Banks. Macquarie Bank Limited. Australia. Full Rating Report. Key Rating Drivers. Rating Sensitivities. Ratings

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1 Australia Full Rating Report Ratings Foreign Currency Long-Term IDR Short-Term IDR A F1 Viability Rating a Support Rating 3 Support Rating Floor BB Sovereign Risk Long-Term Foreign-Currency IDR Long-Term Local-Currency IDR Outlooks Long-Term Foreign-Currency IDR Sovereign Long-Term Foreign- Currency IDR Sovereign Long-Term Local- Currency IDR Financial Data 31 Mar 15 AAA AAA Stable Stable Stable 31 Mar 14 Total assets (USDm) 131, ,010 Total assets (AUDm) 172, ,911 Total equity (AUDm) 11,126 9,031 Operating profit (AUDm) 1,177 1,175 Published net income 1, (AUDm) Comprehensive income 1,796 1,280 (AUDm) Operating ROAA (%) Operating ROAE (%) Internal capital generation (%) Fitch Core Capital/ weighted risks (%) Tier 1 ratio (%) Related Research Ratings Navigator (August 2015) Macquarie Group Limited Ratings Navigator (August 2015) Macquarie Group Limited () Fitch: Still Higher Aussie Bank Capital Expected From New Rules (August 2015) Fitch: Higher Mortgage Risk-Weights First Step to Strengthen Australian Bank Capital (July 2015) Analysts Tim Roche tim.roche@fitchratings.com Andrea Jaehne andrea.jaehne@fitchratings.com Key Rating Drivers Balance-Sheet Strength: The Issuer Default Ratings (IDRs) and Viability Rating (VR) of (MBL) reflect its solid liquidity and capitalisation, robust risk management, and diverse business mix, offset by earnings volatility and a larger risk appetite than Australian retail banks. Strong Risk Management: Fitch Ratings believes MBL s risk controls are strong and adhere to the framework employed by its parent, Macquarie Group Limited (MGL; A /Stable). High Growth Rates: We expect MBL s organic loan growth to moderate in the financial year ended 31 March 2016 (FY16). MBL s loans, particularly Australian mortgages, have expanded strongly since FYE12, and may leave the bank susceptible to a downturn in the domestic housing market. However, we do not believe weakening credit standards are a major growth driver, as its underwriting practices appear in line with market standards and some of the growth has come from the acquisition of portfolios from other banks. Opportunistic growth through acquisitions is possible the bank bought a USD4bn portfolio of operating aircraft leases in FY15. We expect the balance-sheet impact of any substantial purchase to be offset by management action, such as raising fresh capital and funding. Sound Liquidity Management: We expect MBL to maintain its conservative approach to liquidity management this is a key offset to the risks associated with the bank s reliance on offshore wholesale funding. Cash and liquid assets totalled AUD23.8bn at FYE15, greater than all its wholesale funding maturities in FY16 (AUD20.4bn). Solid Capitalisation: MBL s solid capital position helps to offset the bank s higher risk appetite than Australian retail banks. We believe the bank will maintain capital ratios around the levels it reported at FYE15, even if loan growth continues to be strong. Full Basel III requirements have been met, and the bank is well positioned to meet increased minimum average risk weights for Australian mortgages and the incoming leverage ratio. Volatile Earnings Streams: The stability of MBL s earnings profile has improved since FY08, with increased funds under management, and lending and leasing activities. But investment banking remains a key part of its business, and we therefore expect earnings to remain more volatile than at other Australian banks. We believe the transfer of part of its fund management activity to MGL s non-banking arm in April 2015 will have a modest negative impact on FY16 after-tax profit, but income from the lease portfolio bought in FY15 should offset this from FY17. Moderate Likelihood of Support: The Support Rating and Support Rating Floor reflect our view of a moderate chance of support from the authorities. We believe MBL is the most likely entity within MGL to receive sovereign support, being the