ESG Briefing
07 September 2020
Start of Transcript
Tony Warren: Good afternoon everyone and welcome to ANZ’s third ESG market briefing.
My name’s Tony Warren and I look after the communications and public affairs function
here at ANZ. Firstly. let me acknowledge the Traditional Owners of the land on which wemeet and pay my respects to their Elders past and present. Now within the comms andpublic affairs function, we have a specialist team responsible for managing our group wide
ESG work. This includes our disclosures, our customer assessments, as well as helping toensure we are strategic in our approach and are responding to current and emerging ESG
risks and opportunities. But of course management of ESG issues is embedded right acrossthe organisation, including in our risk, strategy, property and sustainable finance teams.
So now to today’s briefing, which will be led by our CEO, Shayne Elliott. Shayne will givean update on how we’re performing against our ESG commitments, including those relating
to carbon. He’ll then provide some insights into how our purpose is helping us navigate the
COVID-19 pandemic. Mark Hand, our Group Executive Retail and Commercial for Australia
will then cover our COVID support measures in more detail and also discuss the ways
we’re managing some key non-financial risks, such as cyber-security.
Now we will have plenty of time for questions right at the end. With that, I’ll hand over to
Shayne.
Shayne Elliott: Okay, thanks Tony and good afternoon everybody and thank you for joining
us. As Tony mentioned, this is our third ESG briefing and while it is a little different
logistically, I hope you’ll find it just as useful. 2020 has been a challenging year. Our
customers and communities have faced significant uncertainty and loss, initially for somebrought about by the bushfires and now, of course, COVID-19. Our thoughts are withthose who have lost loved ones and been directly impacted.
For those who joined us at this briefing last year, you may recall we focused on ourgovernance framework as well as our response to the Royal Commission. So if you like,the focus was on the ‘G’ within ESG. Today I’ll largely be focused on the ‘S’ and how our
purpose has guided our response to COVID-19, particularly how we’re supporting ourcustomers. Mark, our Group Executive Retail and Commercial Australia will cover the
specific support measures for customers and staff and the risks being amplified by the
pandemic, including cyber-security. We’ll then open it up for questions.
So to begin with, I’d like to discuss our ESG framework, our priorities and the progress
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we’re making. We’ve a clear sense of purpose at ANZ to shape a world where people andcommunities thrive. Our purpose guides our decisions about who we bank, how we behave
and what we care about most. We’ve done a lot of work over the last few years to embed
our purpose and build a values-drive culture and ensuring that we have the capacity todeliver it. These foundations have meant we’re in a strong position to meet the current
challenges in a fair, ethical and sensitive way for our customers, employees and thecommunity, while still delivering decent returns to shareholders. We believe those interests
are aligned and not trade-offs.
While we’ve had to adapt our business in the current environment, we haven’t lost focus
on our strategy and our priorities of: improving the availability of suitable and affordable
housing options for all Australians and New Zealanders; supporting household, businessand financial practices that improve environmental sustainability; and on financial
wellbeing, helping our customers, employees and community make the most of theirmoney throughout their lives. Fundamental to our approach is a commitment to fair andresponsible banking, maintaining high standards of conduct and keeping pace with therising expectations of our customers, employees and the community.
Now a brief update on our ESG targets, many of which are aligned with the UN Sustainable
Development Goals. We’re making good progress, with over 80% on track. Now while
progress in some areas has been less than we would have aspired to, I think it’s importantthat we do set ambitious goals. The management of climate-related risks and opportunities
clearly remains a priority issue for the Bank. Our own footprint is relatively small, but not
irrelevant and we have made progress. More importantly, we can influence the impacts ofour customers.
Our target to fund and facilitate at least $50 billion in sustainable financing by 2025 is on
track and progressing well. An example of this is the green loan we provided to Walker
Corporation for the development of Paramatta Square, a great amenity for the people of
New South Wales and the first labelled green loan executed by a private company inAustralia, which means proceeds are allocated towards qualifying green projects.
We also have a target to encourage and support 100 of our largest emitting customers in
the energy, transport, buildings, food, beverage and agricultural sectors in their public
commitments to transition to a net zero economy. We’ve already reviewed the carbon
disclosures of more than 90 of these customers and engaged with more than 60 to support
the strengthening of their plans. We will announce an updated carbon policy at our full
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07 September 2020year results in October. We also know we have a role to play as a borrower and our owngroup treasury team is now systematically including the issuance of Sustainable
Development Goal, or SDG bonds, into our annual capital and funding needs.
A couple of key highlights relating to our other priority areas of housing and financial
wellbeing include that we’ve jointly led three social bonds for the National Housing Financeand Investment Corporation in the past 18 months. Their most recent issue in June was for$562 million and will support 10 community housing providers with access to more than
2700 affordable homes. Our matched saving and financial education program, Saver Plus,
has helped more than 46,000 lower income Australians save over $24 million to support
their own and their children’s educational needs. More recently, we’ve directed about $12
million to our key community partners to, amongst other things, help expand theirprograms online. This is particularly important as our partners witness increased demands
at a time their traditional face-to-face channels are challenged. We’ve also partnered with
the UN Development program to deliver our financial education programs in the Pacific. So
overall, we’re making good progress, but we know we can always do more.
