fee and commission income (-$71 million or -6%)

• $90 million decrease in the Australia division primarily as the result of lower fee income due to timing, the removal of fees, and lower volumes. This was partially offset by lower customer remediation ($13 million).

• $13 million increase in the Wealth Australia division primarily due to lower customer remediation ($21 million), partially offset by lower financial planning volumes.

• $11 million increase in the New Zealand division primarily due to higher credit card incentives/rebates and merchant fees as the result of seasonality, and favourable foreign currency translation movements.

Net income from insurance business (-$57 million or -45%)

• $39 million decrease in the New Zealand division primarily due to the sale of the OnePath Life (NZ) business.

27

GROUP RESULTS

• $18 million decrease in the Australia division primarily due to a reduction in lenders mortgage insurance net premium income as the result of lower volume ($13 million).

Markets income (+$67 million or +8%)

• $75 million increase in Franchise Trading primarily attributable to favourable market conditions in international rates markets and tighter credit spreads in the second quarter of FY19 benefitting the Franchise Trading businesses ($137 million). This was partially offset by adverse derivative valuation adjustments primarily from falling AUS and NZD swap rates ($62 million).

• $10 million increase in Franchise Sales primarily attributable to customer activity in Asia driven by volatility triggered by US China Trade tensions, declining US yields which reduced Asia yields, and franchise growth initiatives in North East Asia.

• $18 million decrease in Balance Sheet trading attributable to reduced net interest income from Australia liquidity desks on reduced average holdings.

Share of associates’ profit (+$36 million or +38%)

• $36 million increase in profits from associates of which $26 million relates to P.T. Bank Pan Indonesia and $8 million relates to AmBank.

Other (+$116 million or +47%)

• Net $184 million increase as the result of OnePath Life (NZ) business divestment impacts ($197 million) and Paymark gain on sale ($37 million) recognised in the March 2019 half, partially offset by divestment impacts recognised in the September 2018 half: MCC gain on sale ($121 million), a net charge recognised on reclassification of Cambodia JV and PNG Retail, Commercial and SME to held for sale (-$61 million), UDC and OnePath Life (NZ) transaction costs (-$7 million and -$3 million respectively).

• $9 million increase in the Australia division as the result of lower customer remediation ($21 million), partially offset by lower brokerage income from ANZ share investing.

• $38 million decrease due to dividend income received from Bank of Tianjin of $28 million and MCC of $10 million in the September 2018 half.

• $29 million decrease in the TSO and Group Centre division primarily due to realised losses on economic hedges against larger foreign exchange denominated revenue streams as the result of the NZD strengthening against the AUD. These offset foreign currency translation gains elsewhere in the Group.

Excluding large/notable items, other operating income decreased $80 million (-3%).

28

GROUP RESULTS

Operating Expenses - continuing operations

	Half Year1						Movement
	Mar 19		Sep 18		Mar 18		Mar 19		Mar 19
	$M		$M		$M		v. Sep 18		v. Mar 18
Personnel expenses		2,370		2,356		2,402		1%		-1%
Premises expenses		406		416		395		-2%		3%
Technology expenses		764		1,084		815		-30%		-6%
Restructuring expenses		51		149		78		-66%		-35%
Other expenses		774		923		783		-16%		-1%
Total cash operating expenses from continuing operations2		4,365		4,928		4,473		-11%		-2%
Full time equivalent staff (FTE) from continuing operations		37,364		37,860		39,655		-1%		-6%
Average full time equivalent staff (FTE) from continuing operations		37,558		38,463		41,568		-2%		-10%
	Half Year1						Movement
	Mar 19		Sep 18		Mar 18		Mar 19		Mar 19
Expenses by division	$M		$M		$M		v. Sep 18		v. Mar 18
Australia		1,843		1,990		1,905		-7%		-3%
Institutional		1,320		1,575		1,373		-16%		-4%
New Zealand		612		613		592		0%		3%
Wealth Australia		70		95		85		-26%		-18%
Pacific		70		65		63		8%		11%
TSO and Group Centre		450		590		455		-24%		-1%
Total cash operating expenses from continuing operations2		4,365		4,928		4,473		-11%		-2%
	Half Year						Movement
FTE by division	Mar 19		Sep 18		Mar 18		Mar 19		Mar 19
	$M		$M		$M		v. Sep 18		v. Mar 18
Australia		13,020		13,039		13,914		0%		-6%
Institutional		6,085		6,188		6,505		-2%		-6%
New Zealand		6,003		6,165		6,319		-3%		-5%
Wealth Australia		640		692		759		-8%		-16%
Pacific		1,096		1,125		1,172		-3%		-6%
TSO and Group Centre		10,520		10,651		10,986		-1%		-4%
Total FTE		37,364		37,860		39,655		-1%		-6%
Average FTE		37,558		38,463		41,568		-2%		-10%

Operating expenses - March 2019 Half Year v March 2018 Half Year

Expenses (excluding large/notable items)	Half Year1						Movement
	Mar 19		Sep 18		Mar 18		Mar 19		Mar 19
	$M		$M		$M		v. Sep 18		v. Mar 18
Personnel expenses		2,361		2,260		2,355		4%		0%
Premises expenses		406		416		395		-2%		3%
Technology expenses		764		829		814		-8%		-6%
Restructuring expenses		-		-		-		n/a		n/a
Other expenses		729		803		730		-9%		0%
Total cash operating expenses from continuing operations		4,260		4,308		4,294		-1%		-1%

^1. On adoption of AASB 15, the Group reclassified certain items previously netted which are now presented gross in operating income and operating expenses. Comparative information has been restated accordingly which increased total operating expenses by $91 million for the September 2018 half and $62 million for the March 2018 half.

^2.  Includes large/notable items of $105 million for the March 2019 half (Sep 18 half: $620 million; Mar 18 half: $179 million). Refer to items on pages 14 to 18 for further details on large/notable items.

29

GROUP RESULTS

• March 2019 v March 2018

Operating expenses decreased by $108 million (-2%).

• Personnel expenses decreased $32 million (-1%) largely driven by lower FTE, a decrease in customer remediation ($17 million) and lower personnel expenses following the sale of OnePath Life (NZ) and Asia Retail and Wealth businesses ($21 million). This was partially offset by wage inflation, the insourcing of technology services and higher long service leave accruals.

• Premises expenses increased $11 million (+3%) primarily driven by higher spend on property projects.

• Technology expenses decreased $51 million (-6%) largely due to lower software amortisation charges and the insourcing of technology services.

• Restructuring expenses decreased $27 million (-35%) due to higher spend in the prior period associated with the move to agile ways of working in the Australia and Technology divisions.

• Other expenses decreased $9 million (-1%) largely due to lower expenses following the sale of OnePath Life (NZ) and Asia Retail and Wealth businesses ($23 million) and a reduction in Royal Commission legal costs ($3 million), partly offset by higher customer remediation ($18 million).

Excluding large/notable items, operating expenses decreased $34 million (-1%).

• March 2019 v September 2018

Operating expenses decreased by $563 million (-11%).

• Personnel expenses increased $14 million (+1%) largely driven by wage inflation, the insourcing of technology services, higher long service leave accruals, and the normalisation of incentives. This was offset by lower FTE, a decrease in customer remediation ($80 million) and lower personnel expenses following the sale of OnePath Life (NZ) ($6 million).

• Premises expenses decreased $10 million (-2%) primarily driven by the consolidation of our property portfolio in Australia and Asia.

• Technology expenses decreased $320 million (-30%) largely due to the accelerated amortisation charge in prior period ($251 million), ongoing lower software amortisation charges and the insourcing of technology services.

• Restructuring expenses decreased $98 million (-66%) due to higher spend in the prior period associated with the move to agile ways of working in the Australia and Technology divisions.

• Other expenses decreased $149 million (-16%) largely related to lower Royal Commission legal costs ($26 million), customer remediation ($40 million), expenses following the sale of OnePath Life (NZ) ($5 million) and lower consultancy spend and lower marketing spend which is typically higher in the September half.

Excluding large/notable items, operating expenses decreased $48 million (-1%).

30

GROUP RESULTS

Software Capitalisation - continuing operations

As at 31 March 2019, the Group’s intangible assets included $1,368 million of costs incurred to acquire and develop software. Details are set out in the table below:

	Half Year									Movement
	Mar 19			Sep 18			Mar 18			Mar 19		Mar 19
	$M			$M			$M			v. Sep 18		v. Mar 18
Balance at start of period		1,421			1,775			1,856			-20%		-23%
Software capitalised during the period		199			195			198			2%		1%
Amortisation during the period
- Current period amortisation		(252	)		(288	)		(281	)		-13%		-10%
- Accelerated amortisation1		-			(251	)		-			-100%		n/a
Software impaired/written-off		(3	)		(12	)		(5	)		-75%		-40%
Foreign currency translation movements		3			2			7			50%		-57%
Total capitalised software from continuing operations		1,368			1,421			1,775			-4%		-23%
Net book value by Division	As at									Movement
		Mar 19			Sep 18			Mar 18			Mar 19		Mar 19
	$M			$M			$M			v. Sep 18		v. Mar 18
Australia		300			334			413			-10%		-27%
Institutional		246			277			542			-11%		-55%
New Zealand		14			17			20			-18%		-30%
Wealth Australia		6			10			13			-40%		-54%
TSO and Group Centre		802			783			787			2%		2%
Total from continuing operations		1,368			1,421			1,775			-4%		-23%

^1.  During the September 2018 half, the Group accelerated the amortisation of certain software assets, predominantly relating to its Institutional division following a review of the International business in light of divestments. Accelerated amortisation expense of $251 million ($206 million post-tax) was recorded in the September 2018 half.

31

GROUP RESULTS

Credit Risk – continuing operations

The Group has adopted AASB 9 Financial Instruments effective from 1 October 2018 which has resulted in key changes to the classification and measurement of financial assets, including the impairment of financial assets. Under the new standard, provision for credit impairment is based on an expected credit loss model (ECL) incorporating forward looking information. The presentation of credit risk information for the March 2019 half has been amended accordingly. Comparative information has not been restated and continues to reflect the requirements of the previous standard AASB 139 Financial Instruments: Recognition and Measurement. For further details on key requirements and impacts of the changes described above refer to Note 1 and 21 of the Condensed Consolidated Financial Statements.

Credit impairment charge/(release)

	Half Year									Half Year									Movement
	Mar 19									Mar 18									Mar 19 v. Mar 18
	Collectively			Individually			Total			Collectively			Individually			Total			Collectively		Individually		Total
	assessed			assessed			charge			assessed			assessed			charge			assessed		assessed		charge
Division		$M			$M			$M			$M			$M			$M			%		%		%
Australia		46			350			396			(25	)		337			312			large		4%		27%
Institutional		(23	)		(12	)		(35	)		21			28			49			large		large		large
New Zealand		(5	)		35			30			(14	)		34			20			-64%		3%		50%
Pacific		(6	)		8			2			2			-			2			large		n/a		0%
TSO and Group Centre		1			(1	)		-			(6	)		31			25			large		large		-100%
Total		13			380			393			(22	)		430			408			large		-12%		-4%
	Half Year									Half Year									Movement
				Mar 19									Sep 18						Mar 19 v. Sep 18
	Collectively			Individually			Total			Collectively			Individually			Total			Collectively		Individually		Total
	assessed			assessed			charge			assessed			assessed			charge			assessed		assessed		charge
Division		$M			$M			$M			$M			$M			$M			%		%		%
Australia		46			350			396			11			375			386			large		-7%		3%
Institutional		(23	)		(12	)		(35	)		(41	)		(52	)		(93	)		-44%		-77%		-62%
New Zealand		(5	)		35			30			(29	)		15			(14	)		-83%		large		large
Pacific		(6	)		8			2			(4	)		5			1			50%		60%		100%
TSO and Group Centre		1			(1	)		-			-			-			-			n/a		n/a		n/a
Total		13			380			393			(63	)		343			280			large		11%		40%

Half Year - Mar 19	Collectively Assessed												Individually Assessed
															Stage 3 -
													Stage 3 -		Recoveries
													New and		and write-
	Stage 1			Stage 2			Stage 3			Total			increased		backs			Total			Total
Division		$M			$M			$M			$M			$M		$M			$M			$M
Australia		(21	)		43			24			46			536		(186	)		350			396
Institutional		19			(35	)		(7	)		(23	)		18		(30	)		(12	)		(35	)
New Zealand		(4	)		(5	)		4			(5	)		60		(25	)		35			30
Pacific		(1	)		(4	)		(1	)		(6	)		11		(3	)		8			2
TSO and Group Centre		1			-			-			1			-		(1	)		(1	)		-
Total		(6	)		(1	)		20			13			625		(245	)		380			393

Individually assessed credit impairment charge/(release) under AASB 139

	New and increased				Recoveries and write-backs						Total
	Half Year				Half Year						Half Year
	Sep 18		Mar 18		Sep 18			Mar 18			Sep 18			Mar 18
Division		$M		$M		$M			$M			$M			$M
Australia		581		528		(206	)		(191	)		375			337
Institutional		51		92		(103	)		(64	)		(52	)		28
New Zealand		76		67		(61	)		(33	)		15			34
Pacific		8		5		(3	)		(5	)		5			-
TSO and Group Centre		-		36		-			(5	)		-			31
Total		716		728		(373	)		(298	)		343			430

32

GROUP RESULTS

Collectively assessed credit impairment charge

• March 2019 v March 2018

The increase in the collectively assessed credit impairment charge of $35 million was primarily driven by an increase of $71 million in the Australia division due to the weakening Australian economic outlook increasing expected credit loss. This was partially offset by a reduction of $44 million in the Institutional division as a result of fewer large customer downgrades relative to the prior period, and also the partial release of a temporary economic overlay.

• March 2019 v September 2018

The increase in the collectively assessed credit impairment charge of $76 million was primarily driven by an increase of $35 million in the Australia division, $18 million in the Institutional division and $24 million in the New Zealand division. The increase in Australia division was due to the weakening Australian economic outlook increasing expected credit loss. The increase in Institutional division was a result of fewer large customer upgrades relative to the September 2018 half, partly offset by the partial release of a temporary economic overlay. The increase in New Zealand division was primarily the result of lower September 2018 half provisions due to a release of the Agri overlay.

Individually assessed credit impairment charge

• March 2019 v March 2018

The individually assessed credit impairment charge decreased by $50 million (-12%) primarily due to lower new and increased individually assessed credit impairment charges in the Institutional division combined with the sale of the Asia Retail and Wealth businesses. This was partially offset by Australia division which experienced higher provisions in Business & Private Bank.

• March 2019 v September 2018

The individually assessed credit impairment charge increased by $37 million (+11%) driven by significant write-backs and recoveries in the

Institutional and New Zealand divisions in the September 2018 half. This was partially offset by a $25 million decrease in the Australia division due to decreased provisions predominantly in the personal loan and credit card portfolios.

Allowance for expected credit losses^1,2

	As at						As at						Movement
	Mar 19						Mar 18						Mar 19 v. Mar 18
	Collectively assessed		Individually assessed		Total provision		Collectively assessed		Individually assessed		Total provision		Collectively assessed		Individually assessed		Total provision
Division	$M		$M		$M		$M		$M		$M		%		%		%
Australia		1,834		586		2,420		1,113		577		1,690		65%		2%		43%
Institutional		1,132		208		1,340		1,101		320		1,421		3%		-35%		-6%
New Zealand		369		73		442		317		104		421		16%		-30%		5%
Pacific		43		24		67		45		14		59		-4%		71%		14%
TSO and Group Centre		-		-		-		3		1		4		-100%		-100%		-100%
Total3		3,378		891		4,269		2,579		1,016		3,595		31%		-12%		19%
	As at						As at						Movement
	Mar 19						Sep 18						Mar 19 v. Sep 18
	Collectively assessed		Individually assessed		Total provision		Collectively assessed		Individually assessed		Total provision		Collectively assessed		Individually assessed		Total provision
Division	$M		$M		$M		$M		$M		$M		%		%		%
Australia		1,834		586		2,420		1,125		569		1,694		63%		3%		43%
Institutional		1,132		208		1,340		1,073		251		1,324		5%		-17%		1%
New Zealand		369		73		442		279		81		360		32%		-10%		23%
Pacific		43		24		67		43		18		61		0%		33%		10%
TSO and Group Centre		-		-		-		3		1		4		-100%		-100%		-100%
Total3		3,378		891		4,269		2,523		920		3,443		34%		-3%		24%
As at Mar 19
							Collectively Assessed								Individually Assessed
							Stage 1		Stage 2		Stage 3		Total		Stage 3		Total
Division							$M		$M		$M		$M		$M		$M
Australia								384		1,150		300		1,834		586		2,420
Institutional								859		234		39		1,132		208		1,340
New Zealand								152		173		44		369		73		442
Pacific								20		11		12		43		24		67
Total3								1,415		1,568		395		3,378		891		4,269

^1.  Includes allowance for expected credit losses for Net loans and advances – at amortised cost, Investment securities – debt securities at amortised cost and Off-balance sheet commitments - undrawn and contingent facilities.

^2. Balance Sheet amounts include assets and liabilities reclassified as held for sale from continuing and discontinued operations.

^3. On adoption of AASB 9 on 1 October 2018, the Group increased the collectively assessed provision by $813 million. Comparative information has not been restated.

33

GROUP RESULTS

Long-Run Loss Rates

Management believe that disclosure of modelled expected loss data using average long-run loss rates for individually assessed provisions assists in assessing the longer term expected loss rates of the lending portfolio as it removes the volatility of reported earnings created by the use of accounting losses. The expected loss methodology is used for economic profit as an internal measure and is not based on the credit loss provision principles of AASB 9 Financial Instruments which were effective from 1 October 2018.

	As at
Long-run loss as a % of gross lending assets		Mar 19	Sep 18	Mar 18
Australia division		0.29%	0.29%	0.31%
New Zealand division		0.19%	0.19%	0.21%
Institutional division		0.27%	0.27%	0.32%
Total Group		0.27%	0.27%	0.30%

Gross Impaired Assets1
	As at									Movement
	Mar 19			Sep 18			Mar 18			Mar 19		Mar 19
	$M			$M			$M			v. Sep 18		v. Mar 18
Impaired loans		1,697			1,676			1,863			1%		-9%
Restructured items2		264			269			76			-2%		large
Non-performing commitments and contingencies		61			68			95			-10%		-36%
Gross impaired assets		2,022			2,013			2,034			0%		-1%
Individually assessed provisions
Impaired loans		(865	)		(894	)		(990	)		-3%		-13%
Non-performing commitments and contingencies		(26	)		(26	)		(26	)		0%		0%
Net impaired assets		1,131			1,093			1,018			3%		11%
Gross impaired assets by division
Australia		1,357			1,285			1,114			6%		22%
Institutional		373			442			626			-16%		-40%
New Zealand		238			236			244			1%		-2%
Pacific		53			46			43			15%		23%
TSO and Group Centre		1			4			7			-75%		-86%
Gross impaired assets		2,022			2,013			2,034			0%		-1%
Gross impaired assets by size of exposure
Less than $10 million		1,505			1,489			1,487			1%		1%
$10 million to $100 million		328			335			547			-2%		-40%
Greater than $100 million		189			189			-			0%		n/a
Gross impaired assets		2,022			2,013			2,034			0%		-1%

^1.  Balance sheet amounts include assets and liabilities reclassified as held for sale from continuing and discontinued operations.

^2. Restructured items are facilities where the original contractual terms have been modified for reasons related to the financial difficulties of the customer. Restructuring may consist of reduction of interest, principal or other payments legally due, or an extension in maturity materially beyond those typically offered to new facilities with similar risk.

• March 2019 v March 2018

Gross impaired assets decreased $12 million (-1%) driven by the Institutional division (-$253 million) with repayments reducing a number of large impaired assets. This was partially offset by an increase in the Australia division ($243 million) primarily driven by a single name restructured loan and an increase in the home loan portfolio. The Group’s individually assessed provision coverage ratio on impaired assets was 44.1% at 31 March 2019 (Mar 18: 50.0%).

• March 2019 v September 2018

Gross impaired assets increased $9 million driven by the Australia division ($72 million) due to a single name exposure in business banking and an increase in the home loan portfolio. This was partially offset by a decrease in the Institutional division (-$69 million) driven by repayments and write-offs. The Group’s individually assessed provision coverage ratio on impaired assets was 44.1% at 31 March 2019 (Sep 18: 45.7%).

34

GROUP RESULTS

New Impaired Assets¹

	Half Year						Movement
	Mar 19 $M		Sep 18 $M		Mar 18 $M		Mar 19 v. Sep 18		Mar 19 v. Mar 18
Impaired loans		857		929		917		-8%		-7%
Restructured items		13		203		21		-94%		-38%
Non-performing commitments and contingencies		20		13		25		54%		-20%
Total new impaired assets		890		1,145		963		-22%		-8%
New impaired assets by division
Australia		715		905		699		-21%		2%
Institutional		41		45		124		-9%		-67%
New Zealand		120		191		101		-37%		19%
Pacific		14		4		7		large		100%
TSO and Group Centre		-		-		32		n/a		-100%
Total new impaired assets		890		1,145		963		-22%		-8%

^1. Balance sheet amounts include assets and liabilities reclassified as held for sale from continuing and discontinued operations.

• March 2019 v March 2018

New impaired assets decreased $73 million (-8%) primarily driven by the Institutional division as the result of an improved risk profile due to portfolio rebalancing, combined with a benign credit environment. In addition, new impaired assets decreased due to lending reductions following the sale of Asia Retail and Wealth businesses.

• March 2019 v September 2018

New impaired assets decreased by $255 million (-22%) driven by the Australia division primarily due to a single name restructured loan recorded in the September 2018 half, combined with decreases in the New Zealand Commercial and Agri business.

Ageing analysis of net loans and advances that are past due but not impaired¹

	As at						Movement
	Mar 19 $M		Sep 18 $M		Mar 18 $M		Mar 19 v. Sep 18		Mar 19 v. Mar 18
1-29 days		9,560		8,958		8,974		7%		7%
30-59 days		2,997		2,240		2,576		34%		16%
60-89 days		1,437		1,268		1,233		13%		17%
>90 days		3,396		2,998		3,038		13%		12%
Total		17,390		15,464		15,821		12%		10%

^1. Balance sheet amounts include assets and liabilities reclassified as held for sale from continuing and discontinued operations.

• March 2019 v March 2018

Net loans and advances past due but not impaired increased $1,569 million due to portfolio deterioration across Australia division home loans ($1,286 million) and New Zealand division home loans ($118 million) and Agri portfolios ($127 million).

• March 2019 v September 2018

Net loans and advances past due but not impaired increased $1,926 million due to portfolio deterioration across Australia division home loans ($1,675 million) and New Zealand division home loans ($184 million) and Commercial and Agri portfolios ($186 million).

35

GROUP RESULTS

Income Tax Expense - continuing operations

	Half Year						Movement
	Mar 19 $M		Sep 18 $M		Mar 18 $M		Mar 19 v. Sep 18		Mar 19 v. Mar 18
Income tax expense on cash profit		1,415		1,286		1,489		10%		-5%
Effective tax rate (cash profit)		28.4%		30.0%		29.8%

• March 2019 v March 2018

The effective tax rate has decreased from 29.8% to 28.4%. The decrease of 140 bps was primarily due to the inclusion in the March 2018 half of a non-tax deductible net loss on completion of the sale of Shanghai Rural Commercial Bank (-176 bps), partially offset by non-taxable profit on the disposal of the Group’s stake in Metrobank Card Corporation (+74 bps) and tax provisions no longer required (+46 bps), while the March 2019 half included a net non-assessable gain on the sale of OnePath Life (NZ) (-20 bps), a non-assessable gain on the sale of Paymark (-20 bps) and higher offshore earnings which attracted a lower average tax rate (-46 bps).

• March 2019 v September 2018

The effective tax rate has decreased from 30.0% to 28.4%. The decrease of 160 bps was primarily due to higher offshore earnings which attracted a lower average tax rate (-118 bps), a net non-assessable gain on the sale of OnePath Life (NZ) (-20 bps) and a non-assessable gain on the sale of Paymark (-20 bps) in the March 2019 half.

36

GROUP RESULTS

Impact of Foreign Currency Translation - continuing operations

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

Cash Profit - March 2019 Half Year vs March 2018 Half Year

	Half Year												Movement
	Actual			FX unadjusted			FX impact			FX adjusted			FX unadjusted		FX adjusted
	Mar 19			Mar 18			Mar 18			Mar 18			Mar 19		Mar 19
	$M			$M			$M			$M			v. Mar 18		v. Mar 18
Net interest income		7,299			7,350			91			7,441			-1%		-2%
Other operating income		2,447			2,520			20			2,540			-3%		-4%
Operating income		9,746			9,870			111			9,981			-1%		-2%
Operating expenses		(4,365	)		(4,473	)		(70	)		(4,543	)		-2%		-4%
Profit before credit impairment and income tax		5,381			5,397			41			5,438			0%		-1%
Credit impairment charge		(393	)		(408	)		(3	)		(411	)		-4%		-4%
Profit before income tax		4,988			4,989			38			5,027			0%		-1%
Income tax expense		(1,415	)		(1,489	)		(8	)		(1,497	)		-5%		-5%
Non-controlling interests		(9	)		(7	)		(1	)		(8	)		29%		13%
Cash profit from continuing operations		3,564			3,493			29			3,522			2%		1%
Balance Sheet
Net loans and advances1		610,143			592,469			5,822			598,291			3%		2%
Cash Profit - March 2019 Half Year vs September 2018 Half Year
	Half Year												Movement
	Actual			FX unadjusted			FX impact			FX adjusted			FX unadjusted		FX adjusted
	Mar 19			Sep 18			Sep 18			Sep 18			Mar 19		Mar 19
	$M			$M			$M			$M			v. Sep 18		v. Sep 18
Net interest income		7,299			7,164			57			7,221			2%		1%
Other operating income		2,447			2,333			(1	)		2,332			5%		5%
Operating income		9,746			9,497			56			9,553			3%		2%
Operating expenses		(4,365	)		(4,928	)		(57	)		(4,985	)		-11%		-12%
Profit before credit impairment and income tax		5,381			4,569			(1	)		4,568			18%		18%
Credit impairment charge		(393	)		(280	)		5			(275	)		40%		43%
Profit before income tax		4,988			4,289			4			4,293			16%		16%
Income tax expense		(1,415	)		(1,286	)		(1	)		(1,287	)		10%		10%
Non-controlling interests		(9	)		(9	)		1			(8	)		0%		13%
Cash profit from continuing operations		3,564			2,994			4			2,998			19%		19%
Balance Sheet
Net loans and advances1		610,143			605,437			6,638			612,075			1%		0%

^1. Balance sheet amounts include assets and liabilities reclassified as held for sale from continuing and discontinued operations.

37

GROUP RESULTS

Earnings Related Hedges – continuing operations

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). New Zealand Dollar exposure relates to the New Zealand geography and USD exposures relate to Asia, Pacific, Europe & America. Details of these hedges are set out below.

	Half Year
	Mar 19 $M			Sep 18 $M			Mar 18 $M
NZD Economic hedges
Net open NZD position (notional principal)1		3,361			2,076			2,669
Amount taken to income (pre-tax statutory basis)2		(105	)		63			(50	)
Amount taken to income (pre-tax cash basis)3		(25	)		(2	)		7
USD Economic hedges
Net open USD position (notional principal)1		561			174			-
Amount taken to income (pre-tax statutory basis)2		(2	)		2			-
Amount taken to income (pre-tax cash basis)3		-			-			-

^1. Value in AUD at contracted rate.

^2. Unrealised valuation movement plus realised revenue from matured or closed out hedges.

^3. Realised revenue from closed out hedges.

As at 31 March 2019, the following hedges were in place to partially hedge future earnings against adverse movements in exchange rates:

• NZD 3.6 billion at a forward rate of approximately NZD 1.06/AUD.

• USD 0.4 billion at a forward rate of approximately USD 0.71/AUD.

During the March 2019 half:

• NZD 0.9 billion of economic hedges matured and a realised loss of $24.5 million (pre-tax) was recorded in cash profit.

• USD 0.1 billion of economic hedges matured and a realised gain of $0.2 million (pre-tax) was recorded in cash profit.

• An unrealised loss of $82 million (pre-tax) on the outstanding NZD and USD economic hedges were recorded in the statutory Income Statement during the year. This unrealised loss has been treated as an adjustment to statutory profit in calculating cash profit as these are hedges of future NZD and USD revenues.

Earnings per Share - continuing operations

	Half Year						Movement
							Mar 19		Mar 19
	Mar 19		Sep 18		Mar 18		v. Sep 18		v. Mar 18
Cash earnings per share (cents) from continuing operations
Basic		124.8		103.9		119.4		20%		5%
Diluted		118.4		100.0		113.4		18%		4%
Cash weighted average number of ordinary shares (M)1
Basic		2,856.9		2,882.2		2,924.6		-1%		-2%
Diluted		3,125.8		3,132.3		3,204.3		0%		-2%
Cash profit from continuing operations ($M)		3,564		2,994		3,493		19%		2%
Cash profit from continuing operations used in calculating diluted cash earnings per share ($M)		3,701		3,132		3,634		18%		2%

^1. Cash weighted average number of ordinary shares includes treasury shares held in Wealth Australia, which will form part of continuing operations post completion of the Successor Fund Transfer (SFT) performed in preparation for the disposal of discontinued operations.

38

GROUP RESULTS

Dividends - continuing operations

	Half Year						Movement
							Mar 19		Mar 19
	Mar 19		Sep 18		Mar 18		v. Sep 18		v. Mar 18
Dividend per ordinary share (cents) - continuing operations
Interim (fully franked)1		80		-		80		n/a		0%
Final (fully franked)		-		80		-		n/a		n/a
Ordinary share dividends used in payout ratio ($M)2		2,267		2,295		2,317		-1%		-2%
Cash profit from continuing operations ($M)		3,564		2,994		3,493		19%		2%
Ordinary share dividend payout ratio (cash basis)2		63.6%		76.7%		66.3%

^1. Interim dividend for 2019 is proposed.

^2. Dividend payout ratio is calculated using proposed 2019 interim dividend of $2,267 million, which is based on the forecast number of ordinary shares on issue at the dividend record date. Dividend payout ratios for the September and March 2018 halves were calculated using actual dividend paid of $2,295 million and $2,317 million respectively.

The Directors propose an interim dividend of 80 cents be paid on each eligible fully paid ANZ ordinary share on 1 July 2019. The proposed 2019 interim dividend will be fully franked for Australian tax purposes. New Zealand imputation credits of NZD 9 cents per ordinary share will also be attached.

Economic Profit - continuing operations

	Half Year									Movement
	Mar 19			Sep 18			Mar 18			Mar 19		Mar 19
	$M			$M			$M			v. Sep 18		v. Mar 18
Statutory profit attributable to shareholders of the Company from continuing operations		3,243			3,172			3,923			2%		-17%
Adjustments between statutory profit and cash profit from continuing operations		321			(178	)		(430	)		large		large
Cash profit from continuing operations		3,564			2,994			3,493			19%		2%
Economic credit cost adjustment		(316	)		(434	)		(369	)		-27%		-14%
Imputation credits		601			529			600			14%		0%
Economic return from continuing operations		3,849			3,089			3,724			25%		3%
Cost of capital		(2,862	)		(2,825	)		(2,762	)		1%		4%
Economic profit from continuing operations		987			264			962			large		3%

Economic profit is a risk adjusted profit measure used to evaluate business unit performance. This is used for internal management purposes and is not subject to review.

Economic profit is calculated via a series of adjustments to cash profit. The economic credit cost adjustment replaces the accounting credit loss charge with internal expected loss based on the average long-run loss rate per annum on the portfolio over an economic cycle. The benefit of imputation credits is recognised, measured at 70% of Australian tax. The cost of capital is a major component of economic profit. At an ANZ Group level, this is calculated using average ordinary shareholders’ equity (excluding non-controlling interests), multiplied by the cost of capital rate (currently 10% and applied across comparative periods). At a business unit level, capital is allocated based on Regulatory Capital, whereby higher risk businesses attract higher levels of capital. The basis of allocation was changed from Economic Capital to Regulatory Capital in the current period and comparative information has been restated. This method is designed to help drive appropriate risk management and ensure business returns align with the level of risk. Key risks covered include credit risk, operational risk, market risk and other risks.

Economic profit increased $25 million (+3%) against the March 2018 half driven by higher cash profit and lower economic credit costs, partly offset by higher cost of capital.

Economic profit increased $723 million against the September 2018 half mainly driven by higher cash profit, lower economic credit costs and higher imputation credits on higher Australian profits, partly offset by higher cost of capital.

39

GROUP RESULTS

Condensed Balance Sheet - including discontinued operations

	As at						Movement
	Mar 19		Sep 18		Mar 18		Mar 19		Mar 19
	$B		$B		$B		v. Sep 18		v. Mar 18
Assets
Cash / Settlement balances owed to ANZ / Collateral paid		109.9		98.0		98.0		12%		12%
Trading and investment securities/available-for-sale assets1		121.8		112.0		115.3		9%		6%
Derivative financial instruments		79.4		68.4		70.9		16%		12%
Net loans and advances		609.3		604.4		589.5		1%		3%
Assets held for sale		43.5		45.2		45.3		-4%		-4%
Other		16.4		15.2		16.7		8%		-2%
Total assets		980.3		943.2		935.7		4%		5%
Liabilities
Settlement balances owed by ANZ / Collateral received		18.1		18.3		20.0		-1%		-9%
Deposits and other borrowings		635.0		618.2		616.2		3%		3%
Derivative financial instruments		80.9		69.7		70.6		16%		15%
Debt issuances		129.7		121.2		114.9		7%		13%
Liabilities held for sale		46.6		47.2		44.8		-1%		4%
Other		10.0		9.2		9.7		9%		3%
Total liabilities		920.3		883.8		876.2		4%		5%
Total equity		60.0		59.4		59.5		1%		1%

^1. On adoption of AASB 9 on 1 October 2018, the classification and measurement of financial assets were revised. Available-for-sale classification used in comparative periods ceases to exist under AASB 9 and a new classification of investment securities was introduced. Refer to Note 1 for further details. Comparative information has not been restated.

