westpac banking corporation - new zealand division banking corporation – new zealand division 4...

Westpac Banking Corporation - New Zealand DivisionDisclosure Statement For the three months ended 31 December 2012

Index 1 Generalinformationanddefinitions 1 Generalmatters 2 Creditratings 2 DisclosurestatementsoftheOverseasBankandthefinancialstatementsoftheOverseasBankandthe OverseasBankingGroup 2 Guaranteearrangements 2 Conditionsofregistration 3 Directors’andtheChiefExecutiveOfficer,NZBranch’sstatement 4 Indextofinancialstatements

Westpac Banking Corporation–NewZealandDivision1

General information and definitionsCertainoftheinformationcontainedinthisDisclosureStatementisrequiredbysection81oftheReserveBankofNewZealandAct1989(‘Reserve Bank Act’)andtheRegisteredBankDisclosureStatements(OverseasIncorporatedRegisteredBanks)Order(No2)2012(‘Order’).InthisDisclosureStatement,referenceismadetofivemainreportinggroups:

■■ WestpacBankingCorporationGroup(otherwisereferredtoasthe‘Overseas Banking Group’)–referstothetotalworldwidebusinessofWestpacBankingCorporationincludingitscontrolledentities;

■■ WestpacBankingCorporation(otherwisereferredtoasthe‘Overseas Bank’)–referstotheworldwideactivitiesofWestpacBankingCorporationexcludingitscontrolledentities;

■■ WestpacBankingCorporation-NewZealandDivision(otherwisereferredtoasthe‘NZ Banking Group’)–referstotheNewZealandoperationsofWestpacBankingCorporationGroupincludingthoseentitieswhosebusinessisrequiredtobereportedinthefinancialstatementsoftheOverseasBankingGroup’sNewZealandbusiness.ControlledentitiesoftheNZBankingGroupasat30September2012aresetoutinNote26tothefinancialstatementsincludedintheOverseasBank’sDisclosureStatementfortheyearended30September2012.ExceptasdetailedinNote10tothefinancialstatementsincludedinthisDisclosureStatement,therehavebeennootherchangesinthestructureorcompositionoftheNZBankingGroupsince30September2012;

■■ WestpacBankingCorporationNewZealandBranch(otherwisereferredtoasthe‘NZ Branch’)–referstotheNewZealandBranchofWestpacBankingCorporation(tradingasWestpac);and

■■ WestpacNewZealandLimited(otherwisereferredtoas‘Westpac New Zealand’)–referstoalocallyincorporatedsubsidiaryoftheOverseasBankcarryingontheOverseasBank’sNewZealandconsumer,businessandinstitutionalbankingoperations.

WordsandphrasesnotdefinedinthisDisclosureStatement,butdefinedbytheOrder,havethemeaninggivenbytheOrderwhenusedinthisDisclosureStatement.AllamountsreferredtointhisDisclosureStatementareinNewZealanddollarsunlessotherwisestated.

General matters

DirectorsTheDirectorsoftheOverseasBankatthetimethisDisclosureStatementwassignedwere:

Lindsay Philip Maxsted,DipBus(Gordon),FCA,FAICD–Chairman

Gail Patricia Kelly, HigherDipEd,BA,MBA,HonDBus–ManagingDirector&ChiefExecutiveOfficer

John Simon Curtis AM,BA,LLB(Hons.)–DeputyChairman

Elizabeth Blomfield Bryan, BA(Econ.),MA(Econ.)

Gordon McKellar Cairns,MA(Hons.)

Ewen Graham Wolseley Crouch,BEc(Hons.),LLB

Robert George Elstone, BA(Hons.),MA(Econ.),MCom

Peter John Oswin Hawkins, BCA(Hons.),SFFin,FAIM,ACA(NZ),FAICD

Ann Darlene Pickard,BA,MA

Chief Executive Officer, NZ BranchKaren Lee Ann Silk,B.Com

ThefollowingchangesinthecompositionoftheOverseasBank’sBoardofDirectors(the ‘Board’)havebeeneffectedsince30September2012:

■■ PeterWilsonretiredfromtheBoardattheconclusionofWestpacBankingCorporation’s2012AnnualGeneralMeetingon13December2012;

■■ RobertElstonewasappointedasChairmanoftheOverseasBank’sBoardAuditCommitteeeffective13December2012;and■■ EwenCrouchwasappointedtotheBoardeffective1February2013.

Responsible personAlltheDirectorsnamedabovehaveauthorisedinwritingPeterGrahamClare,ChiefExecutive,WestpacNewZealandtosignthisDisclosureStatementontheDirectors’behalfinaccordancewithsection82oftheReserveBankAct.


Credit ratingsTheOverseasBankhasthefollowingcreditratingswithrespecttoitslong-termseniorunsecuredobligations,includingobligationspayableinNewZealandinNewZealanddollars,asatthedatethisDisclosureStatementwassigned:

Rating Agency Current Credit Rating Rating Outlook

FitchRatings AA- Stable

Moody’sInvestorsService Aa2 Stable

Standard&Poor’s AA- Stable

TherehavebeennochangestoanyoftheOverseasBank’screditratingsorratingoutlookssince30September2012.Acreditratingisnotarecommendationtobuy,sellorholdsecuritiesoftheOverseasBank.Suchratingsaresubjecttorevision,qualification,suspensionorwithdrawalatanytimebytheassigningratingagency.InvestorsintheOverseasBank’ssecuritiesarecautionedtoevaluateeachratingindependentlyofanyotherrating.

Disclosure statements of the Overseas Bank and the financial statements of the Overseas Bank and the Overseas Banking GroupDisclosureStatementsoftheOverseasBankforthelastfiveyearsareavailable,freeofcharge,attheinternetaddresswww.westpac.co.nz.Aprintedcopywillalsobemadeavailable,freeofcharge,uponrequestandwillbedispatchedbytheendofthesecondworkingdayafterthedayonwhichtherequestismade.ThemostrecentlypublishedfinancialstatementsoftheOverseasBankandtheOverseasBankingGrouparefortheyearended30September2012andcanbeaccessedattheinternetaddresswww.westpac.com.au.

