Westpac New Zealand Limited Disclosure Statement For the nine months ended 30 June 2012
Westpac New Zealand LimitedDisclosure Statement For the nine months ended 30 June 2012
Index 1 Generalinformationanddefinitions
1 Directors
1 Creditratings
1 Guaranteearrangements
2 Conditionsofregistration
2 Othermaterialmatters
3 Directors’statement
4 Indextofinancialstatements
Westpac New Zealand Limited 1
General information and definitionsCertainoftheinformationcontainedinthisDisclosureStatementisrequiredbysection81oftheReserveBankofNewZealandAct1989(‘Reserve Bank Act’)andtheRegisteredBankDisclosureStatements(NewZealandIncorporatedRegisteredBanks)Order2012(‘Order’).InthisDisclosureStatement,referenceismadeto:
■■ WestpacNewZealandLimited(otherwisereferredtoasthe‘Bank’);and■■ WestpacNewZealandLimitedanditscontrolledentities(otherwisereferredtoasthe‘Banking Group’).ControlledentitiesoftheBankasat30September2011aresetoutinNote26tothefinancialstatementsincludedintheDisclosureStatementfortheyearended30September2011.ExceptasdetailedinNotes2and10tothefinancialstatementsincludedinthisDisclosureStatement,therehavebeennootherchangesinthestructureorcompositionoftheBankingGroupsince30September2011.
WordsandphrasesnotdefinedinthisDisclosureStatement,butdefinedbytheOrder,havethemeaninggivenbytheOrderwhenusedinthisDisclosureStatement.AllamountsreferredtointhisDisclosureStatementareinNewZealanddollarsunlessotherwisestated.
DirectorsThefollowingchangesinthecompositionoftheBoardofDirectorsoftheBank(the‘Board’)havebeeneffectedsince30September2011:
■■ GeorgeFrazisresignedfromtheBoardwitheffectfrom13April2012;■■ PeterGrahamClarewasappointedtotheBoardwitheffectfrom13April2012;and■■ PeterDavidWilsonwasredesignatedfromnon-IndependentDirectortoIndependentDirector(forthepurposesoftheReserveBankdocumententitled‘CorporateGovernance’(BS14)datedMarch2011)witheffectfrom1April2012.
Credit ratingsTheBankhasthefollowingcreditratingswithrespecttoitslong-termseniorunsecuredobligations,includingobligationspayableinNewZealandinNewZealanddollars,asatthedatetheDirectorssignedthisDisclosureStatement:
Rating Agency Current Credit Rating Rating Outlook
FitchRatings AA- Stable
Moody’sInvestorsService Aa3 Stable
Standard&Poor’s AA- Stable
TherehavebeennochangestoanyoftheBank’screditratingsorratingoutlookssince31March2012.Acreditratingisnotarecommendationtobuy,sellorholdsecuritiesoftheBank.Suchratingsaresubjecttorevision,qualification,suspensionorwithdrawalatanytimebytheassigningratingagency.InvestorsintheBank’ssecuritiesarecautionedtoevaluateeachratingindependentlyofanyotherrating.
Guarantee arrangements CertainmaterialobligationsoftheBankareguaranteedasatthedatetheDirectorssignedthisDisclosureStatement.
Government Wholesale GuaranteeTheBankhasaWholesaleFundingGuaranteeFacilityDeedandWholesaleFundingGuaranteewiththeNewZealandGovernment(‘Crown’),eachdated23February2009(togetherthe‘Wholesale Guarantee’).TheWholesaleGuaranteeclosedon30April2010fromwhichdatenonewGuaranteeEligibilityCertificatescanbeissued.GuaranteeLiabilitiesexistingasat30April2010werenotaffected.
Description of Wholesale Guarantee
ThefollowingdescriptionoftheWholesaleGuaranteeisforgeneralinformationpurposesonlyanddoesnotpurporttobeexhaustive.FurtherinformationabouttheWholesaleGuaranteeisavailablefromtheTreasuryinternetsitewww.treasury.govt.nz.TheguarantoroftheBank’sobligationsundertheWholesaleGuaranteeistheCrown.TheCrown’saddressforserviceinrelationtotheWholesaleGuaranteeis:(i) MinisterofFinance,ParliamentBuildings,Wellington;or(ii) NewZealandHighCommissionerinLondonattheaddressoftheNewZealandHighCommissioninLondonforthetime
being;or(iii)NewZealandConsulandTradeCommissionerattheaddressoftheNewZealandConsulate-GeneralinNewYorkforthetime
being;ineachcasewithacopy(withdeliverymadebyhandorfacsimile)to:TheTreasurer,TheNewZealandDebtManagementOffice,1TheTerrace,Wellington,NewZealand.FurtherinformationabouttheWholesaleGuaranteeisincludedintheBank’sDisclosureStatementfortheyearended30September2011.AcopyoftheBank’sDisclosureStatementfortheyearended30September2011isavailable,freeofcharge,attheinternetaddresswww.westpac.co.nz.Aprintedcopywillalsobemadeavailable,freeofcharge,uponrequestandwillbedispatchedbytheendofthesecondworkingdayafterthedayonwhichtherequestismade.
Westpac New Zealand Limited 2
Guarantee arrangements (continued)Summary of obligations guaranteed
TheobligationsguaranteedbytheCrownundertheWholesaleGuaranteeareobligationsoftheBanktopaymoneytoaBeneficiary(asdefinedbelow)underaGuaranteedLiability.AGuaranteedLiabilityisaliabilitytopayprincipalorinterestinrespectofwhichtheCrownhasissuedaGuaranteeEligibilityCertificateundertheWholesaleGuarantee.Inthiscontext,a‘Beneficiary’meanseachpersontowhomaGuaranteedLiabilityisowed,excludinga‘RelatedParty’oftheBankasthattermisdefinedintheWholesaleGuaranteeandanyoneactingasanomineeof,ortrusteefor,aRelatedParty.TheCrownhasissuedGuaranteeEligibilityCertificatesinrespectofpaymentobligationsoftheBankundercertainnotesissuedbytheBank.TheCrownhasalsoissuedGuaranteeEligibilityCertificatesinrespectofpaymentobligationsoftheBankasguarantorofcertainnotesissuedbyWestpacSecuritiesNZLimited(‘WSNZL’),acontrolledentityoftheBank.CopiesoftheGuaranteeEligibilityCertificatesissued,whichprovidefurtherdetailsoftheobligationsoftheBankguaranteedbytheCrownundertheWholesaleGuarantee,areavailableontheNewZealandTreasuryinternetsitewww.treasury.govt.nz.
Expiry of the Wholesale Guarantee
ForeachGuaranteedLiabilitytheguaranteeundertheWholesaleGuaranteewillexpireatmidnightonthedatefalling30daysaftertheearlierof:(i) thescheduledmaturitydateofthesecurityunderwhichthatGuaranteedLiabilityarises;and(ii) thedatefallingfiveyearsaftertheissuedateofthesecurityunderwhichthatGuaranteedLiabilityarises.ThereisnoprovisionforthewithdrawaloftheWholesaleGuaranteeinrespectofaGuaranteedLiability.TherehavebeennochangestothetermsoftheWholesaleGuaranteesincethedateofsigningtheBank’sDisclosureStatementfortheyearended30September2011.
Conditions of registration TheBank’sconditionsofregistrationwereamendedinJune2012andtheamendedconditionsofregistrationapplywitheffectfromandincluding1July2012.Theamendmentsrelatedtothedeletionofsupersededconditionsandotherminorchangestoimprovetheinternalconsistencyoftheconditionsofregistration.
