ASX Release
For release: 2 May 2019

Transcript of First Half 2019 Results Presentation
A transcript of the presentation of ANZ’s First Half 2019 result on Wednesday 1 May by
ANZ’s CEO Shayne Elliott and CFO Michelle Jablko follows.
This document should be read in conjunction with ANZ’s Half Year Financial materials
released via the Australian Stock Exchange, which are available in the Shareholder Centre
on the ANZ website.
All results materials are all available on shareholder.anz.com
For investor enquiries contact:
Jill Campbell, +61 412 047 448
Cameron Davis, +61 421 613 819

Australia and New Zealand Banking Group Limited

ABN 11 005 357 522

TRANSCRIPTION
Company:

ANZ

Date:

01 May 2019

Title:

Half Year Results

Time:

10:00am AEST[START OF TRANSCRIPT]
Jill Campbell:

Good morning everyone. I'm Jill Campbell, I'm the Head of Investor Relations
for ANZ. Welcome to all of those joining us in Sydney today for the presentationof ANZ's Half Year Financial Results 2019, and also anyone listening on thephone or via the webcast.
We're also livestreaming today's presentation on social media, through
Periscope and Twitter. You can access that feed by searching for ANZ Mediaon Twitter.
We've lodged a number of documents this morning with the ASX, and they're allavailable on our website in the Shareholder Centre. You can access a replay ofthe presentation along with the Q&A via our website from around mid-afternoon
today.
Our CEO Shayne Elliott, and CFO Michelle Jablko, will present for around 40
minutes, and then we'll go to Q&A. Thanks Shayne.

Shayne Elliott:

Good morning. In the six years of reporting to you as either CFO or CEO, I
cannot recall a time when the outlook for the home market operating
environment was more different than the past, but we're well prepared and havedelivered a balanced result for the times. We made progress improving returns,
strengthening capital, and delivering higher earnings per share.
We've made further improvements in preparing for a more difficult future, afuture where competitive advantage and long-term success will go to those that
understand the need for change and deliver on it at pace.

Three years ago, we laid out a plan based on a simple belief that the way tosucceed in an environment of slower growth, faster change and lower margins,
was to do a few things and do them well. As a result, we set about building asimpler, stronger and safer - more productive ANZ.
On the cost front, we've absorbed $550 million of inflation in that time, and tookout over $300 million in cost, over and above the benefit we got from sellingbusinesses.
On capital, we've sold 23 businesses and reduced risk-weighted assets in
Institutional by $50 billion. These and other actions freed up $12 billion ofcapital, which we used to re-balance our portfolio, return capital to shareholders
and invest in targeted growth.
On simplification, we've cut the number of products in Australia by a third, andsuccessfully transferred two million customers from legacy products onto
contemporary platforms.
We've simplified processes, decommissioned systems and reduced our branchfootprint in across both Australia and New Zealand by more than 20%, ascustomers moved aggressively to online solutions.
We've built a stronger and safer balance sheet. Yes, we've got more capital, but
beyond that only 18% of our Australian Home Book today is interest-only, and
86% of our Institutional book is investment grade. I feel good about thosesettings. With the lower software capitalisation balance of our peers, because
we expense more of our investment up-front.
On remediation, we resourced a team early and are well-progressed on getting
funds back to customers and learning from our mistakes.
Finally, on people, we invested in and rebuilt our senior leadership, madesignificant progress changing the way we pay people, skewed our resourcing
more heavily to software engineering and data, and changed the way we work,
adopting agile methodology across much of the Bank.
This is the most fundamental change in the structure and way of working in
decades, and is delivering results in terms of productivity, engagement andspeed.
These actions sometimes came at a short-term cost, but we're more focusedand capable as a result.