• March 2019 v March 2018

• Cash/Settlement balances owed to ANZ/Collateral paid increased $11.9 billion (+12%) primarily driven by an increase in short term reverse repurchase agreements in Markets, increased overnight bank deposits in Treasury, and the impact of foreign currency translation movements.

• Trading and investment securities/available-for-sale assets increased $6.5 billion (+6%) primarily driven by an increase in liquid assets in Markets and the impact of foreign currency translation movements.

• Derivative financial assets and liabilities increased $8.5 billion (+12%) and $10.3 billion (+15%) respectively as interest rate movements resulted in higher derivative volumes and fair values, particularly in interest rate swap products.

• Net loans and advances increased $19.8 billion (+3%) primarily driven by lending growth in the Institutional division (+$10.9 billion), growth in home loans in the New Zealand division (+$5.2 billion), UDC net loans and advances no longer being classified as held for sale (+3.3 billion) and the impact of foreign currency translation movements, partially offset by the decrease in home loans in the Australia division (-$3.9 billion).

• Assets held for sale decreased $1.8 billion primarily driven by UDC no longer being classified as held for sale, partially offset by reclassification of Cambodia JV and PNG Retail, Commercial & SME to held for sale. Liabilities held for sale increased $1.8 billion primarily due to the reclassification of Cambodia JV and PNG Retail, Commercial & SME to held for sale and an increase of $0.8 billion in payables relating to the IOOF secured note, partially offset by UDC no longer being classified as held for sale.

• Deposits and other borrowings increased $18.8 billion (+3%) primarily driven by increase in deposits from banks and repurchase agreements (+$19.6 billion), growth in customer deposits in the New Zealand division (+$4.5 billion) and the impact of foreign currency translation movements. This was partially offset by reduction in certificates of deposit and commercial paper issued (-$16.6 billion).

• Debt issuances increased $14.8 billion (+13%) primarily driven by senior debt issuances and the impact of foreign currency translation movements.

• March 2019 v September 2018

• Cash/Settlement balances owed to ANZ/Collateral paid increased $11.9 billion (+12%) primarily driven by an increase in short term reverse repurchase agreements in Markets, increased overnight bank deposits in Treasury, and the impact of foreign currency translation movements.

• Trading and investment securities/available-for-sale assets increased $9.8 billion (+9%) primarily driven by an increase in liquid assets in Markets and the impact of foreign currency translation movements.

• Derivative financial assets and liabilities increased $11.0 billion (+16%) and $11.2 billion (+16%) respectively as interest rate movements resulted in higher derivative volumes and fair values, particularly in interest rate swap products.

• Net loans and advances increased $4.9 billion (+1%) primarily driven by growth in home loans in the New Zealand division (+2.4 billion), lending growth in the Institutional division (+$1.0 billion) and the impact of foreign currency translation movements, partially offset by a decrease in home loans in the Australia division (-$4.7 billion).

• Assets and liabilities held for sale decreased $1.7 billion and $0.6 billion respectively, primarily driven by the sale completion of OnePath Life (NZ). The decrease in liabilities held for sale was partially offset by an increase in payables relating to the IOOF secured note.

• Deposits and other borrowings increased $16.8 billion (+3%) primarily driven by increase in deposits from banks and repurchase agreements (+$20.0 billion), growth in customer deposits in the New Zealand division (+$1.9 billion) and the impact of foreign currency translation movements. This was partially offset by reduction in customer deposits in the Institutional division (-$21.7 billion) and commercial paper issued (-$2.5 billion).

• Debt issuances increased $8.5 billion (+7%) primarily driven by senior debt issuances and the impact of foreign currency translation movements.

40

GROUP RESULTS

Liquidity Risk - including discontinued operations

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

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

• Scenario modelling of funding sources

ANZ’s liquidity risk appetite is defined by the ability to meet a range of regulatory requirements and internal liquidity metrics mandated by the Board. The metrics cover a range of scenarios of varying duration and level of severity. The objective of this framework is to:

• Provide protection against shorter term extreme market dislocation and stress.

• Maintain structural strength in the balance sheet by ensuring that an appropriate amount of longer-term assets are funded with longer-term funding.

• Ensure that no undue timing concentrations exist in the Group’s funding profile.

A key component of this framework is the Liquidity Coverage Ratio (LCR), which is a severe short term liquidity stress scenario mandated by banking regulators including APRA. As part of meeting LCR requirements, ANZ has a Committed Liquidity Facility (CLF) with the Reserve Bank of Australia (RBA). The CLF has been established to offset the shortage of available High Quality Liquid Assets (HQLA) in Australia and provides an alternative form of contingent liquidity. The total amount of the CLF available to a qualifying ADI is set annually by APRA. From 1 January 2019, ANZ’s CLF is $48.0 billion (2018 calendar year end: $46.9 billion).

• Liquid assets

The Group holds a portfolio of high quality unencumbered liquid assets in order to protect the Group’s liquidity position in a severely stressed environment, as well as to meet regulatory requirements. High Quality Liquid Assets comprise three categories, with the definitions consistent with Basel 3 LCR:

• Highest-quality liquid assets (HQLA1): Cash, highest credit quality government, central bank or public sector securities eligible for repurchase with central banks to provide same-day liquidity.

• High-quality liquid assets (HQLA2): High credit quality government, central bank or public sector securities, high quality corporate debt securities and high quality covered bonds eligible for repurchase with central banks to provide same-day liquidity.

• Alternative liquid assets (ALA): Assets qualifying as collateral for the CLF and other eligible securities listed by the Reserve Bank of New Zealand (RBNZ).

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

	Half Year Average						Movement
	Mar 19		Sep 18		Mar 18		Mar 19		Mar 19
	$B		$B		$B		v. Sep 18		v. Mar 18
Market Values Post Discount1
HQLA1		134.5		137.0		131.8		-2%		2%
HQLA2		7.6		5.1		4.9		49%		55%
Internal Residential Mortgage Backed Securities2		34.2		38.9		37.8		-12%		-10%
Other ALA3		12.9		13.1		13.8		-2%		-7%
Total liquid assets		189.2		194.1		188.3		-3%		0%
Cash flows modelled under stress scenario
Cash outflows		176.3		177.5		180.5		-1%		-2%
Cash inflows		38.6		41.2		40.4		-6%		-4%
Net cash outflows		137.7		136.3		140.1		1%		-2%
Liquidity Coverage Ratio4		137%		142%		134%		-5%		3%

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

^2. In accordance with APRA requirement, March 2019 NZD denominated liquid asset balances beyond that required to achieve 100% NZD LCR must be considered not transferrable and thus excluded from Level 2 LCR.

^3. Comprised of assets qualifying as collateral for the CLF, excluding internal RMBS, up to approved facility limit; and any liquid assets contained in the RBNZ’s Liquidity Policy - Annex: Liquidity Assets - Prudential Supervision Department Document BS13A12.

^4. All currency Level 2 LCR.

41

GROUP RESULTS

Funding - including discontinued operations

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

$15.3 billion of term wholesale debt with a remaining term greater than one year as at 31 March 2019 was issued during the half year ended 31 March 2019.

The following table shows the Group’s total funding composition:

	As at									Movement
	Mar 19			Sep 18			Mar 18			Mar 19		Mar 19
	$B			$B			$B			v. Sep 18		v. Mar 18
Customer deposits and other liabilities
Australia		203.4			202.7			204.2			0%		0%
Institutional		205.4			205.8			190.7			0%		8%
New Zealand		85.4			79.8			79.2			7%		8%
Pacific		3.5			3.5			3.4			0%		3%
TSO and Group Centre1		(4.3	)		(4.5	)		(4.7	)		-4%		-9%
Customer deposits		493.4			487.3			472.8			1%		4%
Other funding liabilities2,3		8.6			8.6			8.5			0%		1%
Total customer liabilities (funding)		502.0			495.9			481.3			1%		4%
Wholesale funding
Debt issuances		113.4			105.3			97.5			8%		16%
Subordinated debt		16.3			15.9			17.2			3%		-5%
Certificates of deposit		43.6			42.7			50.3			2%		-13%
Commercial paper		14.7			17.0			24.1			-14%		-39%
Other wholesale borrowings4,5		100.1			86.8			84.4			15%		19%
Total wholesale funding		288.1			267.7			273.5			8%		5%
Shareholders’ equity		60.0			59.4			59.5			1%		1%
Total funding		850.1			823.0			814.3			3%		4%

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

^2. Includes interest accruals, payables and other liabilities, provisions and net tax provisions, excluding other liabilities in Wealth Australia.

^3. Excludes liability for acceptances as they do not provide net funding.

^4. Includes borrowings from banks, securities sold under repurchase agreements, net derivative balances, special purpose vehicles and other borrowings.

^5. Includes RBA open repo arrangement netted down by the exchange settlement account cash balance.

Net Stable Funding Ratio

The following table shows the Level 2 Net Stable Funding Ratio (NSFR) composition:

	As at						Movement
	Mar 19		Sep 18		Mar 18		Mar 19		Mar 19
	$B		$B		$B		v. Sep 18		v. Mar 18
Required Stable Funding1
Retail & small and medium enterprises, corporate loans <35% risk weight2		182.9		183.9		184.0		-1%		-1%
Retail & small and medium enterprises, corporate loans >35% risk weight2		189.1		182.6		177.2		4%		7%
Other lending3		23.2		23.2		19.1		0%		21%
Liquid assets		10.7		9.8		9.7		9%		10%
Other assets4		40.2		36.6		38.4		10%		5%
Total Required Stable Funding		446.1		436.1		428.4		2%		4%
Available Stable Funding1
Retail & small and medium enterprise customer deposits		236.6		231.7		233.4		2%		1%
Corporate, public sector entities & operational deposits		91.5		91.8		83.4		0%		10%
Central bank & other financial institution deposits		6.1		5.3		4.2		15%		45%
Term funding		101.2		96.3		94.0		5%		8%
Short term funding & other liabilities		3.7		1.3		2.7		large		37%
Capital		73.9		73.3		74.4		1%		-1%
Total Available Stable Funding		513.0		499.7		492.1		3%		4%
Net Stable Funding Ratio		115%		115%		115%		0%		0%

^1. NSFR factored balance as per APRA Prudential Regulatory Standard APS 210 Liquidity.

^2. Risk weighting as per APRA Prudential Regulatory Standard APS 112 Capital Adequacy: Standardised Approach to Credit Risk.

^3. Includes financial institution and central bank loans.

^4. Includes off-balance sheet items, net derivatives and other assets.

42

GROUP RESULTS

Capital Management - including discontinued operations

	As at
	APRA Basel 3						Internationally Comparable Basel 31
	Mar 19		Sep 18		Mar 18		Mar 19		Sep 18		Mar 18
Capital Ratios
Common Equity Tier 1		11.5%		11.4%		11.0%		16.9%		16.8%		16.3%
Tier 1		13.4%		13.4%		12.9%		19.3%		19.2%		18.7%
Total capital		15.3%		15.2%		14.9%		21.7%		21.6%		21.3%
Risk weighted assets ($B)		396.3		390.8		395.8		310.9		305.6		311.5

^1.  Internationally Comparable methodology aligns with APRA’s information paper entitled “International Capital Comparison Study” (13 July 2015)

APRA Basel 3 Common Equity Tier 1 (CET1 ratio) - March 2019 v September 2018

^1. Excludes large/notable items for the purposes of Regulatory Capital Management attribution. Refer to pages 14 to 18.

^2. Capital deductions represent the movement in retained earnings in deconsolidated entities, capitalised software, expected losses in excess of eligible provision shortfall and other intangibles in the period.

• March 2019 v September 2018

ANZ’s CET1 ratio increased 5 bps to 11.5% during the March 2019 half. Key drivers of the movement in the CET1 ratio were:

• Net organic capital generation of 84 bps. This was primarily driven by cash profit (excluding large/notable items), a net reduction in underlying RWA (excluding foreign currency translation movements, regulatory changes and other one-offs), partially offset by growth in other business capital deductions.

• Payment of the September 2018 final dividend (net of BOP issuance, neutralised DRP) reduced the CET1 ratio by 58 bps.

• Capital benefits from asset disposals (OnePath Life (NZ) and Paymark) increased the CET1 ratio by 17 bps.

• Group on-market share buy-back of $1.1 billion decreased the CET1 ratio by 29 bps.

• Other impacts include RWA modelling changes, large/notable items affecting the March 2019 half cash earnings, movements in non-cash earnings, impact of AASB 9 transition and net foreign currency translation movements.

Total Risk Weighted Assets	As at						Movement
	Mar 19		Sep 18		Mar 18		Mar 19		Mar 19
	$B		$B		$B		v. Sep 18		v. Mar 18
Credit RWA		345.5		337.6		342.8		2%		1%
Market risk and IRRBB RWA		13.1		15.6		15.6		-16%		-16%
Operational RWA		37.7		37.6		37.4		0%		1%
Total RWA		396.3		390.8		395.8		1%		0%

43

GROUP RESULTS

Total Risk Weighted Assets (RWA) - March 2019 v September 2018

• March 2019 v September 2018

Total RWA increased by $5.5 billion. Excluding the impact of foreign currency translation movements and other non-recurring CRWA changes, underlying CRWAs (divisional lending and risk migration) increased by $1.6 billion, mainly driven by lending growth in the Institutional division. Other CRWA changes reflect net impacts from RWA modelling changes. The decrease in non-CRWA of $2.4 billion was mainly driven by a lower risk profile for Market Risk & IRRBB RWA.

APRA to Internationally Comparable¹ Common Equity Tier 1 (CET1 ratio) as at 31 March 2019

^1. ANZ’s interpretation of the regulations documented in the Basel Committee publications: “Basel 3: A global regulatory framework for more resilient banks and banking systems” (June 2011) and “International Convergence of Capital Measurement and Capital Standards” (June 2006). Also includes differences identified in APRA’s information paper entitled “International Capital Comparison Study” (13 July 2015).

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

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

Deductions

• Investments in insurance and banking associates - APRA requires full deduction against CET1. On an Internationally Comparable basis, these investments are subject to a concessional threshold before a deduction is required.

• Deferred tax assets - A full deduction is required from CET1 for deferred tax assets (DTA) relating to temporary differences. On an Internationally Comparable basis, this is first subject to a concessional threshold before the deduction is required.

Risk Weighted Assets (RWA)

• Mortgages RWA - APRA imposes a floor of 20% on the downturn Loss Given Default (LGD) used in credit RWA calculations for residential mortgages. The Internationally Comparable Basel 3 framework requires a downturn LGD floor of 10%. Additionally, from July 2016, APRA requires a higher correlation factor than the Basel framework.

• IRRBB RWA - APRA requires inclusion of Interest Rate Risk in the Banking Book (IRRBB) within the RWA base for the CET1 ratio calculation. This is not required on an Internationally Comparable basis.

• Specialised lending - APRA requires the supervisory slotting approach to be used in determining credit RWA for specialised lending exposures. The Internationally Comparable basis allows for the advanced internal ratings based approach to be used when calculating RWA for these exposures.

• Unsecured Corporate Lending LGD - an adjustment to align ANZ’s unsecured corporate lending LGD to 45% to be consistent with banks in other jurisdictions. The 45% LGD rate is also used in the Foundation Internal Ratings-Based approach (FIRB).

• Undrawn Corporate Lending Exposure at Default (EAD) - an adjustment to ANZ’s credit conversion factors (CCF) for undrawn corporate loan commitments to 75% (used in FIRB approach) to align with banks in other jurisdictions.

44

GROUP RESULTS

Leverage Ratio - including discontinued operations

At 31 March 2019, the Group’s APRA Leverage Ratio was 5.4% which is above the 3.5% APRA proposed minimum for internal ratings-based approach ADI (IRB ADI) which includes ANZ. The following table summarises the Group’s Leverage Ratio calculation:

			As at				Movement
	Mar 19		Sep 18		Mar 18		Mar 19		Mar 19
	$M		$M		$M		v. Sep 18		v. Mar 18
Tier 1 Capital (net of capital deductions)1		53,075		52,218		51,125		2%		4%
On-balance sheet exposures (excluding derivatives and securities financing transaction exposures)		810,915		785,405		780,272		3%		4%
Derivative exposures		31,439		30,676		32,747		2%		-4%
Securities financing transaction exposures		37,287		36,066		29,351		3%		27%
Other off-balance sheet exposures		105,942		102,810		99,921		3%		6%
Total exposure measure		985,583		954,957		942,291		3%		5%
APRA Leverage Ratio		5.4%		5.5%		5.4%
Internationally Comparable Leverage Ratio		6.0%		6.1%		6.1%

^1.  Prior period numbers have not been restated for the impact of AASB 15 to align with previously reported regulatory returns.

• March 2019 v September 2018

APRA leverage ratio decreased 8 bps in the March 2019 half. Key drivers of the movement were:

• Net organic capital generation of 10 bps from cash profit (excluding large/notable items) less dividends paid.

• Exposure growth primarily from growth in liquids, trading securities, and securities financing transactions decreased the leverage ratio by 11 bps.

• Benefits from asset divestments increased the leverage ratio by 7 bps (cash settlement of OnePath Life (NZ) and Paymark). This was offset by the impact of $1.1 billion Group on-market share buy-back during the March 2019 half (-12 bps).

• Other impacts (-2 bps) mainly driven by non-cash adjustments (-3 bps), large/notable items affecting the March 2019 half cash earnings (-2 bps), offset by deferred tax asset benefits (+2 bps) and other (+1 bps).

45

GROUP RESULTS

Capital Management - Other Regulatory Developments

• Financial System Inquiry (FSI)

The Australian Government completed a comprehensive inquiry into Australia’s financial system in 2014 which included a number of key recommendations that may have an impact on regulatory capital levels. APRA initiatives in support of the FSI are:

• In July 2017, APRA released an information paper outlining its assessment on the additional capital required for the Australian banking sector to be considered ‘unquestionably strong’ as originally outlined in the FSI final report in December 2014. APRA indicated that “in the case of the four major Australian banks, this equated to a benchmark CET1 capital ratio, under the current capital adequacy framework, of at least 10.5 percent. APRA also stated that the major banks should meet this benchmark by 1 January 2020 at the latest”.

• In February 2018, APRA released a discussion paper that commenced their consultation on the revisions to the capital framework that will produce ‘unquestionably strong’ capital ratios. The discussion paper summarises APRA’s proposal regarding risk-based capital approach for credit, market and operational risk following finalisation of these requirements by the BCBS in December 2017. While the final forms of these proposals will only be determined later in 2020, the Group expects the implementation of any revisions to the current requirements will result in further changes to the risk weighting framework for certain asset classes and other risk types (such as market and operational risks). APRA has announced that it does not expect that the changes to the risk weights will necessitate further increases in capital for ADIs, although this could vary by ADI depending on the final requirements.

• APRA released a discussion paper in August 2018 on adjustments to the overall design of the capital framework to improve transparency, international comparability and flexibility of the ADI capital framework. The focus of the proposals is on the presentation of the capital ratios to facilitate comparability whilst recognising the relative capital strength of ADIs and measures to enhance supervisory flexibility in times of financial stress. APRA’s consultation for the above is currently taking place with final prudential standards planned to be made available by 2020.

• In relation to Leverage Ratio, APRA released draft prudential standards in November 2018 proposing to set the Leverage Ratio minimum for Internal Ratings-Based (IRB) ADI at 3.5%, in addition to other changes to the calculation of the Exposure Measure. These changes are not expected to have a material impact to the Group.

APRA’s consultation for the above is currently taking place with target implementation by 2022 without any phase-in arrangements.

On 8 November 2018, APRA released a discussion paper titled “Increasing the loss-absorbing capacity of ADIs to support orderly resolution”. The paper is in response to recommendation three of the final report of the FSI. The paper proposes an increase in loss-absorbing capacity of between 4% and 5% of RWA for domestic systemically important banks (D-SIBs), and therefore includes ANZ. The Group is currently consulting with APRA on the proposals.

Given the number of items that are currently open for consultation with APRA, the final outcome of the FSI including any further changes to APRA’s prudential standards or other impacts on the Group remains uncertain.

• Level 3 Conglomerates (Level 3)

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

In August 2016, APRA confirmed the deferral of capital requirements for Conglomerate Groups. This is to allow for the final capital requirements arising from FSI recommendations and from international initiatives to be determined.

The non-capital components of the Level 3 framework relating to group governance, risk exposures, intragroup transactions and other risk management and compliance requirements came into effect on 1 July 2017. These have had no material impact on the Group’s capital position.

• The Reserve Bank of New Zealand (RBNZ) review of capital requirements

In December 2018, the Reserve Bank of New Zealand (RBNZ) released a consultation paper titled “Capital Review Paper 4”. This paper relates to possible additional RBNZ capital requirements in relation to ANZ’s New Zealand assets, which are separate to the Group’s capital measurement and minimum requirements set by APRA. The consultation paper sets out amongst other things:

• potential increases in the risk weighting applied to the assets of banks in New Zealand; and

• potential increases to the percentage of capital held against those risk weights in New Zealand.

The proposed implementation period is five years from the date the requirements are finalised. Based on the potential changes set out in the consultation paper, and ANZ Bank New Zealand Limited’s (ANZ New Zealand) balance sheet as at 30 September 2018, the changes imply a potential capital increase in New Zealand of NZ$6 billion to NZ$8 billion (A$5.7 billion to A$7.7 billion). ANZ New Zealand currently has approximately NZ$12.5 billion of Tier 1 capital (A$11.9 billion).

The overall impact on the Group depends on a number of factors. These include the outcome of the consultation, ANZ New Zealand’s balance sheet at the time of implementation, and the outcome of other reviews currently underway by APRA.

Responses to the consultation paper are due on 17 May 2019. ANZ will engage with RBNZ and APRA on these throughout the consultation period.

46

GROUP RESULTS

• Revisions to the related entities framework for ADI (APS222)

In July 2018, APRA released a consultation paper and draft prudential standards on proposed revisions to its existing related entities framework, which also incorporated changes to its large exposures framework finalised and published in December 2017. APRA’s proposals include revisions to:

• The definition of related entities;

• The measurement of exposures to related entities by aligning with requirements in the revised large exposures framework;

• The prudential limits on exposures to related entities. APRA is proposing to align the capital base used in limit calculations to Level 1 Tier 1 Capital (capital base used in the revised large exposures framework) and to reduce the individual and aggregate limits of exposures to individual related ADIs; and

• The extended licensed entity (ELE) framework by amending the criteria for a subsidiary to be consolidated in an ADI’s ELE.

APRA is currently consulting on the proposed changes. The impact on the Group and its subsidiaries will not be known until APRA finalises its review. APRA intends to have the revised related entities framework implemented by in the first half of 2020.

47

GROUP RESULTS

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48

DIVISIONAL RESULTS

CONTENTS	Page
Divisional Performance - continuing operations		50
Australia - continuing operations		55
Institutional - continuing operations		59
New Zealand - continuing operations		66
Wealth Australia - continuing operations		71
Pacific - continuing operations		71
Technology, Services & Operations (TSO) and Group Centre - continuing operations		71

49

DIVISIONAL RESULTS

Divisional Performance - continuing operations

The Group operates on a divisional structure with six continuing divisions: Australia, Institutional, New Zealand, Wealth Australia, Pacific, and

Technology, Services & Operations (TSO) and Group Centre. For further information on the composition of divisions, refer to the Definitions on page 137.

The presentation of divisional results has been impacted by a number of methodology and structural changes during the period. Prior period comparatives have been restated as follows:

• The methodology for allocating earnings on capital at a business unit level has changed from Economic Capital to Regulatory Capital. While neutral at a Group level, this change has impacted net interest income at the divisional level;

• The residual Asia Retail and Wealth businesses have been transferred from the former Asia Retail and Pacific division to TSO and Group Centre division. The remaining segment has been renamed Pacific division; and

• ANZ’s lenders mortgage insurance, share investing and general insurance distribution businesses which were previously part of the continuing operations of Wealth Australia now form part of the Australia division (ANZ’s financial planning business continues to be part of the continuing operations of the Wealth Australia division).

The divisional results were also impacted by the adoption of two new accounting standards:

• AASB 9 - the Group implemented an expected credit loss methodology for impairment of financial assets, and revised the classification and measurement of certain financial assets from 1 October 2018. Consequently, the Group increased its provision for credit impairment by $813 million through opening retained earnings. Comparative information has not been restated.

• AASB 15 - the main impact of adoption is that certain items previously netted are now presented gross in operating income and operating expenses. Comparative information has been restated which increased total operating income for the September 2018 half by $91 million (Mar 18 half: $62 million) and increased total operating expenses by the same amount.

Other than those described above, there have been no other significant changes.

The Divisional Results section is reported on a cash profit basis for continuing operations. For information on discontinued operations please refer to the Guide to Half Year Results on page 8.

The divisions reported are consistent with internal reporting provided to the chief operating decision maker, being the Chief Executive Officer.

50

DIVISIONAL RESULTS

Cash profit by division - March 2019 Half Year v March 2018 Half Year

	Australia			Institutional			New Zealand			Wealth Australia			Pacific			TSO and Group Centre			Group
March 2019 Half Year	$M			$M			$M			$M			$M			$M			$M
Net interest income		4,091			1,579			1,385			1			68			175			7,299
Other operating income		625			1,126			302			26			50			318			2,447
Operating income		4,716			2,705			1,687			27			118			493			9,746
Operating expenses		(1,843	)		(1,320	)		(612	)		(70	)		(70	)		(450	)		(4,365	)
Profit before credit impairment and income tax		2,873			1,385			1,075			(43	)		48			43			5,381
Credit impairment (charge)/release		(396	)		35			(30	)		-			(2	)		-			(393	)
Profit/(Loss) before income tax		2,477			1,420			1,045			(43	)		46			43			4,988
Income tax expense and non-controlling interests		(744	)		(408	)		(292	)		13			(13	)		20			(1,424	)
Cash profit/(loss) from continuing operations		1,733			1,012			753			(30	)		33			63			3,564
	Australia			Institutional			New Zealand			Wealth Australia			Pacific			TSO and Group Centre			Group
March 2018 Half Year	$M			$M			$M			$M			$M			$M			$M
Net interest income		4,325			1,480			1,309			1			65			170			7,350
Other operating income		728			1,031			343			48			47			323			2,520
Operating income		5,053			2,511			1,652			49			112			493			9,870
Operating expenses		(1,905	)		(1,373	)		(592	)		(85	)		(63	)		(455	)		(4,473	)
Profit before credit impairment and income tax		3,148			1,138			1,060			(36	)		49			38			5,397
Credit impairment (charge)/release		(312	)		(49	)		(20	)		-			(2	)		(25	)		(408	)
Profit/(Loss) before income tax		2,836			1,089			1,040			(36	)		47			13			4,989
Income tax expense and non-controlling interests		(853	)		(322	)		(291	)		10			(14	)		(26	)		(1,496	)
Cash profit/(loss) from continuing operations		1,983			767			749			(26	)		33			(13	)		3,493
March 2019 Half Year vs March 2018 Half Year
	Australia			Institutional			New Zealand			Wealth Australia			Pacific			TSO and Group Centre			Group
Net interest income		-5%			7%			6%			0%			5%			3%			-1%
Other operating income		-14%			9%			-12%			-46%			6%			-2%			-3%
Operating income		-7%			8%			2%			-45%			5%			0%			-1%
Operating expenses		-3%			-4%			3%			-18%			11%			-1%			-2%
Profit before credit impairment and income tax		-9%			22%			1%			19%			-2%			13%			0%
Credit impairment charge/(release)		27%			large			50%			n/a			0%			-100%			-4%
Profit/(Loss) before income tax		-13%			30%			0%			19%			-2%			large			0%
Income tax expense and non-controlling interests		-13%			27%			0%			30%			-7%			large			-5%
Cash profit/(loss) from continuing operations		-13%			32%			1%			15%			0%			large			2%

51

DIVISIONAL RESULTS

Cash profit by division - March 2019 Half Year v September 2018 Half Year

	Australia			Institutional			New Zealand			Wealth Australia			Pacific			TSO and Group Centre			Group
March 2019 Half Year	$M			$M			$M			$M			$M			$M			$M
Net interest income		4,091			1,579			1,385			1			68			175			7,299
Other operating income		625			1,126			302			26			50			318			2,447
Operating income		4,716			2,705			1,687			27			118			493			9,746
Operating expenses		(1,843	)		(1,320	)		(612	)		(70	)		(70	)		(450	)		(4,365	)
Profit before credit impairment and income tax		2,873			1,385			1,075			(43	)		48			43			5,381
Credit impairment (charge)/release		(396	)		35			(30	)		-			(2	)		-			(393	)
Profit/(Loss) before income tax		2,477			1,420			1,045			(43	)		46			43			4,988
Income tax expense and non-controlling interests		(744	)		(408	)		(292	)		13			(13	)		20			(1,424	)
Cash profit/(loss) from continuing operations		1,733			1,012			753			(30	)		33			63			3,564
	Australia			Institutional			New Zealand			Wealth Australia			Pacific			TSO and Group Centre			Group
September 2018 Half Year	$M			$M			$M			$M			$M			$M			$M
Net interest income		4,122			1,513			1,342			1			66			120			7,164
Other operating income		722			1,035			328			12			53			183			2,333
Operating income		4,844			2,548			1,670			13			119			303			9,497
Operating expenses		(1,990	)		(1,575	)		(613	)		(95	)		(65	)		(590	)		(4,928	)
Profit before credit impairment and income tax		2,854			973			1,057			(82	)		54			(287	)		4,569
Credit impairment (charge)/release		(386	)		93			14			-			(1	)		-			(280	)
Profit/(Loss) before income tax		2,468			1,066			1,071			(82	)		53			(287	)		4,289
Income tax expense and non-controlling interests		(742	)		(353	)		(299	)		25			(14	)		88			(1,295	)
Cash profit/(loss) from continuing operations		1,726			713			772			(57	)		39			(199	)		2,994
March 2019 Half Year vs September 2018 Half Year
	Australia			Institutional			New Zealand			Wealth Australia			Pacific			TSO and Group Centre			Group
Net interest income		-1%			4%			3%			0%			3%			46%			2%
Other operating income		-13%			9%			-8%			large			-6%			74%			5%
Operating income		-3%			6%			1%			large			-1%			63%			3%
Operating expenses		-7%			-16%			0%			-26%			8%			-24%			-11%
Profit before credit impairment and income tax		1%			42%			2%			-48%			-11%			large			18%
Credit impairment charge/(release)		3%			-62%			large			n/a			100%			n/a			40%
Profit/(Loss) before income tax		0%			33%			-2%			-48%			-13%			large			16%
Income tax expense and non-controlling interests		0%			16%			-2%			-48%			-7%			-77%			10%
Cash profit/(loss) from continuing operations		0%			42%			-2%			-47%			-15%			large			19%

52

DIVISIONAL RESULTS

Cash profit by division (excluding large/notable items¹) - March 2019 Half Year v March 2018 Half Year

The Group cash profit results include a number of items collectively referred to as large/notable items. While these items form part of cash profit they have been excluded from the tables below given their nature and significance.

^1.  Refer to pages 14 to 18 for a description of large/notable items.

	Australia			Institutional			New Zealand			Wealth   Australia			Pacific			TSO and Group Centre			Group
March 2019 Half Year	$M			$M			$M			$M			$M			$M			$M
Net interest income		4,113			1,579			1,381			1			68			178			7,320
Other operating income		656			1,126			280			37			50			84			2,233
Operating income		4,769			2,705			1,661			38			118			262			9,553
Operating expenses		(1,787	)		(1,313	)		(604	)		(71	)		(70	)		(415	)		(4,260	)
Profit before credit impairment and income tax		2,982			1,392			1,057			(33	)		48			(153	)		5,293
Credit impairment (charge)/release		(396	)		35			(30	)		-			(2	)		-			(393	)
Profit/(Loss) before income tax		2,586			1,427			1,027			(33	)		46			(153	)		4,900
Income tax expense and non-controlling interests		(777	)		(410	)		(288	)		10			(13	)		56			(1,422	)
Cash profit/(loss) from continuing operations		1,809			1,017			739			(23	)		33			(97	)		3,478
	Australia			Institutional			New Zealand			Wealth Australia			Pacific			TSO and Group Centre			Group
March 2018 Half Year	$M			$M			$M			$M			$M			$M			$M
Net interest income		4,342			1,480			1,302			1			65			124			7,314
Other operating income		744			1,026			282			50			47			47			2,196
Operating income		5,086			2,506			1,584			51			112			171			9,510
Operating expenses		(1,831	)		(1,365	)		(571	)		(67	)		(63	)		(397	)		(4,294	)
Profit before credit impairment and income tax		3,255			1,141			1,013			(16	)		49			(226	)		5,216
Credit impairment (charge)/release		(312	)		(49	)		(20	)		-			(2	)		1			(382	)
Profit/(Loss) before income tax		2,943			1,092			993			(16	)		47			(225	)		4,834
Income tax expense and non-controlling interests		(885	)		(325	)		(278	)		4			(14	)		71			(1,427	)
Cash profit/(loss) from continuing operations		2,058			767			715			(12	)		33			(154	)		3,407
March 2019 Half Year vs March 2018 Half Year
	Australia			Institutional			New Zealand			Wealth Australia			Pacific			TSO and Group Centre			Group
Net interest income		-5%			7%			6%			0%			5%			44%			0%
Other operating income		-12%			10%			-1%			-26%			6%			79%			2%
Operating income		-6%			8%			5%			-25%			5%			53%			0%
Operating expenses		-2%			-4%			6%			6%			11%			5%			-1%
Profit before credit impairment and income tax		-8%			22%			4%			large			-2%			-32%			1%
Credit impairment charge/(release)		27%			large			50%			n/a			0%			-100%			3%
Profit/(Loss) before income tax		-12%			31%			3%			large			-2%			-32%			1%
Income tax expense and non-controlling interests		-12%			26%			4%			large			-7%			-21%			0%
Cash profit/(loss) from continuing operations		-12%			33%			3%			92%			0%			-37%			2%

53

DIVISIONAL RESULTS

Cash profit by division (excluding large/notable items¹) - March 2019 Half Year v September 2018 Half Year

^1. Refer to pages 14 to 18 for a description of large/notable items.