only group entity permitted to take deposits. Rating Sensitivities Weaker Capital or Liquidity: MBL s ratings are likely to come under downward pressure in the event of a significant weakening in capital and liquidity, particularly if this should occur in conjunction with a deteriorating operating environment and/or an increase in risk appetite. Any damage to the reputation of the bank s franchise could also result in negative ratings action. Positive Rating Action Unlikely: Volatile earnings in a number of MBL s business divisions, and the bank s specialised franchise outside Australia, limit upside potential for the ratings. 3

2 Figure 1 External Customer Revenue Americas Asia (%) Australia Europe Operating Environment MBL is a part of MGL, the most internationally active Australian banking group. Major markets for the group include Australia, North America (primarily the US), and Europe most of these markets have low systemic risk, as indicated by macro-prudential indicators of 1. Asia is a relatively small component (Figure 1). We believe the outlook for MBL s major markets is mixed for FY16, although strong regulatory oversight in Australia ought to help ensure it can withstand a significant deterioration in the operating environment, if it arose FY14 FY15 Company Profile MBL conducts the banking operations of the broader Macquarie group, including its deposittaking activities. It was the fifth-largest Australian bank by Australian assets at 30 June 2015, accounting for 2.1% of total banking-system assets. Figure 2 Divisional NPBT (AUDm) FY15 FY14 MAM CAF 1, BFS MSG 1 18 CFM Corporate Total a 1,518 1,173 a After distributions to non-controlling interests MBL operates in five of the six divisions of MGL the exception being Macquarie capital group (MCG). Either most or all of the other divisions (corporate and asset finance (CAF), banking and financial services (BFS), Macquarie securities group (MSG), and commodities and financial markets (CFM)) reside within MBL, with the exception of Macquarie asset management (MAM). MAM s traditional asset management business was transferred to MGL s non-banking operations, Macquarie Financial Holdings Pty Limited (MFHL, A /Stable), on 15 April 2015, leaving only a small part of the asset management business in the bank. Details of each operating group can be found in the MGL full rating report (see link on Page 1). Operating group contributions to MBL s profit before tax are shown in Figure 2; services such as risk management, treasury, IT, and finance, are centralised in MGL, with MBL utilising them through outsourcing arrangements. MBL has significant international activities, which have been bolstered since FY08 through a number of acquisitions, particularly in North America. We believe the geographic diversity ought to help MBL s profitability in an Australian downturn even as it adds complexity. MBL undertakes more investment banking activities than other large Australian banks; as a result, its loans were relatively low at 42% of total assets at FYE15. Revenues are largely generated from net interest income (42% of FY15 gross revenues) and trading income (38%). Net fee and commission income was historically a significant contributor to gross revenues, although these fell significantly with the transfer of the traditional asset management operations; fee income from these operations has been classified in the profit/loss from discontinued operations line for FY15 and FY14 in the attached spreads. Management MBL s management is experienced and of sound quality; promotions to senior positions have tended to come from within the group, which also leads to a stable culture within the organisation. The board of directors is the same as that at MGL, with the exception that MBL s CEO also has a seat. Strategic objectives are consistently applied across the Macquarie group (see MGL report for details). Risk Appetite Risk is controlled centrally within MGL and details of the framework can be found in the Risk Appetite section of our Full Rating Report on MGL. Related Criteria Global Bank Rating Criteria (March 2015) MBL accounts for almost all of MGL s balance sheet, and is therefore the latter s greatest source of credit risk. Credit risk accounted for 82% of its risk-weighted assets at FYE15; that is similar to that of other Australian banks, although the source is somewhat different, with MBL having a much higher exposure to securities. Its securities underwriting appears sound, as highlighted in the Asset Quality section below. Some of these exposures relate to clientinitiated trades, with the remainder being mainly hedging; loan underwriting criteria are 2