We recognise that community, regulatory and customer expectations havechanged. This is not the time to do everything. It's not the time to focus on
absolute market share growth. This is the time for prudent and targeted growth.
A time to focus on the long-term, recognising that the cost of getting it wrong
will be more than just credit losses.
Non-financial risk, including regulatory, legal and capital costs are playing an
increasing role in our assessment of risk and reward.
So, in summary, we have chosen a strategy of action over hope. We're working
hard, we've more to do, but are better prepared and have delivered a balanced
result despite the difficult conditions and outlook.
Let me now just quickly summarise the half-year result.
Relative to this time last year, profits are continuing. Operations is up 2%, andearnings per share up 5%. Return on equity increased to 12%, whilestrengthening tier 1 equity by a further 45 basis points. Net tangible assets per
share increased 4%.
Sustainable revenue growth was always going to be tough, but our diversified
business did generate a decent result overall. Absolute costs were down
another 1%, despite FX translation moving against us, despite absorbing
inflation, and despite the increased cost of compliance.
Our discipline in managing shareholders' capital is a strength. We're
comfortably above APRA's unquestionably strong target, well ahead of the2020 deadline, even after using some of our surplus capital to reduce shares on
issue.
Organic capital generation remains strong, and announced asset sales willfurther strengthen our position.
The Board has declared a fully franked dividend of $0.80 per share, and we willagain be fully neutralising the DRP on market
So, in summary, it is a tough environment but our business mix is an advantage
and our capability and determination in managing the three Cs of capital, costand change, have prepared us well.
Turning to the operating businesses. New Zealand is performing well. There
are, however, obvious concerns about potential changes to the capital regime.
Our primary focus is the impact of these proposals on the New Zealandeconomy. Let's be clear; what's good for New Zealand is good for ANZ. We
understand and support the desire for a sound financial system, but all
insurance policies come with a cost. We need to understand what level of
insurance is appropriate and affordable for the New Zealand community.
It's too early to comment on the impact for ANZ, other than to say we're in abetter position to manage any change, given the simplification andstrengthening of our New Zealand business. If the rules do change, we have anumber of practical options to manage and optimise our capital, and we have a
responsibility to do so.
We've been active in New Zealand since 1840, longer than any other bank, andwe're one of New Zealand's biggest investors. It's our intention to be active andsuccessful in New Zealand, employing thousands of Kiwis, paying a significant
amount of tax, and helping New Zealanders thrive for many years to come, but
we cannot expect our shareholders to unreasonably subsidise those ambitions.
We will therefore be making an active contribution to the debate, because it's
important for New Zealand to get this right.
Institutional is now a very well-managed business, delivering better consistent
results for shareholders and customers. Our institutional return on equity
reached almost 11% in the half, and we know we can do even better.
While we manage it as a whole, the contribution from a well-managed,
improving Asian network added diversification, growth and quality to theGroup's result, and I'm proud of that, but we know better than most that
Institutional is a tough business. Most competitors fail to generate consistently
decent returns. Most fail to generate a fair balance between customers,
shareholders and staff. We know that the credit cycle can be particularly
savage to poorly-disciplined institutional balance sheets.
Recognising those weaknesses is the first step in managing them, and we'remanaging them well. With the Institutional business in much better shape, ourprimary objective is to maintain discipline on cost, on capital, and on customer
selection. In doing so, make further improvements to generate a sustainable,
decent return for shareholders.
Australia Retail and Commercial has had the toughest headwinds. Slower
growth, tighter margins, changing customers preferences and higher
remediation costs. Our data shows that there is more stress in parts ofAustralia, particularly for retail borrowers, and particular those converting from

interest-only to principal and interest. Unsurprisingly, some of that is due to
stubbornly low wage growth, the fall in house prices, and the extension in time ittakes for houses to sell.
In terms of our approach to the market, we continue to favour owner-occupiers,
even though that comes with a drag on margins. This is a marathon and not asprint, and we've made conscious choices about where we think value resides.
We tightened standards, particularly in home lending, partly in response to ourassessment of risk and reward, and partly due to changing definitions withrespect to responsible lending.
I regret neither change. They are the right thing to do, but I do accept that we
could have implemented the changes in a more thoughtful and balanced way,
and not doing so put unreasonable stress on our processes, our people and ourcustomers.
Thinking about what's changed, it's important to remember that the industry has
benefitted from 30 years of stable, high return growth. So, we engineered a
production line to maximise efficiency and deliver those high returns.
But as we learnt in the Royal Commission, while it was an efficient process, it
did fail some people badly. We are now asking that same process to deal withnuance, judgment and exceptions at an unprecedented scale andunsurprisingly, that process is struggling and in many cases, is no longer
appropriate.
So we have two choices. We can assume the world will return to the way it was
and focus on practical solutions to manage the short term, or we can assume
that these changes require material re-engineering for the long term. I
acknowledge that some in the industry will take the first option; it's an attractive
choice, involves less disruption and will deliver better short-term results. But at
ANZ we think this would be a fundamental misreading of the environment.
Our customers and the community are demanding a different banking system
and ANZ is adapting to those expectations. We do not believe there is any
going back. That means rethinking the basis on which we compete, which
segments we focus on, what we do where and how we responsibly fulfil theneeds of our customers and we're well advanced in that work. In the short term,
we are taking targeted actions, while respecting our risk appetite andresponsible lending obligations and at the same time, investing in a morestrategic re-engineering for the long term.

The challenge for our Australian business is complex. Completing our
remediation task and rebuilding momentum in chosen areas and ensuring ourbankers and customers have the tools needed for long-term success in a fastchanging world, it became clear that a single governance model for such acomplex business was no longer optimal.
Other parts of our business are running well and so we can focus more of ourresources on building the foundation for longer-term success in our Australianbusiness, so we've made changes to the way we organise ourselves, how weprioritise work and the leadership of the team. I'm excited about these changes.
We've been able to take advantage of the diverse skills and experience at ANZ
to build a strong, capable team, fit for the times and to maximise the opportunity
ahead.
While we've transformed our Bank more in the last three years then any time inour history, the market has been changing even faster. Headwinds that weforesaw in 2016 are stronger than predicted and as we said before, we're
fortunate that we started getting costs and our balance sheet in shape early, as
it's not something you would want to be starting now. We're not sitting idly,
hoping for a return to the golden years of banking, so today I want to outline theactions we're taking over the next three years. This is not a change in strategy,
but more work constructing a simpler, safer, more agile bank. We have fivepriorities.
First, facing into the mistakes of the past; in these three years we will makesubstantive progress on remediation with the vast bulk of refunds to customer
made and processes re-engineered to avoid repeat. We will be a stronger,
safer bank for customers and these costs will largely be behind us. Second, we
will continue to simplify and strengthen the Bank, including exiting, shrinking
and closing non-core businesses and assets. Third, we will step up investment
to reposition and retool the Australian business for targeted and improved
growth, with lower cost, more flexible platforms.
Fourth, despite ongoing investment, we will continue our intense focus on cost.
All else being equal, in 2022 we expect to run this Bank for less than $8 billion,
with a global workforce and branch network to match. Finally, we will makefurther investment in transforming our skills and capabilities. This includes
increased investment and training in leadership, changing the fundamental
reward structure for our people and strengthening our accountability andconsequence frameworks. None of these are easy tasks, but they will result in
prudent and targeted growth, a safer bank and better returns.
Our track record, simplifying New Zealand, transforming Institutional and thehard decision selling 23 businesses demonstrates our capability, determination
and willingness to act. Part of adapting to these new expectations is embedding
our core purpose in everything we do, how we bank, how we behave and what
we care about and our purpose is to shape a work where people andcommunities thrive. It's an integral part of our strategy and how we will drive
long-term value.
Our purpose guided our decision to provide relief to farmers impacted bynatural disaster even though it came at a short-term cost. It informed ourapproach to sustainable and affordable housing, an area of particular interest.
We will fund and facilitate $1 billion in projects to deliver more than 3000
affordable, secure and sustainable homes, to buy and rent here in Australia andto support our ambitions in New Zealand, we launched a Healthy Homes
Incentive to encourage Kiwis to improve the environmental sustainability of theirhomes. We also continued our work with larger customers, where we funded
and facilitated more than $3 billion of environmentally sustainable solutions in
the last half, taking our total commitments to almost $15 billion.
To ensure customers have the most appropriate product, we've alreadyproactively contacted over 275,000 customers to help them get better value
from their banking. Our approach to remediation has been driven by the need torebuild trust and led to the creation of a centralised responsible banking team.
That team is currently resolving issues with more than 2.6 million customer
accounts in Australia. That's not a number that anyone is proud of. But I am
proud of ANZ's focus, approach and commitment to put things right as quickly
as we can, to learn and to improve and all known remediation challenges are
fully provided for.
At the end of March, we'd successfully made remediation payments toapproximately $420,000 customer accounts and in some cases, getting refunds
into our customers' hands in half the time it took previously.
But in terms of the future, we're confident Institutional and New Zealand cancontinue to deliver, not without challenges, but each with strong teams andtrack records of delivery. In Australia, the environment will continue to bechallenging. There will be less high quality value in the home loan market andwe don't want to chase volume for the sake of it. We will continue to invest in
targeting the right customers, better risk-based pricing and being easier andfaster to deal with. At a Group level, our focus is continuing to build a safer,stronger and simpler Bank and our focus on capital efficiency, cost and safety
will remain.
If you walk away today with only three points from my presentation, I want them
to be these. First, we've prepared well for this increasingly difficult environment;
second, future success requires a different focus; and third, this is a team with atrack record and the courage to create log-term competitive advantage as aresult.
I'll now hand over to Michelle.
Michelle Jablko:

Good morning. As Shayne said, we've been positioning ANZ to be simpler,stronger and more productive for the longer term. We've taken some harddecisions, knowing at times they'll have short-term negative impacts. Our
actions to date have helped us deliver a balanced result in tough conditions.
ROE for the half was 12%. Cash profit was $3.6 billion, which is up 2%
compared to the same period last year. It's up 19% half on half, remember wetook large remediation and other charges in the second half of last year.
EPS is up 5% PCP and 20% half on half, assisted by our $3 billion sharebuyback and our balance sheet is strong. We achieved this result with good
contributions from Institutional and New Zealand, another half of absolute cost
reduction and continuing low credit losses. The Australian business has had its
challenges, but we've largely offset that elsewhere.
We've taken a very deliberate approach to ensuring we have a strong balance
sheet and that we're maximising capital efficiency across the Group. This has
positioned us well. Under our capital strategy, we've bought back $3 billion
worth of shares so far and we've neutralised the DRP for five halves in a row.
Average shares on issue are down 2% over the past 12 months, contributing toour 5% increase in EPS.
Our APRA CET1 ratio is 11.5%, well above unquestionably strong and we'vereached this before the completion of our Australian wealth sales. We'll pay an$0.80 per share fully franked dividend and as I mentioned, we'll again fully
neutralise the DRP. Our funding and liquidity metrics are also strong. So we'resafer and stronger and we've released some capital, which has enhanced
shareholder returns.