	Australia			Institutional			New Zealand			Wealth Australia			Pacific			TSO and Group Centre			Group
March 2019 Half Year	$M			$M			$M			$M			$M			$M			$M
Net interest income		4,113			1,579			1,381			1			68			178			7,320
Other operating income		656			1,126			280			37			50			84			2,233
Operating income		4,769			2,705			1,661			38			118			262			9,553
Operating expenses		(1,787	)		(1,313	)		(604	)		(71	)		(70	)		(415	)		(4,260	)
Profit before credit impairment and income tax		2,982			1,392			1,057			(33	)		48			(153	)		5,293
Credit impairment (charge)/release		(396	)		35			(30	)		-			(2	)		-			(393	)
Profit/(Loss) before income tax		2,586			1,427			1,027			(33	)		46			(153	)		4,900
Income tax expense and non-controlling interests		(777	)		(410	)		(288	)		10			(13	)		56			(1,422	)
Cash profit/(loss) from continuing operations		1,809			1,017			739			(23	)		33			(97	)		3,478
																TSO and
										Wealth						Group
	Australia			Institutional			New Zealand			Australia			Pacific			Centre			Group
September 2018 Half Year	$M			$M			$M			$M			$M			$M			$M
Net interest income		4,196			1,513			1,345			1			66			127			7,248
Other operating income		787			1,046			270			44			53			113			2,313
Operating income		4,983			2,559			1,615			45			119			240			9,561
Operating expenses		(1,794	)		(1,335	)		(583	)		(65	)		(65	)		(466	)		(4,308	)
Profit before credit impairment and income tax		3,189			1,224			1,032			(20	)		54			(226	)		5,253
Credit impairment (charge)/release		(386	)		93			14			-			(1	)		-			(280	)
Profit/(Loss) before income tax		2,803			1,317			1,046			(20	)		53			(226	)		4,973
Income tax expense and non-controlling interests		(844	)		(394	)		(295	)		6			(14	)		51			(1,490	)
Cash profit/(loss) from continuing operations		1,959			923			751			(14	)		39			(175	)		3,483
March 2019 Half Year vs September 2018 Half Year
	Australia			Institutional			New Zealand			Wealth Australia			Pacific			TSO and Group Centre			Group
Net interest income		-2%			4%			3%			0%			3%			40%			1%
Other operating income		-17%			8%			4%			-16%			-6%			-26%			-3%
Operating income		-4%			6%			3%			-16%			-1%			9%			0%
Operating expenses		0%			-2%			4%			9%			8%			-11%			-1%
Profit before credit impairment and income tax		-6%			14%			2%			65%			-11%			-32%			1%
Credit impairment (charge)/release		3%			-62%			large			n/a			100%			n/a			40%
Profit/(Loss) before income tax		-8%			8%			-2%			65%			-13%			-32%			-1%
Income tax expense and non-controlling interests		-8%			4%			-2%			67%			-7%			10%			-5%
Cash profit/(loss) from continuing operations		-8%			10%			-2%			64%			-15%			-45%			0%

54

DIVISIONAL RESULTS

Australia - continuing operations

Mark Hand

Divisional performance was impacted by a number of large/notable items. Refer to pages 14 to 18 and pages 53 to 54 for details.

	Half Year									Movement
	Mar 19			Sep 18			Mar 18			Mar 19		Mar 19
	$M			$M			$M			v. Sep 18		v. Mar 18
Net interest income		4,091			4,122			4,325			-1%		-5%
Other operating income		625			722			728			-13%		-14%
Operating income		4,716			4,844			5,053			-3%		-7%
Operating expenses		(1,843	)		(1,990	)		(1,905	)		-7%		-3%
Profit before credit impairment and income tax		2,873			2,854			3,148			1%		-9%
Credit impairment charge		(396	)		(386	)		(312	)		3%		27%
Profit before income tax		2,477			2,468			2,836			0%		-13%
Income tax expense and non-controlling interests		(744	)		(742	)		(853	)		0%		-13%
Cash profit		1,733			1,726			1,983			0%		-13%
Balance Sheet
Net loans and advances		336,584			341,310			340,446			-1%		-1%
Other external assets		4,120			4,097			4,519			1%		-9%
External assets		340,704			345,407			344,965			-1%		-1%
Customer deposits		203,366			202,732			204,165			0%		0%
Other external liabilities		9,603			10,387			10,869			-8%		-12%
External liabilities		212,969			213,119			215,034			0%		-1%
Risk weighted assets		159,279			159,281			161,283			0%		-1%
Average gross loans and advances		341,282			342,757			339,631			0%		0%
Average deposits and other borrowings		202,765			202,530			203,239			0%		0%
Ratios
Return on average assets		1.01%			1.00%			1.16%
Net interest margin		2.61%			2.60%			2.78%
Operating expenses to operating income		39.1%			41.1%			37.7%
Operating expenses to average assets		1.08%			1.15%			1.12%
Individually assessed credit impairment charge/(release)		350			375			337			-7%		4%
Individually assessed credit impairment charge/(release) as a % of average GLA		0.21%			0.22%			0.20%
Collectively assessed credit impairment charge/(release)		46			11			(25	)		large		large
Collectively assessed credit impairment charge/(release) as a % of average GLA1		0.03%			0.01%			(0.01%	)
Gross impaired assets		1,357			1,285			1,114			6%		22%
Gross impaired assets as a % of GLA		0.40%			0.37%			0.33%
Total full time equivalent staff (FTE)		13,020			13,039			13,914			0%		-6%

^1.  Credit impairment charge used in the ratio relates to gross loans and advances and off-balance sheet commitments - undrawn and contingent liabilities.

Performance March 2019 v March 2018

• Lending volumes decreased from lower system credit growth, asset competition and more conservative home loan origination risk settings. This was partly offset by growth in Business & Private Bank.

• Net interest margin decreased as a result of increased funding costs, home loan mix changes and higher discounting, the regulatory impact on credit card pricing, and higher customer remediation. This was partially offset by higher deposit margins and home loans re-pricing.

• Other operating income decreased as the result of higher customer remediation, and lower fee income due to the removal of fees and lower volumes.

• Operating expenses decreased due to a reduction in FTE and related costs, lower redundancy expenses and consultancy spend. This was partially offset by higher customer remediation and inflation.

• Credit impairment charges increased as a result of a weakening Australian economic outlook, and an increase in individually assessed provisions for business and small business banking.    

Cash Profit March 2019 v March 2018

55

DIVISIONAL RESULTS

Australia - continuing operations

Mark Hand

Collectively assessed credit impairment charge/(release)	Half Year									Movement
	Mar 19			Sep 18			Mar 18			Mar 19		Mar 19
	$M			$M			$M			v. Sep 18		v. Mar 18
Retail		35			(27	)		(10	)		large		large
Home Loans		49			21			8			large		large
Cards and Personal Loans		(16	)		(45	)		(18	)		-64%		-11%
Deposits and Payments1		2			(3	)		-			large		n/a
Business & Private Bank		11			38			(15	)		-71%		large
Business Banking		4			43			(8	)		-91%		large
Small Business Banking		5			(5	)		(7	)		large		large
Private Bank		2			-			-			n/a		n/a
Collectively assessed credit impairment charge/(release)		46			11			(25	)		large		large
Individually assessed credit impairment charge/(release)	Half Year									Movement
	Mar 19			Sep 18			Mar 18			Mar 19		Mar 19
	$M			$M			$M			v. Sep 18		v. Mar 18
Retail		195			229			198			-15%		-2%
Home Loans		45			55			44			-18%		2%
Cards and Personal Loans		147			167			144			-12%		2%
Deposits and Payments1		3			7			10			-57%		-70%
Business & Private Bank		155			146			139			6%		12%
Business Banking		57			50			44			14%		30%
Small Business Banking		98			96			95			2%		3%
Private Bank		-			-			-			n/a		n/a
Individually assessed credit impairment charge/(release)		350			375			337			-7%		4%
Net loans and advances	As at									Movement
	Mar 19			Sep 18			Mar 18			Mar 19		Mar 19
	$M			$M			$M			v. Sep 18		v. Mar 18
Retail		279,483			283,088			282,748			-1%		-1%
Home Loans		269,020			272,007			271,146			-1%		-1%
Cards and Personal Loans		9,574			10,128			10,595			-5%		-10%
Deposits and Payments1		42			62			67			-32%		-37%
Wealth		847			891			940			-5%		-10%
Business & Private Bank		57,101			58,222			57,698			-2%		-1%
Business Banking		40,805			41,277			40,777			-1%		0%
Small Business Banking		14,265			15,002			15,345			-5%		-7%
Private Bank		2,031			1,943			1,576			5%		29%
Net loans and advances		336,584			341,310			340,446			-1%		-1%
Customer deposits	As at									Movement
	Mar 19			Sep 18			Mar 18			Mar 19		Mar 19
	$M			$M			$M			v. Sep 18		v. Mar 18
Retail		117,374			119,763			120,990			-2%		-3%
Home Loans2		26,915			27,639			27,488			-3%		-2%
Cards and Personal Loans		240			263			242			-9%		-1%
Deposits and Payments		90,219			91,861			93,260			-2%		-3%
Business & Private Bank		85,992			82,969			83,175			4%		3%
Business Banking		19,797			19,191			19,558			3%		1%
Small Business Banking		40,614			39,976			38,920			2%		4%
Private Bank		25,581			23,802			24,697			7%		4%
Customer deposits		203,366			202,732			204,165			0%		0%

^1.  Net loans and advances for the deposits and payments business represent amounts in overdraft.

^2.  Customer deposit amounts for the home loans business represent balances in offset accounts.

56

DIVISIONAL RESULTS

Australia - continuing operations

Mark Hand

							Australia
	Retail			B&PB			Total
March 2019 Half Year	$M			$M			$M
Net interest income		2,738			1,353			4,091
Other operating income		400			225			625
Operating income		3,138			1,578			4,716
Operating expenses		(1,243	)		(600	)		(1,843	)
Profit before credit impairment and income tax		1,895			978			2,873
Credit impairment (charge)/release		(230	)		(166	)		(396	)
Profit before income tax		1,665			812			2,477
Income tax expense and non-controlling interests		(500	)		(244	)		(744	)
Cash profit		1,165			568			1,733
Individually assessed credit impairment charge/(release)		(195	)		(155	)		(350	)
Collectively assessed credit impairment charge/(release)		(35	)		(11	)		(46	)
Net loans and advances		279,483			57,101			336,584
Customer deposits		117,374			85,992			203,366
Risk weighted assets		107,257			52,022			159,279
March 2018 Half Year
Net interest income		2,984			1,341			4,325
Other operating income		484			244			728
Operating income		3,468			1,585			5,053
Operating expenses		(1,338	)		(567	)		(1,905	)
Profit before credit impairment and income tax		2,130			1,018			3,148
Credit impairment (charge)/release		(188	)		(124	)		(312	)
Profit before income tax		1,942			894			2,836
Income tax expense and non-controlling interests		(583	)		(270	)		(853	)
Cash profit		1,359			624			1,983
Individually assessed credit impairment charge/(release)		(198	)		(139	)		(337	)
Collectively assessed credit impairment charge/(release)		10			15			25
Net loans and advances		282,748			57,698			340,446
Customer deposits		120,990			83,175			204,165
Risk weighted assets		107,514			53,769			161,283
March 2019 Half Year vs March 2018 Half Year
Net interest income		-8%			1%			-5%
Other operating income		-17%			-8%			-14%
Operating income		-10%			0%			-7%
Operating expenses		-7%			6%			-3%
Profit before credit impairment and income tax		-11%			-4%			-9%
Credit impairment (charge)/release		22%			34%			27%
Profit before income tax		-14%			-9%			-13%
Income tax expense and non-controlling interests		-14%			-10%			-13%
Cash profit		-14%			-9%			-13%
Individually assessed credit impairment charge/(release)		-2%			12%			4%
Collectively assessed credit impairment charge/(release)		large			large			large
Net loans and advances		-1%			-1%			-1%
Customer deposits		-3%			3%			0%
Risk weighted assets		0%			-3%			-1%

57

DIVISIONAL RESULTS

Australia - continuing operations

Mark Hand

							Australia
	Retail			B&PB			Total
March 2019 Half Year	$M			$M			$M
Net interest income		2,738			1,353			4,091
Other operating income		400			225			625
Operating income		3,138			1,578			4,716
Operating expenses		(1,243	)		(600	)		(1,843	)
Profit before credit impairment and income tax		1,895			978			2,873
Credit impairment (charge)/release		(230	)		(166	)		(396	)
Profit before income tax		1,665			812			2,477
Income tax expense and non-controlling interests		(500	)		(244	)		(744	)
Cash profit		1,165			568			1,733
Individually assessed credit impairment charge/(release)		(195	)		(155	)		(350	)
Collectively assessed credit impairment charge/(release)		(35	)		(11	)		(46	)
Net loans and advances		279,483			57,101			336,584
Customer deposits		117,374			85,992			203,366
Risk weighted assets		107,257			52,022			159,279
September 2018 Half Year
Net interest income		2,746			1,376			4,122
Other operating income		493			229			722
Operating income		3,239			1,605			4,844
Operating expenses		(1,385	)		(605	)		(1,990	)
Profit before credit impairment and income tax		1,854			1,000			2,854
Credit impairment (charge)/release		(202	)		(184	)		(386	)
Profit before income tax		1,652			816			2,468
Income tax expense and non-controlling interests		(496	)		(246	)		(742	)
Cash profit		1,156			570			1,726
Individually assessed credit impairment charge/(release)		(229	)		(146	)		(375	)
Collectively assessed credit impairment charge/(release)		27			(38	)		(11	)
Net loans and advances		283,088			58,222			341,310
Customer deposits		119,763			82,969			202,732
Risk weighted assets		105,889			53,392			159,281
March 2019 Half Year vs September 2018 Half Year
Net interest income		0%			-2%			-1%
Other operating income		-19%			-2%			-13%
Operating income		-3%			-2%			-3%
Operating expenses		-10%			-1%			-7%
Profit before credit impairment and income tax		2%			-2%			1%
Credit impairment (charge)/release		14%			-10%			3%
Profit before income tax		1%			0%			0%
Income tax expense and non-controlling interests		1%			-1%			0%
Cash profit		1%			0%			0%
Individually assessed credit impairment charge/(release)		-15%			6%			-7%
Collectively assessed credit impairment charge/(release)		large			-71%			large
Net loans and advances		-1%			-2%			-1%
Customer deposits		-2%			4%			0%
Risk weighted assets		1%			-3%			0%

58

DIVISIONAL RESULTS

Institutional - continuing operations

Mark Whelan

Divisional performance was impacted by a number of large/notable items. Refer to pages 14 to 18 and pages 53 to 54 for details.

	Half Year									Movement
	Mar 19			Sep 18			Mar 18			Mar 19		Mar 19
	$M			$M			$M			v. Sep 18		v. Mar 18
Net interest income		1,579			1,513			1,480			4%		7%
Other operating income		1,126			1,035			1,031			9%		9%
Operating income		2,705			2,548			2,511			6%		8%
Operating expenses		(1,320	)		(1,575	)		(1,373	)		-16%		-4%
Profit before credit impairment and income tax		1,385			973			1,138			42%		22%
Credit impairment (charge)/release		35			93			(49	)		-62%		large
Profit before income tax		1,420			1,066			1,089			33%		30%
Income tax expense and non-controlling interests		(408	)		(353	)		(322	)		16%		27%
Cash profit		1,012			713			767			42%		32%
Balance Sheet1
Net loans and advances		152,522			150,108			138,179			2%		10%
Other external assets		307,198			276,607			281,079			11%		9%
External assets		459,720			426,715			419,258			8%		10%
Customer deposits		205,364			205,809			190,733			0%		8%
Other deposits and borrowings		79,148			67,374			68,190			17%		16%
Deposits and other borrowings		284,512			273,183			258,923			4%		10%
Other external liabilities		119,327			104,836			109,032			14%		9%
External liabilities		403,839			378,019			367,955			7%		10%
Risk weighted assets		167,406			163,713			165,614			2%		1%
Average gross loans and advances		153,982			144,488			137,864			7%		12%
Average deposits and other borrowings		281,770			269,578			257,874			5%		9%
Ratios1
Return on average assets		0.44%			0.32%			0.36%
Net interest margin		0.85%			0.86%			0.89%
Net interest margin (excluding Markets)		2.10%			2.12%			2.09%
Operating expenses to operating income		48.8%			61.8%			54.7%
Operating expenses to average assets		0.58%			0.72%			0.65%
Individually assessed credit impairment charge/(release)		(12	)		(52	)		28			-77%		large
Individually assessed credit impairment charge/(release) as a % of average GLA2		(0.02%	)		(0.07%	)		0.04%
Collectively assessed credit impairment charge/(release)		(23	)		(41	)		21			-44%		large
Collectively assessed credit impairment charge/(release) as a % of average GLA2		(0.03%	)		(0.06%	)		0.03%
Gross impaired assets		373			442			626			-16%		-40%
Gross impaired assets as a % of GLA		0.24%			0.29%			0.45%
Total full time equivalent staff (FTE)		6,085			6,188			6,505			-2%		-6%

^1.  Balance Sheet amounts include asset and liabilities reclassified as held for sale from continuing operations.

^2.  Credit impairment charge used in the ratio relates to gross loans and advances and off-balance sheet commitments - undrawn and contingent liabilities.

Performance March 2019 v March 2018

• Lending volumes grew across Loans & Specialised Finance and Transaction Banking. Customer deposits grew in Markets and Transaction Banking.

• Net interest margin ex-Markets increased due to higher deposit margins, partially offset by a reduction in lending margins.

• Other operating income increased as a result of higher Markets income from Franchise Sales and Trading, partially offset by lower Balance Sheet income.

• Operating expenses decreased due to a reduction in FTE and related costs, and lower ongoing software amortisation charges. This was partially offset by inflation.

• Credit impairment charges decreased primarily due to a reduction in collectively and individually assessed provisions in Loans & Specialised Finance, partially offset by lower write-backs.

Cash Profit March 2019 v March 2018

59

DIVISIONAL RESULTS

Institutional - continuing operations

Mark Whelan

Institutional by Geography¹

	Half Year									Movement
	Mar 19			Sep 18			Mar 18			Mar 19		Mar 19
Australia	$M			$M			$M			v. Sep 18		v. Mar 18
Net interest income		874			843			821			4%		6%
Other operating income		484			511			453			-5%		7%
Operating income		1,358			1,354			1,274			0%		7%
Operating expenses		(606	)		(625	)		(616	)		-3%		-2%
Profit before credit impairment and income tax		752			729			658			3%		14%
Credit impairment (charge)/release		5			66			(18	)		-92%		large
Profit before income tax		757			795			640			-5%		18%
Income tax expense and non-controlling interests		(227	)		(238	)		(190	)		-5%		19%
Cash profit		530			557			450			-5%		18%
Individually assessed credit impairment charge/(release)		(1	)		(28	)		(18	)		-96%		-94%
Collectively assessed credit impairment charge/(release)		(4	)		(38	)		36			-89%		large
Net loans and advances		84,634			85,243			78,197			-1%		8%
Customer deposits		71,623			78,562			77,466			-9%		-8%
Risk weighted assets		84,617			82,993			85,181			2%		-1%
Asia, Pacific, Europe, and America
Net interest income		546			520			515			5%		6%
Other operating income		535			414			444			29%		20%
Operating income		1,081			934			959			16%		13%
Operating expenses		(633	)		(864	)		(675	)		-27%		-6%
Profit before credit impairment and income tax		448			70			284			large		58%
Credit impairment (charge)/release		31			25			13			24%		large
Profit before income tax		479			95			297			large		61%
Income tax expense and non-controlling interests		(129	)		(65	)		(90	)		98%		43%
Cash profit		350			30			207			large		69%
Individually assessed credit impairment charge/(release)		(6	)		(25	)		3			-76%		large
Collectively assessed credit impairment charge/(release)		(25	)		-			(16	)		n/a		56%
Net loans and advances		60,456			58,282			52,760			4%		15%
Customer deposits		116,080			111,717			97,869			4%		19%
Risk weighted assets		71,248			70,456			69,565			1%		2%
New Zealand
Net interest income		159			150			144			6%		10%
Other operating income		107			110			134			-3%		-20%
Operating income		266			260			278			2%		-4%
Operating expenses		(81	)		(86	)		(82	)		-6%		-1%
Profit before credit impairment and income tax		185			174			196			6%		-6%
Credit impairment (charge)/release		(1	)		2			(44	)		large		-98%
Profit before income tax		184			176			152			5%		21%
Income tax expense and non-controlling interests		(52	)		(50	)		(42	)		4%		24%
Cash profit		132			126			110			5%		20%
Individually assessed credit impairment charge/(release)		(5	)		1			43			large		large
Collectively assessed credit impairment charge/(release)		6			(3	)		1			large		large
Net loans and advances		7,432			6,583			7,222			13%		3%
Customer deposits		17,661			15,530			15,398			14%		15%
Risk weighted assets		11,541			10,264			10,868			12%		6%

^1.  Balance Sheet amounts include asset and liabilities reclassified as held for sale from continuing operations.

60

DIVISIONAL RESULTS

Institutional - continuing operations

Mark Whelan

Individually assessed credit impairment charge/(release)	Half Year									Movement
	Mar 19			Sep 18			Mar 18			Mar 19		Mar 19
	$M			$M			$M			v. Sep 18		v. Mar 18
Transaction Banking		(3	)		(6	)		11			-50%		large
Loans & Specialised Finance		(10	)		(45	)		17			-78%		large
Markets		-			(3	)		(1	)		-100%		-100%
Central Functions		1			2			1			-50%		0%
Individually assessed credit impairment charge/(release)		(12	)		(52	)		28			-77%		large
Collectively assessed credit impairment charge/(release)	Half Year									Movement
	Mar 19			Sep 18			Mar 18			Mar 19		Mar 19
	$M			$M			$M			v. Sep 18		v. Mar 18
Transaction Banking		6			(5	)		(7	)		large		large
Loans & Specialised Finance		(22	)		(35	)		26			-37%		large
Markets		(6	)		-			1			n/a		large
Central Functions		(1	)		(1	)		1			0%		large
Collectively assessed credit impairment charge/(release)		(23	)		(41	)		21			-44%		large
Net loans and advances1	As at									Movement
	Mar 19			Sep 18			Mar 18			Mar 19		Mar 19
	$M			$M			$M			v. Sep 18		v. Mar 18
Transaction Banking		18,177			17,318			16,701			5%		9%
Loans & Specialised Finance		107,759			101,157			94,416			7%		14%
Markets		25,902			31,201			26,612			-17%		-3%
Central Functions		684			432			450			58%		52%
Net loans and advances		152,522			150,108			138,179			2%		10%
Customer deposits1	As at									Movement
	Mar 19			Sep 18			Mar 18			Mar 19		Mar 19
	$M			$M			$M			v. Sep 18		v. Mar 18
Transaction Banking		99,479			99,519			95,707			0%		4%
Loans & Specialised Finance		925			1,289			1,336			-28%		-31%
Markets		102,411			102,490			91,237			0%		12%
Central Functions		2,549			2,511			2,453			2%		4%
Customer deposits		205,364			205,809			190,733			0%		8%

^1.  Balance Sheet amounts include asset and liabilities reclassified as held for sale from continuing operations.

61

DIVISIONAL RESULTS

Institutional - continuing operations

Mark Whelan

	Transaction Banking			Loans & Specialised Finance			Markets			Central Functions			Institutional Total
March 2019 Half Year1	$M			$M			$M			$M			$M
Net interest income		531			742			280			26			1,579
Other operating income		363			77			667			19			1,126
Operating income		894			819			947			45			2,705
Operating expenses		(406	)		(322	)		(550	)		(42	)		(1,320	)
Profit/(Loss) before credit impairment and income tax		488			497			397			3			1,385
Credit impairment (charge)/release		(3	)		32			6			-			35
Profit/(Loss) before income tax		485			529			403			3			1,420
Income tax expense and non-controlling interests		(133	)		(142	)		(120	)		(13	)		(408	)
Cash profit/(loss)		352			387			283			(10	)		1,012
Individually assessed credit impairment charge/(release)		(3	)		(10	)		-			1			(12	)
Collectively assessed credit impairment charge/(release)		6			(22	)		(6	)		(1	)		(23	)
Net loans and advances		18,177			107,759			25,902			684			152,522
Customer deposits		99,479			925			102,411			2,549			205,364
Risk weighted assets		25,475			93,198			47,902			831			167,406
March 2018 Half Year
Net interest income		452			644			355			29			1,480
Other operating income		362			90			552			27			1,031
Operating income		814			734			907			56			2,511
Operating expenses		(407	)		(322	)		(619	)		(25	)		(1,373	)
Profit/(Loss) before credit impairment and income tax		407			412			288			31			1,138
Credit impairment (charge)/release		(4	)		(43	)		-			(2	)		(49	)
Profit/(Loss) before income tax		403			369			288			29			1,089
Income tax expense and non-controlling interests		(116	)		(101	)		(77	)		(28	)		(322	)
Cash profit		287			268			211			1			767
Individually assessed credit impairment charge/(release)		11			17			(1	)		1			28
Collectively assessed credit impairment charge/(release)		(7	)		26			1			1			21
Net loans and advances		16,701			94,416			26,612			450			138,179
Customer deposits		95,707			1,336			91,237			2,453			190,733
Risk weighted assets		25,726			87,881			51,084			923			165,614
March 2019 Half Year vs March 2018 Half Year
Net interest income		17%			15%			-21%			-10%			7%
Other operating income		0%			-14%			21%			-30%			9%
Operating income		10%			12%			4%			-20%			8%
Operating expenses		0%			0%			-11%			68%			-4%
Profit/(Loss) before credit impairment and income tax		20%			21%			38%			-90%			22%
Credit impairment (charge)/release		-25%			large			n/a			-100%			large
Profit/(Loss) before income tax		20%			43%			40%			-90%			30%
Income tax expense and non-controlling interests		15%			41%			56%			-54%			27%
Cash profit/(loss)		23%			44%			34%			large			32%
Individually assessed credit impairment charge/(release)		large			large			-100%			0%			large
Collectively assessed credit impairment charge/(release)		large			large			large			large			large
Net loans and advances		9%			14%			-3%			52%			10%
Customer deposits		4%			-31%			12%			4%			8%
Risk weighted assets		-1%			6%			-6%			-10%			1%

^1.  Balance Sheet amounts include asset and liabilities reclassified as held for sale from continuing operations.

62

DIVISIONAL RESULTS

Institutional - continuing operations

Mark Whelan

	Transaction Banking			Loans & Specialised Finance			Markets			Central Functions			Institutional Total
March 2019 Half Year1	$M			$M			$M			$M			$M
Net interest income		531			742			280			26			1,579
Other operating income		363			77			667			19			1,126
Operating income		894			819			947			45			2,705
Operating expenses		(406	)		(322	)		(550	)		(42	)		(1,320	)
Profit/(Loss) before credit impairment and income tax		488			497			397			3			1,385
Credit impairment (charge)/release		(3	)		32			6			-			35
Profit/(Loss) before income tax		485			529			403			3			1,420
Income tax expense and non-controlling interests		(133	)		(142	)		(120	)		(13	)		(408	)
Cash profit/(loss)		352			387			283			(10	)		1,012
Individually assessed credit impairment charge/(release)		(3	)		(10	)		-			1			(12	)
Collectively assessed credit impairment charge/(release)		6			(22	)		(6	)		(1	)		(23	)
Net loans and advances		18,177			107,759			25,902			684			152,522
Customer deposits		99,479			925			102,411			2,549			205,364
Risk weighted assets		25,475			93,198			47,902			831			167,406
September 2018 Half Year1
Net interest income		475			710			303			25			1,513
Other operating income		359			82			577			17			1,035
Operating income		834			792			880			42			2,548
Operating expenses		(418	)		(316	)		(561	)		(280	)		(1,575	)
Profit/(Loss) before credit impairment and income tax		416			476			319			(238	)		973
Credit impairment (charge)/release		11			80			3			(1	)		93
Profit/(Loss) before income tax		427			556			322			(239	)		1,066
Income tax expense and non-controlling interests		(121	)		(147	)		(82	)		(3	)		(353	)
Cash profit/(loss)		306			409			240			(242	)		713
Individually assessed credit impairment charge/(release)		(6	)		(45	)		(3	)		2			(52	)
Collectively assessed credit impairment charge/(release)		(5	)		(35	)		-			(1	)		(41	)
Net loans and advances		17,318			101,157			31,201			432			150,108
Customer deposits		99,519			1,289			102,490			2,511			205,809
Risk weighted assets		25,717			87,472			49,658			866			163,713
March 2019 Half Year vs September 2018 Half Year
Net interest income		12%			5%			-8%			4%			4%
Other operating income		1%			-6%			16%			12%			9%
Operating income		7%			3%			8%			7%			6%
Operating expenses		-3%			2%			-2%			-85%			-16%
Profit/(Loss) before credit impairment and income tax		17%			4%			24%			large			42%
Credit impairment (charge)/release		large			-60%			100%			-100%			-62%
Profit/(Loss) before income tax		14%			-5%			25%			large			33%
Income tax expense and non-controlling interests		10%			-3%			46%			large			16%
Cash profit/(loss)		15%			-5%			18%			-96%			42%
Individually assessed credit impairment charge/(release)		-50%			-78%			-100%			-50%			-77%
Collectively assessed credit impairment charge/(release)		large			-37%			n/a			0%			-44%
Net loans and advances		5%			7%			-17%			58%			2%
Customer deposits		0%			-28%			0%			2%			0%
Risk weighted assets		-1%			7%			-4%			-4%			2%

^1.  Balance Sheet amounts include asset and liabilities reclassified as held for sale from continuing operations.

63

DIVISIONAL RESULTS

Institutional - continuing operations

Mark Whelan

  Analysis of Markets operating income¹

	Half Year							Movement
	Mar 19			Sep 18		Mar 18		Mar 19		Mar 19
Composition of Markets operating income by business activity	$M			$M		$M		v. Sep 18		v. Mar 18
Franchise Sales2		465			455		438		2%		6%
Franchise Trading3		226			151		177		50%		28%
Balance Sheet4		256			274		292		-7%		-12%
Markets operating income		947			880		907		8%		4%
Includes:
Derivative valuation adjustments		(10	)		52		11		large		large

^1.  Markets operating income includes net interest income and other operating income.

^2.  Franchise Sales represents direct client flow business on core products such as fixed income, foreign exchange, commodities and capital markets.

^3.  Franchise Trading primarily represents management of the Group’s strategic positions and those taken as part of direct client sales flow. Franchise Trading also includes the impact of valuation adjustments made when determining the fair value of derivatives (includes credit and funding adjustments, bid-offer adjustments and associated hedges).

^4.  Balance Sheet represents hedging of interest rate risk on the Group’s loan and deposit books and the management of the Group’s liquidity portfolio.

	Half Year						Movement
	Mar 19		Sep 18		Mar 18		Mar 19		Mar 19
Composition of Markets operating income by geography	$M		$M		$M		v. Sep 18		v. Mar 18
Australia		312		347		306		-10%		2%
Asia, Pacific, Europe & America		507		408		456		24%		11%
New Zealand		128		125		145		2%		-12%
Markets operating income		947		880		907		8%		4%

64

DIVISIONAL RESULTS

Institutional - continuing operations

Mark Whelan

Market risk

Traded market risk

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

99% confidence level (1 day holding period)

	As at			High for period		Low for period		Avg for period			As at			High for year		Low for year		Avg for year
	Mar 19			Mar 19		Mar 19		Mar 19			Sep 18			Sep 18		Sep 18		Sep 18
	$M			$M		$M		$M			$M			$M		$M		$M
Value at Risk at 99% confidence
Foreign exchange		3.6			9.5		2.0		4.8			3.7			10.3		1.7		4.2
Interest rate		5.1			10.4		4.3		6.6			8.4			16.0		4.9		7.9
Credit		4.1			4.4		1.2		2.4			2.5			6.5		2.3		4.0
Commodities		2.3			3.9		1.4		2.1			3.7			4.5		1.4		3.1
Equity		-			-		-		-			-			-		-		-
Diversification benefit		(8.3	)		n/a		n/ a		(7.5	)		(10.5	)		n/a		n/a		(8.1	)
Total VaR		6.8			13.4		5.8		8.4			7.8			19.9		6.9		11.1

Non-traded interest rate risk

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

99% confidence level (1 day holding period)

	As at			High for period		Low for period		Avg for period			As at			High for year		Low for year		Avg for year
	Mar 19			Mar 19		Mar 19		Mar 19			Sep 18			Sep 18		Sep 18		Sep 18
	$M			$M		$M		$M			$M			$M		$M		$M
Value at Risk at 99% confidence
Australia		17.2			18.3		16.4		17.4			21.9			32.7		20.3		23.6
New Zealand		8.1			8.1		7.1		7.6			6.8			7.1		5.6		6.6
Asia, Pacific, Europe & America		16.9			17.7		12.9		15.5			15.1			15.1		12.5		13.7
Diversification benefit		(14.1	)		n/a		n/a		(14.0	)		(16.1	)		n/a		n/a		(14.4	)
Total VaR		28.1			28.1		25.2		26.5			27.7			36.4		26.0		29.5

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

	As at
	Mar 19		Sep 18 1
As at period end		0.45%		1.21%
Maximum exposure		0.94%		1.79%
Minimum exposure		0.32%		0.77%
Average exposure (in absolute terms)		0.63%		1.11%

^1.  Prior period numbers have been restated to reflect IRR model enhancements.

65

DIVISIONAL RESULTS

New Zealand - continuing operations

David Hisco

Divisional performance was impacted by a number of large/notable items. Refer to pages 14 to 18 and pages 53 to 54 for details (in AUD).