Now let me talk specifically about our approach to COVID. Put simply, it’s about protecting
what matters, adapting to the changing environment, increasing engagement andpreparing for the future. Our decisions and responding to the crisis have had a very real
short-term financial impact on earnings and profitability and of course on shareholder
value. But our focus remains on the long term. A healthy and sustainable community is in
the long-term interests of ANZ. Throughout we’ve tried to make fair and appropriate
decisions, seeking the balance the needs of all stakeholders. Here today we’re issuing astatement of intent to provide clarity on our commitment to support customers and we
expect to be held to account against this and we will report on our progress.
As you know, in March we commenced offering new assistance to customers who are
current with their repayments but needed support in the form of a payment deferral, due
to the impact of COVID. By current, I mean they were up to date or no more than one
month overdue on their payments. We figured that there will always be good reasons
when people have been overwhelmed why they might be a week or so behind on their
repayments and we shouldn’t penalise them for that.
For those receiving this support but are unable to resume full repayments at the end of theinitial deferral, the statement of intent outlines the following: that we will listen to thecustomer, to understand their current and near-term financial position; that will we adjust
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facilities where possible, for example, provide a period of interest only for those able toresume repayments only if their loan is restructured; we’ll extend the deferral period for
those who are unable to resume repayments, but are likely to have an improved financial
position in the medium term; and we’ll assist those customers likely to experience ongoing
financial hardship to find an appropriate solution for them.
Sadly, we know that there will be difficult situations where we need to help customers wind
up their debts and when this happens, we’ll be ethical and sensitive in our actions. In
short, through this statement of intent, we’re seeking to give customers and otherstakeholders greater certainty at what is an uncertain and stressful time for many.
Now moving to how we are managing the impacts of the pandemic, our first step was toprotect our ability to operate, as well as protecting our customers and our people. In
March we announced our initial support package for small business and home loancustomers and since then we’ve supported around 200,000 customers in Australia and
New Zealand, with measures such as payment deferrals and temporary overdraft facilities.
The COVID pandemic has also meant we’ve needed to do some things differently in theway we support our customers and a good example of this is how we’ve worked to protect
the health and safety of our vulnerable and elderly customers so they don’t have tophysically come into a branch. When the pandemic first started, we still had around 7000
customers who had a passbook account, which they use to withdraw money face to facefrom a teller. Now we’ve developed a new process so they can open a Visa debit account,from their home, over the phone and we’ve been in contact with the majority of thesecustomers to assist with it.
Our other immediate priority was looking after our staff. We transitioned as quickly as
possible to enable most of our staff to work from home and since March, we’ve had
approximately 90% of our people doing just that. Mark will touch on this later, but it’s
important to note the responsibility we have in terms of protecting our people and thisincludes their mental and physical wellbeing. Our people have adapted faster than we
could have imagined and have been remarkably flexible in making sure we continue toprovide services to our customers.
How we’ve adapted to the crisis in many ways demonstrates the success of our efforts inrecent years to strengthen our governance processes. A key element to this was reviewing
our response to the pandemic and deepening board oversight of the business through an
ESG lens. Fortunately, we’ve also had the benefit of a consistent and cohesive
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management team. Our Management Ethics and Responsible Business Committee, which I
chair, is a leadership and decision-making body. It considers the social and environmental
impacts of the industries we finance, our treatment of customers and the communities that
ANZ serves.
The board’s Ethics and Environmental, Social and Governance Committee is responsible foroverseeing and reviewing our approach. For instance, our work to improve our policies,
processes and disclosures on our approach to human rights has been a focus this year.
We’ve committed to review and strengthen our human rights policies, including ourcustomer social and environmental screening processes and developing a grievancemechanism using the UN Guiding Principles on Business and Human Rights. The board has
also overseen our work to upgrade our climate commitments. COVID-19 pandemic has
also seen our board in particular actively engage and oversee a number of key decisions,especially responsibly allocating capital.
A third area of focus is how we’ve engaged with stakeholders. In a time of crisis, people
need clarity and certainty and we’ve stepped up our engagement with all stakeholders forthis reason. We’ve worked closely with government and regulators to ensure that the
support measures in the form of deferrals and extensions were appropriate. In addition,
our senior executives engage weekly with NGOs, consumer advocates and financial
counsellors to discuss what they’re seeing on the ground, to ensure that we’re acting
responsibly and responsively to real-world conditions.
Now just before I hand over to Mark, I want to touch on a few key points as we prepare forthe future. As mentioned, our strategy and priority areas are largely unchanged, but we dohave some forward-looking objectives, which are: to maintain strong discipline, focused ongood customer and regulatory outcomes; improve the financial wellbeing and experience
our customers, such as improving the decision times for home loans and business lending
in Australia; building a diverse and adaptable team; and running our core business as welland delivering sustainable operational improvements. These areas build on our goal to be
simpler, more efficient and better managed and they’ll set us up even more strongly forthe future.
Now with that, let me hand over to Mark who will discuss our non-financial risk
management work. Mark.
Mark Hand: Thanks Shayne. So let me go into a bit more detail on what’s changed for us
during the pandemic. Responding to the needs of our customers was a top priority, as
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Shayne has mentioned. In the peak months of March and April, we saw customers who are
current on their lending arrangements needing access to support measures. This is inaddition to some who were already being provided with assistance through our hardshipteam. Since then, we’ve developed formal and regular check-in and processes to transition
those customers, who can, off support measures.