Guarantee arrangementsAsatthedatethisDisclosureStatementwassigned,nomaterialobligationsoftheOverseasBankthatrelatetotheNZBranchareguaranteed.

Conditions of registrationTheOverseasBank’sconditionsofregistrationwereamendedinDecember2012toincorporatenewcapitaladequacyrequirementsrelatingtotheimplementationofBaselIIIbytheAustralianPrudentialRegulationAuthority(‘APRA’).Theamendmentstakeeffectfrom1January2013andwere:

■■ anewconditionofregistration6(a)wasincludedwhichrequirestheCommonEquityTier1capitalofWestpacBankingCorporationtobenotlessthan4.5%ofriskweightedexposures;and

■■ theminimumTier1capitalofWestpacBankingCorporationwasincreasedfrom4%to6%ofriskweightedexposures.


Directors’ and the Chief Executive Officer, NZ Branch’s statementEachDirectoroftheOverseasBankbelievesandtheChiefExecutiveOfficer,NZBranch,believes,afterdueenquiry,that,asatthedateonwhichthisDisclosureStatementissigned,theDisclosureStatement:(a) containsallinformationthatisrequiredbytheOrder;and(b) isnotfalseormisleading.

EachDirectoroftheOverseasBankbelievesandtheChiefExecutiveOfficer,NZBranch,believes,afterdueenquiry,that,overthethreemonthsended31December2012:(a) theOverseasBankhascompliedwiththeconditionsofregistrationimposedonitpursuanttosection74oftheReserveBank

Act;and(b) theNZBranchhadsystemsinplacetomonitorandcontroladequatelytheNZBankingGroup’smaterialrisks,including

creditrisk,concentrationofcreditrisk,interestraterisk,currencyrisk,equityrisk,liquidityriskandotherbusinessrisks,andthatthosesystemswerebeingproperlyapplied.

ThisDisclosureStatementhasbeensignedonbehalfoftheDirectorsbyPeterGrahamClare,ChiefExecutive,WestpacNewZealand,andbyKarenLeeAnnSilk,asChiefExecutiveOfficer,NZBranch.

PeterGrahamClare

KarenLeeAnnSilk

Datedthisthe28thdayofFebruary2013


Index to financial statementsPage Contents5 Consolidatedincomestatement6 Consolidatedstatementofcomprehensiveincome7 Consolidatedstatementofchangesinequity8 Consolidatedbalancesheet9 Consolidatedstatementofcashflows10 Notestothefinancialstatements10 Note1Statementofaccountingpolicies11 Note2Non-interestincome11 Note3Impairmentchargesonloans12 Note4Tradingsecurities12 Note5Loans12 Note6Creditquality,impairedassetsandprovisionsforimpairmentchargesonloans13 Note7Deposits13 Note8Tradingliabilities13 Note9Debtissues14 Note10Relatedentities14 Note11Commitmentsandcontingentliabilities14 Note12Segmentinformation16 Note13Insurancebusiness16 Note14Riskmanagement16 14.1Creditrisk16 14.2Marketrisk17 14.3Liquidityrisk17 Note15Concentrationofcreditexposurestoindividualcounterparties17 Note16OverseasBankandOverseasBankingGroupcapitaladequacy18 Note17OtherinformationontheOverseasBankingGroup


Consolidated income statement forthethreemonthsended31December2012 NZ Banking Group

Three Months ThreeMonths Year Ended Ended Ended 31-Dec-12 31-Dec-11 30-Sep-12$ millions Note Unaudited Unaudited Audited

Interestincome 967 1,000 3,965Interestexpense (575) (631) (2,440)

Net interest income 392 369 1,525Non-interestincome 2 147 145 582

Net operating income 539 514 2,107Operatingexpenses (234) (211) (872)Impairmentchargesonloans 3 (35) (21) (184)

Operating profit 270 282 1,051Shareofprofitofassociateaccountedforusingtheequitymethod - - 1

Profit before income tax expense 270 282 1,052Incometaxexpenseonoperatingprofit (73) (76) (293)

Profit after income tax expense 197 206 759

Profit after income tax expense attributable to: HeadofficeaccountandownersoftheNZBankingGroup 196 205 756 Non-controllinginterests 1 1 3

197 206 759

Theaccompanyingnotes(numbered1to17)formpartof,andshouldbereadinconjunctionwith,thesefinancialstatements.


Consolidated statement of comprehensive income forthethreemonthsended31December2012 NZ Banking Group

Three Months ThreeMonths Year Ended Ended Ended 31-Dec-12 31-Dec-11 30-Sep-12$ millions Unaudited Unaudited Audited

Profit after income tax expense 197 206 759

Other comprehensive income which may be reclassified to the income statement: Available-for-salesecurities: Netunrealised(losses)/gainsfromchangesinfairvalueofavailable-for-salesecurities (2) 43 66 Exchangedifferences 1 (1) (6) Incometaxeffect 3 (10) (11) Cashflowhedges: Netgainsfromchangesinfairvalueofcashflowhedges 6 51 56 Incometaxeffect (2) (14) (16)

Total other comprehensive income which may be reclassified to the income statement 6 69 89

Other comprehensive expense which will not be reclassified to the income statement: Actuariallossesonemployeedefinedbenefitsuperannuationschemes - - (25) Incometaxeffect - - 7

Total other comprehensive expense which will not be reclassified to the income statement - - (18)

Total other comprehensive income, net of tax 6 69 71

Total comprehensive income 203 275 830

Total comprehensive income attributable to: HeadofficeaccountandownersofNZBankingGroup 202 274 827 Non-controllinginterests 1 1 3

203 275 830



Consolidated statement of changes in equity forthethreemonthsended31December2012 NZ Banking Group

Head Office Account NZ Banking Group Equity Available- Total for-sale Cash Flow before Non- Non- Branch Retained Convertible Share Retained Securities Hedge controlling controlling Total$ millions Capital Profits Debentures Capital Profits Reserve Reserve Interests Interests Equity