Table reflects NZD for New Zealand (AUD results shown on page 70)

	Half Year					Movement
	Mar 19	Sep 18			Mar 18	Mar 19		Mar 19
	NZD M	NZD M			NZD M	v. Sep 18		v. Mar 18
Net interest income	1,464		1,455		1,430		1%		2%
Other operating income1	300		293		308		2%		-3%
Net income from insurance business2	19		62		66		-69%		-71%
Operating income	1,783		1,810		1,804		-1%		-1%
Operating expenses	(647)		(664	)	(646)		-3%		0%
Profit before credit impairment and income tax	1,136		1,146		1,158		-1%		-2%
Credit impairment (charge)/release	(31)		16		(22)		large		41%
Profit before income tax	1,105		1,162		1,136		-5%		-3%
Income tax expense and non-controlling interests	(309)		(325	)	(318)		-5%		-3%
Cash profit	796		837		818		-5%		-3%
Balance Sheet3
Net loans and advances	124,024		121,550		118,596		2%		5%
Other external assets	3,549		4,515		4,910		-21%		-28%
External assets	127,573		126,065		123,506		1%		3%
Customer deposits	89,096		87,101		84,372		2%		6%
Other deposits and borrowings	2,240		2,486		2,555		-10%		-12%
Deposits and other borrowings	91,336		89,587		86,927		2%		5%
Other external liabilities	23,554		24,591		22,939		-4%		3%
External liabilities	114,890		114,178		109,866		1%		5%
Risk weighted assets	62,260		62,463		61,332		0%		2%
Average gross loans and advances	123,000		120,587		118,091		2%		4%
Average deposits and other borrowings	91,231		88,052		87,027		4%		5%
Net funds management income	113		113		108		0%		5%
Funds under management	31,403		30,665		29,185		2%		8%
Average funds under management	30,389		30,132		29,195		1%		4%
Ratios3
Return on average assets	1.26%		1.34%		1.35%
Net interest margin	2.39%		2.41%		2.43%
Operating expenses to operating income	36.3%		36.7%		35.8%
Operating expenses to average assets	1.03%		1.06%		1.07%
Individually assessed credit impairment charge/(release)	37		16		36		large		3%
Individually assessed credit impairment charge/(release) as a % of average GLA4	0.06%		0.03%		0.06%
Collectively assessed credit impairment charge/(release)	(6)		(32	)	(14)		-81%		-57%
Collectively assessed credit impairment charge/(release) as a % of average GLA4	(0.01%)		(0.05%	)	(0.02%)
Gross impaired assets	249		258		260		-3%		-4%
Gross impaired assets as a % of GLA	0.20%		0.21%		0.22%
Total full time equivalent staff (FTE)	6,003		6,165		6,319		-3%		-5%

^1.  Includes net funds management income previously reported under net funds management and insurance income.

^2.  Relates to OnePath Life (NZ) Limited, a controlled entity, which was sold on 30 November 2018.

^3.  Balance Sheet amounts include asset and liabilities reclassified as held for sale from continuing operations.

^4.  Credit impairment charge used in the ratio relates to gross loans and advances and off-balance sheet commitments - undrawn and contingent liabilities.

Performance March 2019 v March 2018

• Lending and customer deposit volumes grew across all portfolios and funds under management increased during the period.

• Net interest margin decreased as a result of home loan and deposit portfolio mix changes.

• Operating income decreased primarily due to the loss of income as the result of the OnePath Life (NZ) divestment, and a one-off insurance recovery in the prior period.

• Operating expenses remained flat due to increased business investment and inflation, mostly offset by lower expenses as the result of the OnePath Life (NZ) divestment and reduced FTE driven by customer migration to lower cost channels.

• Credit impairment charges increased marginally, primarily due to the Agri economic cycle release in the prior period.

Cash Profit March 2019 v March 2018

66

DIVISIONAL RESULTS

New Zealand - continuing operations

David Hisco

Individually assessed credit impairment charge/(release)	Half Year									Movement
	Mar 19			Sep 18			Mar 18			Mar 19		Mar 19
	NZD M			NZD M			NZD M			v. Sep 18		v. Mar 18
Retail		24			27			23			-11%		4%
Home Loans		-			2			-			100%		-
Other		24			25			23			-4%		4%
Commercial		13			(11	)		13			large		0%
Individually assessed credit impairment charge/(release)		37			16			36			large		3%
Collectively assessed credit impairment charge/(release)	Half Year									Movement
	Mar 19			Sep 18			Mar 18			Mar 19		Mar 19
	NZD M			NZD M			NZD M			v. Sep 18		v. Mar 18
Retail		5			(10	)		8			large		-38%
Home Loans		4			(1	)		3			large		33%
Other		1			(9	)		5			large		-80%
Commercial		(11	)		(22	)		(22	)		-50%		-50%
Collectively assessed credit impairment charge/(release)		(6	)		(32	)		(14	)		-81%		-57%
Net loans and advances1	As at									Movement
	Mar 19			Sep 18			Mar 18			Mar 19		Mar 19
	NZD M			NZD M			NZD M			v. Sep 18		v. Mar 18
Retail		81,108			79,090			77,106			3%		5%
Home Loans		77,851			75,685			73,651			3%		6%
Other		3,257			3,405			3,455			-4%		-6%
Commercial		42,916			42,460			41,490			1%		3%
Net loans and advances		124,024			121,550			118,596			2%		5%
Customer deposits1	As at									Movement
	Mar 19			Sep 18			Mar 18			Mar 19		Mar 19
	NZD M			NZD M			NZD M			v. Sep 18		v. Mar 18
Retail		71,882			70,260			67,735			2%		6%
Commercial		17,214			16,841			16,637			2%		3%
Customer deposits		89,096			87,101			84,372			2%		6%

^1.  Balance Sheet amounts include asset and liabilities reclassified as held for sale from continuing operations.

67

DIVISIONAL RESULTS

New Zealand - continuing operations

David Hisco

							Central			New Zealand
	Retail			Commercial			Functions			Total
March 2019 Half Year	NZD M			NZD M			NZD M			NZD M
Net interest income		940			517			7			1,464
Other operating income1		291			10			(1	)		300
Net income from insurance business2		19			-			-			19
Operating income		1,250			527			6			1,783
Operating expenses		(514	)		(128	)		(5	)		(647	)
Profit before credit impairment and income tax		736			399			1			1,136
Credit impairment (charge)/release		(29	)		(2	)		-			(31	)
Profit before income tax		707			397			1			1,105
Income tax expense and non-controlling interests		(197	)		(111	)		(1	)		(309	)
Cash profit		510			286			-			796
Individually assessed credit impairment charge/(release)		24			13			-			37
Collectively assessed credit impairment charge/(release)		5			(11	)		-			(6	)
Net loans and advances		81,108			42,916			-			124,024
Customer deposits		71,882			17,214			-			89,096
Risk weighted assets		29,897			31,344			1,019			62,260
March 2018 Half Year
Net interest income		929			495			6			1,430
Other operating income1		280			10			18			308
Net income from insurance business2		67			-			(1	)		66
Operating income		1,276			505			23			1,804
Operating expenses		(516	)		(126	)		(4	)		(646	)
Profit before credit impairment and income tax		760			379			19			1,158
Credit impairment (charge)/release		(31	)		9			-			(22	)
Profit before income tax		729			388			19			1,136
Income tax expense and non-controlling interests		(204	)		(109	)		(5	)		(318	)
Cash profit		525			279			14			818
Individually assessed credit impairment charge/(release)		23			13			-			36
Collectively assessed credit impairment charge/(release)		8			(22	)		-			(14	)
Net loans and advances3		77,106			41,490			-			118,596
Customer deposits3		67,735			16,637			-			84,372
Risk weighted assets3		29,441			30,748			1,143			61,332
March 2019 Half Year vs March 2018 Half Year
Net interest income		1%			4%			17%			2%
Other operating income1		4%			0%			large			-3%
Net income from insurance business2		-72%			n/a			-100%			-71%
Operating income		-2%			4%			-74%			-1%
Operating expenses		0%			2%			25%			0%
Profit before credit impairment and income tax		-3%			5%			-95%			-2%
Credit impairment (charge)/release		-6%			large			n/a			41%
Profit before income tax		-3%			2%			-95%			-3%
Income tax expense and non-controlling interests		-3%			2%			-80%			-3%
Cash profit		-3%			3%			-100%			-3%
Individually assessed credit impairment charge/(release)		4%			0%			n/a			3%
Collectively assessed credit impairment charge/(release)		-38%			-50%			n/a			-57%
Net loans and advances3		5%			3%			n/a			5%
Customer deposits3		6%			3%			n/a			6%
Risk weighted assets3		2%			2%			-11%			2%

^1.  Includes net funds management income previously reported under net funds management and insurance income.

^2.  Relates to OnePath Life (NZ) Limited, a controlled entity, which was sold on 30 November 2018.

^3.  Balance Sheet amounts include asset and liabilities reclassified as held for sale from continuing operations.

68

DIVISIONAL RESULTS

New Zealand - continuing operations

David Hisco

							Central			New Zealand
	Retail			Commercial			Functions			Total
March 2019 Half Year	NZD M			NZD M			NZD M			NZD M
Net interest income		940			517			7			1,464
Other operating income1		291			10			(1	)		300
Net income from insurance business2		19			-			-			19
Operating income		1,250			527			6			1,783
Operating expenses		(514	)		(128	)		(5	)		(647	)
Profit/(Loss) before credit impairment and income tax		736			399			1			1,136
Credit impairment (charge)/release		(29	)		(2	)		-			(31	)
Profit/(Loss) before income tax		707			397			1			1,105
Income tax expense and non-controlling interests		(197	)		(111	)		(1	)		(309	)
Cash profit/(Loss)		510			286			-			796
Individually assessed credit impairment charge/(release)		24			13			-			37
Collectively assessed credit impairment charge/(release)		5			(11	)		-			(6	)
Net loans and advances		81,108			42,916			-			124,024
Customer deposits		71,882			17,214			-			89,096
Risk weighted assets		29,897			31,344			1,019			62,260
September 2018 Half Year
Net interest income		943			509			3			1,455
Other operating income1		284			10			(1	)		293
Net income from insurance business2		63			-			(1	)		62
Operating income		1,290			519			1			1,810
Operating expenses		(523	)		(132	)		(9	)		(664	)
Profit/(Loss) before credit impairment and income tax		767			387			(8	)		1,146
Credit impairment (charge)/release		(17	)		33			-			16
Profit/(Loss) before income tax		750			420			(8	)		1,162
Income tax expense and non-controlling interests		(209	)		(118	)		2			(325	)
Cash profit/(Loss)		541			302			(6	)		837
Individually assessed credit impairment charge/(release)		27			(11	)		-			16
Collectively assessed credit impairment charge/(release)		(10	)		(22	)		-			(32	)
Net loans and advances		79,090			42,460			-			121,550
Customer deposits		70,260			16,841			-			87,101
Risk weighted assets		30,043			31,264			1,156			62,463
March 2019 Half Year vs September 2018 Half Year
Net interest income		0%			2%			large			1%
Other operating income1		2%			0%			0%			2%
Net funds management and insurance income2		-70%			n/a			-100%			-69%
Operating income		-3%			2%			large			-1%
Operating expenses		-2%			-3%			-44%			-3%
Profit/(Loss) before credit impairment and income tax		-4%			3%			large			-1%
Credit impairment (charge)/release		71%			large			n/a			large
Profit/(Loss) before income tax		-6%			-5%			large			-5%
Income tax expense and non-controlling interests		-6%			-6%			large			-5%
Cash profit/(Loss)		-6%			-5%			-100%			-5%
Individually assessed credit impairment charge/(release)		-11%			large			n/a			large
Collectively assessed credit impairment charge/(release)		large			-50%			n/a			-81%
Net loans and advances3		3%			1%			n/a			2%
Customer deposits3		2%			2%			n/a			2%
Risk weighted assets3		0%			0%			-12%			0%

^1.  Includes net funds management income previously reported under net funds management and insurance income.

^2.  Relates to OnePath Life (NZ) Limited, a controlled entity, which was sold on 30 November 2018.

^3.  Balance Sheet amounts include asset and liabilities reclassified as held for sale from continuing operations.

69

DIVISIONAL RESULTS

New Zealand - continuing operations

David Hisco

Table reflects AUD for New Zealand

NZD results shown on page 66

	Half Year									Movement
	Mar 19			Sep 18			Mar 18			Mar 19		Mar 19
	$M			$M			$M			v. Sep 18		v. Mar 18
Net interest income		1,385			1,342			1,309			3%		6%
Other operating income1		284			271			283			5%		0%
Net income from insurance business2		18			57			60			-68%		-70%
Operating income		1,687			1,670			1,652			1%		2%
Operating expenses		(612	)		(613	)		(592	)		0%		3%
Profit before credit impairment and income tax		1,075			1,057			1,060			2%		1%
Credit impairment (charge)/release		(30	)		14			(20	)		large		50%
Profit before income tax		1,045			1,071			1,040			-2%		0%
Income tax expense and non-controlling interests		(292	)		(299	)		(291	)		-2%		0%
Cash profit		753			772			749			-2%		1%
Consisting of:
Retail		482			498			481			-3%		0%
Commercial		271			279			255			-3%		6%
Central Functions		-			(5	)		13			-100%		-100%
Cash profit		753			772			749			-2%		1%
Balance Sheet3
Net loans and advances		118,840			111,333			111,360			7%		7%
Other external assets		3,401			4,136			4,611			-18%		-26%
External assets		122,241			115,469			115,971			6%		5%
Customer deposits		85,372			79,780			79,225			7%		8%
Other deposits and borrowings		2,146			2,277			2,398			-6%		-11%
Deposits and other borrowings		87,518			82,057			81,623			7%		7%
Other external liabilities		22,570			22,524			21,540			0%		5%
External liabilities		110,088			104,581			103,163			5%		7%
Risk weighted assets		59,658			57,213			57,590			4%		4%
Average gross loans and advances		116,278			111,218			108,107			5%		8%
Average deposits and other borrowings		86,244			81,214			79,669			6%		8%
Net funds management income		107			105			99			2%		8%
Funds under management		30,090			28,087			27,404			7%		10%
Average funds under management		29,119			27,791			26,727			5%		9%
Ratios3
Return on average assets		1.26%			1.34%			1.35%
Net interest margin		2.39%			2.41%			2.43%
Operating expenses to operating income		36.3%			36.7%			35.8%
Operating expenses to average assets		1.03%			1.06%			1.07%
Individually assessed credit impairment charge/(release)		35			15			34			large		3%
Individually assessed credit impairment charge/(release) as a % of average GLA4		0.06%			0.03%			0.06%
Collectively assessed credit impairment charge/(release)		(5	)		(29	)		(14	)		-83%		-64%
Collectively assessed credit impairment charge/(release) as a % of average GLA4		(0.01%	)		(0.05%	)		(0.03%	)
Gross impaired assets		238			236			244			1%		-2%
Gross impaired assets as a % of GLA		0.20%			0.21%			0.22%
Total full time equivalent staff (FTE)		6,003			6,165			6,319			-3%		-5%

^1.  Includes net funds management income previously reported under net funds management and insurance income.

^2.  Relates to OnePath Life (NZ) Limited, a controlled entity, which was sold on 30 November 2018.

^3.  Balance Sheet amounts include asset and liabilities reclassified as held for sale from continuing operations.

^4.  Credit impairment charge used in the ratio relates to gross loans and advances and off-balance sheet commitments - undrawn and contingent liabilities.

70

DIVISIONAL RESULTS

Wealth Australia - continuing operations

Alexis George

Divisional performance was impacted by a number of large/notable items. Refer to pages 14 to 18 and pages 53 to 54 for details.

	Half Year									Movement
	Mar 19			Sep 18			Mar 18			Mar 19		Mar 19
	$M			$M			$M			v. Sep 18		v. Mar 18
Net interest income		1			1			1			0%		0%
Other operating income		26			12			48			large		-46%
Operating income		27			13			49			large		-45%
Operating expenses		(70	)		(95	)		(85	)		-26%		-18%
Profit before credit impairment and income tax		(43	)		(82	)		(36	)		-48%		19%
Credit impairment (charge)/release		-			-			-			n/a		n/a
Profit before income tax		(43	)		(82	)		(36	)		-48%		19%
Income tax expense and non-controlling interests		13			25			10			-48%		30%
Cash profit from continuing operations		(30	)		(57	)		(26	)		-47%		15%
Total full time equivalent staff (FTE)1		640			692			759			-8%		-16%
1.   FTE are allocated between continuing and discontinued operations. The actual FTE that will transfer to IOOF or Zurich on sale completion or at a later date is currently being determined. Pacific - continuing operations David Hisco
	Half Year									Movement
	Mar 19			Sep 18			Mar 18			Mar 19		Mar 19
	$M			$M			$M			v. Sep 18		v. Mar 18
Net interest income		68			66			65			3%		5%
Other operating income		50			53			47			-6%		6%
Operating income		118			119			112			-1%		5%
Operating expenses		(70	)		(65	)		(63	)		8%		11%
Profit/(Loss) before credit impairment and income tax		48			54			49			-11%		-2%
Credit impairment (charge)/release		(2	)		(1	)		(2	)		100%		0%
Profit/(Loss) before income tax		46			53			47			-13%		-2%
Income tax expense and non-controlling interests		(13	)		(14	)		(14	)		-7%		-7%
Cash profit/(loss)		33			39			33			-15%		0%
Balance Sheet
Net loans and advances		2,135			2,114			2,166			1%		-1%
Customer deposits		3,474			3,467			3,370			0%		3%
Risk weighted assets		3,840			3,915			3,827			-2%		0%
Total full time equivalent staff (FTE)		1,096			1,125			1,172			-3%		-6%
TSO and Group Centre - continuing operations Divisional performance was impacted by a number of large/notable items. Refer to pages 14 to 18 and pages 53 to 54 for details of these items.
				Half Year						Movement
	Mar 19			Sep 18			Mar 18			Mar 19		Mar 19
	$M			$M			$M			v. Sep 18		v. Mar 18
Share of associates profit		126			92			87			37%		45%
Operating income (other)		367			211			406			74%		-10%
Operating income		493			303			493			63%		0%
Operating expenses		(450	)		(590	)		(455	)		-24%		-1%
Profit/(Loss) before credit impairment and income tax		43			(287	)		38			large		13%
Credit impairment (charge)/release		-			-			(25	)		n/a		-100%
Profit/(Loss) before income tax		43			(287	)		13			large		large
Income tax expense and non-controlling interests		20			88			(26	)		-77%		large
Cash profit/(loss)		63			(199	)		(13	)		large		large
Risk weighted assets		5,594			6,230			7,033			-10%		-20%
Total full time equivalent staff (FTE)1		10,520			10,651			10,986			-1%		-4%

^1.  FTE are allocated between continuing and discontinued operations. The actual FTE that will transfer to IOOF or Zurich on sale completion or at a later date is currently being determined.

71

DIVISIONAL RESULTS

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72

PROFIT RECONCILIATION

CONTENTS	Page
Adjustments between statutory profit and cash profit		74
Explanation of adjustments between statutory profit and cash profit - continuing operations		74
Explanation of adjustments between statutory profit and cash profit - discontinued operations		75
Reconciliation of statutory profit to cash profit		76

73

PROFIT RECONCILIATION

Non-IFRS information

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

Adjustments between statutory profit and cash profit

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

	Half Year									Movement
	Mar 19			Sep 18			Mar 18			Mar 19		Mar 19
	$M			$M			$M			v. Sep 18		v. Mar 18
Statutory profit attributable to shareholders of the Company from continuing operations		3,243			3,172			3,923			2%		-17%
Adjustments between statutory profit and cash profit from continuing operations
Revaluation of policy liabilities		77			(4	)		(10	)		large		large
Economic hedges		185			(124	)		(124	)		large		large
Revenue and expense hedges		60			(49	)		40			large		50%
Structured credit intermediation trades		(1	)		(1	)		(3	)		0%		-67%
Sale of SRCB		-			-			(333	)		n/a		-100%
Total adjustments between statutory profit and cash profit from continuing operations		321			(178	)		(430	)		large		large
Cash profit from continuing operations		3,564			2,994			3,493			19%		2%
Statutory profit attributable to shareholders of the Company from discontinued operations		(70	)		(95	)		(600	)		-26%		-88%
Adjustments between statutory profit and cash profit from discontinued operations
Treasury shares adjustment		(18	)		30			(23	)		large		-22%
Revaluation of policy liabilities		38			-			6			n/a		large
Total adjustments between statutory profit and cash profit from discontinued operations		20			30			(17	)		-33%		large
Cash profit/(loss) from discontinued operations		(50	)		(65	)		(617	)		-23%		-92%
Cash profit		3,514			2,929			2,876			20%		22%

Explanation of adjustments between statutory profit and cash profit - continuing operations

• Revaluation of policy liabilities - New Zealand division

When calculating policy liabilities, the projected future cash flows on insurance contracts are discounted to reflect the present value of the obligation, with the impact of changes in the market discount rate each period being reflected in the Income Statement. ANZ includes the impact on the remeasurement of the insurance contract attributable to changes in market discount rates as an adjustment to statutory profit to remove the volatility attributable to changes in market interest rates which reverts to zero over the life of the insurance contract. With the sale completion of the OnePath Life (NZ) Ltd business, the March 2019 half includes the reversal of the life-to-date cash profit adjustments on the revaluation of policy liabilities sold.

• Economic and revenue and expense hedges

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

Economic hedges comprise:

• Funding related swaps (primarily cross currency interest rate swaps) used to convert the proceeds of foreign currency debt issuances into floating rate Australian dollar and New Zealand dollar debt. As these swaps do not qualify for hedge accounting, movements in the fair values are recorded in the Income Statement. The main drivers of these fair values are currency basis spreads and Australian dollar and New Zealand dollar fluctuations against other major funding currencies.

• Economic hedges of select structured finance and specialised leasing transactions that do not qualify for hedge accounting. The main drivers of these fair value adjustments are movements in the Australian and New Zealand term structure of interest rates.

• Ineffectiveness from designated accounting hedge relationships.

74

PROFIT RECONCILIATION

In the March 2019 half, the majority of the loss on economic hedges adjusted from cash profit relates to funding related swaps, principally from narrowing basis spreads on NZD/USD and USD/EUR currency pairs.

The loss on revenue and expense hedges adjusted from cash profit in the March 2019 half was due to the weakening of the AUD against the NZD.

	Half Year
	Mar 19		Sep 18		Mar 18
	$M		$M		$M
Economic hedges		260		(174)		(175)
Revenue and expense hedges		85		(69)		57
Increase/(decrease) to cash profit before tax		345		(243)		(118)
Increase/(decrease) to cash profit after tax		245		(173)		(84)

• Structured credit intermediation trades

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

The notional value of outstanding bought and sold CDSs at 31 March 2019 amounted to $0.3 billion (Sep 18: $0.3 billion; Mar 18: $0.3 billion). While both the bought and sold CDSs are measured at fair value through profit and loss, the associated fair value movements do not fully offset due to the impact of credit risk on the bought CDSs which is driven by market movements in credit spreads and AUD/USD and NZD/USD rates. The fair value of the CDSs (excluding CVA) is $20 million (Sep 18: $26 million; Mar 18: $27 million) with CVA on the bought protection of $4 million (Sep 18: $4 million; Mar 18: $5 million).

The profit and loss associated with the bought and sold protection is included as an adjustment to cash profit as it relates to a legacy business where, unless terminated early, the fair value movements are expected to reverse to zero in future periods.

• Sale of Shanghai Rural Commercial Bank (SRCB)

On 3 January 2017, the Group announced that it had agreed to sell its 20% stake in Shanghai Rural Commercial Bank (SRCB).

The impact of SRCB has been treated as an adjustment between statutory profit to cash profit. The rationale being the loss on reclassification to held for sale was expected to be largely offset by the release of reserve gains on sale completion within the 2017 full year. The transaction was subsequently completed in the March 2018 half and the entire impact of the transaction was recognised in cash profit.

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

Derivative credit valuation adjustments on defaulted and impaired derivative exposures are reclassified to cash credit impairment charges to reflect the manner in which the defaulted and impaired derivatives are managed.

Explanation of adjustments between statutory profit and cash profit - discontinued operations

• Treasury shares adjustment

ANZ shares held by the Group in Wealth Australia (Mar 19: 15.5 million shares; Sep 18: 15.5 million shares; Mar 18: 14.8 million shares) are deemed to be Treasury shares for accounting purposes. Dividends and realised and unrealised gains and losses from these shares are reversed as these are not permitted to be recognised as income for statutory reporting purposes. In deriving cash profit, these earnings are included to ensure there is no asymmetrical impact on the Group’s profits because the Treasury shares are held to support policy liabilities which are revalued through the Income Statement.

• Revaluation of policy liabilities - Wealth Australia division

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

75

PROFIT RECONCILIATION

							Adjustments to statutory profit
																Structured						Sale of
				Treasury			Revaluation						Revenue and			credit			Credit risk			Shanghai Rural		Total
				shares			of policy			Economic			expense			intermediation			on impaired			Commercial		adjustments to
	Statutory profit			adjustment			liabilities			hedges			hedges			trades			derivatives			Bank		statutory profit			Cash profit
	$M			$M			$M			$M			$M			$M			$M			$M		$M			$M
March 2019 Half Year
Net interest income		7,299			-			-			-			-			-			-			-		-			7,299
Net income from insurance business		77			-			(7	)		-			-			-			-			-		(7	)		70
Other		1,917			-			115			260			85			(1	)		1			-		460			2,377
Other operating income		1,994			-			108			260			85			(1	)		1			-		453			2,447
Operating income		9,293			-			108			260			85			(1	)		1			-		453			9,746
Operating expenses		(4,365	)		-			-			-			-			-			-			-		-			(4,365	)
Profit before credit impairment and tax		4,928			-			108			260			85			(1	)		1			-		453			5,381
Credit impairment charge		(392	)		-			-			-			-			-			(1	)		-		(1	)		(393	)
Profit before income tax		4,536			-			108			260			85			(1	)		-			-		452			4,988
Income tax expense		(1,284	)		-			(31	)		(75	)		(25	)		-			-			-		(131	)		(1,415	)
Non-controlling interests		(9	)		-			-			-			-			-			-			-		-			(9	)
Profit after tax from continuing operations		3,243			-			77			185			60			(1	)		-			-		321			3,564
Profit/(Loss) after tax from discontinued operations		(70	)		(18	)		38			-			-			-			-			-		20			(50	)
Profit after tax		3,173			(18	)		115			185			60			(1	)		-			-		341			3,514
September 2018 Half Year
Net interest income		7,164			-			-			-			-			-			-			-		-			7,164
Net income from insurance business		133			-			(6	)		-			-			-			-			-		(6	)		127
Other		2,450			-			-			(174	)		(69	)		(1	)		-			-		(244	)		2,206
Other operating income		2,583			-			(6	)		(174	)		(69	)		(1	)		-			-		(250	)		2,333
Operating income		9,747			-			(6	)		(174	)		(69	)		(1	)		-			-		(250	)		9,497
Operating expenses		(4,928	)		-			-			-			-			-			-			-		-			(4,928	)
Profit before credit impairment and tax		4,819			-			(6	)		(174	)		(69	)		(1	)		-			-		(250	)		4,569
Credit impairment charge		(280	)		-			-			-			-			-			-			-		-			(280	)
Profit before income tax		4,539			-			(6	)		(174	)		(69	)		(1	)		-			-		(250	)		4,289
Income tax expense		(1,358	)		-			2			50			20			-			-			-		72			(1,286	)
Non-controlling interests		(9	)		-			-			-			-			-			-			-		-			(9	)
Profit after tax from continuing operations		3,172			-			(4	)		(124	)		(49	)		(1	)		-			-		(178	)		2,994
Profit/(Loss) after tax from discontinued operations		(95	)		30			-			-			-			-			-			-		30			(65	)
Profit after tax		3,077			30			(4	)		(124	)		(49	)		(1	)		-			-		(148	)		2,929

76

PROFIT RECONCILIATION

				Adjustments to statutory profit
																Structured					Sale of
				Treasury			Revaluation						Revenue and			credit			Credit risk		Shanghai Rural			Total
				shares			of policy			Economic			expense			intermediation			on impaired		Commercial			adjustments to
	Statutory profit			adjustment			liabilities			hedges			hedges			trades			derivatives		Bank			statutory profit			Cash profit
	$M			$M			$M			$M			$M			$M			$M		$M			$M			$M
March 2018 Half Year
Net interest income		7,350			-			-			-			-			-			-		-			-			7,350
Net income from insurance business		140			-			(14	)		-			-			-			-		-			(14	)		126
Other		2,747			-			-			(175	)		57			(4	)		-		(231	)		(353	)		2,394
Other operating income		2,887			-			(14	)		(175	)		57			(4	)		-		(231	)		(367	)		2,520
Operating income		10,237			-			(14	)		(175	)		57			(4	)		-		(231	)		(367	)		9,870
Operating expenses		(4,473	)		-			-			-			-			-			-		-			-			(4,473	)
Profit before credit impairment and tax		5,764			-			(14	)		(175	)		57			(4	)		-		(231	)		(367	)		5,397
Credit impairment charge		(408	)		-			-			-			-			-			-		-			-			(408	)
Profit before income tax		5,356			-			(14	)		(175	)		57			(4	)		-		(231	)		(367	)		4,989
Income tax expense		(1,426	)		-			4			51			(17	)		1			-		(102	)		(63	)		(1,489	)
Non-controlling interests		(7	)		-			-			-			-			-			-		-			-			(7	)
Profit after tax from continuing operations		3,923			-			(10	)		(124	)		40			(3	)		-		(333	)		(430	)		3,493
Profit/(Loss) after tax from discontinued operations		(600	)		(23	)		6			-			-			-			-		-			(17	)		(617	)
Profit after tax		3,323			(23	)		(4	)		(124	)		40			(3	)		-		(333	)		(447	)		2,876

77

PROFIT RECONCILIATION

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78

CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - TABLE OF CONTENTS

CONTENTS	Page
Condensed Consolidated Income Statement		81
Condensed Consolidated Statement of Comprehensive Income		82
Condensed Consolidated Balance Sheet		83
Condensed Consolidated Cash Flow Statement		84
Condensed Consolidated Statement of Changes in Equity		85
Notes to Condensed Consolidated Financial Statements		86
Directors’ Declaration		120
Auditor’s Review Report and Independence Declaration		121

79

DIRECTORS’ REPORT

The Directors present their report on the Condensed Consolidated Financial Statements for the half year ended 31 March 2019.

Directors

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

Mr DM Gonski, AC	Chairman
Mr SC Elliott	Director and Chief Executive Officer
Ms IR Atlas	Director
Ms PJ Dwyer	Director
Ms SJ Halton, AO PSM	Director
Mr Lee Hsien Yang	Director, retired on 19 December 2018
Mr GR Liebelt	Director
Rt Hon Sir JP Key, GNZM AC	Director
Mr JT MacFarlane	Director

Result

The consolidated profit attributable to shareholders of the Company was $3,173 million, and consolidated profit attributable to shareholders of the Company from continuing operations was $3,243 million. Further details are contained in Group Results on pages 21 to 47 which forms part of this report, and in the Condensed Consolidated Financial Statements.

Review of operations

A review of the operations of the Group during the half year and the results of those operations are contained in the Group Results on pages 21 to 47 which forms part of this report.

Lead auditor’s independence declaration

The lead auditor’s independence declaration given under section 307C of the Corporations Act 2001 (as amended) is set out on page 121 which forms part of this report.

Rounding of amounts

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

Significant events since balance date

There have been no significant events from 31 March 2019 to the date of signing of this report.

Signed in accordance with a resolution of the Directors.

David M Gonski, AC	Shayne C Elliott
Chairman	Director

30 April 2019

80

CONDENSED CONSOLIDATED INCOME STATEMENT

Australia and New Zealand Banking Group Limited

		Half Year1									Movement
	Note	Mar 19  $M			Sep 18  $M			Mar 18  $M			Mar 19 v. Sep 18		Mar 19 v. Mar 18
Interest income			15,970			15,478			14,849			3%		8%
Interest expense			(8,671	)		(8,314	)		(7,499	)		4%		16%
Net interest income	2		7,299			7,164			7,350			2%		-1%
Other operating income	2		1,786			2,355			2,659			-24%		-33%
Net income from insurance business	2		77			133			140			-42%		-45%
Share of associates’ profit	2, 17		131			95			88			38%		49%
Operating income			9,293			9,747			10,237			-5%		-9%
Operating expenses	3		(4,365	)		(4,928	)		(4,473	)		-11%		-2%
Profit before credit impairment and income tax			4,928			4,819			5,764			2%		-15%
Credit impairment charge	9		(392	)		(280	)		(408	)		40%		-4%
Profit before income tax			4,536			4,539			5,356			0%		-15%
Income tax expense	4		(1,284	)		(1,358	)		(1,426	)		-5%		-10%
Profit after tax from continuing operations			3,252			3,181			3,930			2%		-17%
Profit/(Loss) after tax from discontinued operations	11		(70	)		(95	)		(600	)		-26%		-88%
Profit for the period			3,182			3,086			3,330			3%		-4%
Comprising:
Profit attributable to shareholders of the Company			3,173			3,077			3,323			3%		-5%
Profit attributable to non-controlling interests			9			9			7			0%		29%
Earnings per ordinary share (cents) including discontinued operations
Basic	6		111.7			107.3			114.2			4%		-2%
Diluted	6		106.4			103.2			108.6			3%		-2%
Earnings per ordinary share (cents) from continuing operations
Basic	6		114.1			110.6			134.8			3%		-15%
Diluted	6		108.7			106.2			127.4			2%		-15%
Dividend per ordinary share (cents)	5		80			80			80			0%		0%

^1.  On adoption of AASB 15, the Group reclassified certain items previously netted which are now presented gross in operating income and operating expenses. Comparative information has been restated accordingly which increased total operating income and total operating expenses by $91 million for the September 2018 half and $62 million for the March 2018 half.

The notes appearing on pages 86 to 119 form an integral part of the Condensed Consolidated Financial Statements.

