BASEL III PILLAR 3 DISCLOSURE AS AT 30 JUNE 20 JUNE 20 PILLAR 3 / 20 THIRD QUARTER CHART PACK AUSTRALIA AND NEW Z EALAND BANKING GROUP LIMITED 14 AUGUST 20 To be read in conjunction with ANZ 20 Basel III Pillar 3 disclosure as at 30 June 20
S U M M A RY Capital Level 2 Common Equity Tier 1 (CET1) ratio of 11.07 at. 3bps increase from largely driven by: organic capital generation (+50bps) and receipt of reinsurance proceeds from the One Path Life (OPL) sale (+25bps); offset by the FY Interim Dividend (-59bps) and the share buyback (-8bps). 20 interim DRP was neutralised. ~$1.5bn of the announced $3bn on-market share buyback had been completed as at 30-Jun 20. Portfolio movement Total RWA decreased $2bn to $394bn driven by a $2bn reduction in CRWA. $2bn reduction in CRWAs from net risk improvement across both Institutional and Retail businesses in Australia & New Zealand. Credit Quality Total provision charge was $121m in 3Q with individual provision (IP) charge of $0m. The IP charge in 3Q was the lowest quarter since 2014, reflecting both the ongoing benign environment and improved quality of the portfolio. While typically Q1 and Q3 provision charges are lower than Q2 and Q4 (see slide 7), 3Q was substantially lower than the average for the past four years, reflecting in part a high level of write backs and recoveries in the Institutional loan book. ANZ has retained an overlay initially taken at 30 Sep 20 in relation to the Retail Trade book which remains on watch. Australian Residential Mortgage 90+ day past due loans (as a of Residential Mortgage EAD) was flat vs prior quarter. There are some pockets of stress in the mortgage book, primarily in Western Australia, more particularly in Perth itself. Australia Housing update Throughout FY the Australian housing system has been characterised by slowing credit system growth, increased price competition, increased capital intensity and tighter credit conditions. As at end June 20, YTD APRA System has grown 4.1, down vs. prior comparable period 5.3. ANZ s ongoing focus is on the Owner Occupier Principal & Interest segment, with Owner Occupier loan growth of 4.4 annualised in the June quarter 1. Investor segment growth in the June quarter was -2.5 annualised 1. ANZ s total Australian home lending portfolio grew at 0.4 times system in the June quarter (2 annualised growth). ANZ Interest Only home loan flows in the June quarter represented 13 of total home loan flows. $6.5bn of Interest Only loans switched to Principal & Interest in the June quarter (3Q), compared with $5.2bn in 2Q, $5.7bn in 1Q and $5.6bn per quarter on average across FY. The Bills/OIS spread has remained elevated. Regulatory Impacts The combined impact of prudential responses over the past 3 financial years including various regulatory changes, together with subsequent policy changes by the banks, has been a meaningful reduction in the average maximum borrowing capacity for home loan borrowers. Banks 2 home loan growth over the period to has been circa 11 compared with a circa 28 increase in Non-Banks 2 home loan growth (refer slide 8). June quarter growth refers to June 20 vs March 20 unless otherwise stated 1. Source: ANZ analysis of Home Loans Market Share APRA Banking statistics. June 20 report. The current classification of Investor vs Owner Occupier, as reported to regulators and the market, is based on the classification at origination (as advised by the customer) and the ongoing precision relies on the customers obligation to advise ANZ, and ANZ targeted activity to identify, any change in circumstances 2. Total Housing Lending sourced from RBA Statistical Table D2 - Lending and Credit Aggregates. Bank Housing Lending sourced from RBA Statistical Table D5 - Bank Lending Classified by Sector and APRA Monthly Banking Statistics. Non-Bank defined as difference between Total Housing Lending and Bank Housing Lending. Data includes securitisation 2
C A P I TA L, L I Q U I D I T Y & F U N D I N G APRA CET1 CAPITAL MOVEMENT Equivalent to ~11.5 on a pro forma basis taking into consideration announced asset divestments yet to settle (80bps) and $1.5b (~40bps) 2 nd tranche of share buy back announced in June 20 and commenced in July 20 APRA COMMON EQUITY TIER 1 (CET1) 10.6 10.8 9.6 9.8 9.7 9.6 9.5 10.1 9.4 9.8 11.0 11.1 11.04 0.45 11.07 0.25-0.59-0.08 LEVERAGE RATIO 5.1 4.9 5.1 5.1 5.3 5.1 5.3 5.1 5.4 5.5 5.4 5.3 Dividends OPL Reinsurance proceeds Share Buy Backs Organic Cap Gen & Other Leverage Ratio APRA Proposed Minimum 4 3