3 Figure 3 Mortgage LVRs Australia (AUDm) 30,000 25,000 20,000 15,000 10,000 5,000 0 >50% 51%-75% 76%-90% 91%-100% >100% FYE12 FYE13 FYE14 FYE15 generally in line with the markets in which MBL operates, although consumer lending is mostly distributed through third parties. MBL s loan growth continued to be strong in FY15, with about half coming from the Australian residential mortgage portfolio. About a third of the growth was through acquired portfolios. The organic growth is relatively unseasoned; MBL only began new originations of Australian mortgages in FY12, although its exposure to higher loan-to-valuation ratios (LVRs) has fallen as a proportion of the book in FY15 (Figure 3). Organic mortgage growth ought to slow in FY16 the starting point is higher, and the regulator is seeking to slow investor mortgage growth rates. However, acquisitions of mortgage portfolios are possible. MBL has also undertaken non-mortgage acquisitions with its purchase of a USD4bn portfolio of aircraft operating leases in FY15; we believe further acquisitions are possible. These may put pressure on the bank s liquidity and capital positions; however, we expect management to offset any significant impact with fresh funding and capital, or recycle capital from lower returning assets. We believe market risk is manageable, accounting for 8% of risk-weighted assets at FYE15. Traded market risk is MBL s main form of market risk, and MBL says it transfers interest-rate risk in the banking book to its trading portfolio, where possible. The bank says its trading is undertaken primarily on behalf of clients. This has typically led to low volatility in its trading revenue. The bank says its non-traded foreign-currency exposures are hedged, unless specifically approved by the risk management group. MBL says its traded market risk is managed within three complementary limit structures; its contingent loss limits are implemented and tested using a range of price and volatility stress tests daily, including comprehensive worst-case scenarios. Multiple scenarios are set for each market. The worst-case multi-market scenario analysis is used as the basis for calculating the total capital requirement for market risk in MGL s economic capital model. MBL says that volume, maturity, and open-position limits are used to constrain concentration risk and to avoid the accumulation of illiquid positions. Value-at-Risk with a 10-day holding period and 99% confidence interval resulted in a relatively low average of AUD34m during FY15, or 0.36% of Fitch Core Capital (FCC), with a maximum of AUD63m and 0.66% (FY14: AUD38m and AUD57m, respectively). Financial Profile Asset Quality Figure 4 Future Asset Quality May be Pressured by Strong Loan Growth (%) FY15 FY14 FY13 FY12 Growth of gross loans (6.38) Impaired loans/gross loans Reserves for impaired loans/impaired loans Impaired loans less reserves for impaired loans/fitch Core Capital Loan-impairment charges/average gross loans We believe MBL s strong growth could pressure its loan quality in future periods, although there are no indications of a widespread deterioration in underwriting standards to achieve the growth. In addition, MBL has a greater exposure to commercial lending than most of its domestic peers, meaning impaired-asset levels at the bank are likely to be higher on average through the cycle. The bank also tends to have a greater exposure to resources and commodities lending than its domestic peers (about 4%, or AUD3bn, of MBL s loan book at FYE15). We believe these exposures could come under further pressure if commodities prices 3

