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201 8
AN N UALREVIEW

OUR 2018
REPORTINGSUITE
In preparing this Annual Review we have continued to draw on
aspects of the International Integrated Reporting (IR) Framework
to describe how our business model, strategy, governance andrisk-management processes are addressing our most material
issues and delivering value for our shareholders and otherstakeholders. We outline our response to external social andenvironmental challenges, including the work we are undertaking
to rebuild our reputation as a fair and responsible business, driving
sustainable returns for all stakeholders. In future reports we willseek to achieve a closer alignment with the requirements of the IR
Framework, particularly with respect to the connectivity between
our strategy, performance metrics and remuneration outcomes.
This Review covers all ANZ operations worldwide over which,unless otherwise stated, we have operational control for thefinancial year commencing on 1 October 2017 and ending
30 September 2018. Monetary amounts in this document arereported in Australian dollars, unless otherwise stated.
We produce a suite of reports to meet the evolving needs andrequirements of a wide range of stakeholders, including investors,
customers, employees, regulators, non-government organisations
and the community.
Our 2018 Annual Report at anz.com/annualreport principally
details our financial information. Our 2018 Corporate GovernanceStatement discloses how we have complied with the ASX
Corporate Governance Council’s ‘Corporate Governance Principles
and Recommendations – 3rd edition’. We also provide our Principal
Risks and Uncertainties. These documents are available atanz.com/corporategovernance.
Our Sustainability Review complements this Annual Review,providing stakeholders with more detailed sustainability
disclosures, including: performance against our sustainability
targets; our approach to our priority areas of financial wellbeing,environmental sustainability and housing; and how we aremanaging social and environmental risk. This report will beavailable at anz.com/cs in December.

The reports available for stakeholders are as follows,
anti-clockwise from bottom left.
1. 2018 Annual Review anz.com/annualreview
2. 2018 Annual Report anz.com/annualreport
3. 2018 Corporate Governance Statement anz.com/corporategovernance
4. 2018 ANZ Sustainability Review anz.com/cs
Other financial disclosures are available on shareholder.anz.com

Throughout this Annual Review, KPMG has considered common
content which will be disclosed in the 2018 Sustainability
Review1. A copy of KPMG’s limited assurance report over the 2018
Sustainability Review will be contained in that report.
We will continue to evolve and improve our reporting suiteover the coming years and welcome feedback on this report.
Please address any questions, comments or suggestions toinvestor.relations@anz.com.

CONTENTS
What Matters Most

12

2018 Performance Snapshot

2

Stakeholder Engagement

14

Chairman’s Message

4

How We Create Value

16

CEO’s Message

6

Our Operating Environment

18

Banking Royal Commission

8

Our Strategy

20

Improving Customer Outcomes

92018 Sustainability Targets

24

About Our Business10

Governance28

Our 2018 Reporting Suite

1.

Our Climate-related
Financial Disclosures

32

Remuneration Overview

36

Five-year Summary

40

Important Dates for Shareholders

42

Contacts

44

Common content includes the following sections: sustainability metrics contained in the 2018 Performance Snapshot, Improving Customer Outcomes, Approach to Sustainability,
What Matters Most, Stakeholder Engagement, 2018 Sustainability Targets, Our Climate-Related Financial Disclosures and Five Year Summary.

ANZ 2018 ANNUAL REVIEW“I believe ANZ’s long-term viability 
is dependent on us making decisions
that are mindful of the impact we haveon the community, our shareholders, 
our customers and our people.”
Shayne Elliott, CEOThis report is being released at a time of unprecedented
scrutiny of our industry, particularly in Australia where 
the Royal Commission into Misconduct in the Banking,Superannuation and Financial Services Industry has
highlighted misconduct and conduct falling below community
standards and expectations. We do not underestimate thesignificance of the Royal Commission’s examination of oursector and the magnitude of the task ahead to correct ourfailings and demonstrate we are trustworthy.
We recognise that communicating transparently and openly
with our stakeholders is critical to rebuilding the community’s
confidence in us. This Annual Review not only talks tostakeholders about the challenges we face, what we have got
wrong and what we are doing to fix it, but also the positive
contributions we have made during the year.
Throughout this report there are case studies featuring ourcustomers – customers we have supported to grow theirbusiness, improve their financial wellbeing and succeed in adigital world. These positive stories are in no way intended
to diminish the instances where we have let our customers
and the community down. They do, however, speak to thefact that, if we are to deliver a strong and sustainable bank tobenefit all stakeholders, our customers must be at the centreof everything we do.

1

2018 PERFORMANCE
SNAPSHOT$6.5

11

BILLIONPERCENTCash profit1

Cash earnings
per share1

11.4

$11.5
BILLIONPERCENTNet tangible
assets per share2

CommonEquityTier 1 Capital3$

funded and facilitatedin low carbon andsustainable solutions$137
MILLIONPERCENTof women in
leadership5

CENTS

Cash returnon equity1$ $18.47

32

223.4

in community
investment6

3.71 MILLION$341 BILLION$184 BILLION$95 BILLION#1		

Fully franked
dividend for FY18
per share
MORE THAN

889

THOUSAND
people reachedthrough our target tohelp enable social andeconomic participation4

RANKED

1ST

3RD

Australia and
New ZealandInstitutional NPS7Net Promoter Score
Retail Australia8

IN HOME LENDING – INCREASE OF $10 BILLION9IN RETAIL DEPOSITS – INCREASE OF $2 BILLION9IN BUSINESS LENDING – INCREASE OF $1 BILLION9

statutory profit and discontinued operations included in cash profit. It is provided toassist readers in understanding the result of the ongoing business activities of the Group.
For further information on adjustments between statutory and cash profit refer to page
15 of the 2018 Annual Report.
2. Equals shareholders’ equity less preference share capital, goodwill, software and otherintangible assets divided by the number of ordinary shares.
3. APRA Basel 3 methodology.
4. Through our initiatives to support financial wellbeing including financial inclusion,
employment and community programs, and targeted banking products and services
for small businesses and retail customers. Refer to the 2018 Sustainability Review formethodology (to be released in December 2018).
5. Measures representation at the Senior Manager, Executive and Senior Executive
levels. Includes all employees regardless of leave status but not contractors (who areincluded in FTE).
ANZ 2018 ANNUAL REVIEWCENTSDIGITALLY ACTIVE CUSTOMERS9

1. On a cash profit (continuing operations) basis. Excludes non-core items included in

2160

LEAD BANK FOR TRADE SERVICES 10
6. Figure includes foregone revenue of $107 million, being the cost of providing low or

fee free accounts to a range of customers such as government benefit recipients, notfor profit organisations and students.
7. Peter Lee Associates 2018 Large Corporate and Institutional Relationship Banking
surveys, Australia and New Zealand 2018. In New Zealand ranked against the Top 4
competitors.
8. Roy Morgan Research Single Source, Australian population aged 14+, Main Financial
Institution, six month rolling average to Sep’ 18. Ranking based on the four major
Australian banks.
9. Australia and New Zealand.
10. Peter Lee Associates Large Corporate and Institutional Transactional Banking surveys,
Australia 2004–2018 and New Zealand 2005–2018.

CASE STUDYFINANCIALWELLBEINGJILPANTI ENTERPRISES –ANZ FORTESCUE PARTNERSHIP
Through our partnership with Fortescue Metals Group Ltd(Fortescue) we are providing finance to Jilpanti Enterprises Pty
Ltd (Jilpanti). Jilpanti is owned and operated by Puutu Kunti
Kurrama and Pinikura peoples’ Elder Lennie Ashburton and his
son Leonard. The company is providing exploration earthworks
for Fortescue.

– are able to access finance at a competitive rate through ANZ.
In the case of Jilpanti, they have purchased two 80 tonne
excavators and several vehicles which they would otherwise
have hired at more expensive casual hire rates.

“The support of Fortescue and ANZ has allowed Jilpanti to becomea more financially viable entity. Having access to funds to purchaseequipment has meant that we are creating steady growth for ourbusiness, increasing our income and employing Aboriginal people
directly into our business”, Lennie Ashburton explains.

Our Managing Director of Institutional banking in Australia
Graham Turley is pleased that through the partnershipwith Fortescue, ANZ is able to open up opportunities for
Indigenous businesses. “We hope that this experience will help
these businesses grow sustainably, become more financiallyindependent and ultimately drive economic growth andemployment in their communities,” he said.

Under the $50 million funding initiative, which is supported bya guarantee from Fortescue, eligible Indigenous businesses –especially those without an established trading or credit history

Left to right – Heath Nelson, Manager, Community Development, Fortescue
Metals Group – Frank Van Rooyen, Head Of Natural Resources Australia
Institutional, ANZ – Leonard Ashburton, Jilpanti Enterprises –Darryn Brice, Relationship Manager, WA North, ANZ

3

CHAIRMAN’SMESSAGEDAVID GONSKI, AC

THIS SIMPLIFICATION OF OUR
BUSINESS IS CRITICAL. WE KNOWA SIMPLER BANK IS MORE FOCUSEDAND EASIER TO MANAGE IN AN
ENVIRONMENT WHERE REGULATIONAND COMPLIANCE IS INCREASING.

The final dividend of 160 cents per share fully franked was
unchanged from 2017. This reflects a dividend payout ratio of
79.5% of cash profit (total Group), with $4.6 billion in dividends paid
to shareholders. This is above our target fully franked payout ratioof 60–65% of cash profit (total Group), however our strong capital
position has allowed us to maintain a stable dividend.
While growth was subdued, particularly in Australian retail banking,the fundamentals of our business remain sound. We recognised
many of the headwinds facing the sector early and the actionscommenced several years ago to simplify our business are now
benefiting shareholders.

This was a challenging year
for both ANZ and the entirebanking industry.
Our statutory profit was $6,400
million, flat since 2017. Cash profit 
for ANZ’s continuing operations(which excludes non-core items andthe discontinued Wealth businesses
from the statutory profit) was $6,487 million, down 4.7%.