At the three-month mark, we checked in with customers on their progress and have justthis week commenced engaging with them again, prior to their deferrals ending, toprepare and plan ahead. We believe most will resume paying down their loan as deferrals
finish and encouragingly, we’ve already seen a number of customers make some kind of
repayment. However, some will need further help and for those who remain impacted andunable to return to full repayments, we are working through this sensitively and on an
individual basis, trying to give them as much breathing room as we can to help them getback on their feet.
But it’s good news for some business customers and we are seeing some positive signs
from those who are in a good position, who have been able to proactively manage costs,
be conservative with capital and innovate during the crisis.
Our response has also been about how our contact centres have helped support and serve
our customers. For many who needed assistance, English wasn’t their first language and so
we had 22 languages covered from our contact centre staff. In August, we hired an
additional 250 full time employees to work in our customer hardship team, as demand in
our contact centre has seen an increase of more than 65%.
Operationally, the other most significant piece of work was around how we were able toadapt and support our staff to work from home. This was a big task, as we had to increase
our capacity very quickly, but we already had the right systems in place to do this. We’ve
also planned for the return of a limited number of our employees to the workplace, in linewith government advice. During June and July, a small number of our staff in somelocations, such as South Australia and Western Australia, returned to the office, with otherlocations on hold due to further stay-at-home restrictions being in place.
With this significant change in our work life, our approach to culture and employee
wellbeing became another top priority for us. It wasn’t just about ensuring our people
could work at their best, but more so how they managed and were they okay. Early on we
focused on how we would help our people build resilience to steer through this crisis. For
instance, we launched a HealthyMe digital app, offering bite-sized piece of content on
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topics of health and wellbeing. The aim was to help our staff develop the skills to boost
resilience and deal with challenging situations.
We increased communication about our Employee Assistance Program, which provides
short-term wellbeing support services for employees and family members. Interestingly,
during the COVID situation, periods of isolation, our utilisation of the program remains
stable compared to previous quarters, which possibly reflects the impacts of the wellbeing
measures that we did put in place. Pleasingly, the results from a global employee survey
conducted in July told us that 93% of our staff feel that ANZ is supporting employees
during the COVID pandemic.
From an overall business perspective, we wanted to confirm we had the right strategies inplace while also strengthening the integrity of our risk management system. We started tolook more closely at everything based on a heightened risk appetite, including ourassumptions on how we do business, how we work together and how we manage risks andcapability. Our policies are designed to ensure we have the right boundaries and guidelines
in place for how we operate; in a time of crisis we’ve needed to adjust our thinking onthese. This has included reviews of how we model risk in our portfolios, on how we viewhigh-risk sectors, how we grade customers and stress test them and understand thecapital and provisioning implications of it all.
Another element to this crisis has been the increase in cyber-security threats. The threat ofcyber-crime and fraud is not new, but in the current environment, has become more
prolific. We have seen a significant increase of cyber-attacks since COVID began. For
example, early in the crisis we were blocking around 550,000 COVID-related phishingemails per month, which has now reduced. But to put this in context, we block over sevenmillion emails every month. Our 24/7 sophisticated security operation centre’s defences
and mitigation capabilities, which analyse millions of data events every day, help keep thebank and its staff and customers safe online.
We’ve also increased staff and customer communications to ensure people are protecting
themselves by being able to spot a suspicious email or a website, recognise a ransomware
scam and by having the latest software and hardware to block the traffic.
This is in addition to our mandatory security training for all staff. So we’re well preparedand managing well but we’re not complacent and continue to take this risk seriously.
Before I hand back to Shayne, I want to talk to the effects of the bushfires that devastatedparts of Australia earlier this year and our work to help support the communities affected.
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The bushfires were some of the worst in our history and impacted wellbeing and livelihoodsof so many with effects still being felt in locations such as Gippsland in Victoria.
In January, we activated a financial relief package for customers. We also donated morethan $1 million to support customers in communities that were impacted and we extended
special paid leave for employees who volunteer in emergency services to ensure they were
supported while helping the communities.
I was also able to spend time visiting a number of regions across Australia in the weeks
following the fires and saw first hand the impact on local communities. Sadly, COVID isalso now hitting them as most of the regions affected rely on tourism for income.
We will continue to support our customers as best we can to get through this time. For
instance, we are planning to direct a portion of our sustainable finance target of $50 billion
towards supporting customers in communities impacted by disasters. For example, capitalwill be allocated to fund or facilitate weather event resilience initiatives or to build
resilience against non-weather related disasters such as pandemics.
With that, let me hand back to Shayne.
Shayne Elliott: Okay, thanks Mark. Now, before we take questions, there are a couple ofimportant pieces of work I’d like to mention briefly. The Royal Commission and the APRA
self-assessment work.
On the Royal Commission, as you would know, we announced 16 commitments that
responded to the final report.
We made significant changes to how we reward and recognise our people, making sure it
encourages collaboration, team performance and long-term thinking but also reduces therisk of having outcomes that may not always be in customer’s best interests.
We replaced individual performance-based bonuses with a Group performance-based
bonus for approximately 80% of employees and we reduced variable remuneration.
We strengthened ANZ Group Board and Management oversight, particularly in relation toaccountability and governance and we introduced new accountability and consequence
principles.
