News Release
For release: 17 February 2017

Transcript: Trading Update – BlueNotes interview
with ANZ CEO Shayne Elliott
The following is a transcript of a video interview with ANZ Chief Executive Officer Shayne
Elliott discussing ANZ’s first quarter 2017 trading update which was released today.
The interview was conducted by Andrew Cornell, Managing Editor of BlueNotes, ANZ’s digitalpublication for news, opinion and insight and can be viewed at www.bluenotes.anz.com
Andrew Cornell

Good morning Shayne. Thanks very much for joining us again on BlueNotes
on the morning of the trading update. It looks a very solid result particularly strong growth in retail and commercial in Australia; gooddeposits growth; good markets performance. Were you happy with thecomposition and is it sustainable?

Shayne Elliott

Yes, we’re pretty pleased with the result. I mean it’s early days, it’s the firstquarter of the year and we’re going through quite a transformation at ANZ
but yes, we’re really pleased with how the year has started. We’re getting
growth in right areas – the areas that we committed to, the areas where wewant to grow and we’re seeing the performance, even in global markets, arecoming through exactly where you would expect them to be. There’s been alittle bit more volatility, a little bit more customer activity, and so that is I
think a really pleasing way to start the year.

Andrew Cornell

When we look at revenue and growth in particular – for a long time we’ve
warned about a low-growth environment, to expect a low-growthenvironment. Given the background of what you’ve said in the past, is it that
we’re growing too fast even?

Shayne Elliott

I don’t know that we’re growing too fast. I think that the reality is that theeconomy has slowed down a little bit and Australia’s still a great place to be;
New Zealand’s a great place to be; Asia’s a great place to be. But the growth
rates have just tempered down a little bit and we’ve seen that. And that
affects our business – we reflect the state of the economy by-in-large andyou see across the banking sector revenue growth, asset growth, lending
growth – it’s all just been a little bit more subdued than we’ve been used to.
And that puts the onus on us to be just even more focused on productivity
and efficiency to ensure that we can continue to deliver great things forcustomers but also deliver a decent result for shareholders.

Andrew Cornell

And indeed one of the real strengths here looking at the numbers is that cost
performance. You’ve made significant change in the 14 months or so thatyou’ve been here now. Can you talk us through those cost reductions andshould we expect more? You mention that the point of this is to pass on thecost reductions.

Shayne Elliott

We’ve had a view that the world that we live in is just slowing a little bit andtherefore, as I said, in that view we’ve got to be even more efficient if wewant to win and be winning with our customers.

Australia and New Zealand Banking Group Limited

ABN 11 005 357 522

So we started early I think, and we delivered a great cost outcome last year
where we kept costs pretty flat and this year, well in this quarter anyway, weactually got costs down and that’s a pretty big step for large organisations
like this and there clearly has to be more to come. Why? Because that’s theonly way we’re going to have the resources to deliver really competitive
products for our customers and be able to invest in new things, newtechnology, the whole kind of digital platform that we want to build to service
our customers better.
Andrew Cornell

And that’s the tension isn’t it? You want to take costs out of the ongoing
business but remain the best in digital. Have you got the kind of capacity toinvest in that full slate of digital technology that you want to?

Shayne Elliott

I think we’ve got enough, and that’s something that we can never haveenough money to invest in digital. The reality is that it’s about getting theright cost mix. So we’ve really focused in terms of where the cost out has
been, we’ve really focused around the non-customer-facing costs. Just thebureaucracy, how we run things at the bank, to simplify the place, to be
doing less things in less places and do those things really really well. We
actually have a cost benefit out of that and that allows us to reinvest some ofthat into more customer-focused costs. That’s things like Apple Pay, things
like the whole digital experience that we want to continue to improve.

Andrew Cornell

The other area of concern coming into this reporting season, I know not somuch for ANZ but for the environment in general, was that credit quality
story – again a good result here but is that something that we should expect
over the 12 months ahead?

Shayne Elliott

So we’ve always got to be cautious when we look at credit quality because,
you know, one quarter doesn’t make a year and we know that historically,
well for our business away, the first quarter is usually a low-point of credit
costs. It’s usually the most benign for all sorts of seasonal reasons. Having
said that, a year ago when we had a full year result we said when looking
forward we would expect 2017 to be more or less the same as 2016 in termsof credit costs. Sitting where we are today, with that proviso our first quarter
isn’t always the best indicator, you’d have to say it’s looking a little more
optimistic today. So we expect them to be marginally better than that but asI said it’s early days.

Andrew Cornell

Another one that’s perennial in recent years for banks is the capital position,
the regulatory environment is still not certain, we’re getting a bit morecertainty but good capital generation here and some asset sales still
projected for the year ahead. Can you talk us through how you’re looking oncapital?

Shayne Elliott

So our number one priority is to have really strong organic capital generation
i.e. that we just run this business really well, servicing customers that will
naturally generate cash that will boost our capital position and that was reallya standout, I believe, in the quarter. And what we’re seeing here is almost adoubling of that capital generation in this quarter compared to what it has
been over the last number of years. So that alone has put us in a greatposition. And then on top of that we’ve been disposing of non-core assets –businesses and assets that we don’t believe are important for our future
customer franchise and they even add more into that capital position – not inthis quarter but they certainly will come in the future.

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So we’ve really transformed ANZ from a capital position pretty early on I
think and there’s more to come on that and that says we’re in a very, verystrong capital position. In fact, it’s the strongest we’ve been in for a longtime and I think relative to our peers we’re in an incredibly strong position.
Andrew Cornell

Much of that reshaping that you talk about has been in the institutional bank,
how does that play out in terms of customer satisfaction and theperformance of the institution?

Shayne Elliott

We made it clear that the right thing to do for institutional was to be a more
focused bank. To be focused on those customers that are really on-strategy
for us. And that’s essentially customers who are in the business of moving
goods and money around the region, and that’s what we do really, reallywell. So yes we’ve been shrinking our balance sheet, we’ve been shrinking
our number of customers. There’s always a risk in that - are you shrinking
the right customers and assets? And I think the team here have done a reallyfantastic job. Again, it’s early days, but again the right assets are going to
the right customers. What we’re seeing is margin improvement and actually
we’ll be releasing some data soon that will show that the customer
satisfaction, particularly in our Asian franchise, is actually holding up andimproving as a result. And that may seem counter-intuitive but it’s not – it’s
because we’re able to focus our smaller resources against those customers
that we really care about, that we know we can do a great job for and that’s I
think really commendable for the institutional team.

Andrew Cornell

Well thanks very much for speaking with BlueNotes again, good luck for theyear ahead.

Shayne Elliott

Thank you.

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