4

ANZ 2018 ANNUAL REVIEW

During the year, we announced the sale of both our Pensions andInvestments businesses to IOOF and our Life Insurance businesses
to Zurich, as well as the sale of our Life Insurance business in New
Zealand to Cigna. We also increased our focus on Institutionalbanking with the announced sale of our Retail and Commercial
business in Papua New Guinea to Kina Bank and the sale of our
ANZ Royal Bank (Cambodia) joint venture to J Trust.
We completed the sale of our minority stake in Shanghai Rural
Commercial Bank and the sale of our share in the Philippines-based
Metrobank Card Corporation joint venture.
A highlight of the year was completing the complex separationof our six retail and wealth businesses in Asia on time andunder budget.
This simplification of our business is critical. We know a simpler
bank is more focused and easier to manage in an environment
where regulation and compliance is increasing. We haverebalanced our business, improved the returns of the Institutional
Division, delivered consistent outcomes in New Zealand and we are
directing investment and capital to our areas of strategic focus suchas Australian home owners.

EARNING TRUSTThe Royal Commission into Misconduct in the Banking,Superannuation and Financial Services Industry has been
confronting for all of us at ANZ, including the Board. We are
unanimous in our resolve to build a company of which weand all of our stakeholders can be proud.
We recognise this has not been the case in the last decade andthat we have failed in some circumstances to do the right thing
and to keep the needs of our customers as our priority.
The Board and senior management will improve transparency
with customers and ensure that the balance between earnings
and providing worthwhile, fair and desired services to ourcustomers is maintained at all times.
This is why we have engaged openly and constructively with theRoyal Commission and will not wait for its final recommendations
before taking action to ensure our failures do not occur again.
We also support strongly the approach that our Chief Executive
Officer, Shayne Elliott has stated publicly which is that where ANZ
has failed we will compensate those affected quickly and fairly andtake steps to ensure that it does not happen again.
The Ethics, Environment, Social and Governance Committee of
the Board is active and well informed. The Board has also made it
known within ANZ that asking the question ‘is this the right thing
to do?’ is critical.
As you will see in the Remuneration Report, variable remuneration
at all levels of ANZ has been materially reduced.
We now have a new executive team running the bank. However,accountability for our failures is still reflected in this year’s
remuneration of our most senior team including our Chief
Executive Officer.
While the Board itself does not receive variable compensation,
it shares some accountability for what has occurred.

As an indication of the Board’s understanding of its accountability,
existing Non-Executive Directors will receive in FY19 a reductionof an amount equivalent to 20% of the FY18 base Non-Executive
Director fee (and in my case, 20% of my Chairman’s fee). This isin addition to the bank’s efforts to identify and fix the causes ofour failures.

CAPITAL MANAGEMENT
Despite these difficult macro conditions, the progress of ourtransformation means we have been able to return surplus capitalto shareholders while retaining appropriate flexibility to invest in
our business. This year we have maintained our unquestionably
strong capital levels, reducing shares on issue by 67 million(equivalent to $1.9 billion) from an announced $3.0 billion sharebuyback program.

OUTLOOK
We expect the trading environment in Australia to remainchallenging, particularly in retail banking, as the industry responds
to increasing regulation and compliance costs, as well as
implementing the recommendations of the Royal Commission.
ANZ is well placed to navigate these difficult conditions given
the progress of our transformation and simplification agenda.
Our focus on cost and capital management and our exposure tointernational trade and commercial banking also positions ANZ
well for the future.
I know we have the right management team in place, led by
Shayne Elliott, to deliver on a strategy that will create sustained
value for our shareholders, customers and employees well into
the future. I know we are taking the action required to create acompany we can all be proud of.

David Gonski, AC
CHAIRMANCHAIRMAN’S MESSAGE

5

CEO’SMESSAGESHAYNE ELLIOTTWE ARE MAKING THE INVESTMENTSREQUIRED TO BUILD A BANK WORTHY
OF THE TRUST AND RESPECT OF OUR
CUSTOMERS, SHAREHOLDERS AND
THE COMMUNITY.

 e have delivered aWcredible result in 2018 forshareholders, customers
and employees given thesignificant challenges facing
ANZ and the industry.

Retail banking in Australia is facing strong headwinds.
The combined impacts of regulatory and macro prudential
requirements have seen annual housing market growth slow
with a substantial reduction in the average household’s potential
borrowing capacity.

The actions commenced in 2016 
to simplify our business, reduce 
cost and rebalance capital have us
well placed to meet the challenges
facing the industry.

Institutional banking continued to provide diversified earnings
for the Group with the transformation of our business making
earnings less volatile. ANZ was again named a top-four corporatebank in Asia and our position as a leading trade bank in the Asian
region will be an even more important differentiator as housing
credit slows in Australia.

OUR PROGRESS
We want to do fewer things and do them really well – while
ensuring they are aligned to our purpose. At the same time, weneed to focus on the areas where we can win and drive a decent
return for shareholders.
In Australia and New Zealand we want to be the best bank forpeople who want to buy and own their home and for those whowant to start, run or grow a small business. In Institutional banking
we want to be the best bank in the world for those companies andorganisations that move goods and money around the region.
I am confident our strategy of focus, simplification and digitaltransformation is right, indeed essential, for the times. A simpler
organisation is less complex to manage and hence better able todeliver sustainable earnings – and when things do go wrong, weare in a better position to fix them quickly.

6

ANZ 2018 ANNUAL REVIEWThis year we maintained our disciplined approach to home loan
growth, focusing on customers who want to buy and own theirown home. We have deliberately foregone short-term revenue
growth and higher margins, particularly in the investor andinterest-only segments. This focus has driven better risk-adjusted
returns and is in the long-term interest of shareholders.

ROYAL COMMISSION
This is a critical moment for the industry, our bank and our people.
We continue the urgent work required to fix the significant
failures highlighted by the Royal Commission. We have accepted
responsibility and we are determined to improve.
We have taken action to fast-track fundamental changes
involving leadership, strategy, systems, people and culture.
We are also making the investments required to build a bankworthy of the trust and respect of our customers, shareholders
and the community.
We will also compensate customers we have failed quickly andfairly and take steps to ensure that it does not happen again.

DIGITAL CUSTOMERSThis year we made significant gains in using digital technology
to improve the services we provide to customers, while also
improving our operational capacity and reducing risk.
We rolled out the New Payments Platform to more than three
million retail and commercial customers, allowing them totransfer funds to other participating banks in real-time withimproved data capability. This was a complex project involving
more than 150 people over three years that will provide
significant benefit to our customers.
During the year, we extended our leadership in mobile paymentswith the addition of Fitbit Pay and Garmin Pay, while adding
eftpos on Apple Pay and Android Pay. In an Australian-first we now
allow cash withdrawals from ANZ ATMs using any mobile device.
We also introduced a new mobile banking app that remains the
top-rated banking app in the Australian Apple store with almost
150,000 reviews.
In New Zealand, we made it easier for customers to interact withthe bank through the introduction of a digital assistant, ‘Jamie’,using artificial intelligence technology to help customers withthe top-40 most asked banking questions.

LIVING OUR PURPOSE
A crucial evolution for our business this year has been identifying,
adopting and embedding a clear sense of purpose: to shape aworld where people and communities thrive.
Along with our values, this underpins everything we do and will
ensure all our people can undertake their work with pride and astronger sense of ethics and fairness.
We took action to rebalance sales incentives for front-line staff,
including the removal of all sales incentives for financial planners.
This included offering free advice reviews for customers concerned
about their current financial position.

We invested more than $137 million in the communities in which
we operate, though our employee volunteering and giving
programs, our grants programs, and emergency relief measuresfor customers and communities impacted by natural disasters.
This year sadly has been extremely tough for many of our ruraland regional customers in eastern Australia and we implemented
a significant package to help our customers impacted by this oncein a generation drought in NSW and Queensland.
The package included reducing rates on business loans forfarmers by 1% pa in all drought declared areas and setting aside$130 million for discounted loans to help farmers re-stock andre-plant for next season. All home owners in drought declared
regions were also excluded from a recent interest rate increase. In
addition, we donated $1 million to rural financial counselling andcommunity grants assisting farmers in drought-affected areas.
Our purpose also guided our decision to increase our low carbon
finance commitment from $10 billion to $15 billion by 2020,and since 2015 we have funded $11.5 billion in low carbon andenvironmentally sustainable solutions, such as renewable energy
and efficient irrigation. We are reducing our lending to the mostcarbon-intensive sectors but doing so in a way that supports ourcustomers in making a manageable transition to a low carbon future.
Finally, I would like to acknowledge the over 39,000 people whoturn up to work every day to do a better job for our customers,
shareholders and our community. While we know we still havea significant job ahead of us, we have the right team to deliver abetter bank for all our stakeholders – a bank that can truly shape aworld where people and communities thrive.

Shayne Elliott
CHIEF EXECUTIVE OFFICER

CEO’S MESSAGE

7

BANKING ROYALCOMMISSION

The Royal Commission into
Misconduct in the Banking,Superannuation and Financial
Services Industry has conducted
six rounds of hearings into:
1

consumer lending;

We have acknowledged to the Commission that ANZ has engaged
in misconduct and conduct falling below community standards
and expectations.
These acknowledgements include that:-- we failed our responsible lending obligations for some car loans;

2 financial advice;-- financial advice customers paid fees for advice reviews we did
not provide; and3 loans to small and 
medium enterprises;-- there have been cases of inappropriate financial advice, together
with other poor conduct by advisors.

4 issues affecting Australians 
who live in remote and 
regional communities;
5 superannuation; and6 insurance.

On 28 September 2018, the Royal
Commission submitted its Interim Reporton the first four hearing rounds. ANZ
submitted its response to the Interim
Report on 26 October 2018.
From 19 November to 30 November
2018, the Royal Commission will conduct
a seventh round of hearings on policyquestions arising from the first six rounds.
The Commissioner has been asked tosubmit his final report by 1 February 2019.

8

The Royal Commission’s Interim Report lays out conduct of astandard below what the community expects and, in some cases,
what the law requires. The observations of the Commission haverightly dismayed and disappointed Australians.

