News Release
For Release: 29 October 2020

Transcript of bluenotes video interview with ANZ Chief
Financial Officer Michelle Jablko
ANDREW CORNELL: Morning Michelle and thanks very much for joining us on bluenotes forthe full-year result. Can we start off by talking us through the capital and why that’s
important for the components of the bank’s balance sheet and the robustness of the bank?
MICHELLE JABLKO: Sure and Andrew it would be nice, hopefully we get to see you in person
sometime soon. I think capital is really important at a time like this. Essentially what it doesis it gives us capacity to absorb potential future losses that might come. And the way I think
about it is you’ve got to look at the starting point. So as we sit here today our capital
position is really strong. We talk about ratios, it’s 11.4 per cent … pro forma. And what thatmeans is essentially we’ve got nearly $A4 billion more than what the regulator says is theminimum. And then on top of that, we’ve got about $A5 billion in collective provision
charges, so that’s money we’ve put away for losses that might come in the future. Thatgives us quite a lot of capacity because the world is still uncertain and we don’t know
exactly what’s going to come. On top of that, we continue to add to that capacity. So as wego into next year, we’ll continue to generate profits and those profits add to those capitallevels. So all of that means is, while things are still uncertain, we feel like we’re in a reallystrong position to be able to deal with them going forward.
ANDREW CORNELL: Well it looks like it won’t be too long before we can see one another inperson Michelle so hopefully that continues. But it is, as you say, a different world so how
are you balancing that prudence that you’re talking about with the need to allocate capitaland use that capital efficiently?
MICHELLE JABLKO: That’s a really good question. The way we’ve approached it is to reallythink about them together, not as an either/or. So if I go back to the start of the year, noone knew what this crisis would look like. At that point in time, many of our customers
didn’t know if there would be a liquidity crisis because that actually can be a big issue when
there are economic stresses. And so we had quite a lot of our customers want our support interms of access to liquidity which we were able to work through with them. And because wedidn’t know how the stress would evolve, we thought the right thing to do at that time wastake a really prudent approach to the dividend. And we deferred the decision on the interim
dividend. That was prudent but it was also the most efficient thing to do in terms of thevalue outcome for our shareholders as well. As the year has gone on, actually the liquidity
dynamic has changed so those customers didn’t need that support and we were able tomanage our capital to effectively build our capital reserves just through working thatthrough. And so with that, that enabled us when we got to August to actually declare aninterim dividend and it has again given us confidence to declare a final dividend today. So
we sort of worked through it to keep our balance sheet safe but as we made our decisions
on dividends and how we used our capital, we were really conscious of doing that as
efficiently as we could for our shareholders.
ANDREW CORNELL: And the other element here that is a sort of ongoing force is pressure
on interest margins, particularly from the sort of lower global interest rates. How are you
managing those margin pressures?
MICHELLE JABLKO: Yes, and you touch on lower rates. I mean, lower rates is potentially abenefit to losses, because we’ve just been speaking about losses that might come. But yes,Australia and New Zealand Banking Group Limited9/833 Collins Street Docklands Victoria 3008 Australia
ABN 11 005 357 522

you’re right they do impact on revenue and that is a pressure the whole industry is working
through right now. And it was quite a big factor in the result actually with our margins downquite a bit in the half. There were some other drivers of margin, so we had… some of thechoices our customers were making this year in terms of which customers wanted to growand which customers were probably a bit more cautious. The growth was probably more in
those lower margin type parts of the business. On top of that we grew our deposits reallystrongly – and that’s a good thing – but in a way, because our customers … the demand
from our customers didn’t grow as fast as that, that also causes a headwind to margins. So
how did we deal with that? The way we deal with it is, as always, we manage our capital
allocation to think about our risk-adjusted returns. But, we also try to manage the cost of
our funding and the composition of our funding to at least sort of minimise some of thoseimpacts. But, the way we think about this is much broader than just margins actually. And if
you look at our result, our revenue performance was pretty much flat year-on-year and sowhile margins caused us some pressure, we did grow in some parts of the business. And we
had strong performance for example in our Institutional, our Markets business, which is alittle bit of a natural hedge to some of the pressures and stresses we feel elsewhere. So welook at it quite holistically. And then the other thing I think we’ve been really good atmanaging, and I’m sure we’ll get into a bit later, is costs because managing yourproductivity is also really important to offset some of those pressures.
ANDREW CORNELL: Well if we look at costs then, how are you balancing cost managementwith that higher investment spend that’s going on?
MICHELLE JABLKO: Yes, I think we do a really good job of that. Every year for the last fouryears I think we’ve managed our costs in an absolute sense really, really well. And within
that, we’ve been increasing our investment. So this year, for example, we reduced our,what I’d call ‘business-as-usual-run-the-bank’ costs by pretty much the same amount as weincreased our investment spend by. And that’s after inflation and everything so really, really
good outcome. Some of what we’ve been working on in previous years we’ve started to get
the benefits come through this year – some of our simplification of our processes, some of
the rationalisation we’ve been doing on property. So we’ve been working through some of itfor a time. But COVID also accelerated some changes in our customer preferences whichactually led to us being able to interact with our customers more through digital channels
which also helped us on costs.
ANDREW CORNELL: And just finally then, ANZ is now looking for a better than expected –well perhaps a less worse – outcome from COVID but the recovery will be slower. Is thatchanging priorities?
MICHELLE JABLKO: When we were sitting here, I was talking to you six months ago, wewere looking at a pretty sharp, severe economic impact. So we had 13 per cent trough fallin GDP, 13 per cent peak unemployment. As we sit here today, that clearly didn’t happen in2020 but we are forecasting a slightly longer recovery. And so for example, we’reforecasting unemployment to stay a bit higher for longer. What does that mean? As we lookat different parts of our business, starting maybe with the Institutional business which is ourbigger customers, they are more impacted by the short, sharp impact and retail and sort ofsmaller customers probably are more impacted by a longer period of unemployment. At thesame time, we’ve been doing a lot of work on both groups of customers. So at the bigger
end of town, you pretty much review every customer one by one and actually as we’ve gone
through that we feel pretty good about where they’re sitting. Probably better than we did six
months ago. Where we feel more of the stress is going to be is probably around some of oursmaller business customers and particularly some of those in some geographies or somesegments.
ANDREW CORNELL: Well thanks again very much for your time and hopefully it won’t be toolong before we see one another. Thanks Michelle.
MICHELLE JABLKO: Thanks Andrew.

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