We acknowledge the importance of fixing the mistakes of the past in returning money
owed to customers as quickly as possible. To date, our Retail and Commercial Responsible
Banking Team has remediated over 1.5 million customer accounts and issued refunds ofPage 8 of 22

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$134 million.
In response to our self-assessment, and commitments to improve areas such as
governance and accountability, simplification and culture, we have taken action to simplify
our business which included the sale of ANZ’s life and general insurance businesses,
pensions and investments business and of course UDC Finance.
There is more to be done but I feel we’re on the right track in making the necessarychanges. So in closing, I hope today has helped explain how we’ve responded to thepandemic and how our approach has been informed by our purpose.
I see this time, as difficult as it is, as a real opportunity for us to prove the value we
provide to the community. I also hope we have given you a sense of where we’re focussing
our efforts with respect to ESG issues and that this work remains a priority, despite thepandemic. So thank you.
Tony, over to you to set up for questions, please.
Tony Warren: Thanks, Shayne and thanks, Mark. The operator will walk you through in a
moment just how to do the questions. I believe it’s star one but could I remind you all to
say your name and your affiliation, please, up front, that will make it much help - mucheasier in this kind of environment.
The other thing is, just a reminder to our media friends who are online, we really do want
to hear from you on this issue so if you do have questions, please reach out to the MediaTeam but this briefing itself is for the market analysts and we’ll go through and hear thequestions from them.
So operator, over to you, please.
Operator: Thank you. If you wish to ask a question, please press star one on yourtelephone and wait for your name to be announced. If you wish to cancel your request,
please press star two. If you are on a speaker phone, please pick up the handset to ask
your questions.
Your first question today comes from James Ellis with Bank of America. Please, go ahead.
James Ellis: (Bank of America, Analyst) Thanks very much for taking the question. Look,
just on the issue of foreclosure. I acknowledge your statement that where this needs tohappen, it will be ethical and sensitive in the way it’s conducted but can you talk throughhow you avoid ESG issues on how you select and execute on foreclosure, given it isPage 9 of 22

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particularly sensitive?
Then, related to that in terms of political interference, where - how would you deal with apotential situation where a politician might expect endless forbearance to be provided,even in circumstances where it was clearly in nobody’s interest to do so?
Shayne Elliott: Yes.
James Ellis: (Bank of America, Analyst) So if the ESG risks of foreclosure and politicalinterference on it.
Shayne Elliott: Sure. So thanks for the question. I guess it’s a bit of a statement of theobvious, James, but I mean we have to deal with these issues every day with or without apandemic. In fact, sadly, we are having to deal with foreclosures.
The good news is that in normal times it’s very, very low numbers. It’s sad for every oneof those but it’s a few hundred in any given year and we make sure that we deal with eachone of those sensitively and ethically as well.
So we do actually have those skills. We do understand how to deal with customers who aregoing through emotional and all sorts of financial stress situations.
Now, you’re quite right that the point is here, we’re talking about having to be able to dothat at scale.
So what we’ve already been doing is leveraging our teams who have that experience sothat they’re already gearing up for, we hope we don’t need to, but for - they’re gearing up
in terms of numbers.
They’re training people, they’re sharing their experiences, making sure that when and if
this does come to be a bigger issue for us, we can do so in a well-managed way.
I’ll get Mark to talk a little bit about it because it is in his businesses. The only thing I
would say there is, we do have another benefit in this particular crisis as opposed to manyof the ones that we’ve been through and that is that interest rates are low. I don’t want todismiss that because that basically says the time value of money is very, very low.
So there actually - there is value in sometimes we can afford to buy time. We can afford to
be a bit more sensitive than we might not otherwise be and so I think that is another toolthat we have, that extending a deferral, buying time, being thoughtful, listening to people
can - we can actually contemplate that pretty seriously.
In terms of your question about political risk and, again, that is always the case. It doesn’t
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always reach the media. It may not reach people’s attention. I mean, as I said, it’s a sadreality of the business we’re in that sometimes we do have to wind people up and local
MPs and that do reach out to us from time to time.
Again, I think we’re pretty well attuned to all that. We understand our business is aboutbalance. We know we can’t keep everybody happy. It is our job to sometimes make some
hard decisions with customers. I believe we have the resilience to be able to continue to dothat but it will be our early actions, the way we approach this, this sense of purpose, thissense of ethics etcetera, that will set us up well to deal with this.
But undoubtedly you’re right in that there’s going to be a much more - there’s going to bea much higher degree of oversight and interrogation about the way we go about ourbusiness and we’re - we are prepared for that. But Mark, do you want to talk a little bit
about the foreclosure process itself?
Mark Hand: Yes, I think the two key things to remember that are different this time, one iseven with the GFC, the cost of funds was significantly elevated and so we made someblanket decisions about re-pricing customers. That was a mass approach to a lot ofcustomers.
The interest rates this time are considerably different so you do have more options
available. Whether that be extending the term of loans for customers to lower their
repayments, moving them to interest-only, which can in fact lessen the burden for acouple of years while they get back on their feet.
So we generally have more options and we have considerably more experience andcapability to have a lot more individual one-on-one conversations. I think that will be thebiggest change this time, that we are able to have those conversations about thecustomer’s individual circumstances.
We’ve also got the option with agreement of the regulators, that in some cases we can
extend deferrals by a further four months. So up to 10 months for some customers,
particularly with what we’re seeing here with the second lockdown in Victoria. That is
another lever that we have open to us in the coming months if that is needed.