ANZ 2018 ANNUAL REVIEWThe Commission found that in other cases ANZ had failed to meet
community standards and expectations or may have a case toanswer as to misconduct.
The Commission’s Interim Report strengthens our resolve to make
ANZ simpler and better able to serve our customers.
We are improving the accountability of our senior executives for
failures that harm customers. This includes the implementationof the Banking Executive Accountability Regime (BEAR).
We are also reducing the complexity of the bank, including
by reducing the number of products we offer. While no excuse
for customer harm, complexity makes it harder to identify andfix problems.
Other steps we are taking to improve customer outcomes are
discussed on the following page.
We will continue to engage constructively with the Royal
Commission as it finishes its work. Our hope is that the Royal
Commission serves as a watershed in the restoration of trust in
financial services. This trust is necessary if financial services areto help Australians save, borrow and grow their wealth.

IMPROVING CUSTOMEROUTCOMES
During the year, we have participated in a large number of reforms, at an industry
and bank level, to improve customer outcomes and restore community trust.
Discussed below are the key reforms on which we have been working.
CHANGES TO REMUNERATION
We are implementing all recommendations from Stephen
Sedgwick’s ‘Retail Banking Remuneration Review’, which is focusedon strengthening the alignment of retail bank incentives, practices
and good customer outcomes.
We have made significant progress, with actions completed sincecommencement of the program including: changing frontline staff
incentive and recognition plans so that no rewards are directly
linked to sales; removing the payment of volume-based incentives
to aggregators, brokers and introducers; changing staff performance
management plans; and focusing our efforts on initiatives that will
support the achievement of sustainable culture change.
We are on track to complete all recommendations ahead of
expected timeframes and will make further changes as quickly
as possible to ensure we achieve full alignment. Management
provides regular updates to the Board Human Resources Committee
on progress. We will continue to report externally through theAustralian Banking Association’s (ABA) reporting framework.

NEW BANKING CODE OF PRACTICE
We are implementing strengthened protections for consumer
and small business customers arising from the new Banking Codeof Practice (Code). The Code has been revised to better reflectcommunity standards and will be binding and enforceable.
Changes include:-- loan contracts for small businesses that are written in plain
English and easier to understand – we have simplified our main
contract for small business customers, halving contract lengthand increasing customer safeguards;-- active promotion of affordable banking products, specificallyassisting people on low incomes to pick appropriate products –see our discussion below on product suitability;-- assistance for vulnerable customers – we have developed
a new Vulnerable Customer mandatory learning module tohelp our staff identify and assist customers experiencing
vulnerable circumstances;-- abolition of fees and commissions on lenders mortgage
insurance; and-- an end to unsolicited offers of credit card increases.

BETTER PRODUCTS AND SERVICES
At the end of 2016, we appointed former Commonwealth Ombudsman
Colin Neave as our first Customer Fairness Advisor – signalling the startof a number of changes we knew we needed to make.
Customer remediation principles developed by Mr Neave, the key
elements of which are below, have guided our work this year to fix
systemic errors, refund impacted customers more quickly and learn
from our mistakes so as not to repeat them in future.

CUSTOMER REMEDIATION PRINCIPLES-- customer focused – fair, honest and efficient;-- comprehensive, timely and transparent decision-making;-- appropriate governance and oversight;-- clear communication to customers impacted by aremediation issue; and-- where relevant, a commitment to paying refunds orcompensation to customers without undue delay.
We have established a Responsible Banking group within ourAustralian Retail and Commercial Business, with specialist teams
dedicated to customer remediation, as well as product suitability
and responsible lending.
Our Product Suitability Program aims to achieve fair customer
outcomes via proactive customer contact, triggered bybehavioural indicators in our data. It is intended to help ourcustomers derive greater value from our products.
We have focused initially on vulnerable customers, particularly
those with persistent credit card debt or with potential for futurefinancial stress. During the year, our bankers provided financial
education and coaching to around 2,000 customers with persistentcredit card debt on how to use, and pay down, their credit card.
In addition, those customers were offered a lower interest rate
for 12 months, or a product transfer (e.g. from a ‘rewards’ card toa low-rate card). The results of the pilot were encouraging, withcustomers initially increasing their monthly payments and using
their credit cards less, with lower arrears levels.
We are also building product suitability into our product review
processes – for example, we are proactively contacting our homeloan customers paying interest only before they move to principal
and interest payments, to enable them to plan for, and successfully
manage, the transition to higher payments.
Finally, at a product level, this year we have removed ATM fees for
non-ANZ customers and reduced rates on low-rate cards by two
percentage points.
The agile transformation of our workforce – our New Ways ofWorking – means we are in a better position to implementchanges in a timely manner with minimum disruption to ourcustomers. There is more to do but our changes so far are alreadymaking ANZ easier to manage and better for customers.
We recognise that getting the basics of customer service right isessential to underpinning our social licence as a bank.

IMPROVING CUSTOMER OUTCOMES

9

ABOUT OUR
BUSINESSFounded in 1835 and headquartered in Australia, we provide banking and financial products and services to around eight million individual and business customers. We operate in and across 34 markets.

OUR CULTURE AND VALUESOUR PEOPLE

Our values are the foundation of how we work and aresupported by our Code of Conduct. All employees andcontractors must comply with the Code, which contains
guiding principles and sets the standards for the way we dobusiness at ANZ.

We employ 39,924 full-time equivalent employees and arecommitted to building an engaged,
diverse and inclusive workforce,ensuring we have the right people to meet external challenges andachieve our business strategy.  

We care about:

INTEGRITYC O L L A B O R AT I O N
A C C O U N TA B I L I T Y
RESPECTE XC E L L E N C E

We are building a workplace that reflects the communities
in which we operate and is inclusive of a wide rangeof diversity indicators such as gender, age, caring
responsibilities, cultural identity, disability, sexual orientation,
religious beliefs, education, work experience and socioeconomic background. Leveraging the full diversity of
our workforce gives us a strategic advantage and createscommercial, social and economic value.
As we seek to achieve diversity within our workforce,a key focus continues to be on improving the genderbalance within our business. We have targets to improve
the representation of women in leadership, with progress
reviewed monthly by the CEO and the Group Executive
Committee, and results informing the Group’s bonus pooland performance outcomes.
We are also providing employment opportunities to people
who may find it difficult to secure employment, such as
refugees, people with disability and Indigenous Australians.

OUR PURPOSE
Our purpose is to help shape a world in which people
and communities thrive. That means striving to create abalanced, sustainable society in which everyone can takepart and build a better life.
One of the ways we are bringing our purpose to life isthrough helping to address complex issues that matter tosociety and are core to our business and strategy. We arefocusing our efforts on financial wellbeing, environmental
sustainability and housing, contributing to these challenges
by: developing innovative and responsible financial
products and services; participating in relevant policy
development and research; strengthening stakeholder
partnerships; and harnessing the skills of our people.

10

ANZ 2018 ANNUAL REVIEWA summary of our policy position on Diversity and Inclusion
can be found at anz.com/corporategovernance.
It is important we focus on supporting the wellbeing andsafety of our people. Our Health and Safety policy, andhealth, safety and wellbeing (HSW) programs, ensure that
we provide an environment that enables employees toparticipate fully in the workplace and perform at their best.
We also provide opportunities for our people to contributeto the communities in which they live and work throughour giving and volunteering programs. This year 34.6% of
our employees volunteered 124,113 hours to community
organisations, representing more than 15,514 working days
and more than $4.5 million value to the community.

CASE STUDYFINANCIALWELLBEINGANZ EMPLOYEES SUPPORTING THE COMMUNITY
Since 2003 our matched savings program, Saver Plus, has helped toincrease the capability of lower income and vulnerable Australians
to create and maintain a savings habit, build financial resilienceand improve financial capabilities. The program was developedwith the Brotherhood of St Laurence and is co-funded by theAustralian Government.
Marcus, pictured with a Saver Plus participant, has been working
at the Fountain Gate branch for nearly ten years. Since 2010, 897
participants have been recruited to the program in the wider CaseyCardinia region. ANZ branch staff have provided around 18% ofreferrals to Saver Plus, with the remainder from local schools andthrough community engagagement.
“I live locally and being able to contribute to my community is very
important. I am proud that ANZ is able to offer this program as
I’ve seen firsthand every day the benefits of building a long termsavings habit,” explains Marcus.

While Saver Plus is delivered by community organisations,our branch employees play an important role in supporting
participants to save – from promoting the program and opening
savings accounts to attending the MoneyMinded financial
education workshops.
One of the Saver Plus participants referred to the program by
Marcus, completed the program whilst studying. “I am currently
completing a Diploma in Early Education and Childcare and needed
the dollar for dollar matching to purchase a new laptop to complete
my Bachelor’s Degree next year” she said.
More than half of our branch network employees in Australia are
actively involved in the delivery of Saver Plus.
To learn more visit anz.com/saverplus
Left to right – Saver Plus Participant (name withheld)
Leanne Farnsworth, Saver Plus Coordinator at Brotherhood of St Laurence
Marcus Menzies, Banking Consultant, ANZ

OUR APPROACH TO SUSTAINABILITY
Our Sustainability Framework supports our business strategy,reflects our most material issues and is aligned with our purpose.
This year we refreshed our Framework.
At the core of our Framework is Fair and responsible banking– keeping pace with the expectations of our customers,
employees and the community, behaving fairly and responsibly
and maintaining high standards of conduct.
Financial wellbeing – improving the financial wellbeing of ourcustomers, employees and the community by helping themmake the most of their money throughout their lives.
Environmental sustainability – supporting household, businessand financial practices that improve environmental sustainability.
Housing – improving the availability of suitable and affordable
housing options for all Australians and New Zealanders.

ABOUT OUR BUSINESS

11

WHAT
MATTERSMOST
OUR MOST MATERIAL ISSUES

Through our annual materiality assessment we engage with internal and external
stakeholders to inform our identification of social and environmental risks andopportunities. We seek to identify those that have the most potential to impact
our ability to operate successfully and create value for our stakeholders.