81

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

Australia and New Zealand Banking Group Limited

	As at									Movement
	Mar 19   $M			Sep 18   $M			Mar 18   $M			Mar 19 v Sep 18		Mar 19 v Mar 18
Profit for the period from continuing operations		3,252			3,181			3,930			2%		-17%
Other comprehensive income
Items that will not be reclassified subsequently to profit or loss
Investment securities - equity securities at FVOCI1		176			-			-			n/a		n/a
Other reserve movements		11			5			27			large		-59%
Items that may be reclassified subsequently to profit or loss
Foreign currency translation reserve2		834			(238	)		460			large		81%
Other reserve movements1		517			(37	)		174			large		large
Income tax attributable to the above items		(187	)		3			(121	)		large		55%
Share of associates’ other comprehensive income3		13			30			(5	)		-57%		large
Other comprehensive income after tax from continuing operations		1,364			(237	)		535			large		large
Profit/(Loss) after tax from discontinued operations		(70	)		(95	)		(600	)		-26%		-88%
Other comprehensive income after tax from discontinued operations		42			8			10			large		large
Total comprehensive income for the period		4,588			2,857			3,875			61%		18%
Comprising total comprehensive income attributable to:
Shareholders of the Company		4,578			2,841			3,865			61%		18%
Non-controlling interests		10			16			10			-38%		0%

^1.  On adoption of AASB 9 on 1 October 2018, the classification and measurement of financial assets were revised. Available-for-sale classification used in comparative periods ceases to exist under AASB 9 and a new classification of investment securities was introduced. Refer to Note 1 and Note 21 for further details. Comparative information has not been restated.

^2.  Includes foreign currency translation differences attributable to non-controlling interests of $1 million gain (Sep 18 half: $7 million gain; Mar 18 half: $3 million gain).

^3.  Share of associates’ other comprehensive income includes an FVOCI reserve gain of $5 million (available-for-sale revaluation reserve: Sep 18 half: $30 million gain; Mar 18 half: $2 million loss), defined benefits gain of $7 million (Sep 18 half: nil; Mar 18 half: nil) and a foreign currency translation reserve gain of $1 million (Sep 18 half: nil; Mar 18 half: $3 million loss) that may be reclassified subsequently to profit or loss.

The notes appearing on pages 86 to 119 form an integral part of the Condensed Consolidated Financial Statements.

82

CONDENSED CONSOLIDATED BALANCE SHEET

Australia and New Zealand Banking Group Limited

		As At				Movement
Assets	Note		Mar 19 $M	Sep 18 $M	Mar 18 $M		Mar 19 v. Sep 18	Mar 19 v. Mar 18
Cash and cash equivalents1			93,996	84,636	82,071		11%	15%
Settlement balances owed to ANZ			4,041	2,319	5,037		74%	-20%
Collateral paid			11,860	11,043	10,863		7%	9%
Trading securities			42,857	37,722	45,058		14%	-5%
Derivative financial instruments			79,375	68,423	70,915		16%	12%
Investment securities2			78,882	-	-		n/a	n/a
Available-for-sale assets2			-	74,284	70,239		-100%	-100%
Net loans and advances3	8		609,255	604,438	589,468		1%	3%
Regulatory deposits			944	882	1,229		7%	-23%
Assets held for sale	11		43,549	45,248	45,278		-4%	-4%
Investment in associates			2,737	2,553	2,481		7%	10%
Current tax assets			500	268	15		87%	large
Deferred tax assets			1,146	900	840		27%	36%
Goodwill and other intangible assets			5,017	4,930	5,338		2%	-6%
Premises and equipment			1,863	1,833	1,892		2%	-2%
Other assets			4,222	3,677	4,946		15%	-15%
Total assets			980,244	943,156	935,670		4%	5%
Liabilities
Settlement balances owed by ANZ			12,371	11,810	10,577		5%	17%
Collateral received			5,726	6,542	9,395		-12%	-39%
Deposits and other borrowings	10		634,989	618,150	616,230		3%	3%
Derivative financial instruments			80,871	69,676	70,624		16%	15%
Current tax liabilities			159	300	371		-47%	-57%
Deferred tax liabilities			48	69	268		-30%	-82%
Liabilities held for sale	11		46,555	47,159	44,773		-1%	4%
Payables and other liabilities			7,641	6,894	7,542		11%	1%
Provisions			2,221	1,972	1,532		13%	45%
Debt issuances	12		129,692	121,179	114,836		7%	13%
Total liabilities			920,273	883,751	876,148		4%	5%
Net assets			59,971	59,405	59,522		1%	1%
Shareholders’ equity
Ordinary share capital	15		26,048	27,205	27,933		-4%	-7%
Reserves	15		1,709	323	541		large	large
Retained earnings	15		32,064	31,737	30,922		1%	4%
Share capital and reserves attributable to shareholders of the Company			59,821	59,265	59,396		1%	1%
Non-controlling interests	15		150	140	126		7%	19%
Total shareholders’ equity			59,971	59,405	59,522		1%	1%

^1.  Includes settlement balances owed to ANZ that meet the definition of cash and cash equivalents.

^2.  On adoption of AASB 9 on 1 October 2018, the classification and measurement of financial assets were revised. Available-for-sale classification used in comparative periods ceases to exist under AASB 9 and a new classification of investment securities was introduced. Refer Note 1 and 21 for further details. Comparative information has not been restated.

^3.  On adoption of AASB 9 on 1 October 2018, the Group increased the collectively assessed provisions by $813 million. Comparative information has not been restated. Refer to Note 1 and 21 for further details.

The notes appearing on pages 86 to 119 form an integral part of the Condensed Consolidated Financial Statements.

83

CONDENSED CONSOLIDATED CASH FLOW STATEMENT

Australia and New Zealand Banking Group Limited

The Condensed Consolidated Cash Flow Statement includes discontinued operations. Please refer to Note 11 for cash flows associated with discontinued operations and cash and cash equivalents reclassified as held for sale.

	Half Year1
	Mar 19   $M			Sep 18   $M			Mar 18   $M
Profit after income tax		3,182			3,086			3,330
Adjustments to reconcile to net cash flow from operating activities:
Provision for credit impairment charge		391			280			408
Depreciation and amortisation		428			714			485
(Profit)/loss on sale of premises and equipment		(1	)		(4	)		-
Net derivatives/foreign exchange adjustment		1,614			5,818			903
(Gain)/loss on sale from divestments		(118	)		(125	)		(469	)
(Gain)/loss on reclassification of businesses to held for sale		-			61			632
Other non-cash movements		(61	)		52			(107	)
Net (increase)/decrease in operating assets:
Collateral paid		(643	)		77			(1,725	)
Trading securities		(5,525	)		9,713			(1,148	)
Loans and advances		1,071			(13,808	)		(11,431	)
Investments backing policy liabilities2		(211	)		(3,033	)		(881	)
Other assets		(1,103	)		(330	)		(643	)
Net increase/(decrease) in operating liabilities:
Deposits and other borrowings		9,056			(1,816	)		14,023
Settlement balances owed by ANZ		443			1,257			596
Collateral received		(924	)		(3,114	)		3,300
Life insurance contract policy liabilities2		110			3,133			1,130
Other liabilities		(126	)		(292	)		494
Total adjustments		4,401			(1,417	)		5,567
Net cash inflows/(outflows) from operating activities3		7,583			1,669			8,897
Cash flows from investing activities
Investment securities/available-for-sale assets:4
Purchases		(16,999	)		(10,323	)		(13,483	)
Proceeds from sale or maturity		13,508			7,922			12,670
Proceeds from divestments		706			104			2,044
Proceeds from Zurich reinsurance arrangement		-			1,000			-
Proceeds from IOOF secured notes		800			-			-
Other assets		(396	)		(162	)		394
Net cash inflows/(outflows) from investing activities		(2,381	)		(1,459	)		1,625
Cash flows from financing activities
Debt issuances:5
Issue proceeds		16,982			10,383			14,692
Redemptions		(10,781	)		(6,154	)		(9,744	)
Dividends paid6		(2,242	)		(2,267	)		(2,296	)
On market purchase of treasury shares		(112	)		-			(114	)
Share buy-back6		(1,120	)		(748	)		(1,132	)
Net cash inflows/(outflows) from financing activities		2,727			1,214			1,406
Net increase in cash and cash equivalents		7,929			1,424			11,928
Cash and cash equivalents at beginning of period		84,964			82,076			68,048
Effects of exchange rate changes on cash and cash equivalents		1,370			1,464			2,100
Cash and cash equivalents at end of period7		94,263			84,964			82,076

^1.  As a result of restatements impacting prior period balance sheet items, certain items in the Cash Flow Statement have restated accordingly. Refer Note 21 for further information.

^2.  Investments backing policy liabilities and life insurance contract policy liabilities have been reclassified as held for sale.

^3.  Net cash inflows/(outflows) from operating activities includes income taxes paid of $1,935 million (Sep 18 half: $1,858 million; Mar 18 half: $1,515 million).

^4.  On adoption of AASB 9 on 1 October 2018, the classification and measurement of financial assets were revised. Available-for-sale classification used in comparative periods ceases to exist under AASB 9 and a new classification of investment securities was introduced. Refer Note 1 and 21 for further details.

^5.  Non-cash changes in debt issuances includes fair value hedging loss of $1,459 million (Sep 18 half: $570 million gain; Mar 18 half: $873 million gain) and foreign exchange losses of $1,104 million (Sep 18 half: $2,732 million loss; Mar 18 half: $2,980 million loss).

^6.  Shares purchased to satisfy the dividend reinvestment plan in the March 2018 half were reclassified from Share buy-back to Dividends paid to conform with current period presentation.

^7.  Includes cash and cash equivalents recognised on the face of balance sheet of $93,996 million (Sep 18: $84,636 million; Mar 18: $82,071 million) and amounts recorded as part of assets held for sale of $267 million (Sep 18: $328 million; Mar 18: $5 million).

The notes appearing on pages 86 to 119 form an integral part of the Condensed Consolidated Financial Statements.

84

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

Australia and New Zealand Banking Group Limited

	Ordinary   share   capital 1   $M			Reserves   $M			Retained   earnings   $M			Share capital   and reserves   attributable to   shareholders of   the Company   $M			Non-   controlling   interests   $M			Total   shareholders’   equity   $M
As at 1 October 2017		29,088			37			29,834			58,959			116			59,075
Impact on transition to AASB 15		-			-			22			22			-			22
Profit or loss from continuing operations		-			-			3,923			3,923			7			3,930
Profit or loss from discontinued operations		-			-			(600	)		(600	)		-			(600	)
Other comprehensive income for the period from continuing operations		-			511			21			532			3			535
Other comprehensive income for the period from discontinued operations		-			10			-			10			-			10
Total comprehensive income for the period		-			521			3,344			3,865			10			3,875
Transactions with equity holders in their capacity as equity holders:2
Dividends paid		-			-			(2,308	)		(2,308	)		-			(2,308	)
Dividend income on treasury shares held within the Group’s life insurance statutory funds		-			-			12			12			-			12
Group share buy-back3		(1,132	)		-			-			(1,132	)		-			(1,132	)
Other equity movements:2
Treasury shares Wealth Australia adjustment		20			-			-			20			-			20
Group employee share acquisition scheme		(43	)		-			-			(43	)		-			(43	)
Other items		-			(17	)		18			1			-			1
As at 31 March 2018		27,933			541			30,922			59,396			126			59,522
Profit or loss from continuing operations		-			-			3,172			3,172			9			3,181
Profit or loss from discontinued operations		-			-			(95	)		(95	)		-			(95	)
Other comprehensive income for the period from continuing operations		-			(247	)		3			(244	)		7			(237	)
Other comprehensive income for the period from discontinued operations		-			8			-			8			-			8
Total comprehensive income for the period		-			(239	)		3,080			2,841			16			2,857
Transactions with equity holders in their capacity as equity holders:2
Dividends paid		-			-			(2,277	)		(2,277	)		(2	)		(2,279	)
Dividend income on treasury shares held within the Group’s life insurance statutory funds		-			-			12			12			-			12
Group share buy-back3		(748	)		-			-			(748	)		-			(748	)
Other equity movements:2
Treasury shares Wealth Australia adjustment		(22	)		-			-			(22	)		-			(22	)
Group employee share acquisition scheme		42			-			-			42			-			42
Other items		-			21			-			21			-			21
As at 30 September 2018		27,205			323			31,737			59,265			140			59,405
Impact on transition to AASB 9		-			14			(624	)		(610	)		-			(610	)
Profit or loss from continuing operations		-			-			3,243			3,243			9			3,252
Profit or loss from discontinued operations		-			-			(70	)		(70	)		-			(70	)
Other comprehensive income for the period from continuing operations		-			1,351			12			1,363			1			1,364
Other comprehensive income for the period from discontinued operations		-			42			-			42			-			42
Total comprehensive income for the period		-			1,393			3,185			4,578			10			4,588
Transactions with equity holders in their capacity as equity holders:2
Dividends paid		-			-			(2,254	)		(2,254	)		-			(2,254	)
Dividend income on treasury shares held within the Group’s life insurance statutory funds		-			-			12			12			-			12
Group share buy-back3		(1,120	)		-			-			(1,120	)		-			(1,120	)
Other equity movements:2
Treasury shares Wealth Australia adjustment		-			-			-			-			-			-
Group employee share acquisition scheme		(37	)		-			-			(37	)		-			(37	)
Other items		-			(21	)		8			(13	)		-			(13	)
As at 31 March 2019		26,048			1,709			32,064			59,821			150			59,971

^1.  No new shares were issued under the Dividend Reinvestment Plan (DRP) for the 2018 final dividend (nil shares for the 2018 Interim dividend; nil shares for the 2017 final dividend) as the shares were purchased on-market and provided directly to the shareholders participating in the DRP. On-market share purchases for the DRP in the March 2019 half were $199 million (Sep 18 half: $200 million; Mar 18 half: $192 million).

^2.  Current period and prior periods include discontinued operations.

^3.  The Company has completed its $3.0 billion on-market share buy-back of ANZ ordinary shares purchasing $1,120 million worth of shares in the March 2019 half (Sep 18 half: $748 million; Mar 18 half: $1,132 million) resulting in 42.0 million shares being cancelled in the March 2019 half (Sep 18 half: 26.6 million; Mar 18 half: 40.1 million).

The notes appearing on pages 86 to 119 form an integral part of the Condensed Consolidated Financial Statements.

85

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. Basis of preparation

These Condensed Consolidated Financial Statements:

_● have been prepared in accordance with the recognition and measurement requirements of Australian Accounting Standards (AASs);

_● should be read in conjunction with ANZ’s Annual Financial Statements for the year ended 30 September 2018 and any public announcements made by the Parent Entity and its controlled entities (the Group) for the half year ended 31 March 2019 in accordance with the continuous disclosure obligations under the Corporations Act 2001 and the ASX Listing Rules;

_● do not include all notes of the type normally included in ANZ’s Annual Financial Report;

_● are presented in Australian dollars unless otherwise stated; and

_● were approved by the Board of Directors on 30 April 2019.

i) Statement of Compliance

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

ii) Accounting policies

These Condensed Consolidated Financial Statements have been prepared on the basis of accounting policies and using methods of computation consistent with those applied in the 2018 ANZ Annual Financial Report with the exception of policies associated with new standards adopted during the period as discussed below.

Discontinued operations are excluded from the results of the continuing operations and are presented as a single line item ‘profit/(loss) after tax from discontinued operations’ in the Condensed Consolidated Income Statement. Notes to the Condensed Consolidated Income Statement have been presented on a continuing basis. Assets and liabilities of discontinued operations have been presented as held for sale in the Condensed Consolidated Balance Sheet as at 31 March 2019.

New standards adopted during the period

AASB 9 Financial Instruments (AASB 9)

The Group has applied AASB 9 effective from 1 October 2018 (with the exception of the ‘own credit’ requirements relating to financial liabilities designated as measured at fair value, which were early adopted by the Group effective from 1 October 2013). In addition the Group chose to early adopt AASB 2017-6 Amendments to Australian Accounting Standards – Prepayment Features with Negative Compensation (AASB 2017-6) effective from 1

October 2018.

AASB 9 and AASB 2017-6 stipulate new requirements for the impairment of financial assets, classification and measurement of financial assets and financial liabilities and general hedge accounting. Details of the key new requirements are outlined below, and a reconciliation of the transitional impact at 1 October 2018 is set out in Note 21.

Impairment

AASB 9 introduces a new impairment model based on expected credit losses (ECL). This model is applied to:

_● Financial assets measured at amortised cost;

_● Debt instruments measured at fair value through other comprehensive income (FVOCI);

_● Lease receivables; and

_● Loan commitments and financial guarantees not measured at fair value through profit or loss (FVTPL).

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 since origination, a provision 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 significant increase in credit risk since origination, a provision 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, a provision 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.

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 Bank considers both qualitative and quantitative information:

86

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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 by comparing each facility’s scenario weighted lifetime probability of default at the reporting date to the scenario weighted lifetime probability of default at origination. 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 Bank 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.

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.

Forward looking information

In applying forward looking information for estimating ECL, the Bank 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 Bank 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.

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 each scenario is determined by management by considering risks and uncertainties surrounding the base case scenario, as well as specific portfolio considerations where required. The Group’s Credit and Market Risk Committee (CMRC) is responsible for reviewing and approving forecast economic scenarios and the associated probability weights applied to each scenario.

Where applicable, 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.

Expected Life

When estimating ECL for exposures in Stage 2 and 3, the Bank considers the expected lifetime over which it is exposed to credit risk.

For non-retail portfolios, the Bank 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 Bank’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 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.

87

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

When there is no realistic probability of recovery, loans are written off against the related impairment allowance on completion of the Bank’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.

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.

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 only 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 only and which are held in a business model whose objective is to collect their cash flows or to sell; 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 fair value through profit or loss on initial recognition when the designation eliminates or significantly reduces an accounting mismatch that would otherwise arise.

Financial assets - equity instruments

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.

Financial liabilities

The classification and measurement requirements for financial liabilities under AASB 9 are largely consistent with AASB 139 Financial Instruments: Recognition and Measurement (AASB 139) with the exception that for financial liabilities 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. This part of the standard was early adopted by the Group on 1 October 2013.

Financial liabilities are measured at amortised cost, or fair value through profit or loss (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; or

_● 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.

General hedge accounting

AASB 9 introduces new hedge accounting requirements which more closely align accounting with risk management activities undertaken when hedging financial and non-financial risks. The Group has exercised an accounting policy choice to continue to apply the AASB 139 hedge accounting requirements until the International Accounting Standards Board’s ongoing Dynamic Risk Management (macro hedging) project is completed.

AASB 15 Revenue from Contracts with Customers (AASB 15)

The Group adopted AASB 15 from 1 October 2018 which resulted in changes in accounting policies and adjustments to amounts recognised in the half year condensed consolidated financial statements. The standard requires identification of distinct performance obligations within a contract, and allocation of the transaction price of the contract to those performance obligations. Revenue is then recognised as each performance obligation is satisfied. The standard also provides guidance on whether an entity is acting as a principal or an agent which impacts the presentation of revenue on a gross or net basis. In accordance with the transitional provisions of AASB 15, the Group has adopted the full retrospective transition approach. Under this approach, the cumulative effect of initially applying the standard has been recognised as an adjustment to opening retained earnings as at 1 October 2017 and comparative information for the 2018 reporting period has been restated.

The adoption of AASB 15 resulted in the following changes in accounting policy:

i) Recognition of trail commission revenue: trail commission revenue previously recognised over time is now recognised at the time the Group initially distributes the underlying product to the customer where it is highly probable the revenue will not need to be reversed in future periods.

88

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

This policy change resulted in an adjustment to the opening balances of Other assets $32 million, Deferred tax liabilities $10 million and Retained earnings $22 million as at 1 October 2017 to recognise revenue that qualifies for upfront recognition under AASB 15 but was not previously recognised under AASB 118 Revenue (AASB 118). The change did not impact net profit or earnings per share in the comparative periods.

ii) Presentation: Certain credit card loyalty costs and other costs will be presented as operating expenses where the Group has assessed that it is acting as principal (rather than an agent). Previously these costs were presented as a reduction of other operating income. In addition, certain incentives received from card scheme providers related to card marketing activities will be presented as operating income where the Group has assessed that it is acting as principal (rather than an agent). Previously these incentives were presented as a reduction of operating expenses.

The presentation of these costs under AASB 15 increased other operating income and operating expenses by $91 million and $62 million in the comparative periods ending 30 September 2018 and 31 March 2018 respectively. The changes did not impact net profit or earnings per share in the comparative periods.

iii) Basis of measurement

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

_● derivative financial instruments as well as, in the case of fair value hedging, the fair value adjustment on the underlying hedged exposure;

_● financial assets and liabilities held for trading;

_● financial assets and liabilities designed at fair value through profit and loss;

_● available-for-sale financial assets (applicable prior to 1 October 2018);

_● financial assets at fair value through other comprehensive income (applicable from 1 October 2018);

_● assets and liabilities held for sale (except those at carrying value as per Note 11).

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

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

iv) Use of estimates, assumptions and judgements

The preparation of these Condensed Consolidated Financial Statements requires the use of management judgement, estimates and assumptions that affect reported amounts and the application of accounting policies. Discussion of the critical accounting estimates and judgements, which include complex or subjective decisions or assessments are provided in Note 1 of the 2018 ANZ Annual Financial Report. Such estimates and judgements are reviewed on an ongoing basis.

Investments in associates

At 31 March 2019, the impairment assessment of non-lending assets identified that one of the Group’s associate investments AMMB Holdings Berhad (AmBank) had indicators of impairment. Although its market value (based on share price) was below its carrying value, no impairment was recognised as the carrying value was supported by its value in use (VIU).

The VIU calculation is sensitive to a number of key assumptions, including discount rates, long term growth rates, future profitability and capital levels. A change in key assumptions could have an adverse impact on the recoverable amount of the investment. The key assumptions used in the VIU calculations are outlined below:

	As at 31 Mar 19
	AmBank
Carrying value supported by VIU calculation ($m)		1,497
Post-tax discount rate		11.2%
Terminal growth rate		4.8%
Expected NPAT growth (compound annual growth rate - 5 years)		4.5%
Core equity tier 1 ratio		11.8% to 12.5%

Investment securities (comparative information shown in available-for-sale assets)

As a result of persistent illiquidity of the quoted share price of Bank of Tianjin (BoT), the Group determines the fair value based on a valuation model using comparable bank pricing multiples. Judgement is required in both the selection of the model and inputs used.

Customer remediation provision

At 31 March 2019, the Group has recognised provisions of $698 million (Sep 18: $602 million; Mar 18: $141 million) in respect of customer remediation and related costs.

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 and the associated remediation costs.

Consequently, the appropriateness of the underlying assumptions is reviewed on a regular basis against actual experience and other relevant evidence, and adjustments are made to the provisions where appropriate.

Assets and liabilities held for sale

When classifying assets and liabilities as held for sale, judgement is required when assessing whether it is highly probable that contracted sales will complete within 12 months after balance date, particularly when the sale is subject to third party approvals. Management constantly reviews the status of each sale transaction to ensure the classification remains appropriate.

89

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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.

Useful lives of software

Management judgement is used to assess the useful life of software assets. A number of factors can influence the useful lives of software assets, including changes to business strategy, significant divestments and the underlying pace of technological change.

The Group reassess the useful lives of software assets on an annual basis. During the September 2018 half, certain software assets in the Institutional and Australia divisions had their useful life reassessed.

iv) Rounding of amounts

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

v) Future accounting developments

General hedge accounting

AASB 9 introduces new hedge accounting requirements which more closely align accounting with risk management activities undertaken when hedging financial and non-financial risks.

AASB 9 provides the Group with an accounting policy choice to continue to apply the AASB 139 Financial Instruments: Recognition and Measurement (AASB 139) hedge accounting requirements until the International Accounting Standards Board’s ongoing project on macro hedge accounting is completed.

AASB 16 Leases (AASB 16)

The final version of AASB 16 was issued in February 2016 and is not effective for the Group until 1 October 2019. AASB 16 requires a lessee to recognise its:

_● right to use the underlying leased asset, as a right-of-use asset; and

_● obligation to make lease payments as a lease liability.

AASB 16 substantially carries forward the lessor accounting requirements in AASB 117 Leases.

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

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 2021. 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.

The Group anticipates that this standard will impact profit measurement of businesses being sold which form part of discontinued operations. This standard is not expected to have a material impact on continuing operations.

90

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

2.    Income

	Half Year1									Movement
	Mar 19  $M			Sep 18  $M			Mar 18  $M			Mar 19 v. Sep 18		Mar 19 v. Mar 18
Interest income		15,970			15,478			14,849			3%		8%
Interest expense		(8,493	)		(8,136	)		(7,322	)		4%		16%
Major bank levy		(178	)		(178	)		(177	)		0%		1%
Net interest income		7,299			7,164			7,350			2%		-1%
i) Fee and commission income
Lending fees2		303			309			343			-2%		-12%
Non-lending fees		1,507			1,529			1,525			-1%		-1%
Commissions		48			46			46			4%		4%
Funds management income		128			108			140			19%		-9%
Fee and commission income		1,986			1,992			2,054			0%		-3%
Fee and commission expense		(721	)		(663	)		(673	)		9%		7%
Net fee and commission income		1,265			1,329			1,381			-5%		-8%
ii) Other income
Net foreign exchange earnings and other financial instruments income3		380			896			770			-58%		-51%
Sale of Asia Retail and Wealth businesses		-			-			99			n/a		-100%
Sale of SRCB		-			-			233			n/a		-100%
Sale of MCC		-			121			119			-100%		-100%
Sale of Cambodia JV		-			(42	)		-			-100%		n/a
Sale of PNG Retail, Commercial & SME		-			(19	)		-			-100%		n/a
Sale of OPL NZ		82			(3	)		-			large		n/a
Sale of Paymark		37			-			-			n/a		n/a
Other4		22			73			57			-70%		-61%
Other income		521			1,026			1,278			-49%		-59%
Other operating income		1,786			2,355			2,659			-24%		-33%
iii) Net income from insurance business
Investment income		-			(1	)		1			-100%		-100%
Insurance premium income		91			155			141			-41%		-35%
Commission expense		4			2			6			100%		-33%
Claims		(26	)		(36	)		(31	)		-28%		-16%
Changes in policy liabilities		8			13			23			-38%		-65%
Net income from insurance business		77			133			140			-42%		-45%
iv) Share of associates’ profit		131			95			88			38%		49%
Operating income5		9,293			9,747			10,237			-5%		-9%

^1.  On adoption of AASB 15, the Group reclassified certain items previously netted which are now presented gross in operating income and operating expenses. Comparative information has been restated accordingly which increased total operating income by $91 million for the September 2018 half and $62 million for the March 2018 half.

^2. Lending fees exclude fees treated as part of the effective yield calculation in interest income.

^3. Includes fair value movements (excluding realised and accrued interest) on derivatives not designated as accounting hedges entered into to manage interest rate and foreign exchange risk on funding instruments, ineffective portions of cash flow hedges, and fair value movements in financial assets and liabilities designated at fair value through profit and loss.

^4. Other income includes external dividend income of nil (Sep 18 half: $39 million; Mar 18 half: nil).

^5.  Includes charges associated with customer remediation of $64 million for the March 2019 half (Sep 18 half: $196 million; Mar 18 half: $32 million).

91

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

3.    Operating expenses

	Half Year1						Movement
	Mar 19 $M		Sep 18 $M		Mar 18 $M		Mar 19 v. Sep 18		Mar 19 v. Mar 18
i) Personnel
Salaries and related costs		2,127		2,092		2,133		2%		0%
Superannuation costs		146		141		149		4%		-2%
Other		97		123		120		-21%		-19%
Personnel expenses		2,370		2,356		2,402		1%		-1%
ii) Premises
Rent		232		236		232		-2%		0%
Other		174		180		163		-3%		7%
Premises expenses		406		416		395		-2%		3%
iii) Technology
Depreciation and amortisation		337		371		368		-9%		-8%
Licences and outsourced services		333		348		327		-4%		2%
Accelerated amortisation2		-		251		-		-100%		n/a
Other		94		114		120		-18%		-22%
Technology expenses		764		1,084		815		-30%		-6%
iv) Restructuring		51		149		78		-66%		-35%
v) Other
Advertising and public relations		97		140		108		-31%		-10%
Professional fees		229		286		244		-20%		-6%
Freight, stationery, postage and communication		107		107		116		0%		-8%
Royal Commission legal costs		13		39		16		-67%		-19%
Other		328		351		299		-7%		10%
Other expenses		774		923		783		-16%		-1%
Operating expenses3		4,365		4,928		4,473		-11%		-2%

^1.  On adoption of AASB 15, the Group reclassified certain items previously netted which are now presented gross in operating income and operating expenses. Comparative information has been restated accordingly which increased total operating expense by $91 million for the September 2018 half and $62 million for the March 2018 half.

^2. Accelerated amortisation charge relates to certain software assets in the Institutional and Australia divisions following the reassessment of their useful lives.

^3. Includes customer remediation expenses of $36 million for the March 2019 half (Sep 18 half: $156 million; Mar 18 half: $35 million).

92

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

4.     Income tax expense

Reconciliation of the prima facie income tax expense on pre-tax profit with the income tax expense recognised in the profit and loss.

	Half Year									Movement
	Mar 19  $M			Sep 18  $M			Mar 18  $M			Mar 19 v. Sep 18		Mar 19 v. Mar 18
Profit before income tax from continuing operations		4,536			4,539			5,356			0%		-15%
Prima facie income tax expense at 30%		1,361			1,362			1,607			0%		-15%
Tax effect of permanent differences:
Sale of SRCB		-			-			(84	)		n/a		-100%
Sale of MCC		-			(41	)		(37	)		-100%		-100%
Sale of Cambodia JV		-			13			-			-100%		n/a
Sale of PNG Retail, Commercial & SME		-			8			-			-100%		n/a
Sale of OPL NZ		(10	)		-			-			n/a		n/a
Sale of Paymark		(10	)		-			-			n/a		n/a
Share of associates’ profit		(39	)		(29	)		(26	)		34%		50%
Interest on convertible instruments		33			33			34			0%		-3%
Overseas tax rate differential		(64	)		(13	)		(45	)		large		42%
Provision for foreign tax on dividend repatriation		9			27			5			-67%		80%
Tax provisions no longer required		-			(18	)		(23	)		-100%		-100%
Other		-			13			(5	)		-100%		-100%
Subtotal		1,280			1,355			1,426			-6%		-10%
Income tax (over)/under provided in previous years		4			3			-			33%		n/a
Income tax expense		1,284			1,358			1,426			-5%		-10%
Australia		771			850			949			-9%		-19%
Overseas		513			508			477			1%		8%
Income tax expense		1,284			1,358			1,426			-5%		-10%
Effective tax rate		28.3%			29.9%			26.6%

93

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

5.    Dividends

Dividend per ordinary share (cents) - including discontinued operations	Half Year									Movement
	Mar 19			Sep 18			Mar 18			Mar 19 v. Sep 18		Mar 19 v. Mar 18
Interim (fully franked)		80			-			80			n/a		0%
Final (fully franked)		-			80			-			n/a		n/a
Total		80			80			80			0%		0%
Ordinary share dividend ($M)1
Interim dividend		-			2,317			-			n/a		n/a
Final dividend		2,295			-			2,350			n/a		-2%
Bonus option plan adjustment		(41	)		(40	)		(42	)		3%		-2%
Total		2,254			2,277			2,308			-1%		-2%
Ordinary share dividend payout ratio (%)2		71.4%			74.6%			69.7%

^1.  Dividends paid to ordinary equity holders of the Company. Excludes dividends paid by subsidiaries of the Group to non-controlling equity holders (Mar 19 half: nil, Sep 18 half: $1.6 million, Mar 18 half: nil).

^2. Dividend payout ratio is calculated using the proposed 2019 interim dividend of $2,267 million (not shown in the above table). The proposed 2019 interim dividend of $2,267 million is based on the forecast number of ordinary shares on issue at the dividend record date. Dividend payout ratios for the September 2018 and March 2018 halves were calculated using actual dividend paid of $2,295 million and $2,317 million respectively.

Ordinary Shares

The Directors propose that an interim dividend of 80 cents be paid on each eligible fully paid ANZ ordinary share on 1 July 2019. The proposed 2019 interim dividend will be fully franked for Australian tax purposes. New Zealand imputation credits of NZ 9 cents per ordinary share will also be attached.

ANZ has a Dividend Reinvestment Plan (DRP) and a Bonus Option Plan (BOP) that will operate in respect of the proposed 2019 interim dividend.

94

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

6.    Earnings per share

	Half Year									Movement
	Mar 19			Sep 18			Mar 18			Mar 19 v. Sep 18		Mar 19 v. Mar 18
Earnings Per Share (EPS) - Basic
Earnings Per Share (cents)		111.7			107.3			114.2			4%		-2%
Earnings Per Share (cents) from continuing operations1		114.1			110.6			134.8			3%		-15%
Earnings Per Share (cents) from discontinued operations		(2.4	)		(3.3	)		(20.6	)		-27%		-88%
Earnings Per Share (EPS) - Diluted
Earnings Per Share (cents)		106.4			103.2			108.6			3%		-2%
Earnings Per Share (cents) from continuing operations1		108.7			106.2			127.4			2%		-15%
Earnings Per Share (cents) from discontinued operations		(2.3	)		(3.0	)		(18.8	)		-23%		-88%
Reconciliation of earnings used in earnings per share calculations
Basic:
Profit for the period ($M)		3,182			3,086			3,330			3%		-4%
Less: Profit attributable to non-controlling interests ($M)		9			9			7			0%		29%
Earnings used in calculating basic earnings per share ($M)		3,173			3,077			3,323			3%		-5%
Less: Profit/(Loss) after tax from discontinued operations ($M)		(70	)		(95	)		(600	)		-26%		-88%
Earnings used in calculating basic earnings per share from continuing operations ($M)		3,243			3,172			3,923			2%		-17%
Diluted:
Earnings used in calculating basic earnings per share ($M)		3,173			3,077			3,323			3%		-5%
Add: Interest on convertible subordinated debt ($M)		137			138			141			-1%		-3%
Earnings used in calculating diluted earnings per share ($M)		3,310			3,215			3,464			3%		-4%
Less: Profit/(Loss) after tax from discontinued operations ($M)		(70	)		(95	)		(600	)		-26%		-88%
Earnings used in calculating diluted earnings per share from continuing operations ($M)		3,380			3,310			4,064			2%		-17%
Reconciliation of weighted average number of ordinary shares (WANOS) used in earnings per share calculations1,2
WANOS used in calculating basic earnings per share (M)		2,841.3			2,867.1			2,909.6			-1%		-2%
Add: Weighted average dilutive potential ordinary shares (M)
Convertible subordinated debt (M)		260.5			240.6			269.7			8%		-3%
Share based payments (options, rights and deferred shares) (M)		8.4			9.5			10.0			-12%		-16%
WANOS used in calculating diluated earnings per share (M)		3,110.2			3,117.2			3,189.3			0%		-2%

^1.  Post completion of the successor funds transfer performed in preparation for the sales of the Group’s wealth businesses to Zurich and IOOF (see Note 11), Treasury shares held in Wealth Australia will cease to be eliminated in the Group’s consolidated financial statements and will be included in the denominator used in calculating earnings per share. If the weighted average number of Treasury shares held in Wealth Australia was included in the denominator used in calculating earnings per share from continuing operations for the half year ended 31 March 2019, basic earnings per share from continuing operations would have been 113.5 cents (Sep 18 half: 110.1 cents; Mar 18 half: 134.1 cents) and diluted earnings per share from continuing operations would have been 108.1 cents (Sep 18 half: 105.7 cents; Mar 18 half: 126.8 cents).