So I think the individual conversations, low rates and well-resourced. Also learning thelessons from the past will put us in a good space.
James Ellis: (Bank of America, Analyst) Thank you.
Operator: Your next question comes from Kylie Molinaro with LUCRF Super.
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Kylie Molinaro: (LUCRF Super, Analyst) Hi, Shayne, I guess my question for you is in terms
of providing this additional one-on-one approach for customers and supporting themthrough their difficulties, just knowing what you know now, do you have a handle on how
long it will take for the core business to work through the impacts of what COVID has
created here?
Shayne Elliott: In terms of - are you talking about the deferral population in particular,
Kylie Molinaro: (LUCRF Super, Analyst) Well yes, we can use that as a good case study but
the other question I had for you as a two-part, is - and if you’re able to just give a bit
more colour on how COVID has also impacted the capital allocations division?
Shayne Elliott: Sure. Yes, I can do that. So Mark can give you some of the data and I thinkit’s been really interesting to some extent. So we’ve seen - in a really short period of time,amazing shifts in consumer behaviour. So we’ve suddenly seen this collapse in people - forobvious reasons. So collapse in people coming to branches.
We’ve seen a collapse in people using cash transactions. We’ve seen a skyrocketing ofpeople using credit cards and using any sort of digital device to pay for things. Point of saletransactions. Those sorts of things.
What that - the reason I mention that - and by the way, that goes all the way up througheven into our Institutional Bank and the sort of activity we’re seeing. More and morehedging activity etcetera, etcetera. What that allows us to do, and I think we - to be fair,
we probably - we did surprise ourselves.
I think part of our work on implementing agile ways of working and some of thetechnology investments have allowed us to re-orient and pivot our resources much fasterthan we would have been able to do in the past.
So as you know, we’ve got about 500-odd branches across the country. Well many of them
have been shut temporarily and what we’ve been able to do, because there was nobody
going to them, what we’ve been able to do is just redirect all those people and putting
them in Collections Teams, Contact Centre, Hardship, because these people are really welltrained at dealing with people. That’s their job. They’re really - they are naturally
empathetic. They listen. They’re good at that.
So I think that sort of - that pivot, that ability to move literally hundreds of people quickly
into new areas where demand has gone up because we have freed up in other areas, hasreally helped us.
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So as you know, in the deferrals world, just using that, we’ve got about 84,000 home loancustomers in Australia on a deferral, we’ve had to check in or at least contact sometimes
on the phone, sometimes by text, sometimes in writing, sometimes by an email but we’ve
contacted every single one of them at the three-month check in rate. We’re essentiallydoing that all again now as they come up to the maturity of that six months to see where
do we go from here?
So I think we’ve proven our ability to do that pretty well, actually. I don’t think we’vereally stumbled too much. I mean, we had to put a lot of thought into it and things have towork but I think they’ve done a really good job.
I’ll just comment on the capital allocation and then get Mark to talk about how we think
about it from here in terms of those numbers.
Our capital - we haven’t changed our risk appetite in - at the highest level. We haven’t
really changed it as a result of COVID. So we haven’t said oh, we don’t want to bank small
business, we don’t want to do this, we don’t want to do that. No, we’ve stayed on the front
foot.
We have to be more thoughtful about taking on risk because - particularly for customers
who we don’t know. So customers who are new to the bank, we have to ask morequestions. We have to be - reassure ourselves about their character and the sustainabilityof their business etcetera.
But we haven’t really changed our risk appetite. What you’re seeing is a natural rebalancing in terms of resources. So despite us being open for business, for small business,
as a general observation, most small - there is not a lot of demand that we see. Now, ourbusiness is different than the other banks and we have different sectors we’re good at but
we’re not really seeing a lot of demand for borrowing from the small business community.
What we do know is though, for those that do apply, our approval rates are about thesame. So we’re still approving the same number of applications, we’re just not seeing that.
So there’s a lot of shifting happening in there but from a capital allocation, if it was justabout COVID, we haven’t really amended that.
In the broader - I mentioned in my speech, we have the broad - we have been looking atfrom an ESG perspective, so broader than COVID, we have been making capital allocation
decisions. That’s more to do with the industries that we want to bank because we thinktheir values are aligned with ours for the long-term.
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So that’s more sustainable finance as we talked about. Less into the carbon-heavy
industries. In fact, we’ve been reducing that pretty heavily and there are some otherexamples of that which I’m happy to go into more detail but Mark, do you just want to talkabout the resourcing? Because that’s been a big demand on your team.
Mark Hand: Yes. Yes, so if you think, Kylie, I’ve been around for a while and I remember inthe ‘90s, about - we went into technical recession in late 1990. It was about October 1990.
Our 1992 financial year was where those losses showed up effectively because in thosedays, you didn’t provide upfront. You recognised the loss as it occurred.
So it was about - sort of eight to 10 months through until about 18 months post the actual
event. Post the recession, that we started to see businesses start to liquidate, if you likeand really materialise the problems that they were facing.
So we’ve recognised what we believe is the size of the issue through our provisions today
but we think we’ll be very busy into mid-2021 and through the end of 2021, facing into
this challenge.