These issues may change over time, reflecting changes in our business and external operating environment and the expectationsof stakeholders. We use the results of the assessment to inform our business strategy thinking and our Sustainability Framework,
reporting and targets.
This year, stakeholders ranked the following issues (risks or opportunities) as having the most potential to impact our value creationin the short, medium and long-term:
Fairness and ethical conduct: is the highest ranked issue, with the Royal Commission strongly influencing stakeholder
sentiment in Australia. Operating in a fair and ethical manner is seen by stakeholders as fundamental if we are todemonstrate we are trustworthy. Stakeholders commented on the specific issues of financial incentives resulting inpoor customer outcomes, products with poor value for customers and conduct issues.
Corporate governance: it is well recognised that organisations with strong corporate governance processes and policies
in place are likely to perform better in the longer term. This year stakeholders told us that ANZ needs to identify and act
on misconduct and failures to meet community standards and expectations quickly, and improve remediation. This is
the first time this issue has been ranked in the top five, reflecting stakeholder concerns following the significant failures
highlighted at the Royal Commission.
Fraud and data security: could significantly disrupt the bank’s operations and impact our reputation in the event of abreach. Ensuring we have strong internal controls and risk management frameworks in place to mitigate this is critical.
Ongoing education of our customers and the wider community about online risks and improving their own data security
is also considered important.
Customer experience: delivering a positive customer experience is a key way in which ANZ can differentiate itself fromcompetitors and deliver sustainable business performance in the long term. Stakeholders also highlighted fairness,transparency, accessibility and simplicity of products as critical to demonstrating to customers that they can trust us toprovide them with the right products and services for their circumstances.
Digital innovation: is core to ANZ’s strategy and a key factor in driving positive customer experience. Customer
expectations are being redefined by their experiences with companies using technology in new ways to deliver better
service. Today, the smartphone is our most popular ‘branch’. It is now more important than ever that we work hard to keep
up with digital change and customer expectations to make banking easier for our customers.

The key steps in our 2018 materiality process, as well as the full list of ourmaterial issues, is discussed in detail in our 2018 ANZ Sustainability Review
available at anz.com/cs in December.

12

ANZ 2018 ANNUAL REVIEWMATERIAL ISSUES AND RISK MANAGEMENTOur most material social and environmental risks and opportunities are captured and managed within our existing Material Risk
categories (as the table below shows). There is also a clear link between our Material Risks and the challenges arising from the external
environment in which we operate.
A full list of ANZ’s Material Risks is available on page 38 of the 2018 Annual Report.
MATERIAL RISK TYPE

MANAGEMENT OF MATERIAL RISKSCOMPLIANCE RISK
The risk of failure to act in accordance withlaws, regulations, industry standards andcodes, internal policies and procedures andprinciples of good governance as applicable
to ANZ’s businesses.

Key features of how we manage Compliance Risk as part of
our Operational Risk framework include:

MOST MATERIALISSUES-- centralised management of key obligations, and emphasis
on identifying changes in regulations and the businessenvironment, so as to enable us to proactively assess emerging
compliance risks and implement robust reporting andcertification processes.
-- recognition of incident management as a separate element
to enhance ANZ’s ability to identify, manage and report on
incidents/breaches in a timely manner.
-- the Whistleblower Protection Policy allowing employees andcontractors to make confidential, anonymous submissions
regarding concerns relating to accounting, internal control,
compliance, audit and other matters.

OPERATIONAL RISK
The risk of loss and/or non-compliance withlaws resulting from inadequate or failed internal
processes, people and/or systems, or fromexternal events. This definition includes legalrisk, and the risk of reputation loss, or damage
arising from inadequate or failed internal
processes, people and systems, but excludes
strategic risk.

We operate a three-lines-of-defence model to manage
Operational Risk, with each Line of Defence having definedroles, responsibilities and escalation paths to support effective
communication and effective management of our operationalrisk. Also, we have ongoing review mechanisms to ensure ourOperational Risk framework continues to meet organisational
needs and regulatory requirements.

REPUTATION RISK
The risk of loss that directly or indirectly
impacts earnings, capital adequacy or value,that is caused by:

We manage Reputation Risk by maintaining a positiveand dynamic culture that:-- adverse perceptions of the Group held by anyof customers, the community, shareholders,investors, regulators, or rating agencies;-- conduct risk associated with the Group’s
employees or contractors (or both); or-- the social or environmental (or both)
impacts of our lending decisions.

-- ensures we act with integrity; and-- enables us to build strong and trusted relationships withcustomers and clients, with colleagues, and with the broader
society.
We have well established decision-making frameworks andpolicies to ensure our business decisions are guided by soundsocial and environmental standards that take into account
Reputation Risk.

STRATEGIC RISK
The risk that the Group’s business strategy andstrategic objectives may lead to an increase inother key Material Risks – for example: Credit
Risk, Market Risk and Operational Risk.

We consider and manage strategic risks through our annual
strategic planning process, managed by the Executive
Committee and approved by the Board. Any increase to our
key Material Risks is managed in accordance with our risk
management practices.

TECHNOLOGY RISK
The risk of loss and/or non-compliance withlaws resulting from inadequate or failed internal
processes, people and systems or from external
events impacting on IT assets, including thecompromise of an IT asset’s confidentiality,
integrity or availability.

Consistent with the management of Operational Risk, we
operate a three-lines-of-defence model to manage Technology
Risk, with each Line of Defence having defined roles,
responsibilities and escalation paths to support effective
communication and effective management of our technology
risk. We also have ongoing review mechanisms to ensure ourOperational Risk framework, which is also used to manage
Technology Risk, continues to meet organisational needs andregulatory requirements.
WHAT MATTERS MOST

13

STAKEHOLDERENGAGEMENT
We know that strong stakeholder relationships are essential to our success and our ability to create long-term value. Transparent andresponsive stakeholder engagement, combined with a real willingness on our part to listen, is one of the most important ways in which
we can demonstrate trustworthiness and rebuild community confidence. Stakeholder engagement is embedded in our policies, processes
and operations. Outlined below are the key issues raised by our stakeholders throughout the year and how we responded.
For more detailed information on how we have responded to what our stakeholders have told us, refer to our 2018 Sustainability Review
available in December at anz.com/cs.

14

OUR STAKEHOLDERS AND
HOW WE ENGAGED WITH THEM

KEY ISSUES RAISEDHOW WE RESPONDED

CUSTOMERS-- ‘Your Say’ – ANZ’s online customer
research community-- Online and face to face, forums,
surveys, focus groups and individual
in-depth interviews-- ‘Voice of Customer’ platform-- Conversations with our Customer
Advocate and Customer Fairness Advisor-- Complaints Resolution Centre-- Social media-- Conduct and culture in the Australian banking
industry, financial advice and treatment ofcustomers in financial difficulty-- Product suitability-- Customer service-- Fees and charges-- Dissatisfaction relating to digital products

Our response to the issues raisedby customers can be found in theRoyal Commission and Improving
Customer Outcomes sections atpages 8–9 and more detail will beavailable in the 2018 Sustainability
Review.

GOVERNMENT AND
REGULATORS-- Appearances before, and written
submissions to, the Royal Commission
into Misconduct in the Banking,Superannuation and Financial
Services Industry-- Regular meetings with politicalstakeholders, officials and regulators-- Submissions to parliamentarycommittee inquiries and othergovernment and regulatory
consultations

Australia:-- Customer detriment caused by poor conduct
and governance failures in the banking industry-- Open data, comprehensive credit reporting, ASIC
powers (e.g. design and distribution obligation, andproduct intervention power), terms of reference for
the Australian Financial Complaints Authority-- Competition, aspects of banking products
and practices-- Public policy development on issues andprograms related to financial wellbeing
and capability

ANZ seeks to listen and engage
constructively with the Royal
Commission, regulators,
government and policy makers.
In addition to participating in theRoyal Commission (discussed at
page 8), we have participatedin a wide range of government
consultations and parliamentary
inquiries.

SHAREHOLDERS-- Results briefings-- Strategy briefings, Environment, Socialand Governance (ESG) briefings andother market updates-- Annual General Meeting-- Disclosure documents, including results
announcements, investor presentations,external reporting suite and other ASX
lodgements-- Dedicated ANZ shareholder website-- Opportunities and challenges associated withthe current operating environment-- ANZ’s strategic focus and business priorities,
including the execution of our strategy-- Financial performance, composition andsustainability of earnings-- Capital and balance sheet management, including
quantum of capital held and efficient use ofcapital, balance sheet quality and liquidity andfunding positions-- Dividend and dividend policy-- ESG approach, commitment and progress

ANZ 2018 ANNUAL REVIEWNew Zealand:-- Conduct and culture in the banking industry-- Regulatory issues including tax reform, financial
markets, overseas investment restrictions,retirement savings, financial advice andresponsible consumer lending-- Public policy development on issues including
financial inclusion, housing and retail payments

An overview of the work underway
in response to key inquiries/
reports, is outlined in the Improving
Customer Outcomes section at
page 9.

We seek to provide shareholders
with quality information in atimely fashion through ANZ’sreporting suite, announcements
and briefings to the market, halfyearly shareholder letters andthrough our dedicated shareholder
site at shareholder.anz.com.
In 2018 we held our first ESG Briefing
for institutional investors and fundmanagers, the purpose of which
was to share with them how we areresponding to external social andenvironmental challenges.

OUR STAKEHOLDERS AND
HOW WE ENGAGED WITH THEM

KEY ISSUES RAISEDHOW WE RESPONDEDEMPLOYEES-- ‘My Voice’ survey of employee
engagement-- Royal Commission – hearings, impacts
and implications

Our response to the issues raisedby employees will be available inthe 2018 Sustainability Review.

-- Regular interactive webcasts with CEO
and Executive Committee members-- ‘ANZ Way’ Podcast series-- Strategic focus and business priorities,
including purpose and values-- Training and development, including on ‘New
Ways of Working’ and ‘New Ways of Leading’-- Direct communication and formal
twice-yearly performance appraisals
with line managers-- Raising issues and concerns without fear ofnegative consequences-- Internal communications channels,
including intranet and Yammer-- Diversity and inclusion-- Meetings with unions representing
ANZ employees-- Organisational restructuring-- Employee health, safety and wellbeing-- Flexible working arrangements-- Performance management-- Remuneration and reward

NON GOVERNMENTORGANISATIONS (NGOS)-- Remediation and compensation schemes-- A regular program of CEO and senior
executive meetings with civil society
leaders to exchange ideas anddiscuss material social, economic andenvironmental issues of mutual interest-- Vulnerable customers, hardship programs andconsumer protection-- Direct engagement with NGOs
and academics-- Regular engagement with peak bodies
for professional community services,such as financial counselling-- Regular meetings with ourcommunity partners

INDUSTRY ASSOCIATIONSANZ is a member of a number of industry
associations. The most significant of thesememberships are the Australian Banking
Association (ABA), the Business Council ofAustralia, the Financial Services Council,
the Association of Superannuation
Funds of Australia, Insurance Councilof Australia, the New Zealand Bankers’
Association, and Business New Zealand.
Via these memberships weparticipated in:-- the development and implementationof the industry consumer protection
reform program in Australia-- discussions about industry-wide issues
and strategy-- provided input into industry association
responses to parliamentary inquiries andgovernment consultations-- Responsible gambling initiatives and policies

Our response to the issues raised
by NGOs will be available in the2018 Sustainability Review.