Other material matters TherearenomattersrelatingtothebusinessoraffairsoftheBankortheBankingGroupwhicharenotcontainedelsewhereintheDisclosureStatementandwhichwould,ifdisclosed,materiallyaffectthedecisionofapersontosubscribefordebtsecuritiesofwhichtheBankoranymemberoftheBankingGroupistheissuer.
Westpac New Zealand Limited 3
Directors’ statement EachDirectoroftheBankbelieves,afterdueenquiry,that,asatthedateonwhichthisDisclosureStatementissigned,theDisclosureStatement:(a) containsallinformationthatisrequiredbytheOrder;and(b) isnotfalseormisleading.
EachDirectoroftheBankbelieves,afterdueenquiry,that,overtheninemonthsended30June2012:(a) theBankhascompliedwiththeconditionsofregistrationimposedonitpursuanttosection74oftheReserveBankAct;(b) creditexposurestoconnectedpersonswerenotcontrarytotheinterestsoftheBankingGroup;and(c) theBankhadsystemsinplacetomonitorandcontroladequatelytheBankingGroup’smaterialrisks,includingcreditrisk,
concentrationofcreditrisk,interestraterisk,currencyrisk,equityrisk,liquidityrisk,operationalriskandotherbusinessrisks,andthatthosesystemswerebeingproperlyapplied.
ThisDisclosureStatementhasbeensignedbyalltheDirectors:
PeterDavidWilson
Peter Graham Clare
PhilipMatthewCoffey
JaniceAmeliaDawson
ChristopherJohnDavidMoller
RalphGrahamWaters
Datedthis22nddayofAugust2012
Westpac New Zealand Limited 4
Index to financial statementsPage Contents
5 Consolidatedincomestatement
6 Consolidatedstatementofcomprehensiveincome
7 Consolidatedstatementofchangesinequity
8 Consolidatedbalancesheet
9 Consolidatedstatementofcashflows
10 Notestothefinancialstatements
10 Note1Statementofaccountingpolicies
11 Note2Businesscombination–transferofoperations
14 Note3Non-interestincome
14 Note4Impairmentchargesonloans
15 Note5Tradingsecurities
15 Note6Loans
15 Note7Creditquality,impairedassetsandprovisionsforimpairmentchargesonloans
16 Note8Deposits
16 Note9Debtissues
16 Note10Relatedentities
17 Note11Commitmentsandcontingentliabilities
17 Note12Segmentinformation
18 Note13Insurancebusiness
18 Note14Capitaladequacy
20 Note15Riskmanagement
20 Note15.1Creditrisk
20 Note15.2Liquidityrisk
21 Note16Concentrationofcreditexposurestoindividualcounterparties
21 Note17Eventsafterthereportingdate
Westpac New Zealand Limited 5
Consolidated income statement fortheninemonthsended30June2012
The Banking Group
Nine Months NineMonths Year Ended Ended Ended 30-Jun-12 30-Jun-11 30-Sep-11$ millions Note Unaudited Unaudited Audited
Interestincome 2,882 2,642 3,521Interestexpense (1,765) (1,691) (2,205)
Net interest income 1,117 951 1,316
Non-interestincome: Feesandcommissions 3 251 223 299 Netineffectivenessonqualifyinghedges 3 (1) 3 1 Othernon-interestincome 3 17 1 8
Total non-interest income 267 227 308
Net operating income 1,384 1,178 1,624Operatingexpenses (607) (573) (771)Impairmentchargesonloans 4 (131) (189) (224)
Operating profit 646 416 629Shareofprofitofassociateaccountedforusingtheequitymethod - - 1
Profit before income tax expense 646 416 630Incometaxexpense (181) (129) (197)
Profit after income tax expense 465 287 433
Profit after income tax expense attributable to: OwnersoftheBankingGroup 463 284 429 Non-controllinginterests 2 3 4
465 287 433
Theaccompanyingnotes(numbered1to17)formpartof,andshouldbereadinconjunctionwith,thesefinancialstatements.
Westpac New Zealand Limited 6
Consolidated statement of comprehensive income fortheninemonthsended30June2012
The Banking Group
Nine Months NineMonths Year Ended Ended Ended 30-Jun-12 30-Jun-11 30-Sep-11$ millions Unaudited Unaudited Audited
Profit after income tax expense 465 287 433
Other comprehensive income: Netunrealisedgainsfromchangesinfairvalueofavailable-for-salesecurities 68 25 6 Cashflowhedges: Netgains/(losses)fromchangesinfairvalueofcashflowhedges 57 (55) 18 Transferredtotheincomestatement 9 4 11 Actuariallossesonemployeedefinedbenefitsuperannuationschemes - - (15) Incometaxrelatingtocomponentsofothercomprehensiveincome1 (33) 9 (3)
Other comprehensive income/(expense), net of tax 101 (17) 17
Total comprehensive income 566 270 450
Total comprehensive income attributable to: OwnersoftheBankingGroup 564 267 446 Non-controllinginterests 2 3 4
566 270 450
1 Theincometaxeffectsrelatingtoeachcomponentofothercomprehensiveincomearedisclosedinthefollowingtable.
Tax effects relating to each component of other comprehensive income
The Banking Group
Tax Before Tax (Expense)/ Net of$ millions Amount Benefit Tax Amount
For the nine months ended 30 June 2012 (Unaudited)Netunrealisedgainsfromchangesinfairvalueofavailable-for-salesecurities 68 (14) 54 Cashflowhedges: Netgainsfromchangesinfairvalueofcashflowhedges 57 (16) 41 Transferredtotheincomestatement 9 (3) 6
Other comprehensive income 134 (33) 101
For the nine months ended 30 June 2011 (Unaudited) Netunrealisedgainsfromchangesinfairvalueofavailable-for-salesecurities 25 (7) 18Cashflowhedges: Netlossesfromchangesinfairvalueofcashflowhedges (55) 17 (38) Transferredtotheincomestatement 4 (1) 3
Other comprehensive expense (26) 9 (17)
For the year ended 30 September 2011 (Audited) Netunrealisedgainsfromchangesinfairvalueofavailable-for-salesecurities 6 - 6Cashflowhedges: Netgainsfromchangesinfairvalueofcashflowhedges 18 (5) 13 Transferredtotheincomestatement 11 (3) 8Actuariallossesonemployeedefinedbenefitsuperannuationschemes (15) 5 (10)
Other comprehensive income 20 (3) 17
Theaccompanyingnotes(numbered1to17)formpartof,andshouldbereadinconjunctionwith,thesefinancialstatements.
Westpac New Zealand Limited 7
Consolidated statement of changes in equity fortheninemonthsended30June2012
The Banking Group
Available- Total for-sale Cash Flow before Non- Non- Share Retained Securities Hedge controlling controlling $ millions Capital Profits Reserve Reserve Interests Interests Total
As at 1 October 2010 3,470 548 25 (1) 4,042 6 4,048
Nine months ended 30 June 2011
Profitafterincometaxexpense - 284 - - 284 3 287
Othercomprehensiveincome/(expense) - - 18 (35) (17) - (17)
Total comprehensive income/(expense) for
the nine months ended 30 June 2011 - 284 18 (35) 267 3 270
Transactionwithowners:
Dividendspaidonordinaryshares - - - - - (2) (2)
As at 30 June 2011 (Unaudited) 3,470 832 43 (36) 4,309 7 4,316
Year ended 30 September 2011
Profitafterincometaxexpense - 429 - - 429 4 433
Othercomprehensive(expense)/income - (10) 6 21 17 - 17
Total comprehensive income for the
year ended 30 September 2011 - 419 6 21 446 4 450
Transactionwithowners:
Dividendspaidonordinaryshares - - - - - (2) (2)
As at 30 September 2011 (Audited) 3,470 967 31 20 4,488 8 4,496
Nine months ended 30 June 2012
Profitafterincometaxexpense - 463 - - 463 2 465
Othercomprehensiveincome - - 54 47 101 - 101
Total comprehensive income for the
nine months ended 30 June 2012 - 463 54 47 564 2 566
Transactionswithowners:
Sharecapitalissued 1,130 - - - 1,130 - 1,130
Dividendspaidonordinaryshares - (480) - - (480) (4) (484)
As at 30 June 2012 (Unaudited) 4,600 950 85 67 5,702 6 5,708
Theaccompanyingnotes(numbered1to17)formpartof,andshouldbereadinconjunctionwith,thesefinancialstatements.