So, whilst we have resourced up now, we’ve not seen a flow of customers into our lending
services division for instance. We’re not seeing the customers come forward or been forced
into receivership yet but we expect that to accelerate, particularly into next year as people
get through what will hopefully be, for much of Australia, a more buoyant trading season
through Christmas but then, post-Christmas, I think we’ll really start to see whatcustomers can generally trade out of this and which customers are going to be in trouble
going forward.
So we’ve set up our resourcing to get through the peak of the deferrals, customers having
the three month check in coming off the deferrals. But we expect our small business tocome in a second wave, effectively, where we need to have those in-depth conversations
next year.
Shayne Elliott: I think it’s a really important point that Mark mentioned. It’s a good trigger
in your question there, Kylie, which is as of right now today, if you came into ANZ and said
what are people doing? We don’t have a lot of demand for those collections activities.
The foreclosure, that sort of stuff that we’ve been talking about because that actually, thegood news is that the coordinated effort from governments of various flavours throughout
the country, the banks, regulators, etcetera, has really bought time.
So people, we’re not seeing companies fall over, people get into really difficult positions
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today and that’s buying time. So - but we know, sadly, that some of that will come, ourguess based on experience and a bit of modelling is that that’s probably middle of next
year when JobKeeper, all these things start to come away or start to reduce.
The bank deferrals won’t be there quite at the same degree etcetera. That’s when we - so
we’re using this time as best we can to gear up our resources. Put them in the right placeand be prepared for that and, of course, hoping that we don’t have to use them.
Operator: Thank you. Your next question comes from Mike Harut with ACSI. Please, go
ahead. Pardon me, Mike, your line is now live. Please proceed with your question.
Your next question comes from Brian Johnson with Jefferies. Please, go ahead.
Brian Johnson: (Jefferies, Analyst) Good morning everyone and thank you very much forthe opportunity to listen to the presentation and ask questions. Shayne, I had three quick
ones. The first one is, on the record, ANZ is quoted as saying you expect housing prices todecline 15% in Melbourne. Can I ask, does that mean that you won’t do LVRs above 85%
on the home lending at the moment?
The second one is, I’m just intrigued on a comment that was reported that you made in
the press where you said, we’re going through our core customers name by name andasking how has this customer behaved? How did they treat their employees? How did theytreat their supplier? How have they treated the community? Can I ask, does that meanthat if you don’t get a satisfactory answer that you shed that person as a customer?
Then the final one, I’m just wondering, should we extrapolate these same higher standards
across to AmBank that you have the substantia holding in and that you also have a Board
representation and a lot of management representation as well?
Shayne Elliott: Yes, I’ll answer the last two and I’ll ask Mark to answer the first one. So I
think with respect, I think your question on AmBank is a bit cheeky, Brian. We don’t haveany control of AmBank. We are a minority shareholder.
We are just a shareholder like anybody else in a company. We express our views. We havea director who is appointed there whose job is to do the right things for AmBank and it’s
not our - is not solely there to represent ANZ’s interests but you - we would expect and wewould certainly be influencing any company we’re associated with to hold themselves tohigh standards.
In terms of the second question, yes, look, yes. I think that we’ve got this amazing
opportunity and we’ve stressed it across the board with our people, as dreadful as thisPage 15 of 22

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situation is, it is an incredible learning opportunity. We are going to see our customers put
through all sorts of stress, and true character will emerge and we should be very attuned
to that.
So we're asking our relationship managers - and I would just stress here for those who are
not familiar with my comments, we're talking about the corporate world, the bigger end of
town, not the little, very small businesses, but we're talking about businesses. Yes, we'regoing to see - and I think it is instructive.
I think that people who've treated their suppliers, employees, banks and others well anddemonstrate a good character are people we should back for the long term. People who've
innovated, people who've adapted quickly, people who've read the tea leaves well and get
on with things.
Those that do the wrong thing, yes, we need to not forget that and we need to sit down.
Now, we're not going to throw them under a bus. We're not going to walk away tomorrowmorning. Because they are our customers and, rightly or wrongly, we're with them today
and we'll back them. But over time, we're going to have think twice about sticking withsome of those customers, yes, that is absolutely the intent of that. But we won't bewalking away in the short term.
Mark, do you want to talk about the 15% house prices? It's a fair question.
Mark Hand: Yes. So I guess a couple of things. When Shayne called that out, that was aworst-case scenario that our economics department had called out at that time. To someextent, some of that's already played out. So prices have already come off from ournumbers across the country in different pockets.
What we will do is we do have postcodes where we won't exceed certain LVRs. So there
are parts of Australia - and we've seen this in WA in the past, where we've considered WA
prices to be lower than what the market probably considered them and we had moreconservative lending appetite in those geographies.
So it's not a blanket approach to the whole of Australia, but there are pockets where we
won't lend beyond an 80% LVR. There are pockets, we have certain property types,
potentially at the top end of luxury properties, where we have more conservative appetite,
sub 70% in some cases. So you're absolutely right, there are pockets of the country where
we won't go beyond that.
Brian Johnson: (Jefferies, Analyst) Thank you.
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Operator: Thank you. Your next question comes from Mike Harut with ACSI. Please go
ahead.
Mike Harut: (ACSI, Analyst) Hi there. A quick question regarding the Royal Commission
and ANZ's progress. So notwithstanding what you've outlined in the presentation, ANZ
hasn't disclosed its full APRA self-assessment compared to some peers. Also, I could bewrong here, but I think there's no ongoing independent review of how you're progressing.
