Washington, D.C. 20549


Report of Foreign Private Issuer


Pursuant to Rule 13a-16 or 15d-16
of the Securities Exchange Act of 1934


Australia and New Zealand Banking Group Limited

(Translation of registrant’s name into English)


Level 6, 100 Queen Street Melbourne Victoria Australia

(Address of principal executive offices)


Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F.


Form 20-F




Form 40-F



Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3- 2(b) under the Securities Exchange Act of 1934.









If “Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): 82-                





Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.



Australia and New Zealand
Banking Group Limited
















/s/ John Priestley




Company Secretary













Date 10 August 2004




* Print the name and title of the signing officer under his signature.




Media Release


Corporate Affairs
100 Queen Street
Melbourne Vic 3000
Facsimile 03 9273 4899


For Release:  29 July 2004


ANZ acquires Trust’s custody client base


ANZ today announced it had entered into an agreement with Trust Company of Australia to acquire Trust’s client base for custody services in equity, fixed interest and related asset products, creating a platform for further growth in ANZ’s specialist Custodian Services business.


Announcement Key Points


                                          ANZ will take over Trust’s domestic and master custody client contracts.


                                          The agreement strengthens ANZ Custodian Services’ product and service offerings, particularly in the Master Custody business.


                                          Develops scale for ANZ’s custody business with assets under custody growing from $50 billion to $61 billion following the addition of Trust’s client contracts for equity, fixed interest and related asset products.


                                          Clear plan established for ANZ and Trust to ensure continuity of client service standards over a 12-month transition period.


                                          Agreement consideration based on successful migration of contracts over the transition period.


ANZ Managing Director Trade and Transaction Services, Mr Mark Paton said:  “The addition of this part of Trust’s custody client base is a further step in building a leading specialist custody business.


“Custodian Services is an attractive business which leverages ANZ’s strong corporate and institutional client franchise and offers good growth opportunities.


“We already have a successful organic growth strategy in custody services based on a specialist focus which has seen assets under custody grow by 20% during 2004.   This move enhances the product and service offerings we can deliver to clients and builds further scale for the business,” Mr Paton said.


ANZ Custodian Services provides safekeeping, settlement, income collection and reporting services for client investments in Australia, New Zealand and globally.


For media enquiries contact:


Paul Edwards
Head of Group Media Relations
Tel: 03-9273 6955 or 0409-655 550




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The ANZ Risk Management



Australia and New Zealand Banking Group Limited


27 July 2004


Dr Mark Lawrence


Chief Risk Officer







Creating a more sustainable, lower risk business


              Significantly improved credit risk framework, profile and outcomes


•           Strong market & operational risk capability


              Economic capital models embedded for all major risks across all businesses


              Independent central risk team is formally involved in all strategic initiatives


              Simplifying and strengthening compliance - ongoing




The Broad Framework



Context:  ANZ has been building its Risk Management Capability for more than a decade


Prior to 1994


No formal “Risk Management” function, but ANZ had a credit “workout” area and an operational risk function; Rudimentary risk grading and pricing processes; no risk-based capital allocation






Credit risk unit formed, with a particular emphasis on handling our actual and prospective property portfolio






Board Risk Management Committee established;
Regulatory Compliance framework implemented;
Credit risk grading models built – Probability of Default, Loss Given Default;
Portfolio granularity enhanced; economic capital for credit risk; EVA






Market and Operational Risk capability strengthened






Operational Risk economic capital model implemented;
Creation of dedicated Retail Risk function






Basel II project commenced






Substantial Risk Management capability embedded in consumer businesses;






Increased focus on the management of project risks;
Formal Group Risk Management involvement in Strategy






Specialised Technology Risk function created Group Compliance framework enhanced




ANZ Organisation & Board Governance


ANZ Board


Board Risk Management Committee

Board Audit



Principal Executive Risk Committees









Credit & Trading
Risk Committee


Asset & Liability


Operational Risk
Committee (OREC)


Project & Initiative
Review Committee










•     Policy


      Balance Sheet Risk




      Project risk


      Major Lending Decisions




      Payments/ operational risk


      Project governance


      Asset Writing Strategies






      Project priorities










     Trading Risk











Governance Role of Group Risk Management


                                          Final authority to determine the risk boundary conditions for the Group and for each business