4 remain weak, although the bank says it has either exited many of the riskier greenfield mine development exposures or the projects have moved to production. We do not expect significant losses to emerge from its mortgage portfolio. But its strong growth and relatively unseasoned portfolio mean a significant downturn in the Australian housing market may result in asset-quality pressure, though its use of lenders mortgage insurance (LMI) ought to help to limit losses. MBL s car-leasing business has had relatively stable loss rates since FY07, and we expect this to continue. These two portfolios accounted for more than half of MBL s loan book at FYE15, while the rest is broadly spread across industries. Its impaired loans expanded strongly in FY15, which led to an increase in impaired-loan ratios (FYE15: 1.62%; FYE14: 1.19%). This is due mostly to a small number of larger exposures being classified as impaired during FY15. Provisioning levels have remained relatively stable despite the increase in impaired loans, and appear adequate for the portfolio; single-name concentration is limited. Its securities exposures were sound, and are likely to remain so 85% of non-equity exposures were classified as investment-grade on MBL s internal model at FYE15, while 0.35% were at least one day past due, or impaired (FYE14: 87% and 0.24%, respectively). MBL s non-trading equity exposure totalled AUD1.6bn at FYE15, while trading equity exposures were AUD14.9bn. The latter are driven by client activity, and are almost entirely listed exposures. Earnings and Profitability Figure 5 Earnings More Volatile Than Retail Bank Peers (%) FY15 FY14 FY13 FY12 Net interest income/average earning assets Non-interest expense/gross revenues Loans and securities impairment charges/ pre-impairment operating profit Operating profit/average total assets Operating profit/risk-weighted assets Net income/average equity Figure 6 Capitalisation As per APRA rules (%) FCC CET1 FEC FYE12 FYE13 FYE14 FYE15 Note: Basel III began 1 Jan 2013, Fitch TCE/ TA We believe continued loan and lease growth (both organic and through acquisition), increased market volumes and volatility, and a further depreciation of the Australian dollar against the US dollar are likely to benefit MBL s earnings in FY16. Regulatory pressure to slow the growth of Australia s residential investor mortgages may partially offset this. Risks to the outlook include a sharp deterioration in the operating environment, leading to higher impairment charges, a reduction in market activity and adverse foreign-exchange movements. MBL s net profit after tax will be affected in FY16 by the transfer of the traditional funds management business to MFHL, although it has already been removed from operating profit and classified as profit from discontinued operations in the attached spreads. The bank has informed Fitch that from FY17 onwards this will be offset by income from the USD4bn aircraft operating lease portfolio bought in FY15. MBL s operating profit was flat in FY15. Revenue grew due to growth in loan and lease assets, and increased market volatility leading to greater client hedging activity, offset by increased operating expenses, due largely to increased activity, staff costs and the depreciation of the Australian dollar against the US dollar. However, its cost-to-income ratio was slightly down at 65.5% due to the strong revenue growth; impairment charges increased by 50% because of the growth in the collective provision to account for the higher loans and lease volumes, as well as some asset quality weakness as described in the Asset Quality section. 4