Westpac New Zealand Limited 8
Consolidated balance sheet asat30June2012
The Banking Group
30-Jun-12 30-Jun-11 30-Sep-11$ millions Note Unaudited Unaudited Audited
AssetsCashandbalanceswithcentralbanks 1,347 434 1,215Duefromotherfinancialinstitutions 308 34 699Derivativefinancialinstruments 11 17 85Tradingsecurities 5 3,395 2,847 3,261Available-for-salesecurities 2,658 1,116 1,518Loans 6,7 58,725 50,671 51,250Duefromrelatedentities 1,921 537 1,517Currenttaxassets - 33 -Investmentinassociate 48 48 48Goodwillandotherintangibleassets 585 559 567Property,plantandequipment 156 153 154 Deferredtaxassets 201 241 194 Otherassets 225 197 148
Total assets 69,580 56,887 60,656
Liabilities Duetootherfinancialinstitutions - - 100Deposits 8 41,845 33,581 34,886Derivativefinancialinstruments 300 75 84Debtissues 9 15,887 15,138 17,630Currenttaxliabilities - - 45Provisions 79 66 70Otherliabilities 515 497 569
Total liabilities excluding related entities liabilities 58,626 49,357 53,384Perpetualsubordinatednotes 970 970 970Duetorelatedentities 4,276 2,244 1,806
Total related entities liabilities 5,246 3,214 2,776
Total liabilities 63,872 52,571 56,160
Net assets 5,708 4,316 4,496
Equity Sharecapital 4,600 3,470 3,470Retainedprofits 950 832 967Available-for-salesecuritiesreserve 85 43 31 Cashflowhedgereserve 67 (36) 20
Total equity attributable to owners of the Banking Group 5,702 4,309 4,488Non-controllinginterests 6 7 8
Total equity 5,708 4,316 4,496
Interestearninganddiscountbearingassets 68,730 55,944 59,737Interestanddiscountbearingliabilities 59,487 47,348 52,060
Theaccompanyingnotes(numbered1to17)formpartof,andshouldbereadinconjunctionwith,thesefinancialstatements.
Westpac New Zealand Limited 9
Consolidated statement of cash flows fortheninemonthsended30June2012
The Banking Group
Nine Months NineMonths Year Ended Ended Ended 30-Jun-12 30-Jun-11 30-Sep-11$ millions Unaudited Unaudited Audited
Cash flows from operating activitiesInterestincomereceived 2,876 2,645 3,527Interestexpensepaid (1,816) (1,730) (2,205)Non-interestincomereceived 218 168 306Netdecrease/(increase)intradingsecurities 1,823 (260) (674)Netmovementinderivativefinancialinstruments 296 75 16Operatingexpensespaid (574) (517) (682)Incometaxpaid (220) (153) (151)
Net cash provided by operating activities 2,603 228 137
Cash flows from investing activities Netincreaseinavailable-for-salesecurities (1,072) (1,047) (1,468)Netloansadvancedtocustomers (1,270) (826) (1,440)Net(increase)/decreaseinduefromrelatedentities (404) 293 (687)Purchaseofcapitalisedcomputersoftware (45) (25) (44)Purchaseofproperty,plantandequipment (22) (46) (55)Netcashacquiredfromthetransferofadditionalbankingoperations (154) - -
Net cash used in investing activities (2,967) (1,651) (3,694)
Cash flows from financing activities Issueofordinarysharecapital 1,130 - -Netincreaseindeposits 1,899 1,115 2,420Net(decrease)/increaseindebtissues (1,743) (301) 2,191Net(decrease)/increaseinduetorelatedentities (597) 554 237Paymentofdividends (484) (2) (2)
Net cash provided by financing activities 205 1,366 4,846
Net (decrease)/increase in cash and cash equivalents (159) (57) 1,289Cashandcashequivalentsatbeginningoftheperiod/year 1,814 525 525
Cash and cash equivalents at end of the period/year 1,655 468 1,814
Cash and cash equivalents comprise: Cashandbalanceswithcentralbanks 1,347 434 1,215 Duefromotherfinancialinstitutions(net) 308 34 599
1,655 468 1,814
Reconciliation of profit after income tax expense to net cash provided by operating activities Profitafterincometaxexpense 465 287 433Adjustments: Impairmentchargesonloans 131 189 224 Computersoftwareamortisationcosts 29 33 42 Depreciationonproperty,plantandequipment 20 19 22 Loss/(gain)ondisposalofproperty,plantandequipment - 1 (7) Lossondisposalofcomputersoftware - - 2 Share-basedpayments 5 12 15 Movementinotherassets (55) (53) 8 Movementinotherliabilities (72) (51) 15 Movementincurrentanddeferredtax (52) (31) 94 Taxlossestransferredfrom/(to)relatedentities 46 - (45) Taxoncashflowhedgereserve (19) 14 (8) Taxonavailable-for-salesecuritiesreserve (14) (7) - Movementintradingsecurities 1,823 (260) (674) Movementinderivativefinancialinstruments 296 75 16
Net cash provided by operating activities 2,603 228 137
Theaccompanyingnotes(numbered1to17)formpartof,andshouldbereadinconjunctionwith,thesefinancialstatements.
Westpac New Zealand Limited 10
Notestothefinancialstatements
Note 1 Statement of accounting policies
Statutory baseTheseconsolidatedfinancialstatementshavebeenpreparedandpresentedinaccordancewiththeOrderandtheReserveBankAct.ThesefinancialstatementshavealsobeenpreparedinaccordancewithGenerallyAcceptedAccountingPracticeinNewZealand(‘NZ GAAP’),asappropriateforprofit-orientedentities,andtheNewZealandEquivalenttoInternationalAccountingStandard(‘NZ IAS’)34Interim Financial ReportingandshouldbereadinconjunctionwiththeDisclosureStatementsfortheyearended30September2011andperiodsended31December2011and31March2012.ThesefinancialstatementscomplywithInternationalAccountingStandard34Interim Financial ReportingasissuedbytheInternationalAccountingStandardsBoard.Asaresultofthenewandrevisedaccountingstandardswhichbecameoperativefortheannualreportingperiodcommencing1October2011,thefollowingstandards,interpretationsandamendmentshavebeenadoptedwitheffectfrom1October2011:
■■ NewZealandEquivalenttoInternationalFinancialReportingStandard(‘NZ IFRS’)7Financial Instruments: Disclosures (‘NZ IFRS 7’):■ Theamendmentsaddanexplicitstatementthatqualitativedisclosureshouldbemadeinthecontextofthequantitative
disclosurestobetterenableuserstoevaluateanentity’sexposuretorisksarisingfromfinancialinstruments.Inaddition,certaindisclosurerequirementshavebeenamendedorremoved.
■ Amendments to NZ IFRS 7 Disclosures – Transfers of Financial Assets–Theamendmentsrequireadditionaldisclosuresaboutthetransferoffinancialassets,includinginrespectofthenatureofthefinancialassetsinvolvedandtherisksassociatedwiththem.
■■ NZIAS1Presentation of Financial Statements–Theamendmentsclarifythatananalysisofothercomprehensiveincomebyitemisrequiredtobedisclosedeitherinthestatementofchangesinequityorinthenotestothefinancialstatements.
■■ NZIAS24Related Party Disclosures–Themainchangestothestandardsimplifythedefinitionofarelatedpartyandclarifyitsintendedmeaning.
■■ NZIAS34Interim Financial Reporting–TheamendmentsaddexamplestothelistofsignificanteventsortransactionsthatrequiredisclosureunderNZIAS34.
■■ NewZealandEquivalenttoInternationalFinancialReportingInterpretationsCommittee(‘NZ IFRIC’)13Customer Loyalty Programmes–Theamendmentsclarifythefairvalueofawardcreditsandtakeintoaccounttheamountofdiscountsorincentivesthatotherwisewouldbeofferedtocustomersthathavenotearnedtheawardcredits.
■■ NZIFRIC14The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction–Theamendmentsremovetheunintendedconsequencearisingfromthetreatmentofprepaymentswhenthereisaminimumfundingrequirement.Theseamendmentsresultinprepaymentsofcontributionsincertaincircumstancesbeingrecognisedasanassetratherthananexpense.
■■ Amendments to NZ IFRS 7: Disclosure Amendments to Appendix E New Zealand-specific additional disclosure requirements applicable to financial institutions–Theamendmentsreplacetheterm‘financialinstitutions’withtheterm‘deposittakers’.TheamendmentsalsoremoveregisteredbanksfromitsscopeasthedisclosurerequirementshavebeenrelocatedtotheOrder.
■■ Amendments to NZ IFRSs to Harmonise with IFRS and Australian Accounting Standards –TheamendmentsremovecertainNewZealand-specificdisclosuresandrelocatecertaindisclosurerequirementstoanewstandard.TheBankingGrouphaschosentocontinuedisclosingcertaininformationnolongerrequiredasaresultofthisjointTrans-TasmanConvergenceproject.
■■ FinancialReportingStandard44New Zealand Additional Disclosures–ThisnewstandardisapplicableonlytoNewZealandandisaconsequenceofthejointTrans-TasmanConvergenceprojectoftheAustralianAccountingStandardsBoardandFinancialReportingStandardsBoard.ThisstandardrelocatescertainNewZealand-specificdisclosuresfromotherNZIFRSandalsorevisescertaindisclosures.
AdoptionofthesenewandrevisedaccountingstandardshasnotresultedinanymaterialchangetotheBankingGroup’sreportedresultorfinancialposition.Inthesefinancialstatementsreferenceismadetothefollowingreportingentities:
■■ WestpacNewZealandLimited(otherwisereferredtoasthe‘Bank’);and■■ WestpacNewZealandLimitedanditscontrolledentities(otherwisereferredtoasthe‘Banking Group’).ControlledentitiesoftheBankingGroupasat30September2011aresetoutinNote26totheBankingGroup’sfinancialstatementsincludedintheDisclosureStatementfortheyearended30September2011.ExceptasdetailedinNotes2and10tothesefinancialstatements,therehavebeennootherchangestothecompositionoftheBankingGroupsince30September2011.ThesefinancialstatementswereauthorisedforissuebytheBoardon22August2012.TheBoardhasthepowertoamendthefinancialstatementsaftertheyareauthorisedforissue.
Basis of preparationThesefinancialstatementsarebasedonthegeneralprinciplesofhistoricalcostaccounting,asmodifiedbyfairvalueaccountingforavailable-for-salefinancialassets,financialassetsandfinancialliabilitiesatfairvaluethroughprofitorlossandallfinancialderivativecontracts.Thegoingconcernconceptandtheaccrualbasisofaccountinghavebeenadopted.AllamountsareexpressedinNewZealanddollarsunlessotherwisestated.
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Notestothefinancialstatements
Note 1 Statement of accounting policies (continued)Thesameaccountingpoliciesandmethodsofcomputationhavebeenfollowedinpreparingthesefinancialstatementsaswereusedinpreparingthefinancialstatementsfortheyearended30September2011,exceptasamendedforthechangesrequiredduetotheadoptionofthenewandrevisedaccountingstandardsasexplainedinthe‘Statutorybase’section.Certaincomparativeinformationhasbeenrestatedtoensureconsistenttreatmentwiththecurrentreportingperiod.Wheretherehasbeenamaterialrestatementofcomparativeinformationthenatureof,andthereasonfor,therestatementisdisclosedintherelevantnote.
Principles of consolidationTheconsolidatedfinancialstatementsincorporatetheassetsandliabilitiesofallsubsidiaries(includingspecialpurposeentities)controlledbytheBankandtheresultsofthosesubsidiaries.TheeffectsofalltransactionsbetweenentitieswithintheBankingGroupareeliminated.Controlexistswhentheparententityhasthepower,directlyorindirectly,togovernthefinancialandoperatingpoliciesofanentitysoastoobtainbenefitsfromitsactivities.Inassessingcontrol,potentialvotingrightsthatarepresentlyexercisableorconvertiblearetakenintoaccount.Subsidiariesarefullyconsolidatedfromthedateonwhichcontrolcommencesandarede-consolidatedfromthedateonwhichcontrolceases.TheacquisitionmethodofaccountingisusedtoaccountfortheacquisitionofsubsidiariesbytheBankingGroup.TheBankingGroupmayinvestinorestablishspecialpurposeentitiestoenableittoundertakespecifictypesoftransactions.WheretheBankingGroupcontrolssuchentitiestheyareconsolidatedintotheBankingGroup’sfinancialresults.Non-controllinginterestsarestatedattheproportionofthenetprofitandnetassetsofasubsidiaryattributabletoequityintereststhatarenotowned,directlyorindirectlybytheBank.Lossesareattributedtothenon-controllinginterestevenifthatresultsinadeficitbalance.
Common control transactionsThepredecessormethodofaccountingisusedtoaccountforbusinesscombinationsbetweenentitieswithintheBankingGroup.AssetsacquiredandliabilitiesassumedinacommoncontroltransactionaremeasuredinitiallyattheacquisitiondateatthecarryingvaluefromtheWestpacBankingCorporation’s(‘Ultimate Parent Bank’)perspective.Theexcessofthecostofacquisitionovertheinitialcarryingvaluesoftheentity’sshareofthenetassetsacquiredisrecordedaspartofacommoncontrolreserve.
Note 2 Business combination – transfer of operationsUntil1November2006,theUltimateParentBankconducteditsoperationsinNewZealandthroughabranchstructure.Onthatdate,andafterextensiveconsultationwiththeReserveBankofNewZealand(‘Reserve Bank’),theUltimateParentBankadoptedadualoperatingmodelincludingalocallyincorporatedsubsidiary,theBank,toconductitsconsumerandbusinessbankingoperationsinNewZealand,andabranchoftheUltimateParentBank(‘NZ Branch’)toconductitsinstitutionalandfinancialmarketsoperations.FollowinganindependentreviewofthestructureoftheoperatingmodeloftheUltimateParentBank’sbusinessinNewZealand,theReserveBank,theBankandtheUltimateParentBankreachedagreementonchangestotheoperatingmodel.On1November2011,assetsandliabilitiesassociatedwithcertainbusinessactivitiesformerlyconductedbytheNZBranchweretransferredtotheBank.ThetransferoccurredpursuanttotheWestpacNewZealandAct2011.ThefollowingbusinessactivitiesweretransferredtotheBank:
■■ institutionalcustomerdeposits;■■ institutionalcustomertransactionalbanking;■■ institutionalcustomerlending(otherthantradefinancingactivities);■■ debtcapitalmarketsactivitiescarriedoutinassistingcorporatecustomerstoobtainfunding,suchasloansyndicationandsecuritisationarrangements,butexcludingthedebtsecuritiesteamactivities,suchasarrangementofcommercialpaperandbondprogrammes;
■■ corporateadvisory;and■■ institutionalcustomerforeigncurrencyaccounts.TheNZBranchhasretained:
■■ financialmarketsoperationsforexternalcustomers,includingsalesandtradingofcapitalmarketsproductsandforeignexchangeforcorporateandinstitutionalcustomers;
■■ pricingandriskmanagementforinterestrate,foreignexchangeandcommodityproductsforconsumer,businessandinstitutionalcustomersoftheBank;
■■ tradingofcapitalmarketsproductsandforeignexchangeasprincipal;■■ globalintra-groupfinancingfunctions;■■ correspondentbankrelationships;■■ debtsecuritiesteamactivities,suchasarrangementofcommercialpaperandbondprogrammes;and■■ internationalbusiness,includingtradefinanceactivitiesbutexcludingcustomerforeigncurrencyaccounts.
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Notestothefinancialstatements
Note 2 Business combination – transfer of operations (continued) TheacquisitioninvolvedthetransfertotheBankof$6,446millionofassetsconsistingprimarilyofloanstocorporatecustomersof$6,336millionand$5,303millionofliabilitiesconsistingprimarilyofdepositsof$5,060million.Forthefinancialyearended30September2011,thebusinessactivitiestransferredfromtheNZBranchtotheBankaccountedfornetoperatingincomeof$166million(30September2010:$163million)andprofitafterincometaxexpenseof$114million(30September2010:$103million).
Funding of acquisitionTofundthepurchaseoftheassetsandliabilitiesrelatingtothebusinessactivitiestransferredfromtheNZBranch(aswellastheadditionalliquidassetsrequiredtobeheldbytheBankingGroupasaresultofthetransfer),aloanof$3.1billionwasprovidedtotheBankbytheNZBranchandtheBankraised$1,130millioninadditionalsharecapital.Theloanof$3.1billionisforaperiodofthreeyearsandwaspricedattheNewZealandBankBillReferenceRateplusamarginthatreflectedmarketpricingon1November2011.TheBankissuedatotalof1,130millionadditionalordinarysharesfor$1persharetotheBank’simmediateparentcompany,WestpacNewZealandGroupLimited(‘WNZGL’),inconnectionwiththetransfer.On28October2011,theBankissued900millionordinarysharesfor$1pershare,andon31October2011,theBankissuedanadditional230millionordinarysharesfor$1pershare.Immediatelypriortotheissuanceoftheseadditional230millionordinaryshares,theBankpaidadividendtoWNZGLof$230million.ThesetransactionswereinaccordancewiththeBankingGroup’scapitalmanagementpolicy.
Compliance with condition of registration 14 and BS13 requirements Asaresultofthetransferofthebusinessactivitiessetoutabove,theBankingGroupisrequiredtoholdadditionalliquidassetsinordertocomplywithconditionofregistration14,whichrelatestoliquidity,andtheReserveBankdocumentLiquidity Policy (BS13).TheseliquidassetswereacquiredthroughacombinationofonmarketpurchasesandapurchaseofliquidassetsfromtheNZBranch.TheBankingGroupwascompliantwithbothconditionofregistration14andBS13immediatelyfollowingthetransferon1November2011.
Asset and liabilities transferred from the NZ Branch to the Bank as at 1 November 2011
Assets and Liabilities Transferred As at 1 November 2011 $ millions Audited
Assets Cashandbalanceswithcentralbanks 58 Loans 6,336 Deferredtaxassets 28 Otherassets 24
Total assets 6,446
Liabilities Duetootherfinancialinstitutions 212 Deposits 5,060 Provisions 12 Otherliabilities 19
Total liabilities 5,303
Net assets acquired 1,143
Contingent liabilities and commitments transferred from the NZ Branch to the Bank as at 1 November 2011
The Bank
As at 1 November 2011 $ millions Audited
Contingent liabilities and commitments Transactionrelatedcontingentitems 421 Short-term,selfliquidatingtraderelatedcontingentliabilities 107 Othercommitmentstoprovidefinancialservices 6,464
Total contingent liabilities and commitments 6,992
Westpac New Zealand Limited 13
Notestothefinancialstatements
Note 2 Business combination – transfer of operations (continued) Consideration paid for the business transferred from the NZ Branch to the Bank on 1 November 2011
The Bank
As at 1 November 2011 $ millions Audited
Consideration transferred Intragrouppayables 3,100 Tradingsecurities (1,957)
Total consideration transferred 1,143
Impact of the transferred business activities on the Banking Group
The Banking Group
Pre-existing Transferred $ millions Note Operations Operations
1 Total
For the period ended 30 June 2012 (Unaudited) Interestincome 2,522 360 2,882 Interestexpense (1,505) (260) (1,765)
Net interest income 1,017 100 1,117
Non-interestincome: Feesandcommissions 3 225 26 251 Netineffectivenessonqualifyinghedges (1) - (1) Othernon-interestincome 3 17 - 17
Total non-interest income 241 26 267
Net operating income 1,258 126 1,384 Operatingexpenses (594) (13) (607)Impairmentchargesonloans 4 (128) (3) (131)
Profit before income tax expense 536 110 646 Incometaxexpense (150) (31) (181)
Profit after income tax expense 386 79 465
Transferred business activities for the nine months ended 30 June 2012
The Banking Group
Pre-acquisition Transferred $ millions result
2 Operations
1 Total
For the period ended 30 June 2012 (Unaudited) Interestincome 46 360 406 Interestexpense (30) (260) (290)
Net interest income 16 100 116
Non-interestincome: Feesandcommissions 4 26 30
Total non-interest income 4 26 30
Net operating income 20 126 146 Operatingexpenses (2) (13) (15)Impairmentchargesonloans 2 (3) (1)
Profit before income tax expense 20 110 130 Incometaxexpense (5) (31) (36)
Profit after income tax expense 15 79 94
1 Representstheeightmonthresultofthetransferredbusinessoperationssincetheacquisitiondateon1November2011,asincludedintheBankingGroup’sconsolidatedincomestatement.
2 Representsthepre-acquisitionresultofthetransferredbusinessoperationsfrom1October2011through31October2011.
Westpac New Zealand Limited 14
Notestothefinancialstatements
Note 3 Non-interest income
The Banking Group
Nine Months NineMonths Year Ended Ended Ended 30-Jun-12 30-Jun-11 30-Sep-11$ millions Unaudited Unaudited Audited
Fees and commissionsTransactionfeesandcommissions 170 157 210Lendingfees(loanandrisk) 43 41 55 Managementfeesreceivedfromrelatedentities 2 2 3 Insurancecommissionsreceived 26 22 30 Othernon-riskfeeincome 10 1 1
Total fees and commissions 251 223 299
Net ineffectiveness on qualifying hedges (1) 3 1
Other non-interest income Netgains/(losses)onderivativesheldfortrading 4 (2) (4)Dividendincome 2 2 3 (Loss)/gainondisposalofproperty,plantandequipment - (1) 7Other 11 2 2
Total other non-interest income 17 1 8
Total non-interest income 267 227 308
Note 4 Impairment charges on loans
The Banking Group
Other Loans Loans for Residential for Consumer Business$ millions Mortgages Purposes Purposes Total
Nine months ended 30 June 2012 (Unaudited)Collectivelyassessedprovisions (1) 4 (38) (35)Individuallyassessedprovisions 20 - 112 132 Baddebtswritten-offdirectlytotheincomestatement 4 32 21 57 Interestadjustments (2) (7) (14) (23)
Total impairment charges on loans 21 29 81 131
Nine months ended 30 June 2011 (Unaudited) Collectivelyassessedprovisions (3) (22) (33) (58)Individuallyassessedprovisions 66 - 161 227Baddebtswritten-offdirectlytotheincomestatement 3 32 14 49Interestadjustments (5) (11) (13) (29)
Total impairment charges on loans 61 (1) 129 189
Year ended 30 September 2011 (Audited) Collectivelyassessedprovisions (14) (35) (33) (82)Individuallyassessedprovisions 80 - 187 267Baddebtswritten-offdirectlytotheincomestatement 5 44 23 72Interestadjustments (6) (12) (15) (33)
Total impairment charges on loans 65 (3) 162 224
Westpac New Zealand Limited 15
Notestothefinancialstatements
Note 5 Trading securities
The Banking Group
30-Jun-12 30-Jun-11 30-Sep-11$ millions Unaudited Unaudited Audited
Trading securitiesListed: NZGovernmentsecurities 606 1,200 1,035
Total listed securities 606 1,200 1,035
Unlisted: NZcorporatesecurities: Certificatesofdeposit 2,333 1,464 2,007 Corporatebonds 254 183 209 NZGovernmentsecurities 202 - 10
Total unlisted securities 2,789 1,647 2,226
Total trading securities 3,395 2,847 3,261
Asat30June2012notradingsecuritiesintheBankingGroup(30June2011:nil,30September2011:nil)wereencumberedthroughrepurchaseagreements.
Note 6 Loans
The Banking Group
30-Jun-12 30-Jun-11 30-Sep-11$ millions Unaudited Unaudited Audited
Overdrafts 1,218 880 945Creditcardoutstandings 1,320 1,279 1,270Moneymarketloans 993 584 571Termloans: Housing 35,901 34,751 35,086 Non-housing 19,543 13,554 13,743Other 391 267 208
Total gross loans 59,366 51,315 51,823Provisionsforimpairmentchargesonloans (641) (644) (573)
Total net loans 58,725 50,671 51,250
Asat30June2012,theNewZealanddollarequivalentoftheaggregateamountofcoveredbondsissuedbyWSNZLwas$2.0billion(30June2011:$1.8billion,30September2011:$1.8billion).WestpacNZCoveredBondLimited(‘WNZCBL’)providesfinancialguaranteesinrespectofWSNZL’sobligationsunderbondsissuedfromtimetotimebyWSNZLunderitsGlobalCoveredBondProgramme.Asat30June2012,thevalueoftheassetsheldbyWNZCBL(beingtheunderlyingcollateralforthoseguarantees)was$3.76billion(30June2011:$2.75billion,30September2011:$2.75billion).TheseassetshavenotbeenderecognisedfromtheBank’sfinancialstatementsinaccordancewiththeaccountingpoliciesoutlinedinNote1tothefinancialstatementsincludedintheDisclosureStatementfortheyearended30September2011.
Note 7 Credit quality, impaired assets and provisions for impairment charges on loans
The Banking Group
Nine Months Ended 30-Jun-12 (Unaudited) Other Loans Loans for Residential for Consumer Business$ millions Mortgages Purposes Purposes Total
Total neither past due nor impaired 34,518 1,666 20,439 56,623
Past due assets: Lessthan90dayspastdue 1,149 137 306 1,592 Atleast90dayspastdue 83 17 96 196
Total past due assets 1,232 154 402 1,788 Individually impaired assets 151 - 804 955
Total gross loans 35,901 1,820 21,645 59,366
Individuallyassessedprovisions 52 - 226 278 Collectivelyassessedprovisions 65 73 259 397
Total provisions for impairment charges on loans and credit commitments 117 73 485 675 Provisionforcreditcommitments - - (34) (34)
Total provisions for impairment charges on loans 117 73 451 641
Total net loans 35,784 1,747 21,194 58,725
Westpac New Zealand Limited 16
Notestothefinancialstatements
Note 8 Deposits
The Banking Group
30-Jun-12 30-Jun-11 30-Sep-11$ millions Unaudited Unaudited Audited
Deposits at fair value Certificatesofdeposit 973 1,469 1,556
Total deposits at fair value 973 1,469 1,556
Deposits at amortised cost Non-interestbearing,repayableatcall 2,962 2,650 2,699Otherinterestbearing: At call 16,013 10,776 11,403 Term 21,897 18,686 19,228
Total deposits at amortised cost 40,872 32,112 33,330
Total deposits 41,845 33,581 34,886
Note 9 Debt issues
The Banking Group
30-Jun-12 30-Jun-11 30-Sep-11$ millions Unaudited Unaudited Audited
Short-term debt Commercialpaper 7,432 5,310 7,229
Total short-term debt 7,432 5,310 7,229
Long-term debt Non-domesticmedium-termnotes 6,384 8,235 8,803Domesticmedium-termnotes 2,071 1,593 1,598
Total long-term debt 8,455 9,828 10,401
Total debt issues 15,887 15,138 17,630
Debtissuesatamortisedcost 8,423 9,368 9,903Debtissuesatfairvalue 7,464 5,770 7,727
Total debt issues 15,887 15,138 17,630
30-Jun-12 30-Jun-11 30-Sep-11$ millions Unaudited Unaudited Unaudited
Movement in debt issues Balanceatbeginningoftheperiod/year 17,630 15,439 15,439Issuancesduringtheperiod/year 11,107 13,859 17,788Repaymentsduringtheperiod/year (12,137) (12,784) (15,120)Effectofforeignexchangemovementsduringtheperiod/year (779) (1,269) (534)Effectoffairvaluemovementsduringtheperiod/year 66 (107) 57
Balance at end of the period/year 15,887 15,138 17,630
Asat30June2012,theBankingGrouphadNewZealandGovernmentguaranteeddebtof$2,039milliononissue(30June2011:$3,789million,30September2011:$4,073million).RefertoGuaranteearrangementsonpages1and2forfurtherinformationonNewZealandGovernmentguaranteeddebt.
On12July2012,theBankissued$620millionofdomesticunsecuredmediumtermnotes.
Note 10 Related entitiesOn9May2012,theBankrepurchasedall20,000BvotingsharesfromWestpacOverseasHoldingsNo.2PtyLimited(‘WOHL’)(representing12%ofthevotingsecuritiesoftheBankthatWOHLhadadirectqualifyinginterestin).Theseshareswereimmediatelycancelledonrepurchase.Followingtherepurchaseandcancellationofthe20,000Bvotingshareson9May2012,WNZGLholds100%ofthevotingsecuritiesoftheBank.On1November2011,theNZBranchtransferredadditionalbusinessactivitiesandassociatedemployeestotheBank,whichwasaccountedforasabusinesscombination(refertoNote2Businesscombination–transferofoperationsforfurtherdetails).TherehavebeennootherchangestothestructureorcompositionoftheBankingGroupsince30September2011.ControlledentitiesoftheBankasat30September2011aresetoutinNote26tothefinancialstatementsincludedintheDisclosureStatementfortheyearended30September2011.
Westpac New Zealand Limited 17
Notestothefinancialstatements
Note 11 Commitments and contingent liabilities
The Banking Group
30-Jun-12 30-Jun-11 30-Sep-11$ millions Unaudited Unaudited Audited
Commitments for capital expenditure Duewithinoneyear 1 12 2
Other expenditure commitments: Oneyearorless 77 85 89 Betweenoneandfiveyears 285 38 306 Overfiveyears - - 34
Total other expenditure commitments 362 123 429
Lease commitments (all leases are classified as operating leases) Premisesandsites 211 257 230Motorvehicles 6 8 8
Total lease commitments 217 265 238
Lease commitments are due as follows: Oneyearorless 42 56 44 Betweenoneandfiveyears 108 120 104 Overfiveyears 67 89 90
Total lease commitments 217 265 238
Other contingent liabilities and commitments Directcreditsubstitutes 79 59 78Loancommitmentswithcertaindrawdown 192 140 164Transactionrelatedcontingentitems 803 253 257Short-term,selfliquidatingtraderelatedcontingentliabilities 386 344 339 Othercommitmentstoprovidefinancialservices 19,138 11,162 11,403
Total other contingent liabilities and commitments 20,598 11,958 12,241
Note 12 Segment informationTheBankingGroupoperatespredominantlyintheconsumer,businessandinstitutionalbankingsectorswithinNewZealand.Onthisbasis,nogeographicalsegmentinformationisprovided.Thebasisofsegmentreportingreflectsthemanagementofthebusiness,ratherthanthelegalstructureoftheBankingGroup.Thereisnodifferenceinaccountingmeasurementbetweenthemanagementandlegalstructures.Theoperatingsegmentresultshavebeenpresentedonamanagementreportingbasisandconsequentlyinternalchargesandtransferpricingadjustmentshavebeenreflectedintheperformanceofeachoperatingsegment.Intersegmentpricingisdeterminedonacostrecoverybasis.TheBankingGroupdoesnotrelyonanysinglemajorcustomerforitsrevenuebase.TheBankingGroup’soperatingsegmentsaredefinedbythecustomerstheyserveandtheservicestheyprovide.TheBankingGrouphasidentifiedthefollowingmainoperatingsegments:
■■ RetailBankingprovidesfinancialservicesforprivateindividuals;■■ Wealthprovidesfinancialservicesforhighnetworthindividuals,fundsmanagementandinsurancedistribution;■■ BusinessBankingprovidesfinancialservicesforsmalltomediumsizedenterprisecustomers,corporatesandagriculturalbusinesses.BusinessBankingalsoprovidesdomestictransactionalbankingtotheNewZealandGovernment;and
■■ InstitutionalBankingprovidesabroadrangeoffinancialservicestolargecorporate,institutionalandgovernmentcustomers1.RetailBankingandWealthhavebeenaggregatedanddisclosedastheConsumerBankingreportablesegment.BusinessBankingandInstitutionalBankingareseparatereportablesegments.Reconcilingitemsprimarilyrepresent:
■■ businessunitsthatdonotmeetthedefinitionofoperatingsegmentsunderNZIFRS8Operating Segments;■■ eliminationentriesonconsolidationoftheresults,assetsandliabilitiesoftheBankingGroup’scontrolledentitiesinthepreparationoftheconsolidatedfinancialstatementsoftheBankingGroup;
■■ resultsofcertainentitiesincludedformanagementreportingpurposes,butexcludedfromtheconsolidatedfinancialstatementsoftheBankingGroupforstatutoryfinancialreportingpurposes;and
■■ resultsofcertainbusinessunitsexcludedformanagementreportingpurposes,butincludedwithintheconsolidatedfinancialstatementsoftheBankingGroupforstatutoryfinancialreportingpurposes.
Netinterestincomeandnon-interestincomehavebeenincludedinthefollowingtabletoalignwiththeinformationprovidedtothe‘chiefoperatingdecisionmaker’.Comparativeinformationfornetoperatingincomefromexternalcustomersandnetinternaloperatingincomehasbeenchangedtoensureconsistentpresentationwiththecurrentreportingperiod.
1 On1November2011,theNZBranchtransferredadditionalinstitutionalbankingbusinessactivitiesandassociatedemployeestotheBank(refertoNote2Businesscombination–transferofoperationsforfurtherdetails).FurtherinformationontheNZBranchisavailableinWestpacBankingCorporation’smostrecentlypublishedDisclosureStatement.
Westpac New Zealand Limited 18
Notestothefinancialstatements
Note 12 Segment information (continued) The Banking Group
Consumer Business Institutional Reconciling $ millions Banking Banking Banking
1 Items Total
Nine months ended 30 June 2012 (Unaudited) Netoperatingincomefromexternalcustomers 1,121 785 144 (666) 1,384 Netinternaloperatingincome (293) (348) (18) 659 -
Net operating income 828 437 126 (7) 1,384
Netinterestincome 609 373 100 35 1,117 Non-interestincome 219 64 26 (42) 267
Net operating income 828 437 126 (7) 1,384 Operatingexpenses (149) (55) (13) (390) (607)Impairmentchargesonloans (44) (84) (3) - (131)
Profit before income tax expense 635 298 110 (397) 646
Total gross loans 31,285 21,978 6,302 (199) 59,366 Total deposits 23,906 10,941 6,025 973 41,845
Nine months ended 30 June 2011 (Unaudited) Netoperatingincomefromexternalcustomers 1,150 808 - (780) 1,178Netinternaloperatingincome (391) (405) - 796 -
Net operating income 759 403 - 16 1,178
Netinterestincome 548 343 - 60 951Non-interestincome 211 60 - (44) 227
Net operating income 759 403 - 16 1,178Operatingexpenses (155) (56) - (362) (573)Impairmentchargesonloans (49) (128) - (12) (189)
Profit before income tax expense 555 219 - (358) 416
Total gross loans 30,368 21,173 - (226) 51,315Total deposits 22,283 9,744 - 1,554 33,581
Year ended 30 September 2011 (Audited) Netoperatingincomefromexternalcustomers 1,548 1,079 - (1,003) 1,624Netinternaloperatingincome (510) (526) - 1,036 -
Net operating income 1,038 553 - 33 1,624
Netinterestincome 755 472 - 89 1,316Non-interestincome 283 81 - (56) 308
Net operating income 1,038 553 - 33 1,624Operatingexpenses (208) (76) - (487) (771)Impairmentchargesonloans (64) (167) - 7 (224)Shareofprofitofassociateaccountedforusingequitymethod - - - 1 1
Profit before income tax expense 766 310 - (446) 630
Total gross loans 30,625 21,421 - (223) 51,823Total deposits 22,908 10,387 - 1,591 34,886
1 Representstheeightmonthresultofthetransferredbusinessoperationssincetheacquisitiondateon1November2011,asincludedintheBankingGroup’sconsolidatedincomestatement.
Note 13 Insurance businessTheBankingGroupdoesnotconductanyinsurancebusiness(asthattermisdefinedintheOrder).
Note 14 Capital adequacyTheinformationcontainedinthisnotehasbeenderivedinaccordancewiththeBankingGroup’sconditionsofregistrationwhichrelatetocapitaladequacyandthedocument‘Capitaladequacyframework(internalmodelsbasedapproach)’(BS2B)issuedbytheReserveBank.Duringtheninemonthsended30June2012,theBankingGroupcompliedinfullwithallitsexternallyimposedcapitalrequirements.
Westpac New Zealand Limited 19
Notestothefinancialstatements
Note 14 Capital adequacy (continued)The Banking Group’s capital summary
The Banking Group
30-Jun-12 $ millions Unaudited
TierOneCapital 5,535 Less deductions from Tier One Capital (701)
Total Tier One Capital 4,834
TierTwoCapital 1,143 Less deductions from Tier Two Capital (49)
Total Tier Two Capital 1,094
Total Capital 5,928
Changes in capital structure B voting sharesOn9May2012,theBankrepurchasedtheBvotingsharesfromWOHL.Eachsharewasrepurchasedfor$1pershare.Theseshareswereimmediatelycancelledonrepurchase.TherewerenoBvotingsharesonissueasat30June2012(30June2011:20,000,30September2011:20,000)withnilaggregateparvalue(30June2011:$0.02million,30September2011:$0.02million).
Basel II ThetablebelowisdisclosedinaccordancewithClause1ofSchedule12totheOrderandrepresentsthecapitaladequacycalculationbasedontheReserveBankdocument‘Capitaladequacyframework(internalmodelsbasedapproach)’(BS2B).
The Banking Group
30-Jun-12 % Unaudited
Capital adequacy ratios TierOneCapitalratio 11.1 TotalCapitalratio 13.6
Reserve Bank minimum ratios TierOneCapitalratio¹ 4.0 TotalCapitalratio 8.0
1 LocallyincorporatedregisteredbankshavingthebenefitoftheWholesaleFundingGuaranteeFacilityarerequiredtomaintainanadditional2%TierOneCapitalratiobuffer.ForfurtherinformationabouttheWholesaleGuaranteerefertoGuaranteearrangementsonpages1and2,ortheBank’sDisclosureStatementfortheyearended30September2011.
The Banking Group Pillar 1 total capital requirement
The Banking Group
30-Jun-12 Total Capital $ millions Requirement
Credit risk Exposuressubjecttotheinternalratingsbasedapproach: Residentialmortgages 1,047 Otherretail(creditcards,personalloans,personaloverdrafts) 194 Smallbusiness 97 BankingGroup–Corporate/Businesslending 1,250 Sovereign 20 Bank 36
Total exposures subject to the internal ratings based approach 2,644
Exposuresnotsubjecttotheinternalratingsbasedapproach: Equityexposures 16 Specialisedlendingsubjecttotheslottingapproach 373 Exposuressubjecttothestandardisedapproach 89
Total exposures not subject to the internal ratings based approach 478
Total credit risk1 3,122
Operational risk 327 Market risk 50
Total 3,499
1 AsdisclosedintheBank’sconditionsofregistration,thevalueofthescalarusedindeterminingtheminimumcapitalrequirement(RequiredRegulatoryCapital)is1.06.
Westpac New Zealand Limited 20
Notestothefinancialstatements
Note 14 Capital adequacy (continued)Pillar 2 capital for other material risk TheBankingGroup’sinternalcapitaladequacyassessmentprocessidentifiesandmeasuresall‘othermaterialrisk’,whichisacombinationofbusinessrisk,liquidityriskandotherassetrisk.Theserisksaredefinedas:
■■ Businessrisk–reflectstheriskassociatedwiththevulnerabilityofalineofbusinesstochangesinthebusinessenvironment.■■ Liquidityrisk–isthepotentialinabilitytomeetpaymentobligationsastheycomedue,withoutincurringunacceptablelosses.■■ Otherassetrisk–reflectsthestrategicriskassociatedwiththecompositionofthebalancesheetthatisnotreflectedinotherriskcategories.
TheBankingGroup’sinternalcapitalallocationfor‘othermaterialrisk’is:
The Banking Group
30-Jun-12 $ millions Unaudited
Internal capital allocation Othermaterialrisk 321
Note 15 Risk management
15.1 Credit risk
The Banking Group’s residential mortgages by loan-to-value ratio (‘LVR’) as at 30 June 2012 (Unaudited)InordertocalculateoriginationLVR,thecurrentexposureisthatusedintheinternalratingsbasedapproachformortgagelending.Forloansoriginatedfrom1January2008,theBankutilisesitsloanoriginationsystem.Forloansoriginatedpriorto1January2008,theoriginationLVRisnotseparatelyrecorded,andthereforenotavailablefordisclosureasrequiredunderClause7ofSchedule12totheOrder.Fortheseloans,theBankutilisesitsdynamicLVRprocesstocalculateanoriginationLVR.ExposuresforwhichnoLVRisavailablehavebeenincludedinthe‘Exceeds90%’categoryinaccordancewiththerequirementsoftheOrder.
The Banking Group
30-Jun-12 (Unaudited) Exceeds Exceeds Exceeds Does not 60% and 70% and 80% andLVR range ($ millions) Exceed 60% not 70% not 80% not 90% Exceeds 90% Total
On-balancesheetexposures 13,431 5,735 7,922 5,560 3,155 35,803 Undrawncommitmentsandotheroff-balancesheet exposures 3,963 953 917 387 216 6,436
Value of exposures 17,394 6,688 8,839 5,947 3,371 42,239
15.2 Liquidity risk
Liquid assets ThetablebelowshowstheBankingGroup’sholdingofliquidassetsandrepresentsthekeyliquidityinformationprovidedtomanagement.LiquidassetsincludehighqualityassetsreadilyconvertibletocashtomeettheBankingGroup’sliquidityrequirements.Inmanagement’sopinion,liquidityissufficienttomeettheBankingGroup’spresentrequirements.
The Banking Group
30-Jun-12 $ millions Unaudited
Cashandbalanceswithcentralbanks 1,347 Supranationalsecurities 410 NZGovernmentsecurities 4,064 NZpublicsecurities 234 NZcorporatesecurities 2,619 Residentialmortgage-backedsecurities 3,992
Total liquid assets 12,666
Westpac New Zealand Limited 21
Notestothefinancialstatements
Note 16 Concentration of credit exposures to individual counterpartiesThefollowingcreditexposuresarebasedonactualcreditexposurestoindividualcounterpartiesandgroupsofcloselyrelatedcounterparties.Thenumberofindividualbankcounterparties(whicharenotmembersofagroupofcloselyrelatedcounterparties),andgroupsofcloselyrelatedcounterpartiesofwhichabankistheparent,towhichtheBankingGrouphasanaggregatecreditexposurethatequalsorexceeds10%oftheBankingGroup’sequity:
■■ asat30June2012wasnil;and■■ inrespectofpeakend-of-dayaggregatecreditexposureforthethreemonthsended30June2012wasnil.Thenumberofindividualnon-bankcounterparties(whicharenotmembersofagroupofcloselyrelatedcounterparties),andgroupsofcloselyrelatedcounterpartiesofwhichabankisnottheparent,towhichtheBankingGrouphasanaggregatecreditexposureorpeakend-of-dayaggregatecreditexposurethatequalsorexceeds10%oftheBankingGroup’sequity:
■■ asat30June2012wasonecounterpartywithacreditratingofA-orA3orabove,oritsequivalent,havinganaggregatecreditexposurebetween15%-19%;and
■■ forthethreemonthsended30June2012wasonecounterpartywithacreditratingofA-orA3orabove,oritsequivalent,havingapeakend-of-dayaggregatecreditexposurebetween15%-19%.
Thepeakend-of-dayaggregatecreditexposureshavebeencalculatedbydeterminingthemaximumend-of-dayaggregateamountofactualcreditexposureovertherelevantthree-monthperiodandthendividingthatamountbytheBankingGroup’sequityasattheendoftheperiod.Creditexposurestoindividualcounterparties(notbeingmembersofagroupofcloselyrelatedcounterparties)andtogroupsofcloselyrelatedcounterpartiesexcludeexposurestoconnectedpersons,tothecentralgovernmentofanycountrywithalong-termcreditratingofA-orA3orabove,oritsequivalent,ortoanybankwithalong-termcreditratingofA-orA3orabove,oritsequivalent.ThesecalculationsrelateonlytoexposuresheldinthefinancialrecordsoftheBankingGroupandwerecalculatednetofindividuallyassessedprovisions.
Note 17 Events after the reporting dateOn12July2012,theBankissued$620millionofdomesticunsecuredmediumtermnotes.
Westpac New Zealand Limited