^2. Weighted average number of ordinary shares excludes the weighted average number of Treasury shares held in ANZEST and Wealth Australia as summarised in the table below:

	Mar 19 half (Million)	Sep 18 half (Million)	Mar 18 half (Million)
ANZEST Pty Ltd	4.9	5.5	6.3
Wealth Australia	15.6	15.1	15.0
Total Treasury shares	20.5	20.6	21.3

95

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

7.    Segment analysis

i)  Description of segments

The Group operates on a divisional structure with six continuing divisions: Australia, New Zealand, Institutional, Pacific, Wealth Australia, and TSO and Group Centre. For further information on the composition of divisions refer to the Definitions on page 137.

The presentation of divisional results has been impacted by a number of methodology and structural changes during the period. Prior period comparatives have been restated as follows:

• The methodology for allocating earnings on capital at a business unit level has changed from Economic Capital to Regulatory Capital. While neutral at a Group level, this change has impacted net interest income at the divisional level;

• The residual Asia Retail and Wealth businesses have been transferred from the former Asia Retail and Pacific division to TSO and Group Centre division. The remaining segment has been renamed Pacific division; and

• ANZ’s lenders mortgage insurance, share investing and general insurance distribution businesses which were previously part of the continuing operations of Wealth Australia now form part of the Australia division (ANZ’s financial planning business continues to be part of the continuing operations of the Wealth Australia division).

The divisional results were also impacted by the adoption of two new accounting standards:

• AASB 9 - the Group implemented an expected credit loss methodology for impairment of financial assets, and revised the classification and measurement of certain financial assets from 1 October 2018. Consequently, the Group increased its provision for credit impairment by $813 million through opening retained earnings. Comparative information has not been restated.

• AASB 15 - the main impact of adoption is that certain items previously netted are now presented gross in operating income and operating expenses. Comparative information has been restated which increased total operating income for the September 2018 half by $91 million (Mar 18 half: $62 million) and increased total operating expenses by the same amount.

Other than those described above, there have been no other significant changes. The divisions reported below are consistent with internal reporting provided to the chief operating decision maker, being the Chief Executive Officer.

ii)  Operating segments

ANZ measures the performance of continuing segments on a cash profit basis. To calculate cash profit, certain non-core items are removed from statutory profit. Details of these items are included in the ‘Other items’ section of this note. Transactions between divisions across segments within ANZ are conducted on an arm’s-length basis and disclosed as part of the income and expenses of these segments.

For information on discontinued operations please refer to Note 11.

	Australia   $M			Institutional   $M			New   Zealand   $M			Wealth   Australia   $M			Pacific   $M			TSO and   Group   Centre   $M			Other   items1   $M			Group   Total   $M
March 2019 Half Year
Net interest income		4,091			1,579			1,385			1			68			175			-			7,299
Net fee and commission income
- Lending fees		144			144			8			-			7			-			-			303
- Non-lending fees		708			435			354			-			20			(10	)		-			1,507
- Commissions		22			-			21			18			-			(13	)		-			48
- Funds management income		2			1			120			8			-			(3	)		-			128
- Fee and commission expense		(322	)		(168	)		(227	)		-			(4	)		-			-			(721	)
Net income from insurance business		52			-			18			-			-			-			7			77
Other income		18			714			4			-			27			218			(460	)		521
Share of associates’ profit		1			-			4			-			-			126			-			131
Operating income2		4,716			2,705			1,687			27			118			493			(453	)		9,293
Profit after tax from continuing operations		1,733			1,012			753			(30	)		33			63			(321	)		3,243
Profit/(Loss) after tax from discontinued operations		-			-			-			(17	)		-			(33	)		(20	)		(70	)
Profit after tax attributable to shareholders		1,733			1,012			753			(47	)		33			30			(341	)		3,173

^1.  In evaluating the performance of the operating segments, certain items are removed from statutory profit where they are not considered integral to the ongoing performance of the segment and are evaluated separately.

^2.  On adoption of AASB 15, the Group reclassified certain items previously netted which are now presented gross in operating income and operating expenses. Comparative information has been restated accordingly which increased total operating income by $91 million for the September 2018 half and $62 million for the March 2018 half.

96

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

	Australia  $M			Institutional  $M			New  Zealand  $M			Wealth  Australia  $M			Pacific  $M			TSO and  Group  Centre  $M			Other  items1  $M			Group  Total  $M
September 2018 Half Year
Net interest income		4,122			1,513			1,342			1			66			120			-			7,164
Net fee and commission income
- Lending fees		158			136			8			-			7			-			-			309
- Non-lending fees		768			409			326			-			20			6			-			1,529
- Commissions		18			-			23			21			-			(16	)		-			46
- Funds management income		-			2			118			(8	)		-			(4	)		-			108
- Fee and commission expense		(300	)		(147	)		(210	)		-			(4	)		(2	)		-			(663	)
Net income from insurance business		70			1			57			-			-			-			5			133
Other income		9			634			2			(1	)		30			107			245			1,026
Share of associates’ profit		(1	)		-			4			-			-			92			-			95
Operating income2		4,844			2,548			1,670			13			119			303			250			9,747
Profit after tax from continuing operations		1,726			713			772			(57	)		39			(199	)		178			3,172
Profit/(Loss) after tax from discontinued operations		-			-			-			(51	)		-			(14	)		(30	)		(95	)
Profit after tax attributable to shareholders		1,726			713			772			(108	)		39			(213	)		148			3,077
March 2018 Half Year
Net interest income		4,325			1,480			1,309			1			65			170			-			7,350
Net fee and commission income
- Lending fees		195			133			7			-			7			1			-			343
- Non-lending fees		726			423			331			-			19			26			-			1,525
- Commissions		21			-			19			23			-			(17	)		-			46
- Funds management income		6			3			112			24			-			(5	)		-			140
- Fee and commission expense		(309	)		(142	)		(207	)		-			(4	)		(11	)		-			(673	)
Net income from insurance business		57			-			60			(1	)		-			10			14			140
Other income		32			614			20			2			25			232			353			1,278
Share of associates’ profit		-			-			1			-			-			87			-			88
Operating income2		5,053			2,511			1,652			49			112			493			367			10,237
Profit after tax from continuing operations		1,983			767			749			(26	)		33			(13	)		430			3,923
Profit/(Loss) after tax from discontinued operations		-			-			-			(585	)		-			(32	)		17			(600	)
Profit after tax attributable to shareholders		1,983			767			749			(611	)		33			(45	)		447			3,323

^1.  In evaluating the performance of the operating segments, certain items are removed from statutory profit where they are not considered integral to the ongoing performance of the segment and are evaluated separately.

^2.  On adoption of AASB 15, the Group reclassified certain items previously netted which are now presented gross in operating income and operating expenses. Comparative information has been restated accordingly which increased total operating income by $91 million for the September 2018 half and $62 million for the March 2018 half.

iii) 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.

		Half Year									Movement
Item gains/(losses)	Related segment	Mar 19 $M			Sep 18 $M			Mar 18 $M			Mar 19 v. Sep 18	Mar 19 v. Mar 18
Revaluation of policy liabilities	New Zealand, TSO and Group Centre		(77	)		4			10		large	large
Economic hedges	Institutional, TSO and Group Centre		(185	)		124			124		large	large
Revenue and expense hedges	TSO and Group Centre		(60	)		49			(40	)	large	51%
Structured credit intermediation trades	Institutional		1			1			3		0%	-67%
Sale of SRCB	TSO and Group Centre		-			-			333		n/a	-100%
Total profit after tax from continuing operations			(321	)		178			430		large	large
Treasury shares adjustment	Wealth Australia		18			(30	)		23		large	-22%
Revaluation of policy liabilities	Wealth Australia		(38	)		-			(6	)	n/a	large
Total profit after tax from discontinued operations			(20	)		(30	)		17		-33%	large
Total profit after tax			(341	)		148			447		large	large

97

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

8.    Net loans and advances

	As at									Movement
	Mar 19  $M			Sep 18  $M			Mar 18  $M			Mar 19 v. Sep 18		Mar 19 v. Mar 18
Australia
Overdrafts		5,832			5,741			5,843			2%		0%
Credit cards outstanding		8,168			8,372			8,629			-2%		-5%
Commercial bills outstanding		6,441			6,861			7,467			-6%		-14%
Term loans - housing		268,766			271,554			270,631			-1%		-1%
Term loans - non-housing		132,733			134,503			125,901			-1%		5%
Lease receivables		966			1,059			1,080			-9%		-11%
Hire purchase contracts		561			548			893			2%		-37%
Total Australia		423,467			428,638			420,444			-1%		1%
Asia, Pacific, Europe & America
Overdrafts		611			491			538			24%		14%
Credit cards outstanding		12			12			13			0%		-8%
Term loans - housing		770			767			729			0%		6%
Term loans - non-housing		61,405			59,446			53,971			3%		14%
Lease receivables		305			180			210			69%		45%
Other		13			14			17			-7%		-24%
Total Asia, Pacific, Europe & America		63,116			60,910			55,478			4%		14%
New Zealand
Overdrafts		1,040			829			809			25%		29%
Credit cards outstanding		1,552			1,506			1,558			3%		0%
Term loans - housing		79,410			73,833			73,751			8%		8%
Term loans - non-housing		42,930			40,456			41,306			6%		4%
Lease receivables		162			168			182			-4%		-11%
Hire purchase contracts		1,592			1,473			1,411			8%		13%
Total New Zealand		126,686			118,265			119,017			7%		6%
Sub-total		613,269			607,813			594,939			1%		3%
Unearned income		(446	)		(430	)		(441	)		4%		1%
Capitalised brokerage/mortgage origination fees1		947			997			1,044			-5%		-9%
Gross loans and advances (including assets reclassified as held for sale)		613,770			608,380			595,542			1%		3%
Allowance for expected credit losses (refer to Note 9)2,3,4		(3,627	)		(2,943	)		(3,073	)		23%		18%
Net loans and advances (including assets reclassified as held for sale)		610,143			605,437			592,469			1%		3%
Net loans and advances held for sale (refer to Note 11)		(888	)		(999	)		(3,001	)		-11%		-70%
Net loans and advances		609,255			604,438			589,468			1%		3%

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

^2.  On adoption of AASB 9 on 1 October 2018, the Group increased the collectively assessed provision by $813 million. Comparative information has not been restated. Refer to Note 21 for further details.

^3.  $500 million of collectively assessed provisions for credit impairment attributable to off-balance sheet credit related commitments at 30 September 2018 (Mar 18: $522 million) were reclassified from Net loans and advances at amortised cost to Other provisions to enhance comparability with current period presentation.

^4.  Provision for credit impairment includes individually assessed provisions against off balance-sheet credit exposures of $26 million as at 31 March 2019 (Sep 18: $26 million; Mar 18: $26 million).

98

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

9.    Allowance for expected credit losses

As described in Note 1, the Group adopted AASB 9 effective from 1 October 2018 which resulted in the application of an expected credit loss (ECL) model for measuring impairment of financial assets and amendments to the presentation of credit impairment information for the March 2019 half. Comparative information has not been restated.

The following tables present the movement in the allowance for ECL (including allowance for ECL reclassified as held for sale) for the March 2019 half.

Net loans and advances - at amortised cost
Allowance for ECL is included in Net loans and advances.							Stage 3
	Stage 1  $M			Stage 2  $M			Collectively  assessed  $M			Individually  assessed  $M			Total  $M
As at 1 October 2018		920			1,391			359			894			3,564
Transfer between stages		133			(228	)		(53	)		148			-
New and increased provisions (net of releases)		(124	)		244			74			475			669
Write-backs		-			-			-			(152	)		(152	)
Bad debts written off (excluding recoveries)		-			-			-			(498	)		(498	)
Foreign currency translation and other movements		11			8			1			(2	)		18
As at 31 March 2019		940			1,415			381			865			3,601

Investment securities - debt securities at amortised cost
Allowance for ECL is included in Investment securities.							Stage 3
	Stage 1  $M			Stage 2  $M			Collectively  assessed  $M			Individually  assessed  $M			Total  $M
As at 1 October 2018		9			2			-			-			11
Transfer between stages		-			-			-			-			-
New and increased provisions (net of releases)		2			(1	)		-			-			1
Write-backs		-			-			-			-			-
Bad debts written off (excluding recoveries)		-			-			-			-			-
Foreign currency translation and other movements		-			-			-			-			-
As at 31 March 2019		11			1			-			-			12
Investment securities - debt securities at FVOCI
Allowance for ECL does not change the carrying amount which remains at fair value. Instead, the allowance for ECL is recognised in Other Comprehensive Income (OCI), with a corresponding charge to profit or loss.
							Stage 3
	Stage 1  $M			Stage 2  $M			Collectively  assessed  $M			Individually  assessed  $M			Total  $M
As at 1 October 2018		14			-			-			-			14
Transfer between stages		-			-			-			-			-
New and increased provisions (net of releases)		(3	)		-			-			-			(3	)
Write-backs		-			-			-			-			-
Bad debts written off (excluding recoveries)		-			-			-			-			-
Foreign currency translation and other movements		-			-			-			-			-
As at 31 March 2019		11			-			-			-			11
Off-balance sheet commitments - undrawn and contingent facilities
The collectively assessed allowance for ECL is included in Provisions. The individually assessed allowance for ECL is included in Net loans and advances.
							Stage 3
	Stage 1  $M			Stage 2  $M			Collectively  assessed  $M			Individually  assessed  $M			Total  $M
As at 1 October 2018		474			166			15			26			681
Transfer between stages		19			(19	)		-			-			-
New and increased provisions (net of releases)		(34	)		3			(1	)		1			(31	)
Write-backs		-			-			-			-			-
Bad debts written off (excluding recoveries)		-			-			-			-			-
Foreign currency translation and other movements		5			2			-			(1	)		6
As at 31 March 2019		464			152			14			26			656

99

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

9.    Allowance for expected credit losses, cont’d

2018 Provision for credit impairment disclosures under AASB 139

The below disclosure does not reflect the adoption of AASB 9 and are prepared under the requirements of the previous AASB 139.

	Half Year
	Sep 18  $M			Mar 18  $M
Individually assessed provision
Balance at start of period		1,016			1,136
New and increased provisions		716			728
Write-backs		(234	)		(191	)
Adjustment for foreign currency translation movements and transfers		5			1
Discount unwind		(10	)		(7	)
Bad debts written-off		(573	)		(651	)
Total individually assessed provision		920			1,016
Collectively assessed provision
Balance at start of period		2,579			2,662
Charge/(release) to Income Statement		(63	)		(22	)
Adjustment for foreign currency translation movements and transfers		7			18
Asia Retail and Wealth businesses divestment		-			(79	)
Total collectively assessed provision		2,523			2,579
Unfunded portion reclassified to provisions1		(500	)		(522	)
Total collectively assessed provision		2,023			2,057
Total provision for credit impairment		2,943			3,073

^1.  $500 million of collectively assessed provisions for credit impairment attributable to off-balance sheet credit related commitments at 30 September 2018 (Mar 18: $522 million) were reclassified from Net loans and advances at amortised cost to Other provisions to enhance comparability with current period presentation.

Credit impairment charge/(release) analysis under AASB 9	Half Year
	Mar 19  $M
New and increased provisions (net of releases)
- Collectively assessed		12
- Individually assessed		624
Write-backs		(152	)
Recoveries of amounts previously written off		(93	)
Total credit impairment charge		391
Less: credit impairment charge/(release) from discontinued operations		(1	)
Total credit impairment charge from continuing operations		392

2018 Credit impairment charge/(release) analysis under AASB 139

The below disclosures do not reflect the adoption of AASB 9 and are prepared under the requirements of the previous AASB 139.

	Half Year
	Sep 18  $M			Mar 18 $M
New and increased individual provisions		716			728
Write-backs		(234	)		(191	)
Recoveries of amounts previously written off		(139	)		(107	)
Individually assessed credit impairment charge		343			430
Collectively assessed credit impairment charge/(release)		(63	)		(22	)
Credit impairment charge		280			408

100

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

10. Deposits and other borrowings

	As at									Movement
	Mar 19  $M			Sep 18  $M			Mar 18  $M			Mar 19 v. Sep 18		Mar 19 v. Mar 18
Australia
Certificates of deposit		39,481			39,671			43,157			0%		-9%
Term deposits		77,714			75,551			75,116			3%		3%
On demand and short term deposits		180,863			189,287			190,473			-4%		-5%
Deposits not bearing interest		12,202			11,931			11,303			2%		8%
Deposits from banks and securities sold under repurchase agreements		49,964			41,480			37,718			20%		32%
Commercial paper		12,530			14,742			21,658			-15%		-42%
Total Australia		372,754			372,662			379,425			0%		-2%
Asia, Pacific, Europe & America
Certificates of deposit		3,215			2,242			5,234			43%		-39%
Term deposits		94,396			92,145			77,335			2%		22%
On demand and short term deposits		19,930			18,056			19,557			10%		2%
Deposits not bearing interest		5,234			4,993			4,362			5%		20%
Deposits from banks and securities sold under repurchase agreements		34,705			30,738			30,756			13%		13%
Total Asia, Pacific, Europe & America		157,480			148,174			137,244			6%		15%
New Zealand
Certificates of deposit		874			833			1,897			5%		-54%
Term deposits		50,890			46,986			44,810			8%		14%
On demand and short term deposits		41,011			38,106			39,580			8%		4%
Deposits not bearing interest		10,383			9,365			9,334			11%		11%
Deposits from banks and securities sold under repurchase agreements		245			473			1,543			-48%		-84%
Commercial paper and other borrowings		2,896			3,130			3,297			-7%		-12%
Total New Zealand		106,299			98,893			100,461			7%		6%
Total deposits and other borrowings (including liabilities reclassified as held for sale)		636,533			619,729			617,130			3%		3%
Deposits and other borrowings held for sale (refer to Note 11)		(1,544	)		(1,579	)		(900	)		-2%		72%
Total deposits and other borrowings		634,989			618,150			616,230			3%		3%

101

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

11.    Discontinued operations and assets and liabilities held for sale

i)     Discontinued operations

On 17 October 2017, the Group announced it had agreed to sell its OnePath pensions and investments (OnePath P&I) business and aligned dealer groups (ADG) businesses to IOOF Holdings Limited (IOOF). The sale of the aligned dealer groups business completed on 1 October 2018. The completion of the remaining OnePath P&I business, which is dependent on the receipt of all necessary approvals, is expected to occur before the end of the March 2020 half.

On 12 December 2017, ANZ announced that it had agreed to the sale of its life insurance business to Zurich Financial Services Australia (Zurich) and regulatory approval was obtained on 10 October 2018. The transaction is subject to closing conditions and ANZ expects it to complete in the first half of the 2019 calendar year.

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 reporting perspective. This impacts the current and comparative financial information for Wealth Australia and TSO and Group Centre divisions.

Details of the financial performance and cash flows of discontinued operations are shown below.

Income Statement

	Half Year									Movement
	Mar 19   $M			Sep 18   $M			Mar 18   $M			Mar 19 v. Sep 18		Mar 19 v. Mar 18
Net interest income		(57	)		-			-			n/a		n/a
Other operating income1,2		199			310			(229	)		-36%		large
Operating income		142			310			(229	)		-54%		large
Operating expenses2		(221	)		(301	)		(243	)		-27%		-9%
Profit/(Loss) before credit impairment and income tax		(79	)		9			(472	)		large		-83%
Credit impairment (charge)/release		1			-			-			n/a		n/a
Profit/(Loss) before income tax		(78	)		9			(472	)		large		-83%
Income tax expense 2		8			(104	)		(128	)		large		large
Profit/(Loss) for the period attributable to shareholders of the Company2		(70	)		(95	)		(600	)		-26%		-88%

^1. Includes a $632 million loss recognised on the reclassification of Wealth Australia businesses to held for sale in the March 2018 half.

^2. Includes customer remediation of $53 million post-tax recognised in the March 2019 half (Sep 18 half: $127 million; Mar 18 half: nil) comprising $55 million of customer remediation recognised in other operating income (Sep 18 half: $106 million; Mar 18 half: nil), $20 million of remediation costs recognised in operating expenses (Sep 18 half: $75 million; Mar 18 half: nil), and a $22 million benefit in income tax expense (Sep 18 half: $54 million; Mar 18 half: nil).

Cash Flow Statement

	Half Year									Movement
	Mar 19   $M			Sep 18   $M			Mar 18   $M			Mar 19 v. Sep 18		Mar 19 v. Mar 18
Net cash provided by/(used in) operating activities		(589	)		2,065			924			large		large
Net cash provided by/(used in) investing activities		803			(1,311	)		(1,133	)		large		large
Net cash provided by/(used in) financing activities		(219	)		(754	)		179			-71%		large
Net increase/(decrease) in cash and cash equivalents		(5	)		-			(30	)		n/a		-83%

ii) Assets and liabilities held for sale

At 31 March 2019, assets and liabilities held for sale were re-measured at the lower of their carrying amount and fair value less costs to sell, except for assets such as deferred tax assets, financial assets and contractual rights under insurance contracts, which are specifically exempt from this requirement and continue to be recognised at their existing carrying value.

In addition to the assets and liabilities associated with the Group’s discontinued operations, assets and liabilities held for sale contain the assets and liabilities of other assets or disposal groups, subject to sale, which do not meet the criteria to classify as a discontinued operation under the accounting standards.

102

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Assets and liabilities held for sale¹

	As at 31 March 2019										As at 30 September 2018												As at 31 March 2018
	Discontinued operations $M			Cambodia JV $M		PNG Retail, Commercial & SME $M		Total $M			Discontinued operations $M			Cambodia JV $M		OPL NZ $M		PNG Retail, Commercial & SME $M		Total $M			Discontinued operations $M			UDC and Paymark $M			Metrobank Card Corporation $M		Total $M
Cash and cash equivalents		-			267		-		267			5			323		-		-		328			5			-			-		5
Derivative financial instruments		-			1		-		1			-			3		-		-		3			1			-			-		1
Available-for-sale assets		-			-		-		-			1,079			-		-		-		1,079			1,040			-			-		1,040
Investment securities		1,167			-		-		1,167			-			-		-		-		-			-			-			-		-
Net loans and advances		43			700		145		888			46			806		-		147		999			118			2,883			-		3,001
Regulatory deposits		-			145		-		145			-			146		-		-		146			-			-			-		-
Investment in associates		-			-		-		-			1			1		-		-		2			1			7			60		68
Deferred tax assets		97			2		-		99			102			2		-		-		104			72			-			-		72
Goodwill and other intangible assets		1,138			-		-		1,138			1,155			-		93		-		1,248			946			124			-		1,070
Investments backing policy liabilities2		39,191			-		-		39,191			40,054			-		-		-		40,054			38,803			-			-		38,803
Premises and equipment		2			5		6		13			4			6		-		6		16			5			-			-		5
Other assets		590			50		-		640			450			92		727		-		1,269			1,198			15			-		1,213
Total assets held for sale		42,228			1,170		151		43,549			42,896			1,379		820		153		45,248			42,189			3,029			60		45,278
Deposits and other borrowings		-			1,064		480		1,544			-			1,067		-		512		1,579			-			900			-		900
Derivative financial instruments		-			-		-		-			-			1		-		-		1			-			-			-		-
Current tax liabilities		(192	)		4		-		(188	)		(33	)		8		15		-		(10	)		(158	)		36			-		(122	)
Deferred tax liabilities		338			1		-		339			160			1		160		-		321			387			(9	)		-		378
Policy liabilities2		38,787			-		-		38,787			39,607			-		-		-		39,607			38,381			-			-		38,381
External unit holder liabilities2		4,590			-		-		4,590			4,712			-		-		-		4,712			4,618			-			-		4,618
Payables and other liabilities		1,349			53		-		1,402			644			98		130		-		872			560			28			-		588
Provisions		35			42		4		81			28			43		-		6		77			29			1			-		30
Total liabilities held for sale		44,907			1,164		484		46,555			45,118			1,218		305		518		47,159			43,817			956			-		44,773

1. Amounts in the table above are shown net of intercompany balances.

2. The Group completed the Successor Fund Transfer (SFT) on 13 April 2019 which separated the Life Insurance and Pensions and Investments businesses. On completion of the SFT, the Group reduced external unit holders liabilities by circa $4.6 billion, policy liabilities by circa $36.1 billion and investments backing policy liabilities by circa $37.1 billion within assets and liabilities held for sale. The Group also ceased elimination of intercompany balances increasing liabilities and equity not held for sale by circa $3.2 billion and circa $0.4 billion respectively.

103

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

11.      Discontinued operations and assets and liabilities held for sale, cont’d

Other strategic divestments not classified as discontinued operations but have been presented as held for sale:

_● UDC Finance and Paymark Limited (UDC and Paymark) – New Zealand division

On 11 January 2017, the Group announced that it had entered into a conditional agreement to sell UDC to HNA Group (HNA). On 21 December 2017, the Group announced that it had been informed that New Zealand’s Overseas Investment Office had declined HNA’s application to acquire UDC and the agreement with HNA was terminated in January 2018. The assets and liabilities of UDC were no longer classified as held for sale at September 2018.

On 17 January 2018, the Group entered into an agreement to sell its 25% shareholding in Paymark to Ingenico Group. The transaction was completed on 11 January 2019.

_● Metrobank Card Corporation (MCC) – TSO and Group Centre division

On 18 October 2017, the Group announced it had entered into a sale agreement with its joint venture partner Metropolitan Bank & Trust Company (Metrobank) in relation to its 40% stake in the Philippines based Metrobank Card Corporation (MCC). The Group sold its 40% stake in two equal tranches in January and September 2018.

_● ANZ Royal Bank (Cambodia) Ltd (Cambodia JV) – Institutional division

On 17 May 2018, the Group announced it had reached an agreement to sell its 55% stake in Cambodia JV ANZ Royal Bank to J Trust, a Japanese diversified financial holding company listed on the Tokyo Stock Exchange. The transaction is subject to closing conditions and regulatory approval and ANZ expects it to close in the 2019 financial year.

_● OnePath Life (NZ) Ltd (OPL NZ) – New Zealand division

On 30 May 2018, the Group announced that it had agreed to sell OPL NZ to Cigna Corporation and the final regulatory approval was obtained on 29 October 2018. The transaction was completed on 30 November 2018.

_● Papua New Guinea Retail, Commercial and Small-Medium Sized Enterprise businesses (PNG Retail, Commercial & SME) – Institutional division

On 25 June 2018, the Group announced it had entered into an agreement to sell its Retail, Commercial and Small-Medium Sized Enterprise (SME) banking businesses in Papua New Guinea to Kina Bank. The transaction is subject to closing conditions and ANZ expects it to close by late 2019 calendar year.

Income Statement impact relating to assets and liabilities held for sale

During the March 2019 half, the Group recognised the following impacts in relation to assets and liabilities held for sale:

_● $69 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 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.

During the September 2018 half, the Group recognised the following impacts in relation to assets and liabilities held for sale:

_● $42 million loss after tax relating to the reclassification of the Cambodia JV to held for sale, comprising a $27 million impairment and $15 million of costs associated with the sale. The loss was recognised in continuing operations.

_● $21 million loss after tax relating to the reclassification of the PNG Retail, Commercial and SME businesses to held for sale, comprising a $12 million impairment of goodwill, $7 million costs associated with the sale and a $2 million tax expense. The loss was recognised in continuing operations.

_● $3 million loss after tax relating to OPL NZ transaction costs. The loss was recognised in continuing operations.

_● $126 million gain after tax relating to MCC comprising a $138 million gain on sale of the second 20% stake, $14 million of foreign exchange losses, $3 million loss on release of reserves and a $5 million tax benefit. This gain was recognised in continuing operations.

During the March 2018 half, the Group recognised the following impacts in relation to assets and liabilities held for sale:

_● $632 million loss after tax recognised on the reclassification of the Wealth Australia businesses to held for sale. This loss was recognised in discontinued operations.

_● $85 million gain after tax comprising $99 million relating to the sale of the remaining Asia Retail and Wealth businesses, net of costs associated with the sale and a $14 million tax expense. This gain was recognised in continuing operations.

_● $18 million gain after tax relating to UDC comprising a cost recovery in respect of the terminated transaction process. This gain was recognised in continuing operations.

_● $247 million gain after tax relating to SRCB comprising a $289 million gain on release of reserves, $56 million of foreign exchange losses and other costs, and a $14 million tax benefit. This gain was recognised in continuing operations.

_● $121 million gain after tax relating to MCC comprising a $121 million gain on sale of the first 20% stake, $1 million of foreign exchange gains, $3 million loss on release of reserves, and a $2 million tax benefit. This gain was recognised in continuing operations.

The impacts on continuing operations are shown in the relevant Income Statement categories and items relating to discontinued operations are included in Profit/(Loss) after tax from discontinued operations.

104

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

12. Debt issuances

	Half Year						Movement
Total unsubordinated debt	Mar 19 $M		Sep 18 $M		Mar 18 $M		Mar 19 v. Sep 18		Mar 19 v. Mar 18
		113,424		105,271		97,576		8%		16%
Additional Tier 1 Capital (perpetual subordinated securities)1
ANZ Capital Notes (ANZ CN)2
ANZ CN1		1,118		1,117		1,117		0%		0%
ANZ CN2		1,606		1,605		1,604		0%		0%
ANZ CN3		965		965		961		0%		0%
ANZ CN4		1,611		1,610		1,609		0%		0%
ANZ CN5		925		924		924		0%		0%
ANZ Capital Securities3		1,336		1,240		1,188		8%		12%
ANZ NZ Capital Notes4		478		456		467		5%		2%
Tier 2 Capital
Perpetual subordinated notes5		423		416		1,174		2%		-64%
Term subordinated notes6		7,806		7,575		8,216		3%		-5%
Total subordinated debt		16,268		15,908		17,260		2%		-6%
Total debt issuances		129,692		121,179		114,836		7%		13%

^1.  ANZ Capital Notes, ANZ Capital Securities and the ANZ NZ Capital Notes are Basel 3 compliant instruments.

^2.  Each of the ANZ Capital Notes will convert into a variable number of ANZ ordinary shares on a specified mandatory conversion date at a 1% discount (subject to certain conditions being satisfied). If ANZ’s Common Equity Tier 1 capital ratio is equal to or less than 5.125%, or ANZ receives a notice of non-viability from APRA, then the notes will immediately convert into ANZ ordinary shares at a 1% discount subject to a maximum conversion number. Subject to certain conditions, the notes are redeemable or convertible to ANZ ordinary shares (on similar terms to mandatory conversion) by ANZ at its discretion on early redemption or conversion date.

	Issuer	Issue date		Issue Amount   $M		Early redemption or conversion date		Mandatory conversion date
CN1	ANZ		7 Aug 2013		1,120		1 Sep 2021		1 Sep 2023
CN2	ANZ		31 Mar 2014		1,610		24 Mar 2022		24 Mar 2024
CN3	ANZ, acting through its New Zealand branch		5 Mar 2015		970		24 Mar 2023		24 Mar 2025
CN4	ANZ		27 Sep 2016		1,622		20 Mar 2024		20 Mar 2026
CN5	ANZ		28 Sep 2017		931		20 Mar 2025		20 Mar 2027

^3.  On 15 June 2016, ANZ acting through its London branch issued fully-paid perpetual subordinated contingent convertible securities (ANZ Capital Securities). If ANZ’s Common Equity Tier 1 capital ratio is equal to or less than 5.125%, or ANZ receives a notice of non-viability from APRA, then the securities will immediately convert into ANZ ordinary shares at a 1% discount subject to a maximum conversion number. Subject to certain conditions, on the First Reset Date (15 June 2026) and each 5 year anniversary, ANZ has the right to redeem all of the securities at its discretion.

^4.  On 31 March 2015, ANZ Bank New Zealand Limited (ANZ Bank NZ) issued convertible notes (ANZ NZ Capital Notes) which will convert into ANZ ordinary shares on 25 May 2022 at a 1% discount (subject to certain conditions being satisfied). If ANZ or ANZ Bank NZ’s Common Equity Tier 1 capital ratio is equal to or less than 5.125%, ANZ receives a notice of non-viability from APRA, ANZ Bank NZ receives a direction from RBNZ or a statutory manager is appointed to ANZ Bank NZ and makes a determination, then the notes will immediately convert into ANZ ordinary shares at a 1% discount subject to a maximum conversion number. Subject to certain conditions, on 25 May 2020 the notes are redeemable or convertible into ANZ ordinary shares (on similar terms to the mandatory conversion) by ANZ Bank NZ.

^5.  The USD 300 million perpetual subordinated notes have been granted Basel 3 transitional capital treatment until the end of the transition period in December 2021.

^6.  All the term subordinated notes are convertible and are Basel 3 compliant instruments, except ANZ’s EUR 750 million subordinated notes due in September 2019 which have been granted Basel 3 transitional capital treatment until their maturity. If ANZ receives a notice of non-viability from APRA, then the convertible subordinated notes will immediately convert into ANZ ordinary shares at a 1% discount subject to a maximum conversion number.

105

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

13.    Credit risk

The Group has adopted AASB 9 effective from 1 October 2018 which has resulted in changes to the classification and measurement of financial assets, including the impairment of financial assets. The presentation of credit risk information for the March 2019 half has been amended with no restatement of comparatives. For further details on key requirements and impacts of the changes described above refer to Note 1.