5 Figure 7 Wholesale Debt Maturity FYE15 (AUDbn) <1yr 1-2yrs 2-3yrs 3-4yrs 4-5yrs 5+yrs Equity and hybrids Loan capital Wholesale funding Capitalisation and Leverage Capital management is undertaken at the group level, although we expect MBL s capital levels to be generally stronger than for other large Australian banks given the higher risk nature of its operations. We expect MBL s capital ratios to remain relatively stable during FY16 the aircraft operating lease acquisition and associated capital raise having already been captured in the FYE15 ratios. The Australian Prudential Regulatory Authority (APRA) said in July 2015 that the minimum average risk weights for Australian mortgages must rise to at least 25% from 1 July 2016; MBL has said that this will have an impact equivalent to about AUD150m, or 20bp of CET1 capital, and is to be funded from internal sources. We believe further regulatory initiatives that result in increased capital requirements are possible over the next months, although it is too early to determine what capital management MBL will need to undertake to meet these potential new rules. Figure 8 Sound Capitalisation to Be Maintained (%) FY15 FY14 FY13 FY12 Fitch Core Capital/weighted risk Fitch Eligible Capital/weighted risks Tangible common equity/tangible assets Core Tier 1 regulatory capital ratio Internal capital generation (0.44) Note: FY12 under Basel II; Basel III for FY13 onward Both MBL s FCC and Fitch Eligible Capital ratios rose in FY15 to 11.00% and 11.71%, respectively (FYE14: 10.56% and 11.13%, respectively). FCC rose by 37%, due to solid profitability and AUD950m of capital injection from the parent (AUD500m of which relates to the capital raise for the aircraft operating lease acquisition), which more than offset a 32% increase in its risk-weighted assets, the result of strong asset growth. Its Fitch Eligible Capital also benefited from an AT1 issue of AUD430m in FY15 to which we assigned 50% equity credit. Its reported regulatory capital ratios tend to be lower than those of international peers, but this appears to be a result of the conservative implementation by the Australian regulator, with unrisk-weighted ratios ahead of many peers. MBL s CET1 ratio was 9.7% at FYE15 (it rose to 9.9% at end-1qfy16), while the Tier 1 ratio was 11.0% (FYE14: 9.6% and 10.6%, respectively). Tangible common equity/ tangible assets improved by 39bp to 6.32% in FY15. Funding and Liquidity Figure 10 Wholesale Debt by Currency FYE15 EUR 8% GBP 6% AUD 28% Other 10% Senior debt only USD 48% Figure 9 Conservative Liquidity Management Offsets Wholesale Reliance (%) FY15 FY14 FY13 FY12 Loans/customer deposits Interbank assets/interbank liabilities n.a. n.a. n.a Customer deposits/total funding (excluding derivatives) We believe its liquidity management is strong, helping to offset the group s reliance on wholesale funding; MBL s liquidity risk appetite is set so that it is able to meet all of its obligations over a 12-month period with constrained access to funding markets and a modest reduction in the bank s core businesses. The bank held AUD23.8bn of cash and liquid assets at FYE15, as well as AUD9.5bn of internally securitised residential mortgages; the latter are repoeligible with the Reserve Bank of Australia in a crisis. These holdings more than offset the AUD20.4bn of maturing wholesale debt in FY16. MBL has indicated its Basel III liquidity 5

6 coverage ratio was above 120% at FYE15, although the full disclosure of this ratio does not begin until the first reporting period after 1 July Wholesale funding made up 64% of MBL s total funding excluding derivatives at FYE15. Issuance is undertaken across a number of different programmes and includes both unsecured and secured (primarily residential mortgage and car lease-backed securitisations) deals. MBL established an AUD5bn covered bond programme in mid-2015 but is yet to issue from the programme. The weighted average term-to-maturity of debt rose to four years at FYE15 from 3.6 years at FYE14 as the bank focused on longer-term issuance. Issuance is primarily in US and Australian dollars, with foreign-currency borrowings hedged into the functional currency to the extent possible. Customer deposits made up the remaining 36% of total funding (excluding derivatives), and consisted mainly of retail deposits. Customer deposits rose by 12% in FY15; but further substantial growth appears unlikely as Australia s household savings rate moderates. 6