As at 1 October 2011 1,300 89 1,284 139 1,984 31 (74) 4,753 8 4,761

Three months ended 31 December 2011 Profitafterincometaxexpense - 59 - - 146 - - 205 1 206Netgainsfromchangesinfairvalue - - - - - 43 51 94 - 94Exchangedifferences - - - - - (1) - (1) - (1) Incometaxeffect - - - - - (10) (14) (24) - (24)

Total comprehensive income for the three months ended 31 December 2011 - 59 - - 146 32 37 274 1 275

As at 31 December 2011 (Unaudited) 1,300 148 1,284 139 2,130 63 (37) 5,027 9 5,036

Year ended 30 September 2012 Profitafterincometaxexpense - 196 - - 560 - - 756 3 759Netgainsfromchangesinfairvalue - - - - - 66 56 122 - 122Exchangedifferences - - - - - (6) - (6) - (6) Incometaxeffect - - - - - (11) (16) (27) - (27)Actuariallossesonemployeedefined benefitsuperannuationschemes - - - - (25) - - (25) - (25) Incometaxeffect - - - - 7 - - 7 - 7

Total comprehensive income for the year ended 30 September 2012 - 196 - - 542 49 40 827 3 830

Transactionswithowners: Dividendspaidonconvertible debentures(netoftax) - (72) - - - - - (72) - (72) Dividendspaidonordinaryshares - - - - - - - - (4) (4)

As at 30 September 2012 (Audited) 1,300 213 1,284 139 2,526 80 (34) 5,508 7 5,515

Three months ended 31 December 2012 Profitafterincometaxexpense - 53 - - 143 - - 196 1 197 Netgainsfromchangesinfairvalue - - - - - (2) 6 4 - 4 Exchangedifferences - - - - - 1 - 1 - 1 Incometaxeffect - - - - - 3 (2) 1 - 1

Total comprehensive income for the three months ended 31 December 2012 - 53 - - 143 2 4 202 1 203

As at 31 December 2012 (Unaudited) 1,300 266 1,284 139 2,669 82 (30) 5,710 8 5,718



Consolidated balance sheet asat31December2012 NZ Banking Group

31-Dec-12 31-Dec-11 30-Sep-12$ millions Note Unaudited Unaudited Audited

AssetsCashandbalanceswithcentralbanks 2,235 1,626 1,714Duefromotherfinancialinstitutions 424 144 322 Derivativefinancialinstruments 4,965 5,672 5,506Tradingsecurities 4 4,672 5,593 4,028Available-for-salesecurities 2,826 2,513 2,694Loans 5,6 59,652 58,070 59,892Lifeinsuranceassets 252 197 237Duefromrelatedentities 1,584 1,345 2,006Investmentinassociate 48 48 48Goodwillandotherintangibleassets 663 620 652Property,plantandequipment 167 157 162Deferredtaxassets 216 216 209Otherassets 314 385 384

Total assets 78,018 76,586 77,854

Liabilities Duetootherfinancialinstitutions 741 407 214Deposits 7 45,554 41,156 43,390Derivativefinancialinstruments 4,953 5,475 5,841Tradingliabilities 8 328 670 518Debtissues 9 12,856 13,560 12,914Currenttaxliabilities 44 69 49Provisions 75 71 96Otherliabilities 639 693 721

Total liabilities excluding related entities liabilities 65,190 62,101 63,743Subordinateddebentures 718 774 712Duetorelatedentities 6,392 8,675 7,884

Total related entities liabilities 7,110 9,449 8,596

Total liabilities 72,300 71,550 72,339

Net assets 5,718 5,036 5,515

Equity Head office account Branchcapital 1,300 1,300 1,300Retainedprofits 266 148 213

Total head office account 1,566 1,448 1,513

Convertibledebentures 1,284 1,284 1,284

NZ Banking Group equity Ordinarysharecapital 139 139 139Retainedprofits 2,669 2,130 2,526Available-for-salesecuritiesreserve 82 63 80Cashflowhedgereserve (30) (37) (34)

Total equity attributable to owners of the NZ Banking Group 2,860 2,295 2,711Non-controllinginterests 8 9 7

Total equity 5,718 5,036 5,515

Interestearninganddiscountbearingassets 69,549 68,325 69,024Interestanddiscountbearingliabilities 62,229 60,939 60,877



Consolidated statement of cash flows forthethreemonthsended31December2012 NZ Banking Group


Cash flows from operating activitiesInterestincomereceived 974 992 3,955Interestexpensepaid (539) (616) (2,436)Non-interestincomereceived 159 138 562Net(increase)/decreaseintradingsecurities (672) 23 1,643Netdecreaseintradingliabilities (190) (616) (768)Netmovementinderivativefinancialinstruments (341) 466 1,003Operatingexpensespaid (280) (227) (824)Incometaxpaid (79) (33) (240)

Net cash (used in)/provided by operating activities (968) 127 2,895

Cash flows from investing activities Purchaseofavailable-for-salesecurities (133) (953) (1,179)Proceedsfrommaturitiesofavailable-for-salesecurities - - 63Netloansrepaidby/(advancedto)customers 205 23 (1,962)Netincreaseinlifeinsuranceassets (15) (11) (51)Netdecreaseinduefromrelatedentities 422 927 266Purchaseofcapitalisedcomputersoftware (21) (12) (73)Purchaseofproperty,plantandequipment (12) (10) (36)

Net cash provided by/(used in) investing activities 446 (36) (2,972)

Cash flows from financing activities Netincreaseindeposits 2,164 1,581 3,815Netdecreaseindebtissues (58) (4,070) (4,716)Net(decrease)/increaseinduetorelatedentities (1,494) 1,980 1,185Netincrease/(decrease)insubordinateddebentures 6 (11) (73)Dividendspaidonconvertibledebentures - - (100)Dividendspaidtominorityshareholders - - (4)

Net cash provided by/(used in) financing activities 618 (520) 107

Net increase/(decrease) in cash and cash equivalents 96 (429) 30Cashandcashequivalentsatbeginningoftheperiod/year 1,822 1,792 1,792

Cash and cash equivalents at end of the period/year 1,918 1,363 1,822

Cash and cash equivalents comprise: Cashandbalanceswithcentralbanks 2,235 1,626 1,714 Due(to)/fromotherfinancialinstitutions(net) (317) (263) 108

Cash and cash equivalents at end of the period/year 1,918 1,363 1,822

Reconciliation of profit after income tax expense to net cash provided by operating activities Profitafterincometaxexpense 197 206 759Adjustments: Impairmentchargesonloans 35 21 184 Computersoftwareamortisationcosts 10 9 38 Depreciationonproperty,plantandequipment 7 7 28 Share-basedpayments 2 2 7 Movementinotherassets 10 (65) (108) Movementinotherliabilities (12) (11) (10) Movementincurrentanddeferredtax (12) 61 55 Taxoncashflowhedgereserve (2) (14) (16) Taxonavailable-for-salesecuritiesreserve 3 (10) (11) Taxonconvertibledebenturesdividends - - 28 Movementintradingsecurities (675) 71 1,706 Movementintradingliabilities (190) (616) (768) Movementinderivativefinancialinstruments (341) 466 1,003

Net cash (used in)/provided by operating activities (968) 127 2,895



Notestothefinancialstatements

Note 1 Statement of accounting policies

Statutory baseInthesefinancialstatementsreferenceismadetothefollowingreportingentities:

■■ WestpacBankingCorporationGroup(otherwisereferredtoasthe‘Overseas Banking Group’)–referstothetotalworldwidebusinessofWestpacBankingCorporationincludingitscontrolledentities;

■■ WestpacBankingCorporation(otherwisereferredtoasthe‘Overseas Bank’)–referstotheworldwideactivitiesofWestpacBankingCorporationexcludingitscontrolledentities;

■■ WestpacBankingCorporationNewZealandDivision(otherwisereferredtoasthe‘NZ Banking Group’)–referstotheNewZealandoperationsofWestpacBankingCorporationGroupincludingthoseentitieswhosebusinessisrequiredtobereportedinthefinancialstatementsoftheOverseasBankingGroup’sNewZealandbusiness;

■■ WestpacBankingCorporationNewZealandBranch(otherwisereferredtoasthe‘NZ Branch’)–referstotheNewZealandBranchofWestpacBankingCorporation(tradingasWestpac);and

■■ WestpacNewZealandLimited(otherwisereferredtoas‘Westpac New Zealand’)–referstoalocallyincorporatedsubsidiaryoftheOverseasBank(carryingontheOverseasBank’sNewZealandconsumer,businessandinstitutionalbankingoperations).

TheseconsolidatedfinancialstatementshavebeenpreparedandpresentedinaccordancewiththeRegisteredBankDisclosureStatements(OverseasIncorporatedRegisteredBanks)Order(No2)2012(‘Order’)andtheReserveBankofNewZealandAct1989(‘Reserve Bank Act’).ThesefinancialstatementshavealsobeenpreparedinaccordancewithGenerallyAcceptedAccountingPracticeinNewZealand,asappropriateforprofit-orientedentities,andtheNewZealandEquivalenttoInternationalAccountingStandard(‘NZ IAS’)34Interim Financial ReportingandshouldbereadinconjunctionwiththeDisclosureStatementfortheyearended30September2012.ThesefinancialstatementscomplywithInternationalAccountingStandard34Interim Financial ReportingasissuedbytheInternationalAccountingStandardsBoard.Asaresultofthenewandrevisedaccountingstandardwhichbecameoperativefortheannualreportingperiodcommencing1October2012,theNZBankingGroupadoptedPresentation of Items of Other Comprehensive Income (AmendmentstoNZIAS1).Undertheamendedstandard,theformatofothercomprehensiveincomehaschangedtoseparateitemsthatmayberecycledtotheincomestatementfromitemsthatwillnotberecycled.AdoptionofthisrevisedaccountingstandardhasnotresultedinanymaterialchangetotheNZBankingGroup’sreportedresultorfinancialposition.ThesefinancialstatementswereauthorisedforissuebytheBoardon28February2013.TheBoardhasthepowertoamendthefinancialstatementsaftertheyareauthorisedforissue.

Basis of preparationThesefinancialstatementsarebasedonthegeneralprinciplesofhistoricalcostaccounting,asmodifiedbyfairvalueaccountingforavailable-for-salefinancialassets,financialassetsandfinancialliabilitiesatfairvaluethroughprofitorlossandallfinancialderivativecontracts.Thegoingconcernconceptandtheaccrualbasisofaccountinghavebeenadopted.AllamountsareexpressedinNewZealanddollarsunlessotherwisestated.Thesameaccountingpoliciesandmethodsofcomputationhavebeenfollowedinpreparingthesefinancialstatementsaswereusedinpreparingthefinancialstatementsfortheyearended30September2012,exceptasamendedforthechangesrequiredduetotheadoptionofthenewandrevisedaccountingstandardasexplainedinthe‘Statutorybase’section.Certaincomparativeinformationhasbeenrestatedtoensureconsistenttreatmentwiththecurrentreportingperiod.Wheretherehasbeenamaterialrestatementofcomparativeinformationthenatureof,andthereasonfor,therestatementisdisclosedintherelevantnote.

Basis of aggregationTheNZBankingGroupasat31December2012hasbeenaggregatedbycombiningthesumofthecapitalandreservesoftheNZBranch,HastingsForestryInvestmentsLimited,andtheconsolidatedcapitalandreservesofBTFinancialGroup(NZ)Limited,WestpacFinancialServicesGroup-NZ-Limited,WestpacGroupInvestment-NZ-Limited,WestpacNewZealandGroupLimitedandtheircontrolledentities.ForNewZealandentitiesacquiredbytheOverseasBankingGroup,capitalandreservesatacquisitionarenettedandrecognisedascapitalcontributedtotheNZBankingGroup.TheNZBankingGroupmayinvestinorestablishspecialpurposeentitiestoenableittoundertakespecifictypesoftransactions.WheretheNZBankingGroupcontrolssuchentities,theyareconsolidatedintotheNZBankingGroup’sfinancialresults.AlltransactionsandbalancesbetweenentitieswithintheNZBankingGrouphavebeeneliminated.Non-controllinginterestsarestatedattheproportionofthenetprofitandnetassetsofasubsidiaryattributabletoequityintereststhatarenotowned,directlyorindirectlybytheNZBankingGroup.Lossesareattributedtothenon-controllinginterestevenifthatresultsinadeficitbalance.



Note 2 Non-interest income NZ Banking Group


Fees and commissions Transactionfeesandcommissions 62 56 244Lendingfees(loanandrisk) 16 16 61Insurancecommissionsreceived 4 4 15Othernon-riskfeeincome - 8 1

Total fees and commissions 82 84 321

Wealth management revenue Feesfromtrustandotherfiduciaryactivities 41 35 153Netlifeinsuranceincomeandchangeinpolicyliabilities (13) (10) (32)

Total wealth management revenue 28 25 121

Trading income Foreignexchangetrading 21 24 85Interestratetrading 7 6 31

Total trading income 28 30 116

Net ineffectiveness on qualifying hedges (1) - 1

Other non-interest income Netgainsonderivativesheldforriskmanagementpurposes - 5 6Dividendincome - - 2Rentalincome - - 1Other 10 1 14

Total other non-interest income 10 6 23

Total non-interest income 147 145 582

Note 3 Impairment charges on loans

NZ Banking Group

Other Loans Loans for Residential for Consumer Business$ millions Mortgages Purposes Purposes Total

Three months ended 31 December 2012 (Unaudited) Collectivelyassessedprovisions - 2 8 10 Individuallyassessedprovisions 9 - 3 12 Baddebtswritten-offdirectlytotheincomestatement 1 9 9 19 Interestadjustments (1) (1) (4) (6)

Total impairment charges on loans 9 10 16 35

Three months ended 31 December 2011 (Unaudited) Collectivelyassessedprovisions 2 3 (14) (9)Individuallyassessedprovisions 8 - 15 23Baddebtswritten-offdirectlytotheincomestatement (1) 11 7 17Interestadjustments (1) (2) (7) (10)


Year ended 30 September 2012 (Audited) Collectivelyassessedprovisions (5) (6) (60) (71)Individuallyassessedprovisions 23 - 190 213Baddebtswritten-offdirectlytotheincomestatement 2 43 29 74Interestadjustments (4) (10) (18) (32)




Note 4 Trading securities

NZ Banking Group

31-Dec-12 31-Dec-11 30-Sep-12$ millions Unaudited Unaudited Audited

Trading securities NZcorporatesecurities: Certificatesofdeposit 2,963 2,076 2,172 Corporatebonds 505 444 484 Mortgage-backedsecurities 4 6 5 NZGovernmentsecurities 818 1,978 819 Offshoresecurities 4 26 4 Securitiespurchasedunderagreementtoresell 378 1,063 544

Total trading securities 4,672 5,593 4,028

Asat31December2012,theNZBankingGrouphad$16millionoftradingsecurities(31December2011:$45million,30September2012:$12million)thatwereencumberedthroughrepurchaseagreementsaspartofstandardtermsoftransactionswithotherbanks.

Note 5 Loans

NZ Banking Group


Overdrafts 1,180 1,144 1,460Creditcardoutstandings 1,380 1,332 1,311Moneymarketloans 1,062 918 1,165Termloans: Housing 35,964 35,061 35,963 Non-housing 19,826 19,300 19,798Other 855 984 802

Total gross loans 60,267 58,739 60,499Provisionsforimpairmentchargesonloans (615) (669) (607)

Total net loans 59,652 58,070 59,892

Asat31December2012,$2.9billionofhousingloansareusedbytheNZBankingGrouptosecuretheobligationsofWestpacSecuritiesNZLimited(‘WSNZL’)underWestpacNewZealand’sGlobalCoveredBondProgramme(‘CB Programme’)(31December2011:$2.4billion,30September2012:$3.1billion).ThesehousingloanswerenotderecognisedfromWestpacNewZealand’sfinancialstatementsinaccordancewiththeaccountingpoliciesoutlinedinNote1tothefinancialstatementsincludedintheDisclosureStatementfortheyearended30September2012.Asat31December2012,theNewZealanddollarequivalentofbondsissuedbyWSNZLundertheCBProgrammewas$2.0billion(31December2011:$1.7billion,30September2012:$2.0billion).

Note 6 Credit quality, impaired assets and provisions for impairment charges on loans NZ Banking Group

31-Dec-12 (Unaudited) Other Loans Loans for Residential for Consumer Business$ millions Mortgages Purposes Purposes Total

Total neither past due nor impaired 34,622 1,728 21,348 57,698

Past due assets: Lessthan90dayspastdue 1,159 137 330 1,626 Atleast90dayspastdue 69 16 79 164

Total past due assets 1,228 153 409 1,790 Individually impaired assets 114 - 665 779

Total gross loans 35,964 1,881 22,422 60,267

Individuallyassessedprovisions 37 - 242 279 Collectivelyassessedprovisions 61 65 250 376

Total provisions for impairment charges on loans and credit commitments 98 65 492 655 Provisionforcreditcommitments - - (40) (40)

Total provisions for impairment charges on loans 98 65 452 615

Total net loans 35,866 1,816 21,970 59,652



Note 7 Deposits

NZ Banking Group


Deposits at fair value Certificatesofdeposit 1,591 1,319 1,423

Total deposits at fair value 1,591 1,319 1,423

Deposits at amortised cost Non-interestbearing,repayableatcall 3,335 3,066 2,969Otherinterestbearing: Atcall 16,858 15,636 15,931 Term 23,770 21,135 23,067

Total deposits at amortised cost 43,963 39,837 41,967

Total deposits 45,554 41,156 43,390

TheNZBranchheldnoretaildepositsfromindividualsasat31December2012(31December2011:nil,30September2012:nil).

Note 8 Trading liabilities

NZ Banking Group


Held for tradingSecuritiessoldshort 312 625 506Securitiessoldunderagreementstorepurchase 16 45 12

Total trading liabilities 328 670 518

Note 9 Debt issues

NZ Banking Group


Short-term debtCommercialpaper 4,054 3,640 4,033

Total short-term debt 4,054 3,640 4,033

Long-term debt Non-domesticmedium-termnotes 6,124 8,625 6,207Domesticmedium-termnotes 2,678 1,295 2,674

Total long-term debt 8,802 9,920 8,881

Total debt issues 12,856 13,560 12,914

Debtissuesatamortisedcost 8,771 9,426 8,851Debtissuesatfairvalue 4,085 4,134 4,063

Total debt issues 12,856 13,560 12,914

Movement in debt issues Balanceatbeginningoftheperiod/year 12,914 17,630 17,630Issuancesduringtheperiod/year 1,343 2,283 12,589Repaymentsduringtheperiod/year (1,643) (6,127) (16,196)Effectofforeignexchangemovementsduringtheperiod/year 235 (270) (1,188)Effectoffairvaluemovementsduringtheperiod/year 7 44 79

Balance at end of the period/year 12,856 13,560 12,914

Asat31December2012,theNZBankingGrouphadNewZealandGovernmentguaranteeddebtof$1,985milliononissue(31December2011:$4,034million,30September2012:$1,970million).ForfurtherinformationonNewZealandGovernmentguaranteeddebtrefertoGuaranteearrangementsinWestpacNewZealand’sDisclosureStatementforthethreemonthsended31December2012.



Note 10 Related entitiesWestpacNZSecuritisationNo.2Limited(‘WNZSL 2’)wasincorporatedon2November2012.WNZSL2isawhollyownedsubsidiaryofWestpacNZSecuritisationHoldingsLimited.TherehavebeennootherchangestothestructureorcompositionoftheNZBankingGroupsince30September2012.ControlledentitiesoftheNZBankingGroupasat30September2012aresetoutinNote26tothefinancialstatementsincludedintheOverseasBank’sDisclosureStatementfortheyearended30September2012.ThetotalliabilitiesoftheNZBranch,netofamountsduetorelatedentitiesasat31December2012,amountedto$5,818million(31December2011:$6,267million,30September2012:$6,372million).

Note 11 Commitments and contingent liabilities

NZ Banking Group


Commitments for capital expenditureDuewithinoneyear 1 1 4

Other expenditure commitments: Oneyearorless 106 86 95 Betweenoneandfiveyears 281 307 293 Overfiveyears 2 14 -

Total other expenditure commitments 389 407 388

Lease commitments (all leases are classified as operating leases) Premisesandsites 258 209 219Motorvehicles 10 7 8

Total lease commitments 268 216 227

Lease commitments are due as follows: Oneyearorless 52 44 44 Betweenoneandfiveyears 135 104 117 Overfiveyears 81 68 66

Total lease commitments 268 216 227

Other contingent liabilities and commitments Directcreditsubstitutes 331 331 335Loancommitmentswithcertaindrawdown 176 145 177Transactionrelatedcontingentitems 917 691 796Short-term,selfliquidatingtraderelatedcontingentliabilities 411 503 397Othercommitmentstoprovidefinancialservices 19,223 16,839 19,118

Total other contingent liabilities and commitments 21,058 18,509 20,823

Note 12 Segment informationTheNZBankingGroupoperatespredominantlyintheconsumer,businessandinstitutionalbankingsectorswithinNewZealand.Onthisbasis,nogeographicalsegmentinformationisprovided.Thebasisofsegmentreportingreflectsthemanagementofthebusiness,ratherthanthelegalstructureoftheNZBankingGroup.Thereisnodifferenceinaccountingmeasurementbetweenthemanagementandlegalstructures.Theoperatingsegmentresultshavebeenpresentedonamanagementreportingbasisandconsequentlyinternalchargesandtransferpricingadjustmentshavebeenreflectedintheperformanceofeachoperatingsegment.Intersegmentpricingisdeterminedonacostrecoverybasis.TheNZBankingGroupdoesnotrelyonanysinglemajorcustomerforitsrevenuebase.TheNZBankingGroup’soperatingsegmentsaredefinedbythecustomerstheyserveandtheservicestheyprovide.TheNZBankingGrouphasidentifiedthefollowingmainoperatingsegments:

■■ RetailBankingprovidesfinancialservicesforindividuals;■■ Wealthprovidesfinancialservicesforhighnetworthindividuals,fundsmanagementandinsurancedistribution;■■ BusinessBankingprovidesfinancialservicesforsmalltomediumsizedenterprisecustomers,corporatesandagriculturalbusinesses;and

■■ InstitutionalBankingprovidesabroadrangeoffinancialservicestolargecorporate,institutionalandgovernmentcustomersandthesupplyofderivativesandriskmanagementproductstotheentireWestpaccustomerbaseinNewZealand.

RetailBankingandWealthhavebeenaggregatedanddisclosedastheConsumerBankingreportablesegment.BusinessBankingandInstitutionalBankingareseparatereportablesegments.



Note 12 Segment information (continued)Reconcilingitemsprimarilyrepresent:

■■ businessunitsthatdonotmeetthedefinitionofoperatingsegmentsunderNZIFRS8Operating Segments;■■ eliminationentriesonconsolidation/aggregationoftheresults,assetsandliabilitiesoftheNZBankingGroup’scontrolledentitiesinthepreparationoftheaggregatedfinancialstatementsoftheNZBankingGroup;and

■■ resultsofcertainbusinessunitsexcludedformanagementreportingpurposes,butincludedwithintheaggregatedfinancialstatementsoftheNZBankingGroupforstatutoryfinancialreportingpurposes.

Netinterestincomeandnon-interestincomehavebeenincludedinthefollowingtabletoalignwiththeinformationprovidedtothe‘chiefoperatingdecisionmaker’.Comparativeinformationfornetoperatingincomefromexternalcustomersandnetinternaloperatingincomehasbeenchangedtoensureconsistentpresentationwiththecurrentreportingperiod.Additionally,profitbeforeincometaxexpensefromdomestictransactionalbankingdepositsofcertaincustomersandtheassociateddepositshasbeenreclassifiedfromtheBusinessBankingsegmenttotheInstitutionalBankingsegment.Therevisedpresentationhasnoimpactontotalprofitbeforeincometaxexpenseforthethreemonthsended31December2011andtheyearended30September2012.

NZ Banking Group

Consumer Business Institutional Reconciling $ millions Banking Banking Banking Items 1 Total

Three months ended 31 December 2012 (Unaudited) Netinterestincome 198 120 47 27 392 Non-interestincome 73 25 41 8 147

Net operating income 271 145 88 35 539

Netoperatingincomefromexternalcustomers 342 256 86 (145) 539 Netinternaloperating(expense)/income (71) (111) 2 180 -


Operatingexpenses (51) (20) (15) (148) (234)Impairmentchargesonloans (15) (10) (10) - (35)

Profit before income tax expense 205 115 63 (113) 270

Total gross loans 31,453 22,064 6,955 (205) 60,267 Total deposits 25,367 11,124 7,472 1,591 45,554

Three months ended 31 December 2011 (Unaudited) Netinterestincome 195 119 42 13 369Non-interestincome 68 23 52 2 145


Netoperatingincomefromexternalcustomers 375 267 101 (229) 514Netinternaloperating(expense)/income (112) (125) (7) 244 -


Operatingexpenses (51) (18) (14) (128) (211)Impairment(charges)/recoveriesonloans (18) (18) 17 (2) (21)

Profit before income tax expense 194 106 97 (115) 282

Total gross loans 30,673 21,350 6,973 (257) 58,739Total deposits 23,522 10,057 6,258 1,319 41,156

Year ended 30 September 2012 (Unaudited) Netinterestincome 793 488 181 63 1,525Non-interestincome 292 94 180 16 582

Net operating income 1,085 582 361 79 2,107Netoperatingincomefromexternalcustomers 1,468 1,063 380 (804) 2,107Netinternaloperating(expense)/income (383) (481) (19) 883 -

Net operating income 1,085 582 361 79 2,107

Operatingexpenses (198) (73) (56) (545) (872)Impairmentchargesonloans (38) (144) (6) 4 (184)Shareofprofitofassociateaccountedforusingequitymethod - - - 1 1

Profit before income tax expense 849 365 299 (461) 1,052

Total gross loans 31,383 22,129 7,209 (222) 60,499Total deposits 24,744 10,809 6,414 1,423 43,390

1 Includedinthereconcilingitemsfortotaloperatingexpensesis$153million(31December2011:$138million;30September2012:$548million)ofheadofficeoperatingexpenses,whicharenotallocatedtoabusinessunitthatmeetsthedefinitionofanoperatingsegment.



Note 13 Insurance businessThefollowingtablepresentstheaggregateamountoftheNZBankingGroup’sinsurancebusinessconductedthroughoneofitscontrolledentities,WestpacLife-NZ-Limited(‘Westpac Life’),calculatedinaccordancewiththeOverseasBank’sconditionsofregistrationasatthereportingdate:

NZ Banking Group

31-Dec-12 $ millions Unaudited

Totalassets 206 AsapercentageoftotalassetsoftheNZBankingGroup 0.26%

WestpacLifeiscarryingoninsurancebusinessinNewZealandandisthereforesubjecttotherequirementssetoutintheInsurance(PrudentialSupervision)Act2010,includinglicensingandsupervisionbytheReserveBankofNewZealand(‘Reserve Bank’).WestpacLifewasgrantedaprovisionallicencebytheReserveBankon22February2012,subjecttostandardconditionsincludingarequirementtoestablishastatutoryfundwhicheffectivelyseparateslifeinsuranceassetsandpolicyliabilitiesfromanyotherbusinesscarriedoutbyWestpacLife.ThestatutoryfundwasestablishedbyWestpacLifeeffectivefrom1October2012.

Note 14 Risk management14.1 Credit risk

The NZ Banking Group’s residential mortgages by loan-to-value ratio (‘LVR’) as at 31 December 2012 (Unaudited)InordertocalculateoriginationLVR,thecurrentexposureisthatusedintheinternalratingsbasedapproachformortgagelending.Forloansoriginatedfrom1January2008,theNZBankingGrouputilisesitsloanoriginationsystem.Forloansoriginatedpriorto1January2008,theoriginationLVRisnotseparatelyrecorded,andthereforenotavailablefordisclosureasrequiredunderClause1ofSchedule9totheOrder.Fortheseloans,theNZBankingGrouputilisesitsdynamicLVRprocesstocalculateanoriginationLVR.ExposuresforwhichnoLVRisavailablehavebeenincludedinthe‘Exceeds90%’categoryinaccordancewiththerequirementsoftheOrder.

NZ Banking Group

31-Dec-12 (Unaudited) Does not Exceeds 80%LVR range ($ millions) Exceed 80% and not 90% Exceeds 90% Total

On-balancesheetexposures 27,346 5,587 2,958 35,891 Undrawncommitmentsandotheroff-balancesheetexposures 6,134 412 216 6,762

Value of exposures 33,480 5,999 3,174 42,653

14.2 Market risk ThefollowingtableprovidesasummaryoftheNZBankingGroup’snotionalcapitalchargesbyrisktypeasatthereportingdate.

NZ Banking Group

31-Dec-12 (Unaudited) Implied Notional Risk-weighted Capital $ millions Exposure Charge

End-of-periodInterestraterisk 2,316 185 Foreigncurrencyrisk 89 7 Equityrisk 80 6



Note 14 Risk management (continued)

14.3 Liquidity risk

Liquid assetsThetablebelowshowstheNZBankingGroup’sholdingofliquidassetsandrepresentsthekeyliquidityinformationprovidedtomanagement.LiquidassetsincludehighqualityassetsreadilyconvertibletocashtomeettheNZBankingGroup’sliquidityrequirements.Inmanagement’sopinion,liquidityissufficienttomeettheNZBankingGroup’spresentrequirements.