As we look forward, we're on track to complete our Australian life insurance
sale at the end of May. Following this, our capital management approach interms of buybacks, dividends and franking will depend on three factors: theimpact and timing of regulatory requirements; ongoing business needs; and theearnings and growth outlook for the Group, including its composition. We'll thenlook at the most efficient and effective way to return any capital surplus toshareholders.
As part of this, we'll need to consider RBNZ's proposal to increase capital in
New Zealand. As drafted, it could mean NZ$6 billion to NZ$8 billion of
additional capital over the next five years, around 50% more than we holdtoday. But it's really too early to conclude as we're still working through theconsultation process. It will also be driven by any business decisions we makeabout the size and composition of our New Zealand balance sheet in the future
and any impact on the Group will depend upon a number of reviews that APRA
has underway.
We'd hope to have clarity on all of this over the coming months. Even in theworst case, we're starting with an unquestionably strong capital position and
we've shown in the past that we're prepared to make hard decisions on capital
allocation, just as we've done in Institutional, Asia Retail and Wealth.
In terms of franking capacity, as I've said before, our position is tight. This has
become more pronounced this half, given the lower contribution of the Australia
geography to overall earnings and clearly our franking capacity for dividends
going forward will depend on future Australian earnings.
This slide takes you through some of the larger items to consider whencomparing business trends to prior periods. Cash profit this half included a net
gain of $86 million related to divestments and other large and notable items.
The total cash profit impact of these items is similar to the same period lastyear, however the difference is more pronounced when comparing half on half.
If you look through large and notable items, cash profit was up 2% PCP and flat
half on half.
Customer remediation continues to be a priority. In this half, we took
remediation charges to $175 million before tax. At the end of the half, totalbalance sheet provisions for remediation stood at around $700 million. We'reworking hard to put customers right. We're also completing product and service
reviews to identify any other failures and we're fixing systems and processes toensure these don't happen again. We resourced our team early and we're wellprogressed. We essentially dealt with salary planner fee-for-no-service issues
in prior years and we took a large provision last year for our previously ownedaligned dealer groups.
In our Australian business, we've been working through our reviews over the
past 18 to 24 months. Larger and higher risk products were reviewed first. So
many of them have already been provided for.
Here you can see the components of our cash profit movement half on half. I'll
spend a few minutes now talking you through the key drivers and then talkabout each of our businesses. I will do this on a half on half basis in order tobetter highlight the trends despite seasonality. As Shayne said, we think this is
the time for prudence and targeted growth. You can see how this shows up in
our balance sheet.
Total loans in the Australia division fell $4.7 billion or 1% half on half. This wasmost pronounced in investor and interest-only home loans, unsecured retaillending and consumer asset finance.
We offset this with growth of around $2.5 billion each in institutional and New
Zealand. Our balance sheet mix had an impact on margins but was positive on
a risk adjusted basis.
Margins in our core customer businesses were flat for the half. If you look at thechart you can see mix had a negative 2 basis point impact offset by deposit andasset margins which were up 1 basis point each. The mix impact was split
between home loan switching from interest-only to P&I which continued thetrend from last half and other mix shifts like lower unsecured retail lending andgrowth in lower risk segments in institutional.
Deposit margins were up mostly in institutional due to rising rates and deposit
optimisation. Asset margins also improved. However the underlying trend was
different. Australian home loans were repriced in September but there were anumber of offsets through the half. These include lending competition in all
businesses, support for customers in drought affected communities andregulatory changes in Australian credit cards. Looking forward underlying
margin pressures are likely to continue.
Now we could have achieved better margins by taking more risk. But we thinkthat would have been the wrong thing to do at this time. We improved risk

adjusted margins for the group by 3 basis points. In institutional they increased
7 basis points with the continuation of our strong balance sheet discipline andby 5 basis points in New Zealand driven by strong risk and price discipline incommercial and agri.
In Australia risk adjusted margins were down slightly. This was because of mix
given lower volumes in the higher margin cards business. Notwithstanding thiswe improved risk adjusted margins in each of home loans, cards and personalloans.
I've already said it, but it's a point worth repeating. We achieved another half ofabsolute cost reduction. Costs were down 1% for the half. We achieved thiseven though we had a higher regulatory and compliance spend in Australia and
New Zealand, a greater proportion of our OpEx on our investment spend andadverse FX impact. Excluding FX costs were down 2%.
Personnel costs were up $78 million as the benefit of FTE reductions weremore than offset. Some of this is timing to do with when we accrue for longservice leave and incentives. We also brought some technology services inhouse which benefited costs overall. Other costs were down $165 million or
7%. We drove lower property costs, lower D&A and lower managed services
and consulting spend. We expect costs to be slightly higher in the second half
given normal seasonal differences in marketing and investment spend. For thefull year we expect costs to be down excluding any adverse FX impacts.
We're pleased with our progress and our commitment to absolute cost
reduction remains the same. It may not always be linear but lower costs remain
an intense focus.
One of the positive outcomes of the changes we've made in our business is thelow provision charge. At $393 million for the half and with a 13 basis point loss
rate it was a strong outcome without the same tailwind some write-backs andrecoveries that we had last year. These were $128 million lower half on half.
New and increased individual provision charges were both lower than last year.
The collective provision balance is very healthy at $3.4 billion.
You will recall with the transition to AASB 9 we topped up the CP provisionbalance by $813 million. At the end of the half we increased it slightly to reflecta more cautious outlook. This offset reductions because of portfolio change andcompares to CP releases in both halves of last year. While the more benign
environment has helped provision charges our internal ROE on loss rate is now