7 Income Statement 31 Mar Mar Mar Mar 2012 Year End Year End As % of Year End As % of Year End As % of Year End As % of USDm AUDm AUDm Earning AUDm Earning AUDm Earning Unqualified Unqualified Earning Assets Unqualified Assets Unqualified Assets Unqualified Assets 1. Interest Income on Loans Other Interest Income 3, , , , , Dividend Income Gross Interest and Dividend Income 3, , , , , Interest Expense on Customer Deposits Other Interest Expense 2, , , , , Total Interest Expense 2, , , , , Net Interest Income 1, , , , , Net Gains (Losses) on Trading and Derivatives 1, , , , Net Gains (Losses) on Other Securities Net Gains (Losses) on Assets at FV through Income Statement Net Insurance Income Net Fees and Commissions Other Operating Income Total Non-Interest Operating Income 2, , , , , Personnel Expenses 1, , , , , Other Operating Expenses 1, , , , , Total Non-Interest Expenses 2, , , , , Equity-accounted Profit/ Loss - Operating (13.0) (17.0) (0.01) Pre-Impairment Operating Profit 1, , , , , Loan Impairment Charge Securities and Other Credit Impairment Charges Operating Profit , , Equity-accounted Profit/ Loss - Non-operating Non-recurring Income Non-recurring Expense Change in Fair Value of Own Debt Other Non-operating Income and Expenses Pre-tax Profit 1, , , , Tax expense Profit/Loss from Discontinued Operations Net Income , Change in Value of AFS Investments (18.0) (0.02) (232.0) (0.20) 34. Revaluation of Fixed Assets Currency Translation Differences (29.0) (0.03) (15.0) (0.01) 36. Remaining OCI Gains/(losses) (23.7) (31.0) (0.02) (12.0) (0.01) (9.0) (0.01) 37. Fitch Comprehensive Income 1, , , Memo: Profit Allocation to Non-controlling Interests Memo: Net Income after Allocation to Non-controlling Interests , Memo: Common Dividends Relating to the Period Memo: Preferred Dividends Related to the Period Exchange rate USD1 = AUD USD1 = AUD USD1 = AUD USD1 = AUD

8 Balance Sheet 31 Mar Mar Mar Mar 2012 Year End Year End As % of Year End As % of Year End As % of Year End As % of USDm AUDm Assets AUDm Assets AUDm Assets AUDm Assets Assets A. Loans 1. Residential Mortgage Loans 22, , , , Other Mortgage Loans Other Consumer/ Retail Loans 8, , , Corporate & Commercial Loans 14, , , , Other Loans 10, , , , , Less: Reserves for Impaired Loans Net Loans 55, , , , , Gross Loans 56, , , , , Memo: Impaired Loans included above , Memo: Loans at Fair Value included above , , B. Other Earning Assets 1. Loans and Advances to Banks Reverse Repos and Cash Collateral 13, , , , , Trading Securities and at FV through Income 23, , , , , Derivatives 15, , , , , Available for Sale Securities 4, , , , , Held to Maturity Securities Equity Investments in Associates Other Securities , Total Securities 57, , , , , Memo: Government Securities included Above 5, , , , , Memo: Total Securities Pledged 4, , , , , Investments in Property Insurance Assets , , , , Other Earning Assets Total Earning Assets 113, , , , , C. Non-Earning Assets 1. Cash and Due From Banks 6, , , , , Memo: Mandatory Reserves included above Foreclosed Real Estate Fixed Assets 5, , , , , Goodwill Other Intangibles Current Tax Assets Deferred Tax Assets Discontinued Operations , Other Assets 5, , , , , Total Assets 131, , , , , Liabilities and Equity D. Interest-Bearing Liabilities 1. Customer Deposits - Current 24, , , , , Customer Deposits - Savings 5, , , , Customer Deposits - Term 6, , , , Total Customer Deposits 36, , , , , Deposits from Banks 2, , , , , Repos and Cash Collateral 8, , , , , Commercial Paper and Short-term Borrowings Total Money Market and Short-term Funding 47, , , , , Senior Unsecured Debt (original maturity > 1 year) 40, , , , , Subordinated Borrowing 1, , , , , Covered Bonds n.a. n.a Other Long-term Funding 5, , , , , Total LT Funding (original maturity > 1 year) 48, , , , , Derivatives 13, , , , , Trading Liabilities 4, , , , , Total Funding 114, , , , , E. Non-Interest Bearing Liabilities 1. Fair Value Portion of Debt Credit impairment reserves Reserves for Pensions and Other Current Tax Liabilities Deferred Tax Liabilities Other Deferred Liabilities Discontinued Operations Insurance Liabilities , , , , Other Liabilities 