                                          Responsible for risk policies, principles and process standards that define ANZ Group’s risk strategy and appetite


                                          Satisfy the Board that controls, skills and systems enable compliance with Group policies and standards


                                          Responsible for measuring, assessing and monitoring the level of risk in the Group; approving material risk exposures, limits and transactions; and reporting these and other material risk issues to Executive Management, the Board and Regulators


                                          Champion ANZ’s reputation and risk culture, with objectivity and independence, ensuring that risk is always considered as part of the strategic agenda




Group Risk Management Structure July 2004


Chief Risk
Mark Lawrence








Wholesale Risk
David Stephen

Retail Risk
Peter Tormey

Operational  &
Technology Risk
Graham Collier

Chief Operating
Officer &
Market Risk
Bob Stribling

Sean Hughes

Basel II
Morris Batty

Chief Risk Officer
ANZ National
Mike Aynsley




ANZ Culture: A Question of Balance


                  ANZ is focused on achieving growth within appropriate risk/control boundaries

                  Balance is the KEY to ANZ’s success & PEOPLE provide that balance






Group Risk’s Function: -
To probe, analyse, mitigate and accept risk within agreed appetite and bounds


Customer Needs &
Financial objectives


The Challenge is to bring together disparate parts to form a cohesive whole


Portfolio monitoring & effective controls, using technical skills & a
macro view of the system process/institution built around a shared
cultural approach





Market Risk



Market Risk:  Current Risk Profile


•     Based on publicly-reported VAR measures, ANZ now has the lowest trading risk profile of the major Australian Banks


Total  “Value At Risk” (VAR) from Annual Reports

(normalised to 97.5% confidence level)





CBA stopped publishing “MAX” figures after 1999





What is VaR?


The “Value at Risk “( VAR) of a portfolio:


                                          is a statistical estimate of the potential daily loss to a specified confidence level (eg, 97.5%)


                                          is based on an historical simulation using changes in market prices over the past 500 days …


                                          …which takes into account correlated movements across the different products/ currencies/ positions.


The graph below shows a typical distribution of the 500 simulated profit-and-loss results, and the corresponding level of the Value-at-Risk.


Note : to ascribe meaning to the VAR number which results from this calculation, is to assume that the movement in the various rates and prices over the next 24 hours will be broadly similar to and reflected in the historical rate movements experienced over the past 500 days.


3 limitations of VAR are very important to understand:


      If tomorrow is not like the past, then calculated VAR will be misleading – i.e. , Event Risk is not covered.


                  VAR is typically a 2 or 3 standard deviation measure.  VAR is not “Worst Case” – actual losses can be many multiples of the VAR estimate for certain portfolios.


      VAR presumes market liquidity, irrespective of position size.


Conclusion: VAR numbers must be interpreted with great caution – they are not used in the direct management of risks on the dealer’s desk. A comprehensive framework of Detailed Control Limits is used for this purpose




The PAST is not a proxy for the FUTURE





Value-at-Risk Limits and Exposures


•           ANZ utilitises VAR limits as an “outer-bound” constraint on dealer activity


                                          Limits are allocated by Market Risk at Global ANZ Trading Book level, by each business line down to individual trading desks, by product line, and by geography


                                          VAR Limits are monitored daily by the independent Market Risk Unit, with all excesses thoroughly investigated, action taken as appropriate, and reported to the Credit & Trading Committee as part of the regular monthly Market Risk Report


NB:  VAR aggregation at higher levels takes account of correlation diversification effects across portfolios and is not simply lower level portfolios combined on an additive basis


              Other limits are used to more tightly control dealing activities


                                          Cumulative Stop-Loss Limits specify the maximum loss that a business can sustain before trading is suspended (as a firm policy requirement).  When/if this limit is breached, a full written management assessment ( considering causes, evolving market dynamics, trading strategy and style, skills, mindset,etc. ) is required before Market Risk will authorise resumption of trading.


                                          Detailed Control Limits comprise a detailed set of product- specific measures and sensitivity limits which are designed to control trader behaviour and complement the VAR limit structure.