10 basis points or 27% lower than March 2016 reflecting the significant
changes we've made rebalancing our business.
Australia home loan losses remain very low in absolute terms at $45 million.
But 90 day past due rates increased and were 100 basis points at the end of
March. This was driven by four main factors. Around half is due to thedenominator given lower volumes. Then there was the impact of customers
switching from interest-only to P&I. We saw $8 billion of contracted switching
this half. Interest-only lending is now down to 18% of our mortgage portfolio,
around half of what it was two years ago.
We've also seen customers taking longer to come out of delinquency whichmakes sense as the property market has slowed and more customers going
into hardship particularly in New South Wales, although off a very low base.
This is an area we are managing closely. But to put it in context when we lookat the increase this half 12% are in negative equity with WA and Queensland
making up 82% of this. Importantly more recent home loan vintages continue toperform better than older vintages reflecting our more cautious strategy and risk
settings.
You can see on this slide that it was a difficult half for the Australia division.
Profit was down 8% half on half with revenue down 4%. Expenses were wellmanaged and credit charges were up 3% on the back of higher CP. I've said
already that loan volumes were down and margin benefits from repricing werelargely offset by mix and competition impact. Fee income fell $131 million ofwhich around half was seasonal and the remainder due to our deliberate
decisions to reduce or remove fees across the business.
We know that across the market there is house price moderation, lower
borrower capacity and longer application approval times. We think it's right tobe selective in this environment but we clearly could have done better in theimplementation of some of our settings and Shayne spoke about this.
Stepping through some key data points. During this half growth in owneroccupied lending was flat and investor lending was down 3%. Both were below
system. P&I lending was up 4% as a result of customer switching. Interest-only
lending was down 19% driven by the back book cooling off and a more cautious
approach to front book volumes. All of this impacted our margins but enhances
the quality of our overall portfolio and provides less of a headwind over the
medium term.

