Analysis of ANZ Banking Group's Role in Australia's Financial System

This report provides an overview of the Australian financial system and analyzes the role of Australia and New Zealand Banking Group (ANZ) within it. It details ANZ's sources and uses of funds, its asset liability management (ALM) strategies for managing interest rate, liquidity, and foreign currency risks, and the importance of present value calculations in its financial operations. The report includes a competitive analysis, comparing ANZ's financial performance with other major Australian banks, highlighting its profitability, efficiency, and revenue growth. Furthermore, it examines ANZ's participation in financial markets, including its presence on the ASX and its involvement in derivatives trading, while also noting the regulatory framework governing the banking group. The report concludes that ANZ is a significant driver of diversification within the Australian financial system.

FINANCIAL INSTITUTIONS
AND MARKET

INTRODUCTION
The Australian financial system comprises of activities that involve
borrowing and lending funds in addition to transmit of the ownership
of financial claims.
Some of the services are:
 Authorised deposit-taking institutions
 Insurance
 Superannuation
 Financial markets
 Payment systems

Australia and New Zealand
Banking Group
 Australia and New Zealand Banking Group (ANZ) is a most
significant bank in Australia
 It has worldwide presence and offers a wide range of financial
operations both in domestic as well as overseas market.
 This report would entail in describing how ANZ has driven up the
functionalities of the financial system of Australia through its
activities and performance.

Sources of funds for ANZ

Sources of funds
 Ordinary Equity Capital
 Retained earnings
 Reserves
 Trading securities
 Derivative financial instruments
 Preference share capital
 Treasury shares

Uses of funds
 Purchases
 Interest payments
 Payment of collaterals
 Amortised values of loan origination expenses
 Payment of share-based compensation expenses
 Payments of leases
 Tax implications

Asset Liability management
ALM for managing three major kinds of risk
 Interest rate risk
 Liquidity risks
 Foreign currency risk

Present Value of Money
 It is very clear that 1 AUD of today is not equivalent to 1 AUD
tomorrow due tot its potential earning capabilities.
 Therefore to ascertain the net present value of expected cash inflows
ANZ takes risk free rate as discounting rate and considers time value
of money

Cash Flows for ANZ
Cash inflows or outflows comprises of
 Premiums
 Expenses
 Redemptions
 Benefits payments
 Bonuses

Competitive Analysis

Comparison
 ANZ has sound financial position with increased profitability in
year 2014 as compared to year 2013 with consistent results in term
of solid ROE and ROCE.
 The efficiency ratio of the bank remained below 50% as compared
to the industry.
 ANZ’s operating expenses are comparable to the other 3 national
banks of Australia.
 There has been a revenue growth and PAT by 8% as compared to
the other players in the industry.

Participation of ANZ in the
financial markets