Detailed Control Limits Framework


                                          There are several Detailed Control Limits which further constrain risk levels in different books. Some examples applicable to specific portfolios:


Open Position Limits


Open position limits are used to limit the outright currency risk position for the Spot FX trading business.


“Delta-Gamma” Limits


“Delta-Gamma” limits are P/L sensitivity limits which specify the maximum loss an options book is permitted to sustain for specified movements in underlying rates. Importantly, these limits pick up the non-linearity or convexity risk ( Gamma) inherent in open option positions.


“Vega” Limits


“Vega” limits specify the maximum loss an options book can sustain for a 1% shift in the underlying implied volatility rate - a key input into option pricing – e. g. from 12% to 13% .


Interest Rate Delta Limits


IR Delta limits are used to limit the interest rate risk position for each maturity bucket, for each currency portfolio. The interest rate “delta” is the dollar sensitivity of a portfolio to a one basis point shift in interest rates.




Credit Risk



Volatility in specific provisions generally driven by large single name losses


Specific Provisions


Significant impact from
single customers






Larger loans require sound judgement, rating tools, and a dual approval process


Business Unit
e. g. Institutional Banking






Group Risk

















Credit Group




Risk Function

















Prepares credit


Dual approval


Separate from

for customer






relationship team














Remuneration not



Financial Analysis




linked to deal flow










Credit scoring





Customer pricing,







taking into


Rating agencies





account risk,






Largest deals

capital allocation,






approved by CTC

relationship costs






& Board RMC



Sound judgement














Deal Structuring &



















Single customer







concentration limits


Portfolio Caps


Credit Training


Portfolio modelling




Ratings tools are increasingly powerful


              ANZ customer credit rating ( CCR) must be at or below the equivalent rating from a ratings agency


                                          KMV tool can be a useful early warning indicator. Policy in place now requires material movements in KMV rating be investigated and CCR signed off by credit chain


                                          ANZ’s automated rating tool, aligned with Basel II, has been released internally via the Intranet to most Institutional and Middle Market points and is accompanied by strict, dual-approval policies


                                          ANZ utilises industry- accepted rating and capital allocation methodologies ( Monte Carlo simulations) for its Structured Project lending book


                                          Additional models for the Institutional Banking market are being refined.




Single customer concentration limits are in place to cap single name exposures within the portfolio


Maximum Direct Credit Lending Limits for Individual Customers







Portfolio caps also help drive diversification


% of ANZ Group Lending Assets

(Australia and New Zealand)






Credit Policies & “Scorecards”: the key risk management tools in retail lending


Write-offs in the personal loan portfolio




              Scorecard rebuilt to target 3.5% loss rate

              Retail risk capabilities enhanced




Key challenge: achieving the appropriate risk-vs-return trade-off


Scorecards aim to achieve an appropriate risk/ return trade- off




Ratio of ‘good’ customers to ‘bad’ customers




At a score of 600, expect 150 ‘good’ customers for each ‘bad’ customer




Low exposure to Inner City residential mortgage lending


                                          Total Lending for inner city property at 3.9% of Australian Mortgages portfolio, with 2.2% for investment purposes. Tight policies to control emerging risks include:

                                          valuations required on all new properties

                                          rental income allowable in debt servicing calculation 60%

                                          non- inclusion of negative gearing benefit in serviceability calculation for first time investors

                                          inner city is broadly defined, and extends well beyond CBD


                                          Exposure to Melbourne Docklands area ~ 0.07% of the Australian mortgages portfolio, or < 2% of the inner city lending portfolio



                                          only 16 inner- city customers nationally with arrears > 90 days

                                          no delinquencies in the Docklands and Southbank books


Mortgages Portfolio




Location of Inner City Lending






Operational Risk



The Oldest Risks?