Maximum exposure to credit risk

For financial assets recognised on the balance sheet, the maximum exposure to credit risk is the carrying amount. In certain circumstances there may be differences between the carrying amounts reported on the balance sheet and the amounts reported in the tables below. Principally, these differences arise in respect of financial assets that are subject to risks other than credit risk, such as equity instruments which are primarily subject to market risk, or bank notes and coins.

For undrawn facilities, this maximum exposure to credit risk is the full amount of the committed facilities. For contingent exposures, the maximum exposure to credit risk is the maximum amount the group would have to pay if the instrument is called upon.

The table below shows the maximum exposure to credit risk of on-balance sheet, and off-balance sheet, positions before taking account of any collateral held or other credit enhancements:

			Reported As at				Excluded/Other1,2 As at									Maximum Exposure to Credit Risk As at
On-balance sheet positions3	Mar 19 $M		Sep 18 $M		Mar 18 $M		Mar 19 $M			Sep 18 $M			Mar 18 $M			Mar 19 $M		Sep 18 $M		Mar 18 $M
Net loans and advances		610,143		605,437		592,469		(26	)		(26	)		(26	)		610,169		605,463		592,495
Investment securities4
- debt securities at amortised cost		6,176		-		-		-			-			-			6,176		-		-
- debt securities at FVOCI		72,555		-		-		-			-			-			72,555		-		-
- equity securities at FVOCI		1,318		-		-		1,318			-			-			-		-		-
Available-for-sale assets		-		75,363		71,279		-			1,095			1,052			-		74,268		70,227
Other financial assets		276,973		249,406		258,086		49,466			47,434			49,472			227,507		201,972		208,614
Total on-balance sheet positions		967,165		930,206		921,834		50,758			48,503			50,498			916,407		881,703		871,336
Off-balance sheet commitments
Undrawn and contingent facilities5		245,311		244,608		233,005		26			26			26			245,285		244,582		232,979
Total		1,212,476		1,174,814		1,154,839		50,784			48,529			50,524			1,161,692		1,126,285		1,104,315

^1.  Excluded comprises bank notes and coins and cash at bank within liquid assets, investments relating to the insurance business where the credit risk is passed onto the policy holder. Equity securities and precious metal exposures recognised as trading securities have been excluded as they do not have credit exposure. Equity securities within investment securities – equity securities at FVOCI/available-for-sale financial assets were also excluded as they do not have credit exposure.

^2.  Other relates to the transfer of individual provisions related to off-balance sheet facilities held in net loans and advances. The provisions are transferred for the purposes of showing the maximum exposure to credit risk by relevant facility type in this and the following tables.

^3.  On-balance sheet position includes assets and liabilities reclassified as held for sale.

^4.  On adoption of AASB 9 on 1 October 2018, the classification and measurement of financial assets were revised. Available-for-sale classification used in comparative periods ceases to exist under AASB 9 and a new classification of investment securities was introduced. Refer to Note 1 for further details. Comparative information has not been restated.

^5.  Undrawn facilities and contingent facilities includes guarantees, letters of credit and performance related contingencies, net of collectively assessed allowance for expected credit losses.

106

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

13.    Credit risk, cont’d

Credit Quality

The Group’s internal Customer Credit Rating (CCR) is used 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 Requirement	Moody’s Rating	Standard & Poor’s Rating
Strong	CCR 0+ to 4-	Demonstrated superior stability in their operating and financial performance over the long-term, and whose earnings capacity is not significantly vulnerable to foreseeable events.	Aaa – Baa3	AAA –BBB-
Satisfactory	CCR 5+ to 6-	Demonstrated sound operational and financial stability over the medium to long term even though some may be susceptible to cyclical trends or variability in earnings.	Ba1 – B1	BB+ – B+
Weak	CCR 7+ to 8=	Demonstrated some operational and financial instability, with variability and uncertainty in profitability and liquidity projected to continue over the short and possibly medium term.	B2 - Caa	B - CCC
Defaulted	CCR8- to 10	When doubt arises as to the collectability of a credit facility, the financial instrument (or ‘the facility’) is classified as defaulted.	N/A	N/A

Net loans and advances

	As at Mar 19
					Stage 3
	Stage 1 $M		Stage 2 $M		Collectively assessed $M		Individually assessed $M		Total $M
Strong		444,556		10,273		-		-		454,829
Satisfactory		112,984		19,843		-		-		132,827
Weak		8,808		9,775		-		-		18,583
Defaulted		-		-		4,078		1,961		6,039
Gross loans and advances at amortised cost		566,348		39,891		4,078		1,961		612,278
Provision for credit impairment		940		1,415		381		865		3,601
Net loans and advances at amortised cost		565,408		38,476		3,697		1,096		608,677
Coverage ratio		0.17%		3.55%		9.34%		44.11%		0.59%
Loans and advances at fair value through profit or loss										991
Unearned income										(446	)
Capitalised brokerage/mortgage origination fees										947
Net carrying amount										610,169
Investment securities - debt securities at amortised cost
	As at Mar 19
					Stage 3
	Stage 1 $M		Stage 2 $M		Collectively assessed $M		Individually assessed $M		Total $M
Strong		4,751		-		-		-		4,751
Satisfactory		666		771		-		-		1,437
Weak		-		-		-		-		-
Defaulted		-		-		-		-		-
Gross investment securities - debt securities at amortised cost		5,417		771		-		-		6,188
Provision for credit impairment		11		1		-		-		12
Net investment securities - debt securities at amortised cost		5,406		770		-		-		6,176
Coverage ratio		0.20%		0.13%		-		-		0.19%

107

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

13.    Credit risk, cont’d

  Investment securities - debt securities at FVOCI

	As at Mar 19
					Stage 3
	Stage 1 $M		Stage 2 $M		Collectively assessed $M		Individually assessed $M		Total $M
Strong		72,401		-		-		-		72,401
Satisfactory		154		-		-		-		154
Weak		-		-		-		-		-
Defaulted		-		-		-		-		-
Investment securities - debt securities at FVOCI		72,555		-		-		-		72,555
Loss allowances recognised in other comprehensive income		11		-		-		-		11
Coverage ratio		0.02%		-		-		-		0.02%

Other financial assets

	As at Mar 19
	Total $M
Strong		215,464
Satisfactory		11,596
Weak		447
Defaulted		-
Total carrying amount		227,507

  Off-balance sheet commitments - undrawn and contingent facilities

	As at Mar 19
						Stage 3
	Stage 1 $M		Stage 2 $M		Collectively assessed $M		Individually assessed $M		Total $M
Strong		158,599		1,977		-		-		160,576
Satisfactory		23,519		3,894		-		-		27,413
Weak		395		957		-		-		1,352
Defaulted		-		-		96		61		157
Gross undrawn and contingent facilities subject to ECL		182,513		6,828		96		61		189,498
Allowance for ECL included in Provisions		464		152		14		26		656
Net undrawn and contingent facilities subject to ECL		182,049		6,676		82		35		188,842
Coverage ratio		0.25%		2.23%		14.58%		42.62%		0.35%
Undrawn and contingent facilities not subject to ECL1										56,443
Net undrawn and contingent facilities										245,285

^1.  Commitments that can be unconditionally cancelled at any time without notice.

108

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

13. Credit risk, cont’d

2018 Credit Risk Disclosures

The below disclosures do not reflect the adoption of AASB 9 and have been prepared under the requirements of the previous AASB 139.

Credit Quality

The table below provides an analysis of the credit quality of the maximum exposure to credit risk split by:

• Neither past due nor impaired assets by credit quality

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

• Past due but not impaired assets by ageing

Ageing analysis of past due loans is used by the Group to measure and manage emerging credit risks. Financial assets that are past due but not impaired include those which are assessed, approved and managed on a portfolio basis within a centralised environment (for example credit cards and personal loans) that can be held on a productive basis until they are 180 days past due, as well as those which are managed on an individual basis. A large portion of retail credit exposures, such as residential mortgages, are generally well secured. That is, the value of supporting collateral is sufficient to cover amounts outstanding.

• Restructured and impaired assets presented as gross amounts and net of individually assessed provisions

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

As described in the summary of significant accounting policies in the 2018 Annual Financial Report, impairment provisions are created for financial instruments that are reported on the balance sheet at amortised cost. For instruments reported at fair value, impairment provisions are treated as part of overall change in fair value and directly reduce the reported carrying amounts.

	Loan advances As at						Other financial assets As at				Off balance sheet credit related commitments As at						Total As at
Neither past due nor impaired	Sep 18 $M			Mar 18 $M			Sep 18 $M		Mar 18 $M		Sep 18 $M			Mar 18 $M			Sep 18 $M			Mar 18 $M
Strong credit profile		445,997			427,729			272,110		274,815		206,859			194,393			924,966			896,937
Satisfactory risk		127,384			131,229			4,014		3,859		36,037			36,756			167,435			171,844
Sub-standard but not past due or impaired		15,567			16,767			116		167		1,644			1,761			17,327			18,695
Subtotal		588,948			575,725			276,240		278,841		244,540			232,910			1,109,728			1,087,476
Past due but not impaired
1-29 days		8,958			8,974			-		-		-			-			8,958			8,974
30-59 days		2,240			2,576			-		-		-			-			2,240			2,576
60-89 days		1,268			1,233			-		-		-			-			1,268			1,233
>90 days		2,998			3,038			-		-		-			-			2,998			3,038
Subtotal		15,464			15,821			-		-		-			-			15,464			15,821
Restructured and impaired
Impaired loans		1,676			1,863			-		-		-			-			1,676			1,863
Restructured items1		269			76			-		-		-			-			269			76
Non-performing commitment and contingencies		-			-			-		-		68			95			68			95
Gross impaired financial assets		1,945			1,939			-		-		68			95			2,013			2,034
Individually assessed provisions		(894	)		(990	)		-		-		(26	)		(26	)		(920	)		(1,016	)
Subtotal		1,051			949			-		-		42			69			1,093			1,018
Total		605,463			592,495			276,240		278,841		244,582			232,979			1,126,285			1,104,315

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

109

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

14. Fair value measurement

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.

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

a) 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;

_● when using quoted prices to value an instrument, these are independently verified 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.

b) 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 for that asset or liability exists. This includes the following:

Asset or Liability	Fair Value Approach
Financial instruments classified as:	Valuation techniques are used that incorporate observable market inputs for securities 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.
- trading securities
- securities sold short
- derivative financial assets and liabilities
- investment securities (under AASB 9)
- available-for-sale assets (under AASB 139)
- other assets
Financial instruments classified as:	Discounted cash flow techniques are used whereby contractual future cash flows of the instrument are discounted using discount rates incorporating wholesale market interest rates, or market borrowing rates for debt with similar maturities or with a yield curve appropriate for the remaining term to maturity.
- net loans and advances
- deposits and other borrowings
- debt issuances
Assets and liabilities held for sale	Valuation based on the agreed sale price before transaction costs.

Details of significant unobservable inputs used in measuring fair values are described in (ii)(a).

c) Fair value hierarchy categorisation

The Group categorises financial 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

_● Level 3 - valuations where significant unobservable inputs are used to measure the fair value of the asset or liability.

d) Fair value hierarchy disclosure

The following table presents assets and liabilities carried at fair value in accordance with the fair value hierarchy:

110

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

14. Fair value measurement, cont’d

	Fair value measurements
As at March 2019	Level 1 $M		Level 2 $M		Level 3 $M		Total $M
Assets
Trading securities1		35,967		6,890		-		42,857
Derivative financial instruments		331		78,991		53		79,375
Investment securities2		71,001		393		1,312		72,706
Net loans and advances (measured at fair value)		-		991		-		991
Assets held for sale3		-		43,673		-		43,673
Total		107,299		130,938		1,365		239,602
Liabilities
Deposits and other borrowings (designated at fair value)		-		2,169		-		2,169
Derivative financial instruments		508		80,320		43		80,871
Liabilities held for sale3		-		46,538		-		46,538
Payables and other liabilities4		2,125		42		-		2,167
Debt issuances (designated at fair value)		-		2,414		-		2,414
Total		2,633		131,483		43		134,159
As at September 2018
Assets
Trading securities		30,855		6,867		-		37,722
Derivative financial instruments		647		67,717		59		68,423
Available-for-sale assets2		69,508		3,695		1,081		74,284
Net loans and advances (measured at fair value)		-		133		-		133
Assets held for sale3		-		44,623		-		44,623
Total		101,010		123,035		1,140		225,185
Liabilities
Deposits and other borrowings (designated at fair value)		-		2,332		-		2,332
Derivative financial instruments		1,680		67,952		44		69,676
Liabilities held for sale3		-		46,829		-		46,829
Payables and other liabilities4		1,159		12		-		1,171
Debt issuances (designated at fair value)		-		1,442		-		1,442
Total		2,839		118,567		44		121,450
As at March 2018
Assets
Trading securities		38,517		6,541		-		45,058
Derivative financial instruments		259		70,593		63		70,915
Available-for-sale assets2		63,283		5,921		1,035		70,239
Net loans and advances (measured at fair value)		-		145		-		145
Assets held for sale3		-		42,544		-		42,544
Other assets		4		139		-		143
Total		102,063		125,883		1,098		229,044
Liabilities
Deposits and other borrowings (designated at fair value)		-		2,470		-		2,470
Derivative financial instruments		1,008		69,570		46		70,624
Liabilities held for sale3		-		43,817		-		43,817
Payables and other liabilities4		1,884		161		-		2,045
Debt issuances (designated at fair value)		-		1,785		-		1,785
Total		2,892		117,803		46		120,741

^1. During the March 2019 half, there were no material transfers from Level 2 to Level 1 (Sep 18: $200 million, Mar 18: $753 million) in Trading securities. Transfers from Level 1 to Level 2 for March 2019 half and previous periods are immaterial. Transfers into and out of levels are measured at the beginning of the reporting period in which the transfer occurred.    

^2. On adoption of AASB 9 on 1 October 2018, the classification and measurement of financial assets was revised. The available-for-sale classification used in comparative periods no longer exists under AASB 9 and a new classification of investment securities was introduced. Refer to Note 1 for further details about the adoption of AASB 9. Comparative information has not been restated.    

^3. The amounts reclassified as assets and liabilities held for sale relate to assets and liabilities measured at fair value less costs to sell in accordance with AASB 5 Non-current Assets Held for Sale and Discontinued Operations. The amounts presented reflect fair value excluding cost to sell but including intercompany eliminations.    

^4. Payables and other liabilities relates to securities sold short which are classified as held for trading are measured at fair value through profit or loss.    

111

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

14.    Fair value measurement, cont’d

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

a) Level 3 fair value measurements

The net balance of Level 3 financial instruments is an asset of $1,322 million (Sep 18: $1,096 million; Mar 18: $1,052 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; and

_● other derivatives referencing market rates that cannot be observed primarily due to lack of market activity.

Movements in the Level 3 balance are due to the revaluation of the Group’s investment in Bank of Tianjin.

There were no other material transfers in or out of Level 3 during the period.

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 judgment 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.

b) 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 $121 million increase or decrease to the fair value of the investment (Sep 18: $102 million; Mar 18: $98 million), 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.

c) Deferred fair value gains and losses

When 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 over the life of the transaction on a straight line basis or until all inputs become observable.

The day one gains and losses deferred are not material.

iii) Financial assets and liabilities not measured at fair value

The classes of financial assets and liabilities listed in the table below are generally carried at amortised cost on the Group’s balance sheet. Whilst 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 these financial assets and liabilities at balance date in the table below.

112

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

14. Fair value measurement, cont’d

	Carrying amount in the balance sheet						Fair Value
As at March 2019	At amortised cost $M		At fair value $M		Total $M		$M
Financial assets
Net loans and advances1		608,264		1,879		610,143		610,983
Investment securities1, 2		6,176		73,873		80,049		80,044
Total		614,440		75,752		690,192		691,027
Financial liabilities
Deposits and other borrowings1		632,820		3,713		636,533		637,009
Debt issuances		127,278		2,414		129,692		130,558
Total		760,098		6,127		766,225		767,567
As at September 2018
Financial assets
Net loans and advances1		604,305		1,132		605,437		605,911
Financial liabilities
Deposits and other borrowings1		615,818		3,911		619,729		619,895
Debt issuances		119,737		1,442		121,179		122,060
Total		735,555		5,353		740,908		741,955
As at March 2018
Financial assets
Net loans and advances1		592,206		263		592,469		592,875
Financial liabilities
Deposits and other borrowings1		614,660		2,470		617,130		617,254
Debt issuances		113,051		1,785		114,836		115,811
Total		727,711		4,255		731,966		733,065

^1. Net loans and advances, investment securities and deposits and other borrowings include amounts reclassified to assets and liabilities held for sale. Refer to Note 11.

^2. Investment securities under AASB 9 includes securities measured at amortised cost, fair value through other comprehensive income and fair value through P&L. Refer to Note 1.

113

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

15. Shareholders’ equity

Issued and quoted securities	Half Year
Ordinary shares	Mar 19 No.			Sep 18 No.			Mar 18 No.
Closing balance		2,833,175,579			2,873,618,118			2,898,758,978
Issued/(Repurchased) during the period1		(40,442,539	)		(25,140,860	)		(38,656,349	)

^1. The Company issued 1.6 million shares under the Bonus Option Plan (BOP) for the 2018 final dividend (1.4 million shares for the 2018 interim dividend; 1.5 million shares for the 2017 final dividend). No new shares were issued under the Dividend Reinvestment Plan (DRP) for the 2018 final dividend (nil shares for the 2018 interim dividend; nil shares for the 2017 final dividend) as the shares were purchased on-market and provided directly to the shareholders participating in the DRP. On-market purchases for the DRP in the March 2019 half were $199 million (Sep 18 half: $200 million, Mar 18 half: $192 million). The Company has completed its $3.0 billion on-market share buy-back of ANZ ordinary shares purchasing $1,120 million in the March 2019 half (Sep 18 half: $748 million, Mar 18 half: $1,132 million) resulting in 42.0 million ANZ ordinary shares being cancelled in the March 2019 half (Sep 18 half: 26.6 million; Mar 18 half: 40.1 million).

	Half Year									Movement
Shareholders’ equity	Mar 19 $M			Sep 18 $M			Mar 18 $M			Mar 19 v. Sep 18		Mar 19 v. Mar 18
Ordinary share capital		26,048			27,205			27,933			-4%		-7%
Reserves
Foreign currency translation reserve		846			12			257			large		large
Share option reserve		71			92			70			-23%		1%
Available-for-sale revaluation reserve1		-			113			119			-100%		-100%
FVOCI reserve1		370			-			-			n/a		n/a
Cash flow hedge reserve		444			127			117			large		large
Transactions with non-controlling interests reserve		(22	)		(21	)		(22	)		5%		0%
Total reserves		1,709			323			541			large		large
Retained earnings		32,064			31,737			30,922			1%		4%
Share capital and reserves attributable to shareholders of the Company		59,821			59,265			59,396			1%		1%
Non-controlling interests		150			140			126			7%		19%
Total shareholders’ equity		59,971			59,405			59,522			1%		1%

^1. On adoption of AASB 9 on 1 October 2018, the classification and measurement of financial assets were revised. Available-for-sale classification used in comparative periods ceases to exist under AASB 9 and a new classification of investment securities was introduced. Refer to Note 1 for further details. Comparative information has not been restated.

16. Changes in composition of the Group

The Group disposed of the aligned dealer groups and OnePath Life (NZ) Ltd in the half year ended 31 March 2019. There were no other acquisitions or

disposals of material controlled entities during the period.

17. Investments in Associates

	Half Year						Movement
	Mar 19		Sep 18		Mar 18		Mar 19 v. Sep 18		Mar 19 v. Mar 18
Share of associates’ profit		131		95		88		38%		49%

Contributions to profit1	Contribution to Group profit after tax						Ownership interest held by Group
Associates	Half Year						As at
	Mar 19 $M		Sep 18 $M		Mar 18 $M		Mar 19 %		Sep 18 %		Mar 18 %
P.T. Bank Pan Indonesia		70		44		45		39		39		39
AMMB Holdings Berhad		56		48		42		24		24		24
Other associates		5		3		1		n/a		n/a		n/a
Share of associates’ profit		131		95		88

^1. Contributions to profit reflect the IFRS equivalent results adjusted to align with the Group’s financial year end which may differ from the published results of these entities. Excludes gains or losses on disposal or valuation adjustments.

18. Related party disclosure

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

since 30 September 2018.

114

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

19.    Contingent liabilities and contingent assets

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

Refer to note 33 of the 2018 ANZ Annual Financial Report for a description of contingent liabilities and contingent assets as at 30 September 2018. A summary of some of those contingent liabilities and new contingent liabilities that have arisen during the current reporting period is set out below.

• Bank fees litigation

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

The original claims in the 2010 class action have been dismissed. In 2017, a new claim was added to the 2010 class action, in relation to the Company’s entitlement to charge certain periodical payment non-payment fees. An agreement to settle the claim was reached in December 2018. The settlement is subject to court approval.

• 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. The matters are at an early stage.

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. The matter is at an early stage.

• 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 matter is at an early stage. 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 matter is at an early stage. The Company is defending the allegations.

• Franchisee litigation

In February 2018, two related class actions were brought against the Company alleging breaches of contract and unconscionable conduct in relation to lending to 7-Eleven franchisees. An agreement to settle the claims against the Company was reached in March 2019. The settlement is subject to court approval.

• Regulatory and customer exposures

In recent years there has been an increase in the number of matters on which ANZ engages with its regulators. There have been significant increases in the nature and scale of regulatory investigations and reviews, civil and criminal enforcement actions (whether by court action or otherwise) and the quantum of fines issued by regulators, particularly against financial institutions both in Australia and globally. The nature of these interactions can be wide ranging and, for example, currently include a range of matters including responsible lending practices, product suitability and distribution, interest and fees and the entitlement to charge them, wealth advice, insurance distribution, pricing, competition, conduct in financial markets and capital market transactions, reporting and disclosure obligations and product disclosure documentation. ANZ has received various notices and requests for information from its regulators as part of both industry-wide and ANZ-specific reviews and has also made disclosures to its regulators at its own instigation. 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.

• Royal Commission

The Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry was established on 14 December 2017. The Commission’s final report was released publicly on 4 February 2019. The Commission may result 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.

• 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.

115

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

• 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 potential claims under those warranties, indemnities and commitments.

20. Significant Events Since Balance Date

There have been no significant events from 31 March 2019 to the date of signing this report.

21. Adoption of new accounting standards and other changes to comparatives

i) Changes to comparatives including the impact of AASB 15 Revenue from Contracts with Customers (AASB 15)

The following table summarises the changes to comparatives resulting from the application of AASB 15, and other reclassification adjustments to enhance comparability with current period presentation.

	Reported as at 30 Sep 18 $M		Impact of application of AASB 15 $M			Other reclassification adjustment $M		Restated as at 30 Sep 18 $M
Net loans and advances 1		603,938		-			500		604,438
Other assets2		3,645		32			-		3,677
Other non-impacted balance sheet line items		335,041		-			-		335,041
Total assets		942,624		32			500		943,156
Deferred tax liabilities2		59		10			-		69
Payables and other liabilities3		6,788		106			-		6,894
Provisions1,3		1,578		(106	)		500		1,972
Other non-impacted balance sheet line items		874,816		-			-		874,816
Total liabilities		883,241		10			500		883,751
Retained earnings2		31,715		22			-		31,737
Other non-impacted balance sheet line items		27,528		-			-		27,528
Share capital and reserves attributable to shareholders of the Company2		59,243		22			-		59,265
Non-controlling interests		140		-			-		140
Total shareholders’ equity2		59,383		22			-		59,405

	Reported as at 31 Mar 18 $M		Impact of application of AASB 15 $M			Other reclassification adjustment $M		Restated as at 31 Mar 18 $M
Net loans and advances 1		588,946		-			522		589,468
Other assets2		4,914		32			-		4,946
Other non-impacted balance sheet line items		341,256		-			-		341,256
Total assets		935,116		32			522		935,670
Deferred tax liabilities2		258		10			-		268
Payables and other liabilities3		7,442		100					7,542
Provisions1,3		1,110		(100	)		522		1,532
Other non-impacted balance sheet line items		866,806		-			-		866,806
Total liabilities		875,616		10			522		876,148
Retained earnings2		30,900		22			-		30,922
Other non-impacted balance sheet line items		28,474		-			-		28,474
Share capital and reserves attributable to shareholders of the Company2		59,374		22			-		59,396
Non-controlling interests		126		-			-		126
Total shareholders’ equity2		59,500		22			-		59,522

^1. $500 million of collectively assessed provisions for credit impairment attributable to off-balance sheet credit related commitments at 30 September 2018 (Mar 18: $522 million) were reclassified from Net loans and advances at amortised cost to Other provisions to enhance comparability with current period presentation.

^2. The Group adopted AASB 15 in this reporting period with comparatives restated. This policy change resulted in an adjustment to the opening balance of $32 million to Other assets, $10 million to Deferred tax liabilities and $22 million to Retained earnings as at 1 October 2017 to recognise revenue that qualifies for upfront recognition under AASB 15 but was not previously recognised under AASB 118.

^3. Upon adoption of AASB 15, certain liabilities associated with credit card loyalty programs have been reclassified from Provisions to Other Liabilities. In addition, certain items previously netted are now presented gross in operating income and operating expenses. Comparative information has been restated which increased total operating income and total operating expenses by $91 million for the September 2018 half and $62 million for the March 2018 half.

116

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

ii) Impact of the transition to AASB 9 Financial Instruments (AASB 9)

Allowance for expected credit losses

The table below reconciles the closing provisions for credit impairment for financial assets determined in accordance with AASB 139, and provisions for loan commitments and financial guarantee contracts determined in accordance with AASB 137 Provisions, Contingent Liabilities and Contingent Assets as at 30 September 2018, and the opening provisions for credit impairment determined in accordance with AASB 9 as at 1 October 2018.

	As at 30 Sep 18				As at 1 Oct 18
	Provision for credit impairment under AASB 139 or AASB 137 $M		Incremental allowance for ECL under AASB 9 $M		Allowance for ECL under AASB 9 $M
Loans and advances - at amortised cost		2,943		647		3,590
Investment securities - debt securities at amortised cost		-		11		11
Off-balance sheet commitments - undrawn and contingent facilities1		500		155		655
Total provisions for credit impairment		3,443		813		4,256
Loss allowances recognised in other comprehensive income:
Investment securities - debt securities at FVOCI2		-		14		14
Total loss allowance recognised in other comprehensive income		-		14		14

^1. The collectively assessed allowance for ECL is included in Provisions. The individually assessed allowance for ECL is included in Net loans and advances.

^2. Allowance for ECL does not change the carrying amount which remains at fair value. Instead, the allowance for ECL is recognised in OCI, with a corresponding charge to profit or loss.

117

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The following table summarises the adjustments arising on adoption of AASB 9.

Consolidated balance sheet reconciliation

	Reference		AASB 139 measurement category		AASB 9 measurement category		Restated as at 30 Sep 18 $M		AASB 9 reclassification impact $M			AASB 9 Remeasurement impact (excl. impairment) $M			AASB 9 credit impairment impact $M			Revised carrying amount as at 1 Oct 18 $M
Trading securities		1,2		FVTPL		FVTPL		37,722		(993	)		-			-			36,729
Investment securities:
- debt securities at amortised cost		2,6,7		N/A		Amortised cost		-		6,158			2			(11	)		6,149
- debt securities at FVOCI		1, 2		N/A		FVOCI		-		70,938			-			-			70,938
- equity securities at FVOCI		2		N/A		FVOCI		-		1,087			-			-			1,087
Available-for-sale assets (AFS)		2		AFS		N/A		74,284		(74,284	)		-			-			-
Net loans and advances
- at amortised cost		3,6,7,8		Loans and receivables		Amortised cost		604,305		(4,470	)		15			(647	)		599,203
- at FVTPL		3,8		FVTPL		FVTPL		133		1,564			(23	)		-			1,674
Investment in associates		5		N/A		N/A		2,553		-			-			(65	)		2,488
Deferred tax assets		1,2,4,6		N/A		N/A		900		-			15			234			1,149
Other non-impacted balance sheet line items				N/A		N/A		223,259		-			-			-			223,259
Total assets								943,156		-			9			(489	)		942,676
Current tax liabilities		1,3,4		N/A		N/A		300		-			30			-			330
Provisions		6		N/A		N/A		1,972		-			-			155			2,127
Debt issuances:																			-
- at amortised cost		4		Amortised cost		Amortised cost		119,737		(879	)		-			-			118,858
- at FVTPL		4		FVTPL		FVTPL		1,442		879			(55	)		-			2,266
Other non-impacted balance sheet line items				N/A		N/A		760,300		-			-			-			760,300
Total liabilities								883,751		-			(25	)		155			883,881
Ordinary share capital								27,205		-			-			-			27,205
Reserves		1,2,6						323		1			3			10			337
Retained earnings		1,2,3,4,5,6						31,737		(1	)		31			(654	)		31,113
Share capital and reserves attributable to shareholders of the Company								59,265		-			34			(644	)		58,655
Non-controlling interests								140		-			-			-			140
Total shareholders’ equity								59,405		-			34			(644	)		58,795

118

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Reference

1. On initial application of AASB 9, a portfolio of bonds with a fair value of $1,000 million was transferred from Trading securities to Investment securities - debt securities at FVOCI as the applicable business model was held to collect and sell. Cumulative fair value gains/(losses) on this portfolio of $2 million (after tax) were transferred from Retained earnings to the FVOCI reserve. Additionally, the reclassification resulted in a reduction in deferred tax assets and current tax liabilities of $1 million.

2. The Available-for-sale classification is no longer applicable under AASB 9. Accordingly, on transition:

_● $69,938 million of Available-for-sale debt instruments were reclassified to Investment securities – debt securities measured at FVOCI due to the business model being held to collect and sell. There was no re-measurement impact associated with this reclassification;

_● $3,252 million of Available-for-sale debt instruments were reclassified to Investment securities – debt securities at amortised cost due to the business model being held to collect at 1 October 2018. This reclassification resulted in re-measurement of a $2 million increase to the carrying amount arising from reversal of the previous available-for-sale revaluation reserve. Additionally, a deferred tax asset of $1 million associated with the previous available-for-sale revaluation was reversed;

_● the Group made irrevocable elections to designate $1,087 million of non-traded Available-for-sale equity securities as Investment securities - equity securities at FVOCI; and

_● $7 million of Available-for-sale equity securities were reclassified to Trading securities and the related reserve balance of $1 million was reclassified to Retained earnings.

3. Certain loans with contractual cash flow characteristics that are not solely payments of principal and interest were reclassified from Net loans and advances at amortised cost to Net Loans and advances at FVTPL. The loans had an amortised cost carrying amount of $224 million and a fair value of $201 million at 30 September 2018. The associated re-measurement of $23 million was recognised in Retained earnings offset by a decrease in current tax liabilities of $7 million. In addition, one of the loans was previously in a fair value hedge relationship which was discontinued effective 1 October 2018. Accordingly, changes in the fair value due to changes in the hedged risk which were previously recognised as a reduction to the carrying value of the loan amounting to $15 million were written back to Retained earnings offset by an increase in current tax liabilities of $4 million.

4. The Group elected to designate certain financial liabilities (bonds included within Debt issuances) as measured at fair value through profit or loss effective from 1 October 2018 to reduce an accounting mismatch. The bonds had an amortised cost carrying amount of $879 million and a fair value of $824 million at 30 September 2018. The difference of $55 million (comprising a $109 million decrease in fair value before own credit, offset by a $54 million increase in fair value attributable to own credit) offset by a net tax impact of $17 million (increase in deferred tax asset of $17 million and an increase in current tax liability of $34 million) was recognised in Retained earnings.

5. The Group recognised a decrease of $65 million to the carrying value of Investments in associates 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).

6. The initial application of the expected credit loss requirements of AASB 9, resulted in increases in provisions for credit impairment attributable to the following:

_● On-balance sheet loans and advances of $647 million reflected in the Net loans and advances at amortised cost;

_● Investment securities measured at amortised cost of $11 million reflected in the Investment securities – debt securities at amortised cost; and

_● Off-balance sheet credit related commitments of $155 million reflected in the Provisions.

The total impact of $813 million was recognised as a reduction to Retained earnings, offset by an increase of $234 million related to deferred tax. Additionally, loss allowances of $10 million (after-tax) attributable to Investment securities – debt securities at FVOCI have been recognised in Reserves with a corresponding adjustment to Retained earnings. The debt securities remain at fair value on the face of the Balance Sheet.

7. On initial application of AASB 9, a portfolio of Negotiable Certificates of Deposit with a carrying amount of $2,906 million was reclassified from Net loans and advances at amortised cost to Investment Securities at amortised cost. There was no re-measurement impact associated with this reclassification.

8. On initial application of AASB 9, loans with a carrying amount and fair value of $1,340 million that were in the process of being syndicated were reclassified from Net loans and advances at amortised cost to Net Loans and advances at FVTPL on the basis that the applicable business model is held-to-sell. There was no re-measurement impact associated with this reclassification.

119

DIRECTORS’ DECLARATION

Directors’ Declaration

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

1. in the Directors’ opinion the Condensed Consolidated Financial Statements and Notes to the Condensed Consolidated Financial Statements are in accordance with the Corporations Act 2001, including:

_● section 304, that they comply with the Australian Accounting Standards and any further requirements in the Corporations Regulations 2001; and

_● section 305, that they give a true and fair view of the financial position of the Group as at 31 March 2019 and of its performance for the half year ended on that date; and

2. in the Directors’ opinion as at the date of this declaration there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable.

Signed in accordance with a resolution of the Directors.

David M Gonski, AC Chairman	Shayne C Elliott Director

30 April 2019

120

AUDITOR’S REVIEW REPORT AND INDEPENDENCE DECLARATION

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

Report on the half year Condensed Consolidated Financial Statements

Conclusion

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

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

The Condensed Consolidated Financial Statements comprise:

_● The condensed consolidated balance sheet as at 31 March 2019;

_● The condensed consolidated income statement, condensed consolidated statement of comprehensive income, condensed consolidated statement of changes in equity, and condensed consolidated cash flow statement for the half year ended on that date;

_● Notes 1 to 21 comprising a summary of significant accounting policies and other explanatory information; and

_● The Directors’ Declaration.

