News Release
For Release: 31 October 2019

Transcript of bluenotes interview with ANZ Chief Financial
Officer Michelle Jablko
ANDREW CORNELL: Morning Michelle. Thanks very much for joining us on the morning ofthe annual result. It was a flat result in quite challenging conditions. Can you pull it apart a
bit for us in terms of the remediation, the simplification programme, the transformation
programme and where are we seeing the impacts of those elements?
MICHELLE JABLKO: Sure. Simplification’s probably about two things. It’s about doing lessthings to simplify the business, so you’ve seen we’ve sold quite a lot of businesses this year
– we completed the sale of our life insurance businesses in Australia and New Zealand andalso businesses in Cambodia and PNG. But it’s also about being simpler in terms … and more
efficient in the things we continue to do. And you’ll see, if you look at our cost result thisyear, the underlying costs are down 1.6% so very, very well managed this year.
ANDREW CORNELL: And given what we’re seeing globally; economies are weaker, interest
rates are trending down towards zero, regulatory pressures are still going up. Does thefocus of that work then need to shift?
MICHELLE JABLKO: I think times are definitely tougher for the reasons you mention Andrew,
but I don’t think it changes what we’re doing. I think it underscores actually what we’vebeen doing for a while. And so for us it’s, costs coming down over time continues to be afocus of ours. But it’s not just about costs for costs’ sake, it’s about improving things forour customers. So for example, we think we can significantly reduce the number of steps inour mortgage process, probably by about half. It’s also about reducing operational risk inthe system and taking the need for future remediation out.
ANDREW CORNELL: When we look at the result, it’s a flat result, but in that flat result we
see a good, solid performance in New Zealand, a solid performance in Institutional. The
weakness is the biggest part of the bank, the Australian division and particularly on therevenue front. Can you talk us through that?
MICHELLE JABLKO: I think that’s exactly right Andrew. Revenue in Australia division wasdown $590 million. Actually, most of that was because of lower margins and lower fees thisyear. But, in terms of the biggest part of our business, our home loans, we did also have aslow-down – partly because of the market – but also we had some execution challenges inthe business.
ANDREW CORNELL: We see in this, and you’ve mentioned this, that the investment spend isincreasing and a lot of that is around regulatory and compliance issues. Now, we can seethat some of that will probably flow through, but some of it is more enduring. Is there
positive sides to this investment spend?
MICHELLE JABLKO: Yes. Overall our investment spend is up almost $200 million this year,
that’s within the lower costs I spoke about earlier, while quite a bit of it is regulatory andcompliance. So for example, in New Zealand we’ve got a requirement to effectively create astandalone system over there. And in Australia there are a range of regulatory andcompliance projects we’re working through.
I can understand why some people would classify them as pure regulatory and compliance,
if you like. But the way we’re thinking about them is actually we can use them to make ourbusinesses a lot better, improve our processes, internal processes, improve the way we use
our data. So I think there is real upside for the business that will come from it.
Australia and New Zealand Banking Group Limited

ABN 11 005 357 522

ANDREW CORNELL: We’ve spoken elsewhere specifically about the dividend. But when we
think about capital, and you’ve touched on capital there. What is the overall capital position?
And it’s more than just the dividend, where are your options with capital?
MICHELLE JABLKO: Our capital position remains really strong. In terms of our core equity,
it’s about $3.5 billion above “unquestionably strong”. So, really strong position to start with.
There are a number of potential regulatory changes that are in consultation right now, andwe’re working with regulators on those. As I look at those, for us yes they may provide
some challenges in terms of capital allocation and capital efficiency. But, given where westart from and the strength of our capital position, and also the capital we’re generating
every year, the issue for us is more about efficiency than the amount of capital.
ANDREW CORNELL: You’re the Chief Financial Officer, you’re looking at the balance sheet,
so what’s happening with interest rates is front and centre in your area. Now historically,
lower interest rates have hit bank margins, is that the case today? And, if so, what else areyou seeing with these near zero interest rates and how do you manage that?
MICHELLE JABLKO: It was certainly the case this year. And the reason is we’ve got about$110 billion worth of deposits globally where they’re at pretty close to zero rates. On top ofthat we have capital we invest and as interest rates come down, it reduces the earnings weachieve on those. So just in the past six months, the impact of lower rates has had about a
6 basis point impact on margins. And while there’s some benefit from funding costs andsome pricing decisions taken, they weren’t near enough to offset the impact of lower rates.
ANDREW CORNELL: Well thanks again Michelle for speaking with us this morning.
MICHELLE JABLKO: Thanks Andrew, great to talk.
For media enquiries contact:
Stephen Ries, +61 409 655 551
Nick Higginbottom, +61 403 936 262