Earthquakes, storms and fires




Sick buildings


Regulatory breaches




Professional negligence


System failures


Project failure




Human error


War, political & civil unrest




Harm to staff


Model failure


Failure of service providers


Resulting in:


direct loss




indirect loss






More diverse & complex banking activities


Deregulation & globalisation of financial services


Growing sophistication of financial technology


Activities of Banks ( & their risk profiles) more diverse & complex


              Recent experience makes it clear that risks other than credit and market risks can be substantial:




                  Allfirst (Allied Irish)

                  Life insurance & pension mis-selling in UK

                  “Spitzer” issues - Underwriting/research conflicts + Mutual fund scandals (etc)




We are now seeing greater focus on Operational Risk by financial services providers, government & others …


Financial Services ( Banks, Insurance Companies, Fund Managers)


                  Specialist Operational Risk functions

                  Framework, policy, measurement and monitoring

                  Capital allocation for operational risk – now happening

                  Loss, event and near - miss data collection & analysis

                  Extensive, ‘what if ‘ scenario analysis

                  Business continuity testing and crisis management training

                  Executive and Board Risk Committees




                  Consumer protection

                  Corporate Governance

                  Basel II

                  Sarbanes Oxley

                  Standards & Guidelines





                  Reputation indices

                  Rating Agencies




Key Elements of an Effective Operational Risk Framework


Once Operational Risk is defined within the organisation, what are the other key elements the need to be designed and implemented?


                                      Governance Structure

                                      Operational Risk Identification & Assessment methodology/process

                                      Operational Risk Measurement methodology

                                      Policies, procedures and processes for mitigating and controlling Operational Risks

                                      Process for the timely capture, analysis/monitoring and reporting of Operational Risks to key decision points within the organisation


These elements can be shown graphically as follows:


Defining Operational Risk




Methodology Measurement




Loss Data, Monitoring & Reporting




Operational Risk Categories


                            A set of common operational risk categories have been adopted by ANZ, which further define what operational risk means in ANZ. These risk categories are represented below:


Internal Operational Risks


These risks arise in execution of business strategy and should be controlled by management


Process & Policy failure

Personnel failure

Regulatory & Statutory compliance failure

Project failure

Failure of IT

Modelling Errors


Both Internal & External Operational Risks


Failure of Financial Infrastructure


Theft & Crime

Damage to Premises & Environment


External Operational Risks


These risks arise as a result of external environmental factors


Action by Govt & Regulators

Failure of suppliers / outsourcers

Commercial & Legal disputes




Central Operational Risk Management Structure


Chief Executive Officer


Chief Risk Officer


BU Managing Directors

Business Unit Risk Heads


Operational Risk


Fraud Risk and Investigations

Business Continuity & Crisis Mgt

Operational Risk Measurement & Policy

Payments Risk

Operational Risk Identification & Insurance

Technology Risk




Impact of Basel II


Regulatory Capital for Operational Risk:


                                          Basel I (1988)



                                          Basel II (2007 onwards)





The Big Controversy!


                                               How much capital should be held for Operational Risk?

                                          ~20%?   (Basel CP2, January 2001)

                                          ~12%?   (Basel CP3, April 2003)



*  The magnitude of this shift illustrates the difficulty of the measurement challenge!




The Difficulty of Measurement


                                          In recent years, we have seen the first serious attempts to measure operational risk… really the birth of a new discipline


                                          The industry has made great progress, but difficult questions remain:


1.                                      What are the principal determinants of the level of Operational Risk?


2.                                      What are the key differences between Operational, Credit and Market Risks? Which statistical methods used to measure Credit and Market Risk are applicable to Operational Risk?


3.                                      When is historical loss experience a reliable guide to Operational Risk in the future? More generally, how can Operational Risk measures be made forward-looking?


4.                                      What is the role of historical information, including loss data?




                                        The industry has made great progress, but difficult questions remain:


5.                                      When is external information (including loss data) relevant? How should it be used?


6.                                      How should specific operational scenarios be incorporated in the measurement of Operational Risk?


7.                                      What about “Key Risk Indicators”?


8.                                      How can we incorporate an assessment of the quality of operational processes and internal controls into the Op. Risk measurement process? How important is this?


9.                                      What is the role of Senior Executive judgment in the Operational Risk measurement process? Where is the “right” balance between quantitative and qualitative factors?