Unsecured lending was also lower in both credit cards and personal loans
which is in line with our more cautious stance on both of the portfolios andchanging customer preferences. In response to moderating loan volumes we've
optimised deposit mix over fund growth with deposit margins up slightly this halfand volumes down 2%.
Looking forward there are a number of uncertainties that make it hard to predict
too far into the future. We're refining some of our processes but the market has
slowed. We're sticking to our prudent approach. Improvements will also taketime to flow through into fund growth and revenue. This means that the homeloan balance sheet in the second half is likely to continue to decline and takesome time to stabilise. But we'll have the benefit of seasonality in non-interest
income.
Commercial loan volumes were also lower this half. We continue to run off ourconsumer assets finance book and remain selective in unsecured lending andcommercial property. Our small business volumes were also lower against a
backdrop of weaker sector growth. We're investing in better customer tools
which should provide more opportunity into next year and beyond. Deposit
volumes were up half on half. Many of these customers will broaden theirbanking needs over time.
Overall it's a difficult time for our Australian business. We know we can dobetter and have already started work here. But we think our strategy settings
are right.
In the institutional division we continue to see the benefits of building a simpler,
more focused and higher returning business. Having significantly rebalanced
the business we achieved a disciplined and targeted return to growth. The
highlights were consistent customer revenue growth, higher risk adjusted
margins, a sixth consecutive half of absolute cost reduction and continued low
credit losses. Revenue increased 6% half on half with customer revenue up
4%. Operating costs were down 2% with lower software amortisation and thebenefit of FTE reductions.
Institutional has now reduced FTE by 25% since September 2015. With thereshaping and simplification of the business ongoing we plan to continue thetrend of absolute cost reduction.
All businesses in institutional performed well this half. Cash management had
another record result with revenue up 8% as we benefited from higher depositmargins on the back of US dollar rate rises in our international business. Loansand specialised finance revenue was up 3% with growth being weighted
towards higher credit quality customers. 86% of our lending exposure is now
investment grade. Trade finance revenue was up 5%.
Global markets revenue was $947 million, up 6%. This was a good result in achallenging environment largely driven by good customer volumes andimproving risk sentiment in Asia. So overall a strong start to the year for
institutional with good momentum through the half.
It was a solid underlying performance by the New Zealand business. Volume
growth was solid; margins were down; but risk adjusted margins improved 5basis points driven by better pricing for risk in commercial and agri.
Expenses were up slightly by $6 million with the benefit of branch consolidation
offset by regulatory requirements. Credit quality remains sound with gross
impaired assets down 3% and 93% of our home loan portfolio at a dynamic
LVR of 80% or less. Higher provisions were because of CP overlay releases in
the previous half rather than anything unusual this half.
So we're well on the way to creating a simpler, stronger and more productive
ANZ. You can see this in our strong balance sheet, our performance on costs,
our credit quality and in institutional and New Zealand. It's been a tough time for
the Australian business in a tough banking environment. The market has
slowed and there have been heightened regulatory and competitive pressures.
We know where we need to improve but think our strategy settings are right.
Our strengths elsewhere have helped to balance this result.
I'll now hand back to Shayne.
Shayne Elliott:

As you know the royal commission produced its final report in February. The
process, including Commissioner Hayne's recommendations caused us toreflect more broadly on the issues we face in reshaping our Bank.
This included how we govern the Bank, we ask our people to do, how we pay
them, how we hold ourselves to account when things go wrong and how weensure that our products and services are appropriate, fair and responsible.
Within weeks of the final report, we announced the first phase of our response,with 16 initiatives to improve the treatment of our customers and four of those
have already been fully implemented. While it's good to have a checklist, we've
not treated this as a compliance exercise. Rather, we also want to respond tothe spirit of the report and so there are a lot more material changes than thoseshown here.
Our new set of dispute resolution principles is a tangible example of theapproach we're taking. While not a formal recommendation, some customers'
frustration with the sector's approach to redress was an important element of
the hearings and we felt our public commitment to being a model litigant
represented an important part of the process - of our response.
The Royal Commission and planned law changes are having a profound impact
on Australia and not just the finance industry. It means that changing customer
expectations, more scrutiny from regulators, increased accountability andpenalties and a complete rethink of businesses' role in balancing the needs ofstakeholders. The risk and the cost of doing business has risen as a result andthat's not a complaint, but a reality. The work has already begun at ANZ to reearn the trust of our customers and the broader community and to reshape ourBank for the long term. We believe we are changing to better serve ourcustomers and society and that ANZ will emerge better and stronger for it,
driving better outcomes for customers and shareholders.
In our rehearsals for this event, I was told that my talking notes may be too
sombre and too down-beat. That was not my intention, but I did want you toknow that we get it, that we get that it's tougher than before and it's tougher
than we would like. But we get the need to adapt and change and quickly. This
is not the time for waiting and hoping, it is the time for decisive action. But thisis not a defensive strategy. We believe there is real opportunity to create value
and we want to grab it.
I often get asked by people whether our people at ANZ are up for the challenge.
Let me reassure you that they are and our internal surveys support that. Our
people are dealing with new challenges, but they've risen to the occasion,
they're energetic, they're working harder and more collaboratively than before
and I want to thank them for their ongoing support and their focus on building
the ANZ that we all want and deserve. Thank you.

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