So obviously there's the Board review and so forth. But I know that others, like CBA, forexample, have an independent review on those.
In that context, there's also the capital overlay in place from APRA for ANZ and peers
stemming from the Royal Commission. Given this situation, two questions. Firstly, is it fairto understand that the overlay is a measure of whether APRA is satisfied with ANZ's
performance on these matters? So I suppose what are your expectations or what has APRA
signalled the process is and the timing for potentially, over the longer term, removing it?
Do you anticipate that APRA will look at all the banks together in removing this over time,or will it be each bank separately?
Shayne Elliott: That's a really good question, Mike. So the way that I would think about theoverlay, is the overlay there, essentially, is a recognition that says, as a result of learnings
through the Royal Commission, APRA has assessed the risk profile of ANZ and some otherbanks to be a little higher than it had before, from an operational risk point of view or a
non-financial risk point of view, and therefore requires us to hold more capital until we canassure APRA or convince APRA that we've made sufficient progress to de-risk theorganisation. So I see it as no different than any other overlay we would have in terms ofcapital.
I think in this particular area, it's almost by nature - the nature of non-financial risk
overlays is they're not as mathematical. So it's not as simple as saying, well, if you
achieve X it'll disappear, and if you hit some ratio. So there's always going to be anelement of judgement here.
So we do have a plan. We're very aware of that overlay. Obviously, we'd like it to be
removed. It's not a significant financial burden, but I think it's not a good thing either for
us and so we want it removed. We do have an action plan. In fact, it's funny, so justbefore this meeting I was reading the - there's a Board paper going this week to the Board
exactly on that. Exactly to update the Board about, well, what steps have we taken andhow are we progressing.
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I don't know what APRA's approach will be. All I can say is, again, I would hope that theywould take a bank-by-bank approach to that. I think there would be unintended
consequences of saying, well, the only way it gets removed if it gets removed foreverybody. I don't think that is an incentive for individual banks, like us, to take thesethings seriously and do them as quickly as possible. So I would hope that they would lookat it on a bank-by-bank basis. That is my understanding. Although to be fair to APRA, I
can't recall that they've explicitly said one way or the other to me or to the Board.
Just one other thing. On the 16 things for the Royal Commission, you mentioned wehaven't given a public disclosure on our APRA self-assessment, and I think we've made it
clear why we didn't think that was the right thing to do. But in terms of the 16 items, therecommendations of the Royal Commission, that we had largely within our control, the 11that we could do on our own we've done. There are four that require legislation from thegovernment, and we await that legislation. There's one which is really to do with culture
improvements, which I'm not sure you can ever claim victory on; I think it's an ongoingprocess.
So we feel we're in really good shape. We'll continue to work with the government to get
the appropriate legislation through, so that we can close out the remaining items there.
Mike Harut: (ACSI, Analyst) Thank you.
Operator: Your next question comes from Alison Ewings with Regnan. Please go ahead.
Alison Ewings: (Regnan, Analyst) Thank you. Shayne, it was good to hear you emphasisthat in addition to the environmental financing targets you have in place, that you're also
working with high-emitting clients on the risk exposure side.
Can you provide a bit more detail - similar to the earlier question, actually - with regard towhat the process is should it be identified that clients are unlikely to meet the net zerotargets that you've set out within a reasonable timeframe, if indeed there is even sector
where that's possible, and how credit policies are being adjusted beyond the alreadyannounced energy generation requirements?
Shayne Elliott: Yes, it's really a fair question. So first of all, I gave a bit of a laundry list of
the industries there, with transport and logistics and agriculture, food and beverage, etcetera. So we started with those areas that have been identified as the highest emitting
sectors and customers that we have. So rather than try to tackle everything, we've gonewith the big hundred.
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We then asked them to share with us their transition plans. Now, they will all be in very
stages of maturity. You can imagine that group of customers, it's quite a broad group of
customers with all sorts of things that they do. We haven't prescribed your plan must look
like this, it must have this target, it must achieve these things. We're also learning in this.
But what we've said is it's really as much about the process as it is about the plan.
So we've said we want to enter into a dialogue with those customers. We've alreadyengaged with 60 of them. We want to hear engagement and dialogue. How are you
thinking about this, how do you think about these risks, how actively engaged are you,what plans do you have, are they reasonable, do they align with our values and ourambitions. If not, then we engage and we give feedback. We have been able to give - Iknow, from talking to the team, we've ended up in constructive dialogue.
I have to say what's been really encouraging about this is that the vast, vast bulk of thosepeople have actually welcomed the engagement as a way for them to learn as well,because we're sharing with our plans. So they see it as a mutually-beneficial engagement.
But if we get to a point - and we haven't yet, I'm glad to say - with a customer where wejust don't think they're taking it seriously or we don't think they get it, that to us is amassive red flag in terms of their own risk awareness and their own risk management
framework. While it wouldn't be black and white to say, therefore, again we'll exit them,
there would be a huge red flag that we would have to sit down, at a relationship level, andsay is this the kind of customer that we really want to bank for the long term.