10.                               How can unexpected loss and capital be measured?




Approaches to Measuring Operational Risk


Although “1,000 flowers are blooming”, there are 3 principal methods in use in banks today:


                                          Loss Distribution Approach (statistical)


                                          “Scorecard” or “Risk Drivers and Controls” Approaches (more qualitative)


                                          Scenario-driven methods


Regardless of which method is chosen, to qualify for AMA accreditation under Basel II, a bank must clearly specify how its method makes use of:


                                          Internal data

                                          External data

                                          Quality control assessments





ANZ’s Operational Risk Measurement Objectives (1999)


To develop an operational risk measurement methodology which:


                                          Directly connects risk measurement with the operational risk management process;


                                          Provides increased understanding and transparency of operational risk exposures;


                                          Provides a ‘road map’ for reducing risk; and


                                          Provides transparent incentives for banks to invest in internal controls.




Risk Drivers and Controls” Approaches


                                        A “Scorecard” methodology refers to a class of diverse approaches to operational risk measurement and capital determination, which all have at their core an assessment of specific operational risk drivers and controls.


These can also be called “Risk Drivers and Controls Approaches”, or “RDCAs”.


                                        Such approaches are effectively expert systems, which assess:

                                          the level of a bank’s exposure to specified drivers of risk, and

                                          the scope and quality of a bank’s internal control environment, key operational processes and risk mitigants,


and directly link these assessments to risk capital.




Key Features of RDCAs


                                          A measurement framework designed to focus on the principal drivers and controls surrounding operational risks


                                          A series of weighted, risk-based questions by risk type or category


                                          Reflects the organization’s unique operational risk profile by:

                                          Devising organization-specific questions

                                          Calibrating responses to establish a range from “leading practice”  to “ineffective”

                                          Applying customized question weightings and response scores aligned with the relative importance of individual risks


                                     The specific risk categories, customized suite of questions, weightings and scored response options provide business managers with transparent priorities for risk management improvements




Key Benefits of RDCAs


Business Line Involvement

             RDCAs leverage the collective operational risk knowledge of the organization

             Business line involvement underpins their “ownership” of the results.



                                        RDCAs attract capital when vulnerabilities & weaknesses are identified

                                        RDCAs provide an objective evaluation of the level of each business unit’s risk drivers and further serves as an effective proxy for future risk.


Behavioural Incentives for Improved Risk Management

             Maximized if a direct linkage between capital charges and management performance is established:


E.g. Employ economic capital for operational risk within a RAROC or “Economic Value Added” (EVA) model, and use RAROC/EVA as the basis for:


risk-adjusted performance measurement and compensation







                                          All risk assessments are explicit and transparent, especially to line managers, and are regularly subjected to managerial, audit and/or supervisory interrogation


                                          The linkage to capital is formula-driven, transparent and risk sensitive, reflecting risk profile changes.


Responsive to change


                                          Responsive to changes in the risk profile resulting from changes to the business mix or new operational risks


                                          Before losses are experienced (e.g. Information Technology Security risks)


Fully Integrated into the Operational Risk Management Process


                                          RDCA methodologies are fully aligned with the organization’s operational risk management framework, thus directly linking the measurement and management of operational risk.




Operational Risk Capital & Performance…


“...and one of the things I think that really does matter to this is the earlier introduction of EVA at the transactional and the customer level, means that we have a self-correcting mechanism that is in fact ensuring that risk comes down over time, without it being necessarily driven from the centre.


And in fact the fact we are one of the few banks in the world that allocate capital to Operational Risk in our EVA model, is also a leading edge indicator, which means that Operational Risks also get managed in the same way ...


And we think that’s a very important device because it means that an individual decision that leads to a negative EVA does not get done.”


John McFarlane, CEO, ANZ Banking Group (25 October 2001)




We have also implemented a specialised framework for project risk management






Group Project Centre of


Technology Risk

Excellence (GPCE)


Management (TRM)




Project Management QA


Technology Risks in the project

Financial QA


(not Project Management Risks)

“Is it still sensible to


Risk Management consulting

continue with this project?”


to the project




Simplifying and strengthening Compliance: a holistic approach


                  Strengthening compliance oversight has been identified as a key component to achieving operational excellence.