-- Support for customers and communities
impacted by drought in Australia-- Ensuring our operations and supply chain are
free of ‘modern slavery’-- Climate change, carbon risk management andthe role of banks in supporting the transition to a
low carbon economy-- Strategies to tackle unemployment and build
social and economic participation-- Challenges associated with homelessness
in Australia-- Conduct and culture in the Australian banking
industry, including the complaints handling anddispute resolution, hardship and remediation-- Remuneration, particularly retail salescommissions and product-based payments
and commissions-- Comprehensive credit reporting andopen banking

We engaged with key industry
associations, including the ABA, (weassumed the role of Chair Bank),
and the Financial Services Council
to develop strategic responses toreputational issues.
Together with other Australianbanks we continued to implement
the industry reform program. As
part of this work, the Australian
Securities and Investment
Commission (ASIC) approved a new
Banking Code of Practice, to comeinto effect mid-2019. Refer to the
Improving Customer Outcomes
section at page 9 for more detail.

STAKEHOLDER ENGAGEMENT

15HOW WE
CREATE VALUE
We aim to create value for all of our stakeholders.
We recognise that we have not always met this stated aim and have, as a direct result of ourbusiness activities, caused customer detriment. By transforming our business, focusing on a
purpose and values-led culture and simplifying our products and services – doing fewer things
better – we want to ensure that we are having a positive impact on our stakeholders. Fairness
and ethical conduct will be fundamental to us achieving this.
The table below presents the value created for our key stakeholders for each of our main businessactivities. These activities create value for ANZ in the form of income, business growth, anengaged and high-performing workforce and strong relationships with our stakeholders.

STAKEHOLDERS				

BUSINESS ACTIVITIESOur business model consistsof the following activities:

WE PROVIDETRANSACTIONBANKING SERVICESWE HOLDDEPOSITS FOROUR CUSTOMERSWE LEND MONEY TO
OUR RETAIL, SMALL
BUSINESS ANDCORPORATE CUSTOMERSWE PROVIDE WEALTH
MANAGEMENT AND RISKMITIGATION PRODUCTS

VALUE CREATION*
Which create value for ANZ,
our stakeholders and otherstakeholders:-- Making it simple for ourcustomers to manage
their money andinteract with us how
and when it is mostconvenient for them.

-- Keeping our customers’
money safe andproviding competitive
returns on deposits.
We paid $10.7 billion ininterest on deposits.

-- Enabling customers andtheir families to save forthe future and achieve
personal and businessgoals.

-- Assisting businesses
to safely transact,
trade and invest acrossthe community andborders.

-- Enabling people andbusinesses to save,manage their resourcesand deal with change.

-- Enabling customers
to buy homes andbusinesses to expand
and grow. We provided$341 billion in homelending (Australia and
New Zealand).

*figures stated cover FY18 year.

-- Contributing to
the cyber safety
and security of ourcustomers througheducation andawareness programs.
-- Preventing financial
crime and money
laundering.

MATERIAL ISSUES
Fairness andethical conduct
Corporate governance
Fraud and data security
Customer experience
Digital innovation

16

CUSTOMERSANZ 2018 ANNUAL REVIEW-- Providing fundingfor housing, personal
lending and businesses.

-- Underpinning
employment,
investment andeconomic growth in
the community.
-- Efficiently andresponsibly allocating
financial resources
to meet customer
and market demand,and supportchanging community
expectations.

-- Assisting customers tomanage personal andbusiness risks.
-- Assisting communities tomanage social risks.
-- Allowing business andInstitutional customers tomanage risk associatedwith their businesses.
-- Promoting trade andinvestment, and theefficient allocation offinancial resources.

EMPLOYEESSUPPLIERSWE INVEST IN
OUR PEOPLE TO
BUILD A DIVERSE
AND INCLUSIVEWORKFORCE

WE COLLABORATE
WITH OUR
SUPPLIERSWE COLLABORATE
WITH PARTNERS TO
BUILD CAPACITY
AND IMPROVEFINANCIALWELLBEINGWE INVEST IN THE
COMMUNITYWE PAY TAXES IN
THE COUNTRIESWITHIN WHICH WE
OPERATEWE PAY DIVIDENDSTO OURSHAREHOLDERS-- Enabling us toprovide better
services andproducts tocustomers, andmeeting community
expectations.

-- Contributing to theeconomy acrossthe countries we
operate in.

-- Improving thewellbeing oflower income
and vulnerable
customers,
enabling them toparticipate more
fully in society.
More than 889,000
people havebeen reachedthrough our socialand economic
participation target.

-- Contributing to
the wellbeing of
the community
throughvolunteeringand employee
giving. 124,113
volunteering hours
completed by our
employees.

-- Contributing to
the provision of
public services
such as health,social services
and education.
We paid $3,1882
million in taxes togovernments.

-- Providing
consistent returns
to shareholders.

-- Promoting diversity
and equality ofopportunity. We
recruited 260
people fromunder-represented
groups1.
-- Increasing the skills
and capabilitiesof our people,
providing morethan 877,000 hoursof training.
1 Includes Aboriginal and-- Collaboratingwith suppliers tomanage the socialand environmental
impacts of ourmutual business
operations.

COMMUNITY-- Contributing
to the ability of
not-for-profit
organisations toassist and support
the community.

-- Supporting
customers andthe community intimes of difficulty,
hardship or
natural disaster, forexample, throughour drought relief
package.

SHAREHOLDERS-- Building trust
through transparent
tax reporting.
2 Total taxes borne by

the Group, includes
unrecovered GST/VAT,
employee related taxes
and other taxes. Inclusive ofdiscontinued operations.

-- We are paying
79.5% of 2018 cash
profit (total Group)
to shareholders.
-- Enabling
shareholders tosave and invest to
meet their personaland business goals.
-- Providing funding
for lending andthe economy,
and efficiently
allocating financial
resources.
-- Facilitating capitaland debt raising.

Torres Strait Islander
people, people withdisability and refugees.

HOW WE CREATE VALUE

17

OUR OPERATINGENVIRONMENT
We need to anticipate and respond to the risks and opportunities arising 
in our external environment to ensure that we can continue to create value for our stakeholders.
In addition to the regulatory and reputational impacts associated with the Royal Commission, we are responding to a number of other trends
and challenges in our external environment. A summary of the issues influencing our strategy and the way we respond is outlined below.

THESE GLOBAL TRENDS PRESENT US WITH RISKS AND OPPORTUNITIESGLOBAL TRENDRISKSOPPORTUNITIESDigitaladvancement
and technologicalchange-- Competition from existing and new competitors
is increasing, supported by Government policy,
such as the proposed consumer data right.

-- By improving our digital capabilities andinvesting in cyber security, we can serve
our customers in new and innovative ways,
meeting their needs for safe and secure digitalbanking solutions.

Globalisation-- Community concerns about aspects of trade andinvestment can potentially limit opportunities.

-- With the increase in digitisation, strong cybersecurity capability is critical.

-- With increasing globalisation and the rise of Asia,
we can support our customers to increase theircross border trade and investment.
-- Increased trade and investment leads to higher
incomes and employment for the communities
in which ANZ operates.

Demographic
changes-- Demand for home lending in Australia and
New Zealand is impacted by a range of supply
and demand factors largely outside of ourcontrol, including population growth, housing
prices and dwelling construction.

-- Community concerns about housing
affordability remain high. We can help bypartnering with business, government andNGOs to deliver innovative and practicalhousing solutions.

Lower credit
growthenvironment-- Increasing competition and regulatory
requirements places pressure on margins andcustomer volumes.

-- New approaches are needed to deliver products
and services to our customers, together withefficient allocation of capital and resources togenerate returns to shareholders.

Environmentand climate-- We will continue to experience negative
reputational impacts if we fail to raise standards
across all our activities and take customer andsocietal impacts into consideration when making
business decisions.

-- By continuing to focus on improving customer
outcomes and strengthening our standards
on issues such as environmental sustainability
and human rights, we have an opportunity todifferentiate ourselves from our peers.

OUR STRATEGY AIMS TO RESPOND POSITIVELY TO THISENVIRONMENT AND MEET SOCIETAL EXPECTATIONSCreating a simpler, betterbalanced bank: we are
reducing operating costs andrisks by removing productand management complexityand exiting low-return andnon-core businesses.

18

ANZ 2018 ANNUAL REVIEW

Focusing on areas where
we can win: we are making
buying and owning a home orstarting, running and growing
a small business in Australia
and New Zealand easy. We
want to be the best bank in
the world for customers driven
by the movement of goods
and capital in our region.

Building a superior everyday
experience to compete in thedigital age: we are building
more convenient, engaging
banking solutions to simplify
the lives of customers and ourown people.

Driving a purpose andvalues-led transformation:
we are creating a stronger
sense of core purpose, ethics
and fairness, investing inleaders who can help sense
and navigate the rapidlychanging environment.

CASE STUDYHELPING AUSTRALIAN
BUSINESSES TO GROWSAFE AG SYSTEMS – THE GRAHAM GROUP
The Graham Group (the Group) is a multi-generational South
Australian farming family headed by Mark and Caroline Graham.

As the Group’s business has diversified, they have benefited fromtheir long-term relationship with ANZ.

Originally focused on grain production, the business has diversified
and now encompasses Watervalley Farms, a broad acre cropping
business in the Yorke Peninsula, and Regional Skills Training(RST), a registered training organisation providing agronomic,
management and compliance training to farmers in South
Australia. RST has plans to expand to the eastern States in the
coming year.

“ANZ has a genuine understanding of all aspects of our business.
They have provided flexible and timely options and have always
supported the Group as we have expanded. This relationship willcontinue to grow as our plans for the future are implemented,”Mark Graham said.