P O R T F O L I O M O V E M E N T RISK WEIGHTED ASSETS TOTAL RISK WEIGHTED ASSETS (RWA) (Note: Corporate Banking included in Institutional 1 ) 402 38 14 388 38 409 39 398 39 391 394 396 394 37 37 37 37 CREDIT RWA MOVEMENT DRIVERS 342.8 0.1-2.0 0.0 0.0 Risk improvement across both Institutional and Retail businesses in Australia & New Zealand 340.9 0 2 2 143 133 137 141 140 FX Risk Lending Mvmt. Data / Methodology changes CREDIT RWA MOVEMENT BY SEGMENT 0 2 200 199 204 203 202 201 342.8-0.3-1.4 0.2-0.4 340.9 Driven by reduction in standardised Corporate exposures Residential Mortgage Corporate Sovereign & Banks Other CRWA (ex. Insto) CRWA (Insto) Mkt. & IRRBB RWA Op-RWA 1. Institutional RWAs are inclusive of Corporate Banking, transferred from Australia Division to Institutional in October 20 and backdated to September 20 for the purposes of chart time series 4
P O R T F O L I O M O V E M E N T RISK WEIGHTED ASSETS & EXPOSURE AT DEFAULT (EAD) EXPOSURE AT DEFAULT (EAD) & CRWA/EAD 1 CREDIT RWA MOVEMENT DRIVERS ( vs ) 903 889 894 899 903 920 930 943 Increase in Bank EAD ($3.1bn) and Sovereign exposures ($5.4bn) 8.6 39.4 38.7 37.6 38.0 37.3 36.9 36.9 36.2 3.1 0.5 0.2 0.4-0.3-0.4-1.4 Residential Mortgage (Housing) Corporate Sovereign & Bank Other CRWA/EAD EAD Credit RWA EAD 1. EAD excludes Securitisation and Other assets whereas CRWA is inclusive as per APS 330 5
P O R T F O L I O M O V E M E N T MOVEMENT BY SEGMENTS HOUSING CREDIT RWA & EAD 1 NON HOUSING CREDIT RWA & EAD 2 RWA/EAD INTENSITY () RWA/EAD INTENSITY ().5.4 24.4 24.5 26.3 26.5 26.4 51.0 50.3 49.2 47.0 44.9 43.9 42.6 EXPOSURES () EXPOSURES () 572 545 539 538 534 553 566 331 344 355 361 369 377 377 292 274 265 253 240 243 241 58 60 87 89 97 100 100 CRWA EAD CRWA EAD 1. Housing based on APS330 Pillar 3 Residential Mortgage category. Change in CRWA from to includes impacts from regulatory changes to Australia housing risk weights introduced 1 July 20. Change in CRWA from to includes impacts from further increases to Australia housing risk weights following APRA having completed its review of ANZ s mortgage capital model and approved the new model for Australia residential mortgages effective from June 20 2. Non Housing based on APS330 Pillar 3, all Credit RWA categories excluding Residential Mortgage category 6
C R E D I T Q U A L I T Y PROVISION CHARGE $m 556 338 367 328 362 247 214 278 232 573 191 446 295 7 255 287 229 360 319 226 34 72-8 6 49 43-73 -32 - -108 1Q14 2Q14 3Q14 4Q14 1Q 2Q 3Q 4Q 1Q 2Q 482 448 34 555 599-44 283 325-42 437 462-25 While typically Q1 and Q3 provision charges are lower than Q2 and Q4, 3Q was substantially lower than the average for the past four years, reflecting in part a high level of write backs and recoveries in the Institutional loan book. 243 308-65 236 246 220 210 0-10 202-206 -4 121 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q -39 IP CHARGE COMPOSITION 27 23 31 19 Avg 2014-20 4Q 3Q 2Q 1Q IPC CPC GROSS IMPAIRED ASSETS 1 PAST DUE LOANS > 90 DAYS AS A OF EAD $m 4,000 0.59 0.60 0.62 0.63 0.56 3,2 0.53 0.55 0.56 0.58 3,000 2,719 0.48 0.50 0.50 2,384 2,2 2,033 0.43 2,000 1,877 0.42 0.44 0.39 1,000 0 Sep Australia New Zealand Institutional Other Residential Mortgage Retail (Pillar 3 QRR & Other Retail categories) 1. Excluding unsecured 90 days past due 7
A U S T R A L I A H O U S I N G ANZ GROWTH DRIVERS HOUSING LENDING GROWTH 1 2.0 1.5 1.0 ANZ growth x System (System = 1) 1.32 1.63 1.20 Below system growth driven by a combination of: Focus on priority segments & geographies Tighter credit conditions Competition Below system growth expected in 4Q 1.13 0.96 OWNER OCCUPIER & INVESTOR GROWTH 1,2 20 10 5 0-5 ANZ & SYSTEM Year on year growth () Jun Jun ANZ OO ANZ Inv APRA OO Dec APRA Inv SYSTEM HOUSING BALANCES & GROWTH 3 Jun 0.5 0.49 0.38 0.32 0.30 0.48 1,508 +11 1,672 +28 0.0 Sep Mar Sep Mar Sep Mar Jun Qtr Apr- May- Banks 78 100 Non-Banks ANZ growth relative to system growth APRA System ANZ monthly growth relative to system growth 1. ANZ analysis of APRA monthly banking statistics. June 20 report 2. The current classification of Investor vs Owner Occupier, as reported to regulators and the market, is based on the classification at origination (as advised by the customer) and the ongoing precision relies on the customers obligation to advise ANZ, and ANZ targeted activity to identify, any change in circumstances 3. Total Housing Lending sourced from RBA Statistical Table D2 - Lending and Credit Aggregates. Bank Housing Lending sourced from RBA Statistical Table D5 - Bank Lending Classified by Sector and APRA Monthly Banking Statistics. Non-Bank defined as difference between Total Housing Lending and Bank Housing Lending. Data includes securitisation 8
A U S T R A L I A H O U S I N G ANZ PORTFOLIO DYNAMICS ANZ AUSTRALIA HOME LOAN DELINQUENCIES 1,2 2.0 SWITCHING INTEREST ONLY TO PRINCIPAL & INTEREST $m 1.5 1.0 0.5 0.0 6,8 2,267 1,9 1,857 1,692 965 3,7 2,638 3,114 3,336 3,439 3,504 1Q 2Q 3Q 4Q 1Q 2Q 1,804 4,698 3Q 30+ DPD 90+ Owner Occupied 90+ Investor Early conversions to principal & interest Contractual interest only expiry PORTFOLIO BEHAVIOUR HOME LOANS - 90+ DPD (BY VINTAGE) 3 2.0 1.5 1.0 0.5 0.0 6 8 10 12 14 20 22 24 26 28 30 32 34 36 FY FY FY months SCHEDULED INTEREST ONLY TERM EXPIRY 4 2 8 6 6 4 7 11 11 8 10 8 7 4 5 1H 2H 1H 2H 1H19 2H19 1H20 2H20 1H21 2H21 1H22 2H221H23+ Early conversions to principal & interest Contractual interest only expiry 3 4 1. Excludes Non Performing Loans 2. The current classification of Investor vs Owner Occupier, as reported to regulators and the market, is based on the classification at origination (as advised by the customer) and the ongoing precision relies on the customers obligation to advise ANZ, and ANZ targeted activity to identify, any change in circumstances 3. Home loans 90+ dpd vintages ratio of ever delinquent (measured by # accounts) contains at least 6 application months of that fiscal year contributing to each data point 4. Includes construction loans 9
F U R T H E R I N F O R M AT I O N DISCLAIMER & IMPORTANT NOTICE: The material in this presentation is general background information about the Bank s activities current at the date of the presentation. It is information given in summary form and does not purport to be complete. It is not intended to be relied upon as advice to investors or potential investors and does not take into account the investment objectives, financial situation or needs of any particular investor. These should be considered, with or without professional advice when deciding if an investment is appropriate This presentation may contain forward-looking statements including statements regarding our intent, belief or current expectations with respect to ANZ s business and operations, market conditions, results of operations and financial condition, capital adequacy, specific provisions and risk management practices. When used in this presentation, the words estimate, project, intend, anticipate, believe, expect, should and similar expressions, as they relate to ANZ and its management, are intended to identify forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. Such statements constitute forward-looking statements for the purposes of the United States Private Securities Litigation Reform Act of 1995. ANZ does not undertake any obligation to publicly release the result of any revisions to these forward-looking statements to reflect events or circumstances after the date hereof to reflect the occurrence of unanticipated events. Our Shareholder information shareholder.anz.com Equity Investors Jill Campbell Group General Manager Investor Relations +61 3 8654 7749 +61 412 047 448 jill.campbell@anz.com Cameron Davis Executive Manager Investor Relations +61 3 8654 77 +61 421 613 819 cameron.davis@anz.com Katherine Hird Senior Manager Investor Relations +61 3 8655 3261 +61 435 965 899 katherine.hird@anz.com Retail Investors Michelle Weerakoon Manager Shareholder Services & Events +61 3 8654 7682 +61 411 143 090 michelle.weerakoon@anz.com Debt Investors Scott Gifford Head of Debt Investor Relations +61 3 8655 5683 +61 434 076 876 scott.gifford@anz.com Mary Karavias Associate Director, Debt Investor Relations +61 3 8655 43 mary.karavias@anz.com 10