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

i) giving a true and fair view of the Group’s financial position as at 31 March 2019 and of its performance for the half year ended on that date; and

ii) complying with Australian Accounting Standard AASB 134 Interim Financial Reporting and the Corporations Regulations 2001.

Responsibilities of the Directors for the Condensed Consolidated Financial Statements

The Directors of the Company are responsible for:

_● the preparation of the Condensed Consolidated Financial Statements that give a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001;

_● such internal control as the Directors determine is necessary to enable the preparation of the Condensed Consolidated Financial Statements that are free from material misstatement, whether due to fraud or error.

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

Our responsibility is to express a conclusion on the Condensed Consolidated Financial Statements based on our review. We conducted our review in accordance with Auditing Standard on Review Engagements ASRE 2410 Review of a Financial Report Performed by the Independent Auditor of the Entity, in order to state whether, on the basis of the procedures described, we have become aware of any matter that makes us believe that the Condensed Consolidated Financial Statements are not in accordance with the Corporations Act 2001 including: giving a true and fair view of the Group’s financial position as at 31 March 2019 and its performance for the half year ended on that date, and complying with Australian Accounting Standard AASB 134 Interim Financial Reporting and the Corporations Regulations 2001. As auditor of Australia and New Zealand Banking Group Limited, ASRE 2410 requires that we comply with the ethical requirements relevant to the audit of the annual financial report.

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

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

KPMG
Melbourne	Alison Kitchen
30 April 2019	Partner

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

To the Directors of Australia and New Zealand Banking Group Limited    

I declare that, to the best of my knowledge and belief, in relation to the review of Australia and New Zealand Banking Group Limited for the half-year

ended 31 March 2019, there have been:    

(i) no contraventions of the auditor independence requirements as set out in the Corporations Act 2001 in relation to the review; and

(ii) no contraventions of any applicable code of professional conduct in relation to the review.

KPMG	Alison Kitchen
Melbourne	Partner
30 April 2019

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

121

AUDITOR’S REVIEW REPORT AND INDEPENDENCE DECLARATION

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122

SUPPLEMENTARY INFORMATION

CONTENTS	Page
Capital management - including discontinued operations		124
Average balance sheet and related interest - including discontinued operations		128
Select geographical disclosures – including discontinued operations		131
Exchange rates		132
Derivative financial instruments		133

123

SUPPLEMENTARY INFORMATION

Capital management - including discontinued operations

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

		As at									Movement
Qualifying Capital		Mar 19 $M			Sep 18 $M			Mar 18 $M			Mar 19 v. Sep 18		Mar 19 v. Mar 18
Tier 1
Shareholders’ equity and non-controlling interests1			59,971			59,383			59,500			1%		1%
Prudential adjustments to shareholders’ equity	Table 1		(43	)		(322	)		(394	)		-87%		-89%
Gross Common Equity Tier 1 capital			59,928			59,061			59,106			1%		1%
Deductions	Table 2		(14,400	)		(14,370	)		(15,399	)		0%		-6%
Common Equity Tier 1 capital			45,528			44,691			43,707			2%		4%
Additional Tier 1 capital	Table 3		7,547			7,527			7,418			0%		2%
Tier 1 capital			53,075			52,218			51,125			2%		4%
Tier 2 capital	Table 4		7,569			7,291			8,040			4%		-6%
Total qualifying capital			60,644			59,509			59,165			2%		2%
Capital adequacy ratios
Common Equity Tier 1			11.5%			11.4%			11.0%
Tier 1			13.4%			13.4%			12.9%
Tier 2			1.9%			1.9%			2.0%
Total capital ratio			15.3%			15.2%			14.9%
Risk weighted assets	Table 5		396,291			390,820			395,777			1%		0%

^1. Prior period numbers have not been restated for the impact of AASB 15 to align with previously reported regulatory returns.

124

SUPPLEMENTARY INFORMATION

Capital management - including discontinued operations, cont’d

		As at									Movement
		Mar 19 $M			Sep 18 $M			Mar 18 $M			Mar 19 v. Sep 18		Mar 19 v. Mar 18
Table 1: Prudential adjustments to shareholders’ equity
Treasury shares attributable to ANZ Wealth Australia policyholders			328			328			306			0%		7%
Accumulated retained profits and reserves of insurance and funds management entities			(213	)		(509	)		(608	)		-58%		-65%
Deferred fee revenue including fees deferred as part of loan yields			143			132			135			8%		6%
Reserves attributable to investment securities/ available-for-sale assets related to deconsolidated subsidiaries1			(139	)		(99	)		(91	)		40%		53%
Other			(162	)		(174	)		(136	)		-7%		19%
Total			(43	)		(322	)		(394	)		-87%		-89%
Table 2: Deductions from Common Equity Tier 1 capital
Unamortised goodwill & other intangibles (excluding ANZ Wealth Australia and New Zealand)			(3,865	)		(3,776	)		(3,638	)		2%		6%
Intangible component of investments in ANZ Wealth Australia and New Zealand			(1,494	)		(1,629	)		(1,634	)		-8%		-9%
Capitalised software			(1,360	)		(1,421	)		(1,745	)		-4%		-22%
Capitalised expenses including loan and lease origination fees			(1,019	)		(1,077	)		(1,133	)		-5%		-10%
Applicable deferred net tax assets			(1,162	)		(1,118	)		(869	)		4%		34%
Expected losses in excess of eligible provisions	Table 8		(42	)		(609	)		(686	)		-93%		-94%
Investment in other insurance and funds management subsidiaries			(270	)		(270	)		(274	)		0%		-1%
Investment in ANZ Wealth Australia and New Zealand			(735	)		(750	)		(1,751	)		-2%		-58%
Investment in banking associates and minority interests			(2,501	)		(2,333	)		(2,272	)		7%		10%
Other deductions			(1,952	)		(1,387	)		(1,397	)		41%		40%
Total			(14,400	)		(14,370	)		(15,399	)		0%		-6%
Table 3: Additional Tier 1 capital
ANZ Capital Notes 1			1,118			1,117			1,117			0%		0%
ANZ Capital Notes 2			1,606			1,605			1,604			0%		0%
ANZ Capital Notes 3			965			965			961			0%		0%
ANZ Capital Notes 4			1,611			1,610			1,609			0%		0%
ANZ Capital Notes 5			925			924			924			0%		0%
ANZ Bank NZ Capital Notes			478			456			467			5%		2%
ANZ Capital Securities			1,336			1,240			1,188			8%		12%
Regulatory adjustments and deductions			(492	)		(390	)		(452	)		26%		9%
Total			7,547			7,527			7,418			0%		2%
Table 4: Tier 2 capital
General reserve for impairment of financial assets			307			119			123			large		large
Perpetual subordinated notes			423			416			390			2%		8%
Term subordinated debt notes			7,806			7,575			8,216			3%		-5%
Regulatory adjustments and deductions			(967	)		(819	)		(689	)		18%		40%
Total			7,569			7,291			8,040			4%		-6%

^1. On adoption of AASB 9 on 1 October 2018, the classification and measurement of financial assets were revised. Available-for-sale classification used in comparative periods ceases to exist under AASB 9 and a new classification of investment securities was introduced. Comparative information has not been restated.

125

SUPPLEMENTARY INFORMATION

Capital management - including discontinued operations, cont’d

		As at						Movement
		Mar 19 $M		Sep 18 $M		Mar 18 $M		Mar 19 v. Sep 18		Mar 19 v. Mar 18
Table 5: Risk weighted assets
On balance sheet			264,405		255,196		257,304		4%		3%
Commitments			53,079		52,408		53,644		1%		-1%
Contingents			12,149		11,938		12,333		2%		-1%
Derivatives			15,890		18,038		19,541		-12%		-19%
Total credit risk weighted assets	Table 6		345,523		337,580		342,822		2%		1%
Market risk - Traded			5,790		6,808		6,558		-15%		-12%
Market risk - IRRBB			7,245		8,814		9,019		-18%		-20%
Operational risk			37,733		37,618		37,378		0%		1%
Total risk weighted assets			396,291		390,820		395,777		1%		0%
		As at						Movement
		Mar 19 $M		Sep 18 $M		Mar 18 $M		Mar 19 v. Sep 18		Mar 19 v. Mar 18
Table 6: Credit risk weighted assets by Basel asset class
Subject to Advanced IRB approach
Corporate			127,989		121,891		123,253		5%		4%
Sovereign			7,016		6,955		6,896		1%		2%
Bank			15,511		15,908		15,129		-2%		3%
Residential mortgage			101,469		97,764		99,560		4%		2%
Qualifying revolving retail (credit cards)			5,795		6,314		6,845		-8%		-15%
Other retail			28,029		29,373		30,769		-5%		-9%
Credit risk weighted assets subject to Advanced IRB approach			285,809		278,205		282,452		3%		1%
Credit risk specialised lending exposures subject to slotting criteria			35,696		33,110		32,065		8%		11%
Subject to Standardised approach
Corporate			12,252		13,760		15,105		-11%		-19%
Residential mortgage			331		327		321		1%		3%
Other retail (includes credit cards)			81		88		102		-8%		-21%
Credit risk weighted assets subject to Standardised approach			12,664		14,175		15,528		-11%		-18%
Credit Valuation Adjustment and Qualifying Central Counterparties			6,217		7,344		7,864		-15%		-21%
Credit risk weighted assets relating to securitisation exposures			1,558		1,600		1,728		-3%		-10%
Other assets			3,579		3,146		3,185		14%		12%
Total credit risk weighted assets			345,523		337,580		342,822		2%		1%

126

SUPPLEMENTARY INFORMATION

Capital management - including discontinued operations, cont’d

	Collectively and Individually Assessed Provision						Basel Expected Loss1
Table 7: Total provision for credit impairment and Basel expected loss by division	Mar 19 $M		Sep 18 $M		Mar 18 $M		Mar 19 $M		Sep 18 $M		Mar 18 $M
Australia		2,420		1,694		1,690		2,460		2,428		2,499
Institutional		1,340		1,324		1,421		1,041		1,052		1,097
New Zealand		442		360		421		696		664		725
Pacific		67		61		59		8		9		8
TSO and Group Centre		-		4		4		1		-		-
Total provision for credit impairment and expected loss		4,269		3,443		3,595		4,206		4,153		4,329

^1. Only applicable to Advanced Internal Ratings based portfolios.

	As at									Movement
Table 8: APRA Expected loss in excess of eligible provisions	Mar 19 $M			Sep 18 $M			Mar 18 $M			Mar 19 v. Sep 18		Mar 19 v. Mar 18
APRA Basel 3 expected loss: non-defaulted		2,675			2,664			2,826			0%		-5%
Less: Qualifying collectively assessed provision
Collectively assessed provision		(3,378	)		(2,523	)		(2,579	)		34%		31%
Non-qualifying collectively assessed provision		395			307			312			29%		27%
Standardised collectively assessed provision		151			119			123			27%		23%
Non-defaulted excess included in deduction		-			567			682			-100%		-100%
APRA Basel 3 expected loss: defaulted		1,531			1,489			1,503			3%		2%
Less: Qualifying individually assessed provision
Individually assessed provision		(891	)		(920	)		(1,016	)		-3%		-12%
Additional individually assessed provision for partial write offs		(310	)		(325	)		(301	)		-5%		3%
Standardised individually assessed provision		85			79			108			8%		-21%
Collectively assessed provision on advanced defaulted		(373	)		(281	)		(290	)		33%		29%
		42			42			4			0%		large
Shortfall in expected loss not included in deduction		-			-			5			n/a		-100%
Defaulted excess included in deduction		42			4			9			large		large
Gross deduction		42			609			686			-93%		-94%

127

SUPPLEMENTARY INFORMATION

Average balance sheet and related interest^{1, 2} – including discontinued operations

	Half Year Mar 19							Half Year Sep 18							Half Year Mar 18
	Avg bal $M			Int $M		Rate %		Avg bal $M			Int $M		Rate %		Avg bal $M			Int $M		Rate %
Loans and advances
Home loans		322,407			7,396		4.6%		319,241			7,336		4.6%		313,971			7,296		4.7%
Consumer finance		17,876			887		10.0%		18,024			930		10.3%		16,975			944		11.2%
Business lending		246,530			5,570		4.5%		236,199			5,113		4.3%		231,556			4,739		4.1%
Individual provisions for credit impairment		(902	)		-		n/a		(959	)		-		n/a		(1,057	)		-		n/a
Total (continuing operations)		585,911			13,853		4.7%		572,505			13,379		4.7%		561,445			12,979		4.6%
Non-lending interest earning assets
Cash and other liquid assets		110,337			710		1.3%		101,825			593		1.2%		90,591			438		1.0%
Trading and investment securities/available-for-sale assets3		114,169			1,317		2.3%		109,101			1,392		2.5%		111,734			1,271		2.3%
Other assets		1,111			91		n/a		1,070			114		n/a		1,416			161		n/a
Total (continuing operations)		225,617			2,118		1.9%		211,996			2,099		2.0%		203,741			1,870		1.8%
Total interest earning assets (continuing operations)4		811,528			15,971		3.9%		784,501			15,478		3.9%		765,186			14,849		3.9%
Non-interest earning assets (continuing operations)		120,099							126,817							126,546
Total average assets (continuing operations)		931,627							911,318							891,732
Total average assets (discontinued operations)		42,564							42,859							42,263
Total average assets		974,191							954,177							933,995
Deposits and other borrowings
Certificates of deposit		43,592			505		2.3%		47,855			541		2.3%		51,748			529		2.1%
Term deposits		217,887			2,783		2.6%		207,804			2,503		2.4%		200,255			2,185		2.2%
On demand and short term deposits		215,957			1,892		1.8%		218,847			1,883		1.7%		221,781			1,843		1.7%
Deposits from banks and securities sold under agreement to repurchase		81,748			913		2.2%		71,952			722		2.0%		65,455			508		1.6%
Commercial paper and other borrowings		22,127			309		2.8%		22,653			230		2.0%		21,359			208		2.0%
Total (continuing operations)		581,311			6,402		2.2%		569,111			5,879		2.1%		560,598			5,273		1.9%
Non-deposit interest bearing liabilities
Collateral received and settlement balances owed by ANZ		11,603			51		0.9%		12,652			55		0.9%		12,060			48		0.8%
Debt issuances & subordinated debt		120,454			2,060		3.4%		116,634			2,070		3.5%		109,020			1,858		3.4%
Other liabilities		2,465			159		n/a		1,977			310		n/a		4,050			320		n/a
Total (continuing operations)		134,522			2,270		3.4%		131,263			2,435		3.7%		125,130			2,226		3.6%
Total interest bearing liabilities (continuing operations)4		715,833			8,672		2.4%		700,374			8,314		2.4%		685,728			7,499		2.2%
Non-interest bearing liabilities (continuing operations)		153,751							150,335							145,695
Total average liabilities (continuing operations)		869,584							850,709							831,423
Total average liabilities (discontinued operations)		45,412							44,469							43,573
Total average liabilities		914,996							895,178							874,996
Total average shareholders’ equity		59,195							58,999							58,999

^1.  Averages used are predominantly daily averages.

^2.  Assets and liabilities held for sale are included in continuing operations balance sheet categories and discontinued operations.

^3.  On adoption of AASB 9 on 1 October 2018, the classification and measurement of financial assets were revised. Available-for-sale classification used in comparative periods cease to exist under AASB 9 and a new classification of investment securities was introduced. Comparative information has not been restated.

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

128

SUPPLEMENTARY INFORMATION

Average balance sheet and related interest^{1, 2} – including discontinued operations (cont’d)

	Half Year Mar 19						Half Year Sep 18						Half Year Mar 18
	Avg bal $M		Int $M		Rate %		Avg bal $M		Int $M		Rate %		Avg bal $M		Int $M		Rate %
Loans and advances
Australia		401,296		9,507		4.8%		395,442		9,404		4.7%		389,907		9,273		4.8%
Asia, Pacific, Europe & America		61,248		1,456		4.8%		58,826		1,158		3.9%		56,019		977		3.5%
New Zealand		123,367		2,890		4.7%		118,237		2,817		4.8%		115,519		2,729		4.7%
Total (continuing operations)		585,911		13,853		4.7%		572,505		13,379		4.7%		561,445		12,979		4.6%
Trading and investment securities/available-for-sale assets3
Australia		58,709		684		2.3%		59,075		833		2.8%		62,044		740		2.4%
Asia, Pacific, Europe & America		41,171		455		2.2%		36,135		379		2.1%		35,399		344		1.9%
New Zealand		14,289		178		2.5%		13,891		180		2.6%		14,291		187		2.6%
Total (continuing operations)		114,169		1,317		2.3%		109,101		1,392		2.5%		111,734		1,271		2.3%
Total interest earning assets4
Australia		505,654		10,633		4.2%		495,373		10,605		4.3%		484,628		10,346		4.3%
Asia, Pacific, Europe & America		163,810		2,206		2.7%		152,803		1,827		2.4%		146,690		1,533		2.1%
New Zealand		142,064		3,132		4.4%		136,325		3,046		4.5%		133,868		2,970		4.4%
Total (continuing operations)		811,528		15,971		3.9%		784,501		15,478		3.9%		765,186		14,849		3.9%
Total average assets
Australia		588,469						583,016						571,245
Asia, Pacific, Europe & America		188,160						178,007						172,390
New Zealand		154,998						150,295						148,097
Total average assets (continuing operations)		931,627						911,318						891,732
Total average assets (discontinued operations)		42,564						42,859						42,263
Total average assets		974,191						954,177						933,995
Interest bearing deposits and other borrowings
Australia		334,952		3,716		2.2%		336,275		3,568		2.1%		334,390		3,382		2.0%
Asia, Pacific, Europe & America		150,989		1,554		2.1%		142,316		1,237		1.7%		137,993		855		1.2%
New Zealand		95,370		1,132		2.4%		90,520		1,074		2.4%		88,215		1,036		2.4%
Total (continuing operations)		581,311		6,402		2.2%		569,111		5,879		2.1%		560,598		5,273		1.9%
Total interest bearing liabilities4
Australia		421,237		5,296		2.5%		417,551		5,306		2.5%		408,953		4,880		2.4%
Asia, Pacific, Europe & America		176,119		1,864		2.1%		168,840		1,536		1.8%		165,303		1,182		1.4%
New Zealand		118,477		1,512		2.6%		113,983		1,472		2.6%		111,472		1,437		2.6%
Total (continuing operations)		715,833		8,672		2.4%		700,374		8,314		2.4%		685,728		7,499		2.2%
Total average liabilities
Australia		528,775						522,945						508,875
Asia, Pacific, Europe & America		201,315						193,712						191,147
New Zealand		139,494						134,052						131,401
Total average liabilities (continuing operations)		869,584						850,709						831,423
Total average liabilities (discontinued operations)		45,412						44,469						43,573
Total average liabilities		914,996						895,178						874,996
Total average shareholders’ equity
Ordinary share capital, reserves, retained earnings and non-controlling interests		59,195						58,999						58,999
Total average shareholders’ equity		59,195						58,999						58,999
Total average liabilities and shareholder’s equity		974,191						954,177						933,995

^1.  Averages used are predominantly daily averages.

^2.  Assets and liabilities held for sale are included in continuing operations balance sheet categories and discontinued operations.

^3.  On adoption of AASB 9 on 1 October 2018, the classification and measurement of financial assets were revised. Available-for-sale classification used in comparative periods cease to exist under AASB 9 and a new classification of investment securities was introduced. Comparative information has not been restated.

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

129

SUPPLEMENTARY INFORMATION

		Half Year
Gross earnings rate1	Mar 19 %		Sep 18 %	Mar 18   %
Australia	4.38		4.46	4.49
Asia, Pacific, Europe & America	2.71		2.41	2.12
New Zealand	4.42		4.46	4.45
Group	3.95		3.94	3.89
Net interest spread and net interest margin analysis as follows:
		Half Year2
Australia1	Mar 19 %		Sep 18 %	Mar 18   %
Net interest spread	1.75		1.81	1.99
Interest attributable to net non-interest bearing items	0.35		0.31	0.28
Net interest margin - Australia	2.10		2.12	2.27
Asia, Pacific, Europe & America1
Net interest spread	0.58		0.60	0.68
Interest attributable to net non-interest bearing items	0.13		0.10	0.08
Net interest margin - Asia, Pacific, Europe & America	0.71		0.70	0.76
New Zealand1
Net interest spread	1.82		1.83	1.83
Interest attributable to net non-interest bearing items	0.35		0.33	0.33
Net interest margin - New Zealand	2.17		2.16	2.16
Group
Net interest spread	1.50		1.57	1.70
Interest attributable to net non-interest bearing items	0.30		0.25	0.23
Net interest margin	1.80		1.82	1.93
Net interest margin (excluding Markets)	2.50		2.49	2.60

^1. Geographic gross earnings rate, net interest spread and net interest margin are calculated gross of intra-group items (Intra-group interest earning assets and associated interest income and intra-group interest bearing liabilities and associated interest expense).

^2. In the March 2019 half, the methodology for allocating earnings on capital at a business unit level has changed from Economic Capital to Regulatory Capital. While neutral at a Group level, this change has impacted net interest income at the business unit level and comparative information has been restated accordingly.

130

SUPPLEMENTARY INFORMATION

Select geographical disclosures – including discontinued operations

The following divisions operate across the geographic locations illustrated below:

• Institutional division - International, New Zealand and Australia

• Pacific division - International

• New Zealand division - New Zealand

The International geography includes Asia, Pacific, Europe & America

	Australia		New Zealand		International		Total
	$M		$M		$M		$M
March 2019 Half Year
Statutory profit attributable to shareholders of the company		1,750		877		546		3,173
Cash profit		1,902		1,052		560		3,514
Net loans and advances1		421,261		126,279		62,603		610,143
Customer deposits1		270,779		103,034		119,560		493,373
Risk weighted assets1		249,777		71,322		75,192		396,291
September 2018 Half Year
Statutory profit attributable to shareholders of the company		1,890		939		248		3,077
Cash profit		1,804		885		240		2,929
Net loans and advances1		427,097		117,927		60,413		605,437
Customer deposits1		276,769		95,310		115,194		487,273
Risk weighted assets1		248,504		67,627		74,689		390,820
March 2018 Half Year
Statutory profit attributable to shareholders of the company		1,984		880		459		3,323
Cash profit		1,583		860		433		2,876
Net loans and advances1		418,916		118,610		54,943		592,469
Customer deposits1		276,892		94,623		101,249		472,764
Risk weighted assets1		253,491		68,559		73,727		395,777
1.   Balance Sheet amounts include assets and liabilities held for sale.

New Zealand geography (in NZD)

	Half Year									Movement
	Mar 19			Sep 18			Mar 18			Mar 19		Mar 19
	NZD M			NZD M			NZD M			v. Sep 18		v. Mar 18
Net interest income		1,626			1,605			1,572			1%		3%
Other operating income		654			475			540			38%		21%
Operating income		2,280			2,080			2,112			10%		8%
Operating expenses		(735	)		(761	)		(742	)		-3%		-1%
Profit before credit impairment and income tax		1,545			1,319			1,370			17%		13%
Credit impairment (charge)/release		(32	)		17			(70	)		large		-54%
Profit before income tax		1,513			1,336			1,300			13%		16%
Income tax expense and non-controlling interests		(399	)		(373	)		(359	)		7%		11%
Cash profit2		1,114			963			941			16%		18%
Adjustments between statutory profit and cash profit		(185	)		59			23			large		large
Statutory profit2		929			1,022			964			-9%		-4%
Individually assessed credit impairment charge/(release) - cash		32			17			84			88%		-62%
Collectively assessed credit impairment charge/(release) - cash		-			(34	)		(14	)		-100%		-100%
Net loans and advances1		131,788			128,749			126,316			2%		4%
Customer deposits1		107,528			104,055			100,771			3%		7%
Risk weighted assets1		74,433			73,833			73,014			1%		2%
Total full time equivalent staff (FTE)		7,311			7,511			7,718			-3%		-5%

^1. Balance Sheet amounts include assets and liabilities held for sale from continuing operations.

^2. Statutory profit for March 2019 half included a NZ$59 million gain on sale of OPL NZ, and a NZ$39 million gain on sale of Paymark. Cash profit also includes an after tax gain of NZ$86 million on the reversal of the life-to-date cash profit adjustments on the revaluation of OPL NZ policy liabilities sold.

131

SUPPLEMENTARY INFORMATION

Exchange rates

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

	Balance Sheet						Profit & Loss Average
	As at						Half Year
	Mar 19		Sep 18		Mar 18		Mar 19		Sep 18		Mar 18
Chinese Renminbi		4.7700		4.9679		4.8276		4.8805		4.8977		5.0410
Euro		0.6313		0.6205		0.6221		0.6274		0.6315		0.6460
Pound Sterling		0.5425		0.5520		0.5445		0.5520		0.5584		0.5718
Indian Rupee		48.991		52.363		49.860		50.906		50.956		50.145
Indonesian Rupiah		10,099		10,743		10,556		10,329		10,620		10,534
Japanese Yen		78.550		81.863		81.664		79.629		81.952		85.957
Malaysian Ringgit		2.8963		2.9858		2.9677		2.9526		2.9865		3.1401
New Taiwan Dollar		21.863		22.013		22.362		22.028		22.460		23.087
New Zealand Dollar		1.0436		1.0918		1.0650		1.0578		1.0841		1.0924
Papua New Guinean Kina		2.3924		2.4052		2.4945		2.4051		2.4430		2.5060
United States Dollar		0.7094		0.7216		0.7671		0.7145		0.7428		0.7772

132

SUPPLEMENTARY INFORMATION

Derivative financial instruments

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

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

	Assets		Liabilities			Assets		Liabilities			Assets		Liabilities
	Mar 19		Mar 19			Sep 18		Sep 18			Mar 18		Mar 18
Fair Values	$M		$M			$M		$M			$M		$M
Interest rate contracts
Forward rate agreements		13		(14	)		2		(2	)		23		(22	)
Futures contracts		66		(205	)		101		(42	)		26		(229	)
Swap agreements		55,832		(56,028	)		36,935		(38,808	)		34,981		(35,868	)
Options purchased		1,111		-			782		-			749		-
Options sold		-		(1,789	)		-		(1,408	)		-		(1,549	)
Total		57,022		(58,036	)		37,820		(40,260	)		35,779		(37,668	)
Foreign exchange contracts
Spot and forward contracts		11,303		(10,419	)		15,218		(14,133	)		19,681		(19,347	)
Swap agreements		9,288		(11,087	)		12,577		(11,873	)		13,357		(11,437	)
Options purchased		366		-			494		-			543		-
Options sold		-		(506	)		-		(669	)		-		(527	)
Total		20,957		(22,012	)		28,289		(26,675	)		33,581		(31,311	)
Commodity contracts		1,328		(738	)		2,260		(2,683	)		1,486		(1,567	)
Credit default swaps
Structured credit derivatives purchased		16		-			22		-			22		-
Other credit derivatives purchased		14		(59	)		8		(29	)		6		(47	)
Credit derivatives purchased		30		(59	)		30		(29	)		28		(47	)
Structured credit derivatives sold		-		(20	)		-		(26	)		-		(26	)
Other credit derivatives sold		38		(6	)		24		(3	)		41		(5	)
Credit derivatives sold		38		(26	)		24		(29	)		41		(31	)
Total		68		(85	)		54		(58	)		69		(78	)
Derivative financial instruments		79,375		(80,871	)		68,423		(69,676	)		70,915		(70,624	)

133

SUPPLEMENTARY INFORMATION

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134

DEFINITIONS

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

APRA - Australian Prudential Regulation Authority.

APS - ADI Prudential Standard.

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

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

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

1. gains or losses included in earnings arising from changes in tax, legal or accounting legislation or other non-core items not associated with the ongoing operations of the Group;

2. treasury shares, revaluation of policy liabilities, economic hedging impacts and similar accounting items that represent timing differences that will reverse through earnings in the future; and

3. accounting reclassifications between individual line items that do not impact reported results, such as policyholders tax gross up.

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

Collectively assessed provision under AASB 139 is the provision for credit losses that are inherent in the portfolio but not able to be individually identified. A collectively assessed provision may only be recognised when a loss event has already occurred. Losses expected as a result of future events, no matter how likely, are not recognised.

Collectively assessed provision under AASB 9 represents the Expected Credit Loss (ECL). These incorporate forward looking information and do not require an actual loss event to have occurred for an impairment provision to be recognised.

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

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

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

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

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

Dividend payout ratio is the total ordinary dividend payment divided by profit attributable to shareholders of the Company.

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

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

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

Individually assessed provision is assessed on a case-by-case basis for all individually managed impaired assets taking into consideration factors such as the realisable value of security (or other credit mitigants), the likely return available upon liquidation or bankruptcy, legal uncertainties, estimated costs involved in recovery, the market price of the exposure in secondary markets and the amount and timing of expected receipts and recoveries.

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

1. Repricing and yield curve risk - the risk to earnings or market value as a result of changes in the overall level of interest rates and/or the relativity of these rates across the yield curve;

2. Basis risk - the risk to earnings or market value arising from volatility in the interest margin applicable to banking book items; and

3. Optionality risk - the risk to earnings or market value arising from the existence of stand-alone or embedded options in banking book items.

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

Level 1 in the context of APRA supervision, Australia and New Zealand Banking Group Limited consolidated with certain approved subsidiaries.

Level 2 in the context of APRA supervision, the consolidated ANZ Group excluding associates, insurance and funds management entities, commercial non-financial entities and certain securitisation vehicles.

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

Net loans and advances represent gross loans and advances less allowance for credit losses.

135

DEFINITIONS

Net Stable Funding Ratio (NSFR) is the ratio of the amount of available stable funding (ASF) to the amount of required stable funding (RSF) defined by APRA. The amount of ASF is the portion of an Authorised Deposit-taking Institutions (ADI) capital and liabilities expected to be a reliable source of funds over a one year time horizon. The amount of RSF is a function of the liquidity characteristics and residual maturities of an ADI’s assets and off-balance sheet activities. ADIs must maintain an NSFR of at least 100%.

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

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

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

Return on average assets is the profit attributable to shareholders of the Company, divided by average total assets.

Return on average ordinary shareholders’ equity is the profit attributable to shareholders of the Company, divided by average ordinary shareholders’ equity.

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

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

136

DEFINITIONS

Description of divisions

The Group operates on a divisional structure with six continuing divisions: Australia, Institutional, New Zealand, Wealth Australia, Pacific, and TSO and Group Centre.

The following structural changes have taken place during the period:

• The residual Asia Retail and Wealth businesses have been transferred from the former Asia Retail and Pacific division to TSO and Group Centre division. The remaining segment has been renamed Pacific division; and

• ANZ’s lenders mortgage insurance, share investing and general insurance distribution businesses which were previously part of the continuing operations of Wealth Australia now form part of the Australia division. ANZ’s financial planning business continues to be part of the continuing operations of the Wealth Australia division.

Australia

The Australia division comprises the Retail and Business & Private Banking (B&PB) business units.

• Retail provides products and services to consumer customers in Australia via the branch network, mortgage specialists, contact centres and a variety of self-service channels (internet banking, phone banking, ATMs, website, ANZ share investing and digital banking) and third party brokers.

• B&PB 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 global institutional and corporate customers across three product sets: Transaction Banking, Loans & Specialised Finance and Markets.

• Transaction Banking provides working capital and liquidity solutions including documentary trade, supply chain financing, commodity financing as well as cash management solutions, deposits, payments and clearing.

• Loans & 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 and debt capital markets in addition to managing the Group’s interest rate exposure and liquidity position.

New Zealand

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

• Retail provides a full range of banking and wealth management services to consumer, private banking and small business banking customers. We deliver our services via our internet and app-based digital solutions and network of branches, mortgage specialists, relationship managers and contact centres.

• Commercial provides a full range of banking services including traditional relationship banking and sophisticated financial solutions through dedicated managers focusing on privately owned medium to large enterprises and the agricultural business segment.

Wealth Australia

The retained Wealth Australia business is comprised of financial planning services provided by salaried financial planners.

Refer to Note 11 for details on Wealth Australia discontinued operations.

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.

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 Asia Retail and Wealth, Group Treasury, Shareholder Functions and minority investments in Asia. Refer to Note 11 for details on TSO and Group Centre discontinued operations.

137

ASX APPENDIX 4D - CROSS REFERENCE INDEX

	Page
Details of the reporting period (4D Item 1)	After front cover
Results for Announcement to the Market (4D Item 2)	After front cover
Net Tangible Assets per security (4D Item 3)	13
Details of entities over which control has been gained or lost (4D Item 4)	114
Dividends and dividend dates (4D Item 5)	After front cover
Dividend Reinvestment Plan (4D Item 6)	After front cover
Details of associates and joint venture entities (4D Item 7)	114

138

ALPHABETICAL INDEX

	PAGE
Appendix 4D Cross Reference Index		138
Appendix 4D Statement		2
Auditor’s Review Report and Independence Declaration		121
Average Balance Sheet and Related Interest		128
Basis of Preparation		86
Capital Management		124
Changes in Composition of the Group		114
Condensed Consolidated Balance Sheet		83
Condensed Consolidated Cash Flow Statement		84
Condensed Consolidated Income Statement		81
Condensed Consolidated Statement of Changes in Equity		85
Condensed Consolidated Statement of Comprehensive Income		82
Contingent Liabilities and Contingent Assets		115
Credit Risk		106
Definitions		135
Deposits and Other Borrowings		101
Derivative Financial Instruments		133
Directors’ Declaration		120
Directors’ Report		80
Discontinued Operations and Assets and Liabilities Held for Sale		102
Dividends		94
Divisional Results		49
Earnings Per Share		95
Exchange Rates		132
Fair Value Measurement		110
Full Time Equivalent Staff		19
Group Results		21
Income		91
Income Tax Expense		93
Investments In Associates		114
Net Loans and Advances		98
Operating Expenses		92
Profit Reconciliation		73
Allowance for Expected Credit Losses		99
Related Party Disclosures		114
Segment Analysis		96
Select Geographical Disclosures		131
Share Capital		114
Shareholders’ Equity		114
Subordinated Debt		105
Significant Events Since Balance Date		116
Summary		7

139

ALPHABETICAL INDEX

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140