5, , , , , Total Liabilities 122, , , , , F. Hybrid Capital 1. Pref. Shares and Hybrid Capital accounted for as Debt Pref. Shares and Hybrid Capital accounted for as Equity G. Equity 1. Common Equity 8, , , , , Non-controlling Interest Securities Revaluation Reserves Foreign Exchange Revaluation Reserves (107.0) (0.08) (599.0) (0.46) (658.0) (0.48) 5. Fixed Asset Revaluations and Other Accumulated OCI (66.4) (87.0) (0.05) (28.0) (0.02) (46.0) (0.04) (34.0) (0.02) 6. Total Equity 8, , , , , Total Liabilities and Equity 131, , , , , Memo: Fitch Core Capital 7, , , , , Memo: Fitch Eligible Capital 7, , , , , Exchange rate USD1 = AUD USD1 = AUD USD1 = AUD USD1 = AUD

9 Summary Analytics 31 Mar Mar Mar Mar 2012 Year End Year End Year End Year End A. Interest Ratios 1. Interest Income on Loans/ Average Gross Loans n.a. n.a. n.a. n.a. 2. Interest Expense on Customer Deposits/ Average Customer Deposits n.a. n.a. n.a. n.a. 3. Interest Income/ Average Earning Assets Interest Expense/ Average Interest-bearing Liabilities Net Interest Income/ Average Earning Assets Net Int. Inc Less Loan Impairment Charges/ Av. Earning Assets Net Interest Inc Less Preferred Stock Dividend/ Average Earning Assets B. Other Operating Profitability Ratios 1. Non-Interest Income/ Gross Revenues Non-Interest Expense/ Gross Revenues Non-Interest Expense/ Average Assets Pre-impairment Op. Profit/ Average Equity Pre-impairment Op. Profit/ Average Total Assets Loans and securities impairment charges/ Pre-impairment Op. Profit Operating Profit/ Average Equity Operating Profit/ Average Total Assets Operating Profit / Risk Weighted Assets C. Other Profitability Ratios 1. Net Income/ Average Total Equity Net Income/ Average Total Assets Fitch Comprehensive Income/ Average Total Equity Fitch Comprehensive Income/ Average Total Assets Taxes/ Pre-tax Profit Net Income/ Risk Weighted Assets D. Capitalization 1. Fitch Core Capital/ Risk Weighted Assets Fitch Eligible Capital/ Risk Weighted Assets Tangible Common Equity/ Tangible Assets Tier 1 Regulatory Capital Ratio Total Regulatory Capital Ratio Core Tier 1 Regulatory Capital Ratio Equity/ Total Assets Cash Dividends Paid & Declared/ Net Income Internal Capital Generation (0.44) E. Loan Quality 1. Growth of Total Assets (4.53) (2.99) 2. Growth of Gross Loans (6.38) 3. Impaired Loans/ Gross Loans Reserves for Impaired Loans/ Gross Loans Reserves for Impaired Loans/ Impaired Loans Impaired loans less Reserves for Impaired Loans/ Fitch Core Capital Impaired Loans less Reserves for Impaired Loans/ Equity Loan Impairment Charges/ Average Gross Loans Net Charge-offs/ Average Gross Loans Impaired Loans + Foreclosed Assets/ Gross Loans + Foreclosed Assets F. Funding and Liquidity 1. Loans/ Customer Deposits Interbank Assets/ Interbank Liabilities n.a. n.a. n.a Customer Deposits/ Total Funding (excluding derivatives) Liquidity Coverage Ratio n.a. n.a. n.a. n.a. 5. Net Stable Funding Ratio n.a. n.a. n.a. n.a. 9

10 Reference Data 31 Mar Mar Mar Mar 2012 Year End Year End As % of Year End As % of Year End As % of Year End As % of USDm AUDm Assets AUDm Assets AUDm Assets AUDm Assets A. Off-Balance Sheet Items 1. Managed Securitized Assets Reported Off-Balance Sheet Other off-balance sheet exposure to securitizations Guarantees Acceptances and documentary credits reported off-balance sheet Committed Credit Lines 2, , , , , Other Contingent Liabilities 4, , Total Assets under Management , , , B. Average Balance Sheet Average Loans 50, , , , , Average Earning Assets 96, , , , , Average Assets 116, , , , , Average Managed Securitized Assets (OBS) Average Interest-Bearing Liabilities 98, , , , , Average Common equity 7, , , , , Average Equity 7, , , , , Average Customer Deposits 30, , , , , C. Maturities Asset Maturities: Loans & Advances < 3 months Loans & Advances 3-12 Months Loans and Advances 1-5 Years Loans & Advances > 5 years Debt Securities < 3 Months Debt Securities 3-12 Months Debt Securities 1-5 Years Debt Securities > 5 Years Loans & Advances to Banks < 3 Months Loans & Advances to Banks 3-12 Months Loans & Advances to Banks 1-5 Years Loans & Advances