Today I want to update the ANZ New Zealand banking covenants for September 30th 2015 quarter (corresponding to the EOFY). ANZ New Zealand includes their wholly owned subsidiary UDC finance.
Once again the document I am referencing is the:
"ANZ bank New Zealand Limited Annual Report and Disclosure Statement for the year ended 30th September 2015, Number 79 issued November 2015"
Page 49, note 28 contains the information on capital adequacy.
The information supplied is as follows:
Common Equity Tier 1 ratio: 10.5% (vs RBNZ minimum of 4.5% + 2.5% buffer)
Total Tier 1 ratio: 12.7% (vs RBNZ minimum of 6.0% + 2.5% buffer)
Total Tier 1 & 2 ratio: 13.6% (vs RBNZ minimum of 8.0% + 2.5% buffer)
The improvement in these ratios could have benefittted from the $3.2b capital raising by institutional placement and subsequent share purchase plan offer to shareholders made during the financial year. However the ANZ.NZ Tier 1 capital ratio has gone down in New Zealand over the year, and no new share capital injection is apparent from the accounts. Additional capital requirements recently announced by the Australian Prudential Regulation Authority (APRA), in particular the increase in average credit risk weights for major bank Australian mortgage portfolios to 25% taking effect from 1 July 2016. So it looks like all the capital raising monies were ear marked for Australia, and the ANZ.NZ subsidiary operations have not benefitted at all.
Instead, the ANZ New Zealand operation has been shored up by the issue of two new tranches of ANZ convertible notes.
• On 5 March 2015, the Bank issued 10.0 million convertible notes (ANZ NZ ICN) to the NZ Branch at NZ$100 each,
raising NZ$1,003 million.
• On 31 March 2015, the Bank issued 500 million convertible notes (ANZ NZ CN) at NZ$1 each,
raising NZ$500 million before issue costs.
Both of these issues are structured as additional Tier 1 capital for ANZ.NZ.
Page 50 contains detailed notes on just how the ANZ NZ capital is made up. If you use that information and use it to calculate the above ratios, based on a loan book with net loans and advances of $106,357m (from the balance sheet) I calculate the above ratios as follows (total net loans and advances of broken down under Note 12 'Net Loans & Advances'):
Common Equity Tier 1 ratio: $8,441m/$106,357m = 7.9%
Total Tier 1 ratio: $10,282m/$106,357m = 9.7%
Total Tier 1 & 2 ratio: $10,984m/$106,357m = 10.3%
Those figures are a different to those on the preceding referenced page. That is because the Tier 1 and Tier 2 capital figures have been 'risk adjusted' before they went into my calculation. The risk adjustment is done because the expected capital recovery from loans should they go bad is different among the different classes of loans (corporate, sovereign, bank, retail mortgages and other retail)
SNOOPY
PS Tabulated version of above results
|
30/09/2015 (risk adj) |
30/09/2015 (book value) |
RBNZ Required |
Common Equity Tier 1 Ratio |
10.5 |
7.9 |
4.5+2.5 |
Total Tier 1 Ratio |
12.7 |
9.7 |
6.0+2.5 |
Total Tier 1&2 Ratio |
13.6 |
10.3 |
8.0+2.5 |