Caroline Graham and daughter Katy Landt have also launched astart-up technology business, Safe Ag Systems, providing softwarethat enables farming enterprises across Australia to manage theirlegislative obligations and incorporate workplace health and safety
requirements into their operations. Almost 2,000 Australian farmers
are now using the software and, pending a successful capitalraising, the Group plans to take its software to overseas markets.

We are proud of the relationship we share with the Graham family.
They have strong ties to their local community and are making
a positive impact to agribusiness in Australia. Agribusiness is an
important part of ANZ’s history, and banking customers like theGraham family aligns with our commitment to help Australianbusinesses grow.
Left to right – Katy Landt, Co-Founder and CEO Safe Ag Systems
Caroline Graham, Director and Work, Health and Safety Manager, Safe Ag Systems
Ron Sutcliffe, Agribusiness Manager, ANZOUR OPERATING ENVIRONMENT

19

OUR
STRATEGY
We have embarked on a strategy to become a simpler, better balanced andmore service oriented organisation, helping our customers and our people
respond to a challenging world.
Becoming a simpler bank enables us to invest our resources to build better systems and processes, to fix things that are broken
and to develop products, services and programs that improve the financial wellbeing of our customers and the community.
We are repositioning the bank for the longer term – focused on
fewer things and doing them really well:over the past two and a half years, but recognise that we still havemuch to do.

-- creating the best bank in Australia and New Zealand for homeowners and small businesses

Variable remuneration is designed to focus our CEO and Disclosed
Executives on key measures supporting our business strategy, andencourage the delivery of value for shareholders. Group, Divisionand individual performance is considered to determine theirvariable remuneration recommendations. In respect of Group
performance, an assessment against a range of annual and longerterm strategic indicators is undertaken across the categories
of Risk, Financial and Discipline, Customer, and People and
Reputation. Together these inform the overall Group assessment.

-- building the best bank in the world for clients driven by tradeand capital flows between Australia, New Zealand and Asia-- establishing a common, digital-ready infrastructure and using
data to better assist our customers to succeed in a digital world.
While the environment in which we operate is changing at a
rapid pace, the four priorities that underpin our strategy continue
to drive our transformation. We have made significant progress

FOCUSING ON AREAS WHERE WE CAN WIN
ACTIONS WE ARE TAKINGOUR PROGRESS: FULL YEAR 2015 TO FULL YEAR 20181

Making buying and owninga home in Australia and
New Zealand easy-- established dedicated Home Owners and Home Lending teams, to make buying and owninga home easy-- introduced First Home Buyer coaches: mortgage and home lending experts who assist customers
through the first home buying journey from start to finish, without any cost or obligation-- improved communication with home loan customers transitioning from interest only to principal
and interest loans, helping them prepare for increased payment amounts-- acquired technology start-up REALas, assisting prospective home buyers find out accurate saleprice predictions for properties on the market-- provided an additional $52 billion in home lending in Australia and New Zealand-- maintained market share of owner occupier customers in Australia at 16%2-- maintained number 1 housing market share position in New Zealand with 31%3 share

Making starting, runningand growing a small
business in Australia
and New Zealand easy-- continued to invest in a dedicated Business Banking proposition-- introduced innovative solutions for customers including ANZ Be Business Ready (Honcho),
ANZ Be Trade Ready, Employment Hero and SmartPayroll-- launched BladePay™: smaller, smarter, faster payment technology-- provided $95 billion business lending in Australia and New Zealand (in 2018)-- grew business deposits in Australia and New Zealand by $16 billion

Being the best bank in theworld for customers driven
by the movement of goods
and capital in our region-- ranked number one Institutional Lead Bank in Australia and New Zealand4-- maintained equal 4th corporate bank in Asia and improved to #1 for Overall Quality5-- lead bank for trade services6-- increased Payments and Cash Management revenue in Institutional by 9%

Links to 2018 Group performance assessment7:
Continued to improve customer experience this year, with a highlight being Institutional performance in key customer satisfaction/
relationship strength surveys. A disappointing Net Promoter Score (NPS)8 in Australia was balanced by a record NPS in New Zealand Retail.

20

ANZ 2018 ANNUAL REVIEWCREATING A SIMPLER, BETTER BALANCED BANKACTIONS WE ARE TAKINGOUR PROGRESS: FULL YEAR 2015 TO FULL YEAR 20181

Exit low return andnon-core businesses-- sold or exited 21 non-core businesses, including announced divestments:-- Esanda asset finance business-- Wealth Australia – Life Insurance, Wealth Australia – One Path Pensions and Investments/Aligned
Dealer Groups-- One Path Life New Zealand and New Zealand One Path Life medical insurance book-- six Asia Retail and Wealth businesses across Singapore, China, Hong Kong, Taiwan, Indonesia
and Vietnam-- Papua New Guinea Retail, Commercial and SME business-- Metrobank Card Corporation and Shanghai Rural Commercial Bank partnerships in Philippines
and China respectively and ANZ Royal joint venture in Cambodia-- agreement with CMC Markets to provide the ANZ Share Investing trading platform

Reduce reliance on
low-return aspects ofInstitutional banking-- focused on strategic Institutional customers across Australia, New Zealand and the Asia Pacific region-- reduced the Institutional customer base by ~6,000, exiting off-strategy, low-return customers-- reduced Institutional Total Risk Weighted Assets by $44 billion-- reduced capital allocated to Institutional, from ~48%9 of total Group capital to ~38%9

Reduce operating costs
and risks by removing
product and management
complexity-- total cost base reduced from $9.4 billion to $9.2 billion-- reshaped the workforce, including introduction of agile working practices (our New Ways of Working)to the Australia and Technology Divisions to increase speed-to-market for key customer initiatives-- reduced full time equivalent (FTE) employees by 25%-- decommissioned redundant technology applications-- simplified products, including decommissioning ~140 products in Australia Division

Further strengthen thebalance sheet by rebalancing
our portfolio-- increased Common Equity Tier 1 capital from 9.6% to 11.4%-- reallocated capital to Retail and Commercial in Australia and New Zealand, from ~45%9 to ~60%9of total Group capital-- freed up over ~$12 billion in capital through announced divestments and reduction in Institutionalrisk weighted assets

Links to 2018 Group performance assessment7:
While cost outcomes were below target (resulting from the large/notable items), we maintained a strong balance sheet, anddivestments during the year reduced the complexity of the Group. Total shareholder returns were positive relative to peers and returnon equity was on target. Organic capital generation remained strong. Capital, funding and liquidity continued to be well above
regulatory minimums.
1.
2.
3.
4.

5.

6.

Financial comparisons are on a Cash Profit basis. 2018 excludes discontinued operations.
Source: APRA monthly banking statistics 31 August 2018.
Source: RBNZ, share of all banks as of August 2018.
Peter Lee Associates 2018 Large Corporate and Institutional Relationship Banking surveys,
Australia and New Zealand. In New Zealand ranked against the Top 4 competitors.
Greenwich Associates 2017 Asian Large Corporate Banking Study (issued in March 2018):
ANZ ranked equal No. 4 in 2016 and 2017.
Peter Lee Associates Large Corporate and Institutional Transactional Banking surveys,
Australia 2004–2018 and New Zealand 2005–2018.

7.
8.

9.

See 2018 Annual Report for full Remuneration Report.
NPS is a customer loyalty metric used globally to evaluate a company’s brand, products
or services. Net Promoter® and NPS® are registered trademarks and Net Promoter Score
and Net Promoter System are trademarks of Bain & Company, Satmetrix Systems andFred Reichheld.
Based on Regulatory Capital. 2015: Institutional shown under 2015 IIB Structure, including
Global Institutional and Asia Retail & Pacific. 2018 adjusted for announced divestments of
OnePath, P&I, NZ OnePath, Cambodia subsidiary and ANZ PNG.

OUR STRATEGY21

DRIVING A PURPOSE AND VALUES LED TRANSFORMATIONACTIONS WE ARE TAKINGOUR PROGRESS: FULL YEAR 2015 TO FULL YEAR 20181

Create a stronger sense ofcore purpose and ethics-- renaming both the Board Environmental, Social and Governance Committee and Responsible
Business Committee to include Ethics, providing management with a further vehicle to raise
ethical and conduct issues-- developed an ethical decision-making framework which captures how we apply our purpose,values and principles to inform complex decisions-- changed the way we pay our employees, placing a greater focus on customer outcomes (seeImproving Customer Outcomes on page 9)-- built momentum across our key focus areas of financial wellbeing, environmental sustainability
and housing:-- surveyed 9,500 people in ANZ Adult Financial Wellbeing Survey in Australia and New Zealandand launched an insights report, the findings of which will inform future development of
products and services-- delivered Vulnerable Customer training to 6,100 frontline employees in Australia-- arranged 18 green bonds ($1.867 billion) on behalf of customers, including debuts in New
Zealand and Asia-- introduced interest free loans to help New Zealanders insulate their homes, with nearly 560
loans approved

Invest in leaders who canhelp sense and navigate
the rapidly changing
environment-- launched our New Ways of Leading, which describe the behaviours our leaders most need todemonstrate in order to transform ANZ-- increased women in leadership roles by 0.9% to 32%, driven by our focus on adaptive leaders
who uphold our ICARE values and our New Ways of Leading

Links to 2018 Group performance assessment2:
While there were a number of highlights during the year, such as an increase in the number of women in leadership, this was offset
by employee engagement scores falling below target. Our standing in the community was impacted by significant community
concern as a result of our failures highlighted by the Royal Commission.

BUILDING A SUPERIOR EVERYDAY EXPERIENCE FOR CUSTOMERSAND OUR PEOPLE TO COMPETE IN THE DIGITAL AGE
ACTIONS WE HAVE TAKENOUR PROGRESS: FULL YEAR 2015 TO FULL YEAR 20181

Build more convenient,
engaging banking solutions
to simplify the lives ofcustomers and ourown people-- invested in ANZ’s new Digital Banking division to support growth in priority areas-- upgraded key digital channels resulting in improved customer experience, including through:-- a new mobile app-- full mobile wallet (only major bank in Australia to offer this)-- introduction of secure biometric security for ANZ app, New Zealand Contact Centre andInstitutional channels-- continued to simplify technology architecture, decommissioning 264 applications during 2018,
a 35% increase on 2017-- rolled out New Payments Platform (NPP) to small and medium businesses and Institutional clients-- won 12 of 13 NPP mandates from local and foreign banks-- prepared for Open Banking through a strategic partnership with Australia’s leading datacompany, Data Republic, allowing sharing and analysis of data with trusted third parties in asecure environment-- introduced a digital assistant, ‘Jamie’, using Artificial Intelligence (AI) on help.anz.co.nz, to assist
customers with the top-40 most asked banking questions

Links to 2018 Group performance assessment2:
There was strong digital engagement with customers across the Group. The ANZ app remains the top-rated banking app in theApple store, with almost 150,000 reviews.
1.
2.

22

Financial comparisons are on a Cash Profit basis. 2018 excludes discontinued operations.
See 2018 Annual Report for full Remuneration Report.

ANZ 2018 ANNUAL REVIEWCASE STUDYFACILITATING
TRADE IN ASIAZONZO ESTATE
We are helping our business customers start, run and grow theirbusinesses. Our presence in the Asia Pacific region enables us toassist them to expand their networks and enter new markets.
”Challenging local and global environments mean many
Australian businesses are looking to diversify and they’re focusedon where the world’s long-term growth is – Asia. More of ourcustomers are coming to us to seek advice on regional demand
for their products or services and to help to identify new revenue
opportunities” said Mark Hand, Group Executive, Australia
Business and Private Banking.
More than 20 of our retail and wholesale Australian businesscustomers have participated in our ‘Opportunity Asia’ delegation

to Shanghai and Hong Kong. Taking place over five days, theprogram included seminars, panel sessions and networking
events focused on practical information to help our customers
realise their growth aspirations. Participants had an opportunity
to showcase their products at events attended by local experts
and potential suppliers, as well as representatives of the AustralianGovernment and industry bodies.
Rod Micallef of Zonzo Estate, a winery and restaurant in Victoria’s
Yarra Valley, took part in the delegation. Reflecting on his
experience, Rod said that “joining the delegation gave us a great
insight into the Asian market and has since led to sales in China.”
Tara Williamson, Relationship Manager, ANZ – Rod Micallef, Director, Zonzo Estate

OUR STRATEGY

23

2018
SUSTAINABILITYTARGETS
Each year we set public sustainability targets and a corresponding
Group-wide program of work to support the delivery of our businessstrategy and respond to our most material sustainability issues.
Progress against our targets is reviewed by the Responsible
Business Committee, and twice a year by the Board Ethics,
Environment, Social and Governance Committee. Performanceagainst our 2018 targets, many of which are aligned with theUnited Nations Sustainable Development Goals, are outlined
below. More detail will be available in our 2018 Sustainability
Review available at anz.com/cs in December.

ANZ is committed to the United Nations’ Sustainable
Development Goals (SDGs) and our Framework, together withpublic targets that we set annually, support 10 of the 17 SDGs:

2018 SUSTAINABILITYTARGETS PERFORMANCEThis year we have achieved or made good progressagainst the majority of our targets.

32%

ACHIEVED63%

PARTIALLY ACHIEVED 
OR IN PROGRESS

5%

DID NOT ACHIEVEFINANCIAL WELLBEINGTARGETSPROGRESSCOMMENTARY

Help enable social and economic participation of
1 million people by 2020 through our initiatives
to support financial wellbeing, including ourfinancial inclusion, employment and community
programs, and targeted banking products andservices for small business and retail customers.1

More than 889,000 people have been reached through ourfinancial wellbeing programs, and targeted banking products
and services for small business and retail customers

Build an engaged, diverse and inclusive workforce by:

Relevant SDGs-- increasing the representation of Women in
Leadership by 3% to 34.1% by 2020;

Group-wide representation of Women in Leadership has
increased to 32% (up from 31.1% as at September 2017).

-- maintaining an organisation inclusiveness scoreof at least 93% in 2018;

Organisation inclusiveness is steady at 93%.

-- recruiting >1,000 people from under-represented
groups including Indigenous Australians, people
with disability and refugees; andSince 2016, we have recruited 510 people fromunder-represented groups.

-- improving employee engagement by 6% to 80%
by 2020 (against 2016 baseline score of 74%).

Employee engagement decreased from FY16 by 1% to 73%.

Increase employee volunteering participation rate
in 2018 to 30%.

Across the Group employee volunteering
participation increased to 34.6% in 2018.

Relevant SDGs

Relevant SDG
1.

24

Refer to the 2018 Sustainability Review for methodology (to be released in December).

ANZ 2018 ANNUAL REVIEWCASE STUDYFINANCIALWELLBEING

MAKING SAVINGS POSSIBLE
Nigel, pictured with his daughter Molly, first heard about the
Saver Plus program from Molly’s primary school.
“I originally joined the program for the dollar for dollar matching
to help purchase a new computer for Molly” explains Nigel.
“The matched savings came in handy, but what I learnt from theprogram was more valuable in the long-run.”“The program has taught me that with commitment andconsistency we can make saving possible. I put aside $50 eachmonth with my daughter, even though it was difficult at times.”
Nigel credits Saver Plus with inspiring his daughter to save.
Of particular value to Nigel was the MoneyMinded online modules
he completed as part of the program, often alongside Molly.

“My daughter took an interest in the bank statements and wetalked about what we would do with the extra funds coming in. We
talked about a compound interest managed share fund, and this is
now what we are doing with the savings. She could see how muchthe funds would achieve over many years of compound interest.”
This year, more than 4,000 people in Australia have benefited from
Saver Plus, our financial education and matched savings program
for lower-income earners. Participants make regular deposits
towards a savings goal over a 10-month period and complete
MoneyMinded workshops (either face to face or online) to build
their financial management skills. At the end of the program
participants’ savings are matched dollar for dollar, up to $500 for
education costs.
To learn more visit anz.com/saverplus
Nigel, Saver Plus Participant

OUR SUSTAINABILITY TARGETS

25

FAIR AND RESPONSIBLE BANKINGTARGETSPROGRESSCOMMENTARY

Create the best experience for our customers,
measured by: improving Net Promoter
Score relative to peers (Retail, Corporate andCommercial and Institutional customers).

Australia-- Retail: ranking increased to 3rd from 4th at end of 20171-- Business and Private Bank: ranking increased to 3rd from 4th atend of 20172-- Institutional: ranking increased to 1st from 2nd at end of 20173.
New Zealand-- Retail: ranking of 4th remained steady from end of 20174-- Commercial and Agricultural: ranking of 5th remained steadyfrom end of 20175-- Institutional: ranking increased to 1st from 3rd at end of 2017.6

Improve senior leaders’ role modelling of ANZ
values by 2% to 74% in 2018.

Perception of senior leaders’ role modelling of ANZ Values has
decreased from FY16 by 1% to 71%.

Extend ANZ’s cyber security education andawareness program in 2018 by:-- embedding cyber security information into
key business processes (e.g. security tips whenestablishing new customer accounts) andcustomer ‘touchpoints’ (e.g. ANZ website); andWe have delivered a range of initiatives embedding cybersecurity information into key business processes to raise cyberawareness of both customers and staff.

-- collaborating with others (e.g. government,
universities and industry) to help build a‘pipeline’ of cyber security professionals andraise community awareness of cyber security.

We participate in industry collaborations to address the
skills shortage in cyber security and support a ‘cyber smart’community.

Implement strengthened due diligence for our
Human Rights Standards by end 2018.

Our updated Social and Environmental Risk screening tool was
implemented in October 2017 with our updated online Socialand Environmental Risk training program rolled out to staff in
February 2018.
We expanded the pilot of our strengthened human rights
customer due diligence to three locations in Asia: China,
Indonesia and India. Using the pilot results, we are considering
how to embed the strengthened due diligence in our generalscreening for all locations in FY19.
Relevant SDGs

1.

2.

26

Roy Morgan Research Single Source, Australian population aged 14+, Main Financial
Institution, six month rolling average to Sep’18. Ranking based on the four major
Australian banks.
DBM Business Financial Services Monitor. Base: Business and Private Banking (<$100m
annual turnover) Main Financial Institution customers. Data based on business banking
NPS only (excludes Private Bank NPS). Six month average to Sep’18. Ranking based on thefour major Australian banks.

ANZ 2018 ANNUAL REVIEW

3.

4.
5.

6.

Peter Lee Associates 2018 Large Corporate and Institutional Relationship Banking survey,
Australia.
Retail Market Monitor, Camorra Research, Retail, Sep’18 (monthly).
Business Finance Monitor, TNS Kantar Research. Base: Commercial ($3m – $150m annual
turnover) and Agricultural (>500K annual turnover) customers, Q3’18 (quarterly).
Peter Lee Associates 2018 Large Corporate and Institutional Relationship Banking survey,
New Zealand, ranked against the Top 4 competitors.

ENVIRONMENTAL SUSTAINABILITYTARGETS

Fund and facilitate at least $15 billion by 2020
in low carbon and sustainable solutions including
renewable energy generation, green buildings
and less emissions intensive manufacturing
and transport.

PROGRESSCOMMENTARYANZ has funded and facilitated $11.5 billion in low carbon
and sustainable solutions since 2015
Relevant SDGs

By end 2018, ensure emerging issues and leading
practices are reflected in the policies and procedures
guiding our business lending decisions by:-- reviewing and, where necessary, updating ourSocial and Environmental Risk Policy (including
sensitive sector standards); andWe reviewed a set of priority issues and sectors, including
measures to reduce carbon emissions, with recommended
changes to the policy on track to be approved and publishedby December 2018.

-- amending our risk appetite and customer
assessment processes to increase emphasis on
climate change risks and management.

Climate change risk has been added to the Group andInstitutional Risk Appetite Statements.

Reduce the direct impact of our business activities
on the environment by:

Relevant SDGs-- reducing scope 1 and 2 emissions by 24%
by 2025 and by 35% by 2030 (against a 2015baseline);

Scope 1 and 2 emissions have decreased by 18%, tracking
ahead of the required reduction to meet our target.

-- increasing renewable energy use in ourAustralian operations by 13% by 2020 (against a2017 baseline);

We have entered into a Power Purchase Agreement to‘off-take’ power from a windfarm under development in
Murra Warra (Victoria), due for completion in 2019.

-- reducing paper consumption in Australia and
New Zealand (office and customer paper useonly) by 40% by 2020 (against 2015 baseline);

Paper consumption has decreased by 37%, tracking aheadof the required reduction to meet our target.

-- increasing recycling rates in our Australiancommercial offices (> 20,000m2) by 12% by 2020
(against a 2017 baseline); andRecycling rate is not progressing as expected and has
decreased by 1% since 2017.

-- reducing water consumption in our Australiancommercial offices (> 10,000m2) by 15% by 2020
(against a 2015 baseline).

Water consumption is progressing slower than expectedwith a reduction of approximately 4% since July 2015.

OUR SUSTAINABILITY TARGETS

27

GOVERNANCE
BOARD OF DIRECTORS

Above from left to right: RT Hon Sir John Key, GNZM AC – Independent Non-Executive Director, John Macfarlane – Independent Non-Executive Director,
Paula Dwyer – Independent Non-Executive Director, David Gonski, AC – Chairman, Independent Non-Executive Director, Graeme Liebelt – Independent
Non-Executive Director, Ilana Atlas – Independent Non-Executive Director, Shayne Elliott – Chief Executive Officer, Executive Director, Jane Halton, AO PSM –Independent Non-Executive Director, Lee Hsien Yang – Independent Non-Executive Director
Full biography details can be found on our website at anz.com/directors.

ANZ’s strong governance framework provides a solid structure for effective
and responsible decision making within the organisation.
The Board is responsible for the oversight of ANZ and its soundand prudent management, with specific duties as set out in its
charter available at anz.com/corporategovernance
There are five principal Board Committees – the Audit Committee,
the Ethics, Environment, Social and Governance (EESG) Committee,
the Risk Committee, the Human Resources Committee and theDigital Business and Technology Committee. Each Committee has
its own Charter setting out its roles and responsibilities.
At management level, the Group Executive Committee (ExCo)comprises ANZ’s most senior executives. There is a delegations ofauthority framework that clearly outlines those matters delegatedto the CEO and other members of senior management. In addition,
there are a number of formally established management committees
that deal with particular sets of ongoing issues.

28

ANZ 2018 ANNUAL REVIEWFor further detail on ANZ’s governance frameworksee our 2018 Corporate Governance Statement available
at anz.com/corporategovernance.

POLITICAL DONATIONS
Our policy is that we make an annual donation to the two
major Federal parties to support the democratic process inAustralia. In 2018, ANZ donated $100,000 to the Liberal Partyof Australia and $100,000 to the Australia Labor Party.

DIRECTORS’ MEETINGS
The number of Board meetings and meetings of Committees during the year the Director was eligible to attend, and the number of
meetings attended by each Director were:

Board
A

B

Ilana Atlas

12

12

Paula Dwyer

12

12

Shayne Elliott

1212David Gonski, AC

12

12Jane Halton, AO PSM

12

12

Risk
Committee

Audit
Committee

Ethics,Environment,
DigitalHuman
Social and Business andResources Governance Technology
SpecialCommittee
SharesCommittee Committee Committee Committee1 of the Board1 Committee1

A

A

B

A

B

A

B

8

8

8

8

4

4

8

8

8

8

8
8

B

8
8

Sir John Key, GNZM AC

6

6

3

3

Lee Hsien Yang

12

12

8

8

8

8

Graeme Liebelt

12

12

8

8

8

8

John Macfarlane

12

12

8

8

8

8

A

B

A

B

A

B

A

B

1

1

2

2

1

1

2

2

1

1

4

4

3

3

3

3

1

1

8

8

4

4

4

4

1

1

4

4

8

8

4

4

3

3

1

1

1

1

2

2

8

8

4

4

1

1

8

8

Column A – Indicates the number of meetings the Director was eligible to attend.
Column B – Indicates the number of meetings attended. The Chairman is an ex-officio
member of the Risk, Audit, Human Resources, Ethics, Environment, Social and Governanceand Digital Business and Technology Committees.

1

1

1

1

1

1

2

2

4

4

1

1

1

1

With respect to Committee meetings, the table above records attendance of Committee
members. Any Director is entitled to attend these meetings and from time to time Directors
attend meetings of Committees of which they are not a member.
1.

The meetings of the Special Committee of the Board, Shares Committee and Committee of
the Board as referred to in the table above include those conducted by written resolution.

Below from left to right: David Hisco – Chief Executive Officer New Zealand and Group Executive Mark Whelan – Group Executive Institutional,
Kathryn van der Merwe – Group Executive Talent and Culture, Michelle Jablko – Chief Financial Officer, Fred Ohlsson – Group Executive Australia,
Shayne Elliott – Chief Executive Officer, Maile Carnegie – Group Executive Digital Banking, Kevin Corbally – Group Chief Risk Officer, Mark Hand – Group
Executive, Australian Business & Private Banking, Alexis George – Deputy Chief Executive Officer and Group Executive Wealth Australia, Farhan Faruqui –Group Executive International, Gerard Florian – Group Executive Technology.
Full biography details can be found on our website at anz.com/exco.

EXECUTIVE COMMITTEEGOVERNANCE

29

BOARD AREAS
OF FOCUS
This year the Board and its Committees have undertaken 
key strategic, governance and oversight activities, including:

STRATEGY-- Participating in Strategy Day with CEO and Executive
Committee, reviewing global trends in banking-- Discussing with the CEO regular updates on ANZ’s
strategic priority of creating a simpler, betterbalanced bankST-- Providing oversight of customer remediation activities-- Discussing reports on key matters affecting customers,
including in relation to the new Banking Code ofPractice and ANZ’s proposed implementation of it
and ANZ’s approach to:-- adopting the Sedgwick recommendations;-- supporting vulnerable customers; and-- product suitability for customers.
-- Discussing ANZ’s research into financial wellbeing
and the way this is informing activities across ANZ
for customers, communities and employees30

ANZ 2018 ANNUAL REVIEWP-- Providing oversight of ANZ’s approach to customer
satisfaction, including adoption of Net Promoter
System and customer complaint resolution with regular
discussion in relation to the key trends, themes andissues in particular divisions

IM

IMPROVING CUSTOMER OUTCOMES

N
VI
RO

GC

-- Focusing on reviewing the management of Technology
Risk at ANZ

MER O-- Assessing the impact of, and ANZ’s preparedness for,major technology developments such as the New
Payments Platform and Open Banking

O
U ST-- Providing oversight of the implementation of
New Ways of Working (NWOW) within Australia and
TSO and Group Centre divisions, including reviewing
the lessons learnt at other organisations that haveadopted similar methodologies; reviewing reports,
including external reports, in relation to the risk
assessment of the NWOW operating model andthe impact of NWOW on ANZ’s Risk Management
Framework

UTCOMES-- Discussing ongoing updates and progress on
business simplification, such as product, process andtechnology simplification

TE
A
R

GY

PURPOSE AND VALUES-LED
TRANSFORMATION-- Renaming of the Environment, Sustainability andGovernance Committee to the Ethics, Environment, Socialand Governance Committee, providing management witha further vehicle to raise ethical and conduct issues forbroader discussion with Directors-- Discussing with the CEO regular updates in relation
to ANZ’s strategic priority of driving a purpose andvalues-led transformation of the Bank to build trust andimprove our employee and customer propositions

PURPO

SE A

-- Providing oversight of the development of ANZ’s ethicaldecision making framework

ND

VA
L

UE

S-

LE

-- Providing a continued focus on the oversight of ANZ’s
corporate culture, including reviewing results andkey themes of ANZ’s culture audits and ANZ’s staff
engagement survey and following up key issues raised
within those reports

D

TR

A
NS
FO

RM

FINANCIAL

IO
AT-- Reviewing and approving ANZ’s operating andfunding plans

N-- Providing oversight of capital management initiatives,
including the commencement, and subsequent increasein size, of ANZ’s on-market share buyback-- Providing oversight of ANZ’s approach to theimplementation of key accounting initiatives, including
the implementation of Australian AccountingStandard AASB 9: Financial Instruments, and making
key accounting judgements, including in relation
to software assets amortisation, restructuring andremediation provisioning

$

FIN

$

AN
C

IA

REGULATORY

L-- Providing oversight of ANZ’s approach to preventing
financial crime, including participating in an internal
conference for financial crime professionals andmeeting with AUSTRAC to discuss ANZ’s approach-- Providing oversight of ANZ’s preparedness for the
implementation of the Banking Executive Accountability
Regime, including approving changes in relation to
ANZ’s remuneration policy

REGU

Y
OR
LAT

-- Following the announcement of the Royal Commission
into Misconduct in the Banking, Superannuation and
Financial Services Industry, meeting regularly to discussmatters pertaining to it, including oversight of theapproach to the remediation of matters raised at
the Commission

In addition to regular meetings of the Board in Melbourne and Sydney, the Board also met in the Australian Capital Territory
and New Zealand and have participated in a number of customer and employee facing events. The Board will also have meetings
in regional New South Wales and Western Australia during the remainder of the 2018 calendar year, with a focus on customer andemployee engagement.

GOVERNANCE

31

OUR CLIMATE-RELATEDFINANCIAL DISCLOSURES
We acknowledge the position of the Intergovernmental Panel on Climate
Change (IPCC) that to achieve the full ambition of the Paris commitments
the world needs to transition to net zero emissions by mid-century1. We arecommitted to providing investors and other stakeholders with transparent
information enabling them to assess the adequacy of our approach to climatechange and our ability to manage the associated risks and opportunities.
This is the second year our disclosures have been aligned with the recommendations of the Financial Stability Board’s Task Forceon Climate-related Financial Disclosures (TCFD). Our disclosure includes: 1) how we identify climate-related risks and opportunities;2) who is accountable for managing the risks and opportunities; 3) how climate change informs our business strategy; and 4) theactions we are taking, including targets, to measure our progress.
Our 2017 disclosures were recently reviewed by the TCFD2. While the report confirmed we had taken up many of their recommendations,
there were some suggestions for improvement. For example, it was suggested we provide information on a wider range of customers(beyond the thermal coal supply chain) and risks, particularly physical