to Banks > 5 Years Liability Maturities: Retail Deposits < 3 months Retail Deposits 3-12 Months Retail Deposits 1-5 Years Retail Deposits > 5 Years Other Deposits < 3 Months Other Deposits 3-12 Months Other Deposits 1-5 Years Other Deposits > 5 Years Deposits from Banks < 3 Months Deposits from Banks 3-12 Months Deposits from Banks 1-5 Years Deposits from Banks > 5 Years Senior Debt Maturing < 3 months Senior Debt Maturing 3-12 Months Senior Debt Maturing 1-5 Years Senior Debt Maturing > 5 Years Total Senior Debt on Balance Sheet n.a. n.a. - n.a. - n.a. - n.a. - Fair Value Portion of Senior Debt Subordinated Debt Maturing < 3 months Subordinated Debt Maturing 3-12 Months Subordinated Debt Maturing 1-5 Year Subordinated Debt Maturing > 5 Years Total Subordinated Debt on Balance Sheet 1, , , , , Fair Value Portion of Subordinated Debt D. Risk Weighted Assets 1. Risk Weighted Assets 66, , , , , Fitch Adjustments to Risk Weighted Assets Fitch Adjusted Risk Weighted Assets 66, , , , , E. Equity Reconciliation 1. Equity 8, , , , , Add: Pref. Shares and Hybrid Capital accounted for as Equity Add: Other Adjustments Published Equity 8, , , , , F. Fitch Eligible Capital Reconciliation 1. Total Equity as reported (including non-controlling interests) 8, , , , , Fair value effect incl in own debt/borrowings at fv on the B/S- CC only Non-loss-absorbing non-controlling interests Goodwill Other intangibles Deferred tax assets deduction Net asset value of insurance subsidiaries 1, , , , First loss tranches of off-balance sheet securitizations Fitch Core Capital 7, , , , , Eligible weighted Hybrid capital Government held Hybrid Capital Fitch Eligible Capital 7, , , , , Exchange Rate USD1 = AUD USD1 = AUD USD1 = AUD USD1 = AUD

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The information in this report is provided "as is" without any representation or warranty of any kind. A Fitch rating is an opinion as to the creditworthiness of a security. This opinion is based on established criteria and methodologies that Fitch is continuously evaluating and updating. Therefore, ratings are the collective work product of Fitch and no individual, or group of individuals, is solely responsible for a rating. The rating does not address the risk of loss due to risks other than credit risk, unless such risk is specifically mentioned. Fitch is not engaged in the offer or sale of any security. All Fitch reports have shared authorship. Individuals identified in a Fitch report were involved in, but are not solely responsible for, the opinions stated therein. The individuals are named for contact purposes only. A report providing a Fitch rating is neither a prospectus nor a substitute for the information assembled, verified and presented to investors by the issuer and its agents in connection with the sale of the securities. Ratings may be changed or withdrawn at any time for any reason in the sole discretion of Fitch. Fitch does not provide investment advice of any sort. Ratings are not a recommendation to buy, sell, or hold any security. Ratings do not comment on the adequacy of market price, the suitability of any security for a particular investor, or the tax-exempt nature or taxability of payments made in respect to any security. Fitch receives fees from issuers, insurers, guarantors, other obligors, and underwriters for rating securities. Such fees generally vary from US$1,000 to US$750,000 (or the applicable currency equivalent) per issue. In certain cases, Fitch will rate all or a number of issues issued by a particular issuer, or insured or guaranteed by a particular insurer or guarantor, for a single annual fee. Such fees are expected to vary from US$10,000 to US$1,500,000 (or the applicable currency equivalent). The assignment, publication, or dissemination of a rating by Fitch shall not constitute a consent by Fitch to use its name as an expert in connection with any registration statement filed under the United States securities laws, the Financial Services and Markets Act of 2000 of the United Kingdom, or the securities laws of any particular jurisdiction. 11