Australia and New Zealand Banking : ANZ Trading Update – Third Quarter FY2017

For release: 15 August 2017

ANZ's unaudited Statutory Profit for the Third Quarter to 30 June 2017 was $1.67 billion. Cash Profit for the same period was $1.79 billion.1

Financial Performance Summary (Cash Basis)

Comparisons are Cash Profit based and for the third quarter Financial Year 2017 to 30 June compared to the average of the first two quarters of Financial Year 2017 unless otherwise noted.

3Q17

Profit before provisions $2.79 billion

Provisions $243 million

Cash Profit $1.79 billion

• Cash Profit of $1.79 billion up 5.3%. Profit before Provisions increased 0.3%.

• Customer deposit growth of 2.3% with net lending asset growth of 2.0% during the quarter.

• Revenue decreased 0.3% which in part reflected a normalisation of the Markets business performance after an unusually strong first half along with the sale of 100 Queen Street.

• Expenses reduced 1% and continue to be well managed. As flagged the proceeds of the sale of 100 Queen Street are being reinvested in the business with approximately two thirds occurring in the second half, largely in the final quarter.

• The Group Net Interest Margin (NIM) was stable2, up several basis points excluding Markets. Australia Division NIM improved offsetting a decline in Institutional NIM. The Australian Bank Levy will impact the NIM in the fourth quarter being reflected within the cost of funds.

• The reshaping of the Institutional Division asset base continued with Risk Weighted Assets (RWA) reducing a further $3 billion to $156 billion, with a cumulative reduction of

  $12 billion (-7%) during the Financial Year to date. The changing profile of the book has resulted in a decline in the Division's provision charge and an improvement in the risk adjusted return (NII/Average Credit Risk Weighted Assets (CRWA)).

• Above system growth in residential mortgages in Australia has been primarily driven by the Owner Occupier segment. The Division is tracking well in respect of meeting various macro prudential requirements regarding mortgage growth.

Group Credit Quality

The total provision charge of $243 million was comprised of an Individual Provision (IP) charge of $308 million and a Collective Provision (CP) release. The release of CP was largely driven by continued reshaping of the Institutional portfolio along with some transfers to IP.

Capital

The Australian Prudential Regulation Authority Common Equity Tier 1 (CET1) ratio was 9.8% at 30 June, which incorporates 51 basis points of net organic capital generation offset by the Interim Dividend (59 bps) and adoption of the new RWA models for Australian Residential Mortgages.3 Proforma CET 1 was 10.5%.4

Australia and New Zealand Banking Group Limited ABN 11 005 357 522

Post the end of the third quarter ANZ completed the sale of the Retail and Wealth businesses in China and Singapore to DBS with Hong Kong expected to complete prior to the end of the second-half. All other transactions remain subject to regulatory approvals and completion.

CEO Commentary

ANZ Chief Executive Officer Shayne Elliott said: "This period has seen further progress in improving returns based on rebalancing our business portfolio, ongoing cost management discipline and improved capital efficiency. Although we are in period of lower sector revenue growth with some parts of the economy experiencing challenges, credit quality has improved.

"We are seeking to deliver sustainable returns to our shareholders and at the same time to live up to the expectations of our customers and the community. To do this we are changing the way we work and thinking differently to ensure we continue to provide a compelling service to our customers and make a meaningful contribution to the communities in which we operate," Mr Elliott said.

For media enquiries contact:

Paul Edwards +61-434070101

Stephen Ries +61-409655551

For investor/analyst enquiries contact:

Jill Campbell +61-412047448

Cameron Davis +61-421613819

A video interview with ANZ Chief Executive Shayne Elliott discussing the Third Quarter FY17 Trading Update is available at www.bluenotes.anz.com.

M&A & Other Items Included in Cash Profit

$m

1H17

Reported 3Q17

Asian Minority pro-forma 58

Reclassification of Asia Retail & Wealth to held for sale -284 6

Total Specified Items -226 6

Gain on sale of 100 Queen St Melbourne 112

Institutional Markets - derivative valuation adjustments 115 33

Total other items 227 33

*All items are post tax impacting the revenue line of the Profit & Loss

Footnotes

1

1 Cash Profit excludes non-core items included in Statutory profit and is provided to assist with understanding the results of the ongoing business activities of the Group.

2 Versus Group NIM at 30 March 2017 of 200 basis points (258 basis points excluding Markets) as reported in the Consolidated Financial Report & Dividend Announcement page 20.

3 In an ASX release on 1 June 2017 ANZ advised the average risk weight for its Australian residential mortgage lending book would increase following completion of the Australian Prudential Regulation Authority's review of ANZ's mortgage capital model. The average risk weight outcome is a dynamic calculation.

4 Proforma Common Equity Tier 1 (CET1) incorporates the capital benefit arising from the disposal of assets which have been announced but were not completed as at 30 June 2017.

Risk Adjusted Returns1 Marketsincome

% $m

5.0

4.5

4.0

3.5

3.0

2.5

1H16

2H16

1H17

3Q17

800

600

400

200

0

-200

481

1H16

Qtrly avg

418

2H16

Qtrly avg

682

1H17

Qtrly avg

513

3Q17

Adjusting for APRA regulatory changes to housing CRWAs Net interest income / Credit RWAs

Sales

Trading

Balance Sheet

Val'n adj.

Owner Occupied 1.3x system Investor 0.8x system

ANZ Growth x System (System = 1)

1.5

1.0

0.5

$b

198

182

168

159

156

0.0

Sep 15 Half Yr

Mar 16 Half Yr

Sep 16 Half Yr

Mar 17 Half Yr

June 17 Quarter

Sep-15

Mar-16

Sep-16

Mar-17

Jun-17

ANZ

System

GROSS IMPAIRED ASSETS ($b) COMMON EQUITY TIER 1 RATIO (%)

4.26

2.89

2.72

3.17

2.95

9.6

10.1

9.8

~0.7

~10.5

Sep-13

Sep-14

Sep-15 Sep-16

Jun-17

Sep-16

Mar-17

Jun-17

Announced

Jun-17

divestments Pro-forma

yet to settle

Chart Footnotes

1

1 Excludes Markets income

2 Source: ANZ analysis of APRA monthly banking statistics

Australia and New Zealand Banking Group Limited ABN 11 005 357 522