Previous model focussed on legal/regulatory compliance


Risk that cannot be controlled by compliance (eg strategic risk, pure credit and market risk)


New model extends compliance to address:


                  financial & prudential control


                  credit, market & other operational control requirements for core processes


                  Stronger consequence management for non-compliance breaches






Strategy & Business Risk



Strategy and Business Risks important risk dimensions


                  Credit, Market and Operational Risks are now documented


                  Strategy and business risk is now at the forefront of risk management capability


                  Business Risk is the risk that value will be lost through the selection of specific business directions or through changes to the Group’s overall business model.


Business Risk


Losing money Wrong Strategy


Credit Risk


Customer fails to pay


Market Risk


Change in Market Prices


Operational Risk


Inadequate or failed internal processes, people and systems or from external events




Strategy and Business Risks: a differentiator for ANZ


                  Group Chief Risk Officer is accountable to the Board for oversight of risk in the integration.


                  Accountability includes the development of a framework that assigns accountability for the management of integration risks.


                  Day-to-day management of integration risks is undertaken at a local level.


Integration Risks


Integration of ANZ and NBNZ




BSI (1)








ANZ National Bank


(1)         BSI = Business Systems Integration




Strategy Engagement


Group Risk Management is formally involved in all strategic initiatives


                  A substantial part of the bank’s risk profile is determined by its strategy and growth initiatives


                  “Best practice” risk management involves an independent group providing input into strategy development and key investment decisions, ensuring that all the risks are transparently reflected and properly understood at key decision levels


                  At ANZ Group Risk Management is actively involved in key strategy developments and major investment decisions


                  Specific engagements over the last 6 months have included:


                                          Decision to acquire NBNZ

                                          Establishment of a strategic alliance with the Shanghai Rural Credit Cooperatives Union




Capital Allocation, Risk-Adjusted Pricing, and Basel II



Economic Capital:  Conceptual Framework


Conceptual Framework:

                  Risk models employed to quantify economic risk are used to allocate economic capital - the amount of capital needed to support a bank’s risk taking activities

                  Credit  risk capital allocation systems typically based on institutional estimates of their credit loss distribution

                  Economic capital allocated to a particular activity reflects that activity’s marginal risk contribution to the portfolio taking into account diversification



                  Measure risk adjusted profitability and ensure efficient usage of shareholder funds

                  Portfolio risk management in the setting of limits & reporting of portfolio credit quality


Probability of loss






Risk adjusted EVA based pricing methodology makes the risk/return trade-off explicit to relationship managers


Illustrative example










Cost of Funds








Loan Loss Provision




Direct Expense*




Indirect Expense*












Total charges before capital charge








Capital Charge








Total Required Loan Rate







Funds Transfer Pricing Systems


Credit Risk Models


Product Cost Accounting Systems


Capital calculation

Allocated equity/loan = 6.7%

Opportunity cost of equity = 11%

(“hurdle rate”)

FTP Benefit = 6%

After tax capital charge = 0.067x (0.11 - 0.06) = 0.3%

Tax Rate (imputation-adjusted) = 0.108

Pre-tax capital charge = 0.3%/0.892 = 0.34%


* includes fixed and variable components




ANZ’s Basel II Programme


                  ANZ formally established its Basel II Programme in December 2001.


                  Our objective is compliance with the Advanced IRB approach for Credit Risk and the AMA approach for Operational Risk.


                  The Programme has, at its core, a central programme office, with multiple core projects and workstreams.


                  The senior executive Steering Committee meets monthly to review status, and consists of senior business unit representatives and senior central function executives (e.g Risk, Finance and Technology), including several members of the Management Board.


                  The evaluation phase was completed in 2003 and an independent Quality Assurance check by PwC placed ANZ in the top tier of Banks aspiring to be accredited at the more advanced levels within the new Basel Accord.


                  The design and implementation phase of the programme is well underway with some key phases of the programme now nearing completion.


                  Regular meetings are conducted with APRA to present programme progress and specific developments in the programme workstreams.




Basel II benefits


                  QIS 3 - the first comprehensive survey of likely Basel II effects on Pillar 1 capital – forecasts large regulatory capital reductions for ANZ and other Australian banks.