NZ Banking Group

31-Dec-12 $ millions Unaudited

Cashandbalanceswithcentralbanks 2,002 Duefromotherfinancialinstitutions 174 Supranationalsecurities 424 NZGovernmentsecurities 2,496 NZpublicsecurities 463 NZcorporatesecurities 3,302 Residentialmortgage-backedsecurities 3,992

Total liquid assets 12,853

Note 15 Concentration of credit exposures to individual counterpartiesThefollowingcreditexposuresarebasedonactualcreditexposurestoindividualcounterpartiesandgroupsofcloselyrelatedcounterparties.Thenumberofindividualbankcounterparties(whicharenotmembersofagroupofcloselyrelatedcounterparties),andgroupsofcloselyrelatedcounterpartiesofwhichabankistheparent,towhichtheNZBankingGrouphasanaggregatecreditexposurethatequalsorexceeds10%oftheOverseasBankingGroup’sequity:

■■ asat31December2012wasnil;and■■ inrespectofpeakend-of-dayaggregatecreditexposureforthethreemonthsended31December2012wasnil.Thenumberofindividualnon-bankcounterparties(whicharenotmembersofagroupofcloselyrelatedcounterparties),andgroupsofcloselyrelatedcounterpartiesofwhichabankisnottheparent,towhichtheNZBankingGrouphasanaggregatecreditexposurethatequalsorexceeds10%oftheOverseasBankingGroup’sequity:

■■ asat31December2012wasnil;and■■ inrespectofpeakend-of-dayaggregatecreditexposureforthethreemonthsended31December2012wasnil.Thepeakend-of-dayaggregatecreditexposureshavebeencalculatedbydeterminingthemaximumend-of-dayaggregateamountofactualcreditexposureovertherelevantthree-monthperiodandthendividingthatamountbytheOverseasBankingGroup’sequityasat30September2012.Creditexposurestoindividualcounterparties(notbeingmembersofagroupofcloselyrelatedcounterparties)andtogroupsofcloselyrelatedcounterpartiesexcludeexposurestothecentralgovernmentofanycountrywithalong-termcreditratingofA-orA3orabove,oritsequivalent,ortoanybankwithalong-termcreditratingofA-orA3orabove,oritsequivalent.ThesecalculationsrelateonlytoexposuresheldinthefinancialrecordsoftheNZBankingGroup(excludingexposuresbookedoutsideNewZealand)andwerecalculatednetofindividuallyassessedprovisions.

Note 16 Overseas Bank and Overseas Banking Group capital adequacy

31-Dec-12 31-Dec-11% Unaudited Unaudited

Overseas Banking Group1

TierOneCapitalratio 10.7 9.8TotalCapitalratio 12.1 11.0

Overseas Bank (Extended Licensed Entity)1

TierOneCapitalratio 10.5 9.7TotalCapitalratio 12.3 11.3

1 ThecapitalratiosrepresentinformationmandatedbyAustralianPrudentialRegulationAuthority(‘APRA’).



Note 16 Overseas Bank and Overseas Banking Group capital adequacy (continued)BaselIIcameintoforceon1January2008.TheOverseasBankingGroupisaccreditedbyAPRAtousetheAdvancedInternalRatingsBased(‘Advanced IRB’)approachforcreditrisk,theAdvancedMeasurementApproach(‘AMA’)foroperationalriskandtheinternalmodelapproachforInterestRateRiskintheBankingBook(‘IRRBB’)forcalculatingregulatorycapital(knownas‘AdvancedAccreditation’)andisrequiredbyAPRAtoholdminimumcapitalatleastequaltothatspecifiedundertheAdvancedIRBandAMAmethodologies.UnderNewZealandregulations,thismethodologyisreferredtoastheBaselII(internalmodelsbased)approach.Withthisaccreditation,theOverseasBankingGroupisrequiredtodiscloseadditionaldetailedinformationonitsriskmanagementpracticesandcapitaladequacyonaquarterlyandasemi-annualbasis.ThisinformationismadeavailabletousersviatheOverseasBankingGroupwebsite(www.westpac.com.au).TheaimistoallowthemarkettobetterassesstheOverseasBankingGroup’sriskandrewardassessmentprocessandhenceincreasethescrutinyoftheseprocesses.TheOverseasBankingGroup,andtheOverseasBank(ExtendedLicensedEntity)asdefinedbyAPRA,exceededtheminimumcapitaladequacyrequirementsasspecifiedbyAPRAasat31December2012.APRAspecifiesaminimumprudentialcapitalratiofortheOverseasBankingGroup,whichisnotmadepubliclyavailable.Since2012theOverseasBankingGroup’scapitalratioshavebeenmeasuredusingthenewBasel2.5standards,whichbecameeffectivefrom1January2012.Thesestandardsprincipallyinvolvedchangesinrisk-weightedassetsappliedtomarketriskandtosecuritisation.

Note 17 Other information on the Overseas Banking GroupOtherinformationontheOverseasBankingGroupisfromthemostrecentlypublishedfinancialstatementsoftheOverseasBankingGroupfortheyearended30September2012.

30-Sep-12Profitability Audited

Netprofitaftertaxfortheyearended30September2012(A$millions) 6,036 Netprofitaftertax(fortheyearended30September2012)asapercentageofaveragetotalassets 0.9%

As at 30-Sep-12 Total assets and equity Audited

Totalassets(A$millions) 674,965 Percentagechangeintotalassetsfortheyearended30September2012 0.7%Totalequity(A$millions) 44,249

As at 30-Sep-12 Asset quality Audited

Totalindividuallyimpairedassets1,2 (A$millions) 3,955 Asapercentageoftotalassets 0.6%Totalindividualcreditimpairmentallowance(A$millions) 1,470 Asapercentageoftotalindividuallyimpairedassets 37.2%Totalcollectivecreditimpairmentallowance(A$millions) 2,771

1 Totalindividuallyimpairedassetsarebeforeallowancesforcreditimpairmentlossandnetofinterestheldinsuspense.2 Non-financialassetshavenotbeenacquiredthroughtheenforcementofsecurity.

Westpac Banking Corporation ABN 33 007 457 141, incorporated in Australia (New Zealand division).

westpac banking corporation - new zealand division banking corporation – new zealand division 4...

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