News Release
For release: 15 August 2017

Transcript: Third Quarter 2017 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 third quarter 2017 trading update 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

Morning Shayne. Thanks very much for joining us again on BlueNotes on thisthe morning of the third quarter trading update. It looks a solid result –broadly continuing recent trends so how are you seeing the operating
environment?

Shayne Elliott

Well, the operating environment is pretty steady. Clearly the economy is not
performing to its full potential but it’s going pretty well and there are someactual signs of improvement and so our business is kind of ticking along
pretty well. More importantly the reshaping of our business has proceededagain really strongly in the quarter.

Andrew Cornell

Indeed when the reshaping of the business two things that do stand out alittle bit are the ongoing reduction of risk weighted assets in the institutional
business, it’s a smaller sort of tighter bank, and then also the in-partregulatory driven shift away from investors towards owners occupiers inmortgage lending. Are they really significant trends?

Shayne Elliott

Absolutely, in fact it’s more than just the regulatory pressure and we’ve said
for some time as a strategy we want to be the best bank for people that wantto buy and own a home and so we’ve been growing our business in owneroccupied home loans much faster than the market and actually reallyreweighting our portfolio towards that and we’re really comfortable with that.
The way we’re doing that is just really is focus and great product anddistribution through our branch network. Then on the other side we’ve also
said we want to make sure our Institutional Bank really focuses where it canwin which is about intermediating trade and capital flow. So we’ve been
reshaping that business and the net result of that is it’s smaller, but it’sbetter. That actually again proceeded strongly in the quarter. Those twothings are really helping reposition ANZ and primarily the reasons that we aredriving good capital generation again in the quarter.

Andrew Cornell

When we look the capital since the interim result we’ve now had from APRA
some more detail about what unquestionably strong means. Are you happy
with the shape of capital with the options open to you?

Shayne Elliott

Absolutely, it’s great to have clarity from APRA after many years ofcontinuing to strengthen capital as an industry. I think for all intents andpurposes the moves on capital are largely behind us as an industry now andso we’ve set the new level of what good looks like which is the 10.5% CET1.
Clearly unquestionably strong is more than just capital but from a capital
perspective, ten and a half.

Australia and New Zealand Banking Group Limited

ABN 11 005 357 522

At ANZ what we are showing already is that essentially we’re there on aproforma basis. That just means when we get the proceeds from the things
we’ve already announced we’ve sold we will be at 10.5. We’re in a reallystrong position and clearly the ongoing restructuring of the business isdesigned to improve our capital generation even further.
Andrew Cornell

Perhaps the other big change at the bank which I suspect is much more
visible internally, where it’s very visible, is the new ways working. You only
announced that three months ago at the half year result. How is that projectto change the way ANZ works going?

Shayne Elliott

Well when you’re here it’s pretty profound actually I think for people in thebank. It’s three months in and we’ve still got quite bit of work to do but I’mreally excited about the opportunity here. In fact, over the next couple ofdays we’ve got a big demonstration downstairs of what it actually means forpeople, how to learn about this new way of working, the tribes and thedifferent ways we’re going to get things done. So it’s proceeding really reallywell and there is a lot of excitement I think in the bank about theopportunity. That’s not to say that when we get going with this early in thenext calendar year it’s going to be a bit messy, we are going to be changing
things and people are have to learn new ways. It’s going to take time for us
to get into a new rhythm but we’re prepared for that and I’m really pleased
with the progress.

Andrew Cornell

And I suppose the other, and this is not an ANZ issue particularly, but theother non-operating one is what we see with Commonwealth Bank and again
the focus on trust in banks. You’ve said quite a bit about how banks need toconcentrate on this and all banks are impacted when one particular bank or
many banks are affected. But how is this turn around going to happen? How
do you make people trust banks?

Shayne Elliott

Well the first thing to note is this is going to take some time. This is not
something we can fix overnight. It’s going to take a number of years
actually, that’s how trust is re-earned. But the good news is actually theindustry is totally united in this about doing the right thing. We’ve got our
six-point plan through the ABA and all the banks are pushing really hard to
get those things done as quickly possible. But we also recognise that in its
self is not enough either, so that’s a big transformation project. But as I
said, my experience of working with our peers as an industry, people all wantto put this behind us. They all want to do the right thing and we are talking
about making real and substantive change. And the first parts of that are
already happening and that is about the way that we compensate and incent
our frontline – our people in our branches – moving that much more heavily
toward good customer outcomes. So that’s in train as we speak and many of
the other changes are also happening.

Andrew Cornell

To switch back then to the trading update, revenue is still tough to come by,
margins are still under pressure, that tends to mean more focus on costs. Is
that what you see?

Shayne ElliottYes. Part of our reshaping was always a recognition it may well be that in
the shorter term some of our revenue growth was going to be lower, in fact it
might shrink a little bit, which it did very marginally in this quarter. But
that’s OK if: A, we manage our costs well and costs were down another 1%
in this quarter in absolute terms which is again another terrific result on that.
We’re really standing out from our peer group in terms of our ability tomanage costs. But more importantly when you combine that with a goodoutcome on credit costs because of the rebalancing, we are a lower riskbank, and the capital, our risk adjusted returns are going up.

So when you adjust for the shape of the bank and the risks we are taking,our returns are going up and that’s ultimately what shareholders ask of us
and so it was a great quarter in that respect.
Andrew Cornell

And indeed you touch on credit costs there. The credit environment appears
to be still quite benign. How do you see that environment?

Shayne Elliott

Absolutely it’s benign. As I said, while the economy has kind of been
muddling through for a period of time, there are starting to be some signs
that things are actually pretty good. There’s some weakness I guess in termsof business confidence but when you actually look at the actual economic
indicators they’re pretty good and what that means is that corporates are
doing OK. So there really hasn’t been any major stress in any kind ofindustrial sectors. We’ve got the ones that are still the lag of the slowdownof the mining investment boom. That’s still evident there but even that
seems to be coming to an end. So things are look pretty good from a credit
perspective.

Andrew Cornell

Well thanks again very much for speaking to Bluenotes.

Shayne Elliott

Thank you.

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