I would say again, if we really don't see an alignment of values, we would move to exitthat customer over time. The reason for that is it's a red flag about good old-fashioned risk
management. If you're in one of those industries and you're not even thinking about thisor you're dismissive - and again I'm not sitting here telling them we know what theanswers are. But if you're not even considerate of it or thoughtful, we would have massive
concerns about the viability of that business. Therefore, I think good old-fashioned prudent
banking says we should find a way to move away from that customer, and that's what
we're willing to do.
Operator: Your next question comes from David Humphreys with TelstraSuper. Please go
ahead.
David Humphreys: (TelstraSuper, Analyst) Good afternoon, Shayne, and thank you fortaking my question. Across the financial services sector at the moment you're seeing I
guess expenses creep through, annual leave balances rising fairly dramatically as people
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07 September 2020are all at home. There's been a fair amount of commentary from the FSU and others on
ANZ actively managing annual leave amongst its staff. I note today you've put up a very
impressive staff engagement score of 85%. Can you talk about the importance of taking
annual leave at the moment, from a staff wellbeing perspective, and how ANZ thinks aboutthat?
Shayne Elliott: Sure. Thanks for the question. So really early on actually, in March when
this thing all started happening, the strong feedback we got from our staff, unsurprisingly,
and which continues to this day, is people are seeking as much security as they can,including job security. So of heightened importance, and we all can understand that.
So we treat our people as adults. We had a grown-up conversation really early on, and I
remember we had this on multiple occasions. We basically laid it out and explained thatthe best way that we can protect as many jobs as possible, in terms of providing that
security, is that we have the financial capacity to do so. The more that we can manage ourcosts and keep them tight, the better position we're in.
What we don't want to do is get forced into making bad decisions. When we looked at ourforecasts annual leave for ANZ was $130 million issue for us, i.e. if people did not taketheir normal leave, just what they normally take in any period in the second half, we would
have had a $130 million cost problem. Of course, then that starts pushing you into thatreally uncomfortable area; as a management team, well, what do we do to offset it, andsadly sometimes that can mean jobs.
So we had that very grown-up conversation with our people and we asked them to do theright thing. We asked them to do the right thing for their colleagues and themselves. We
never said we were forcing anybody. It was never that. There was no coercion. We asked
strongly and we pointed out the benefits. We also said, actually, in a time like this it's evenmore important that people have time out and have breaks from work, particularly when
you're working from home.
So we put a bit of a campaign together. I have to say the people of ANZ have stood up somagnificently. Essentially, our people have taken their full entitlements to leave, so we
don't have a problem on the cost side. It's through the collective action of 40,000 people,
across 33 countries, doing the right thing that is really, I think, one of the best cultureindicators that we have, and maintained our engagement incredibly highly. I've taken myleave, Mark's taken his leave, we've all done right across, and I think it's a really goodsign. But we did so through having an active engagement of why it was important, what it
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meant. But that mental break.
We've also said to people, by the way, David, hey, it's not okay to say I'm on holiday, I'm
working at home but I'm still actually working. That was not the intention here. The deal
was, no, you need to take time out. You know, from a bank's perspective, we have goodreasons for compliance leave that require people to take at least two full weeks back toback away from work. We're still insisting on those things. Making sure that doesn't mean
you're logging in, doesn't mean you're still secretly doing your work, or getting up early inthe morning before the kids are up or something. It is about our breaks. So, we've donethat.
I know it's not your question, but we've also engaged, we have a Company psychologist
and we've had people, we've been doing webcasts and others, just how do people balancethat very grey line now between work and home when physically it's all the same. Just
trying to give people tools to be able to manage through that. But it's an important point
and sadly, it's going to continue to be an important point, particularly for those in Victoria.
Operator: Once again, if you wish to ask a question, please press star one on yourtelephone and wait for your name to be announced. We will now pause momentarily toallow questioners to enter the queue. Your next question comes from Brian Johnson withJefferies. My apologies, there are no further questions at this time. I'll now hand back to
Mr Elliott for closing remarks.
Shayne Elliott: I just want it on the record I didn't cut Brian off at all, I was - thank youvery much for your time and it was a great pleasure to be able to go through our ESG
work today.
As I said, look, I think it's important to say, at a time like this, it is totally understandable
when companies become very internally focused and very focused on the short-term.
We're working really hard at ANZ to make sure that's not the case. We've not lost our
focus on ESG.
COVID is not an excuse for us to walk away, or to dampen our enthusiasm for the work
we're doing on who we bank, how we behave and what we care about most, in fact it's
actually a reason to double-down on it. I'm really - it might sound naive, but I believe
actually the work we've done around purpose and the ESG work over the last few years
has actually set us up incredibly well to deal with this.
It's even more important when people are - we essentially have 40,000 offices today,
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because everybody's sitting at home, we've got 40,000 distributed offices. We can't besitting over people's shoulders and neither should we. So, we are asking those people to
make decisions and we're asking more of them than we've asked in the past and to do so,based on a sense of purpose and values.
As I mentioned [in terms of leave] our people have stood up magnificently around that. It
doesn't mean we won't make mistakes, doesn't mean we will get everything right, but I
think we're in a really good spot. We're very mindful of our role in coming out of this crisis.
We're mindful that the impact on the Bank, to Mark's earlier point, will lag.
Things will open up before the economic area is finished and we're going to have a lot ofwork to do for the next couple of years. We're going to use this time wisely to prepare
ourselves for it. So, thanks for your questions and thanks for your listening today.
End of Transcript

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