                  While based on Sept 02 data and CP2 capital formulae, it is directionally in line with what could be expected from the raw calculation of the minimum 8% capital requirement under Basel II.


                  Nonetheless, ANZ is not expecting such drastic falls in regulatory capital to be permitted. Capital for Pillar 2 and potentially other add-ons will be required. However, we do expect a moderate fall in regulatory capital to flow (eventually).


                  Principal benefits will flow from improved risk measurement and management infrastructure, further improvements to rating tools and other quantitative loss modelling, an enhanced corporate collateral management system, and improved data collection and integration.


Change in RWA under Basel II(1) QIS 3 results




ANZ Regulatory Capital under Basel II
by key asset class
(calculated at 8% of risk weighted assets)






(1).                The reduction in RWAs using Advanced IRB outcomes (excluding operational risk) when compared with current accord capital requirements can be used as an indicator of the relative riskiness of a bank’s assets.


(2).                RWA calculations were performed using the capital functions used in QIS 3 These are slightly different compared to the final Accord, but provide a reasonable guide.




We have transformed ANZ into a more sustainable, lower risk business



Reduction in risk and
movement towards
domestic consumer


Has significantly
reduced earnings


And has not had a
material impact on
group earnings




* Standard deviation in six monthly NPAT growth for ANZ, excluding abnormal/significant items




Supplementary info



US power exposures continue to reduce, although lagged credit effects continue to affect the portfolio


Total US Limits(1)




US: March 2004


                  Outstandings: $0.6bn (70%)

                  Other Committed: $0.2bn (25%)

                  Uncommitted: $0.1bn (5%)




                  Investment Grade: 10

                  Non Accrual: 4

                  Total: 19


                  We continue to actively manage our exposure to the US Energy sector.


                  Over the past 18 months, exposure to the merchant energy sector and other non-core segments has reduced substantially through repayments, sell-downs and restructuring.


                  Whilst Non Accrual Loans have increased in the US portfolio as a result of the lagged credit effect, prudent management has resulted in a lower level of expected losses from the portfolio.  Any further losses can be readily absorbed within existing ELP levels.


(1).          Excludes Settlement Limits but includes Contingent and Market-Related products domiciled in the US.




The quality of the Telcos book continues to improve


Total Telcos Limits(1)




March 2004


                  Outstandings: $0.6bn (70%)


                  Other Committed: $0.2bn (25%)


                  Uncommitted: $0.1bn (5%)


KMV Median Expected Default Frequency






(1).    Excludes Settlement Limits but includes Contingent and Market-Related products.




Proactive reduction in volume of “Top 10” client committed exposures


                  Implementation of credit management policies to diversify the loan book exposure, has resulted in reducing the client concentration risk, despite the inclusion of NBNZ exposures. This has been achieved through reducing the volume of “Top 10” client committed lending.


                  Sustained management of client exposures has reduced the sensitivity of the capital base of “Top 10” clients (to 68% of ACE in March 2004 from 75% of ACE September 2003).


S & P


Top 10 Committed Exposures




Top 10 Lending Exposures as % of ACE(1)






(1).                               March 2004 derivative exposures were calculated using a Monte Carlo model to calculate ANZ’s potential credit loss. The impact in moving to this methodology reduced the above ratio by 4.4 percentage points in comparison to ANZ’s previous methodology.




Quality of Consumer & SME portfolios again better than expected


                  Mortgage delinquencies (60 days) improved over the half


                  Delinquency for customers new to SME since September 2002 is in line with delinquency on legacy SME portfolio


                  Strong economic conditions and prudent credit practices have continued to see our Retail delinquency and loss rates remain very low


Delinquencies down on March 03




                  Delinquency for Mortgage products have flattened over the half


                  delinquencies on RILs and Broker introduced loans have remained in line with the wider portfolio


                  Australia’s low unemployment rate should continue to help maintain the quality of the portfolio


Mortgage delinquencies remain low across each category




TPMI – third party mortgage introducers

*Excludes NBNZ

O/O – owner occupied




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.


For further information visit


or contact


Simon Fraser
Head of Investor Relations


ph: (613) 9273 4185   fax: (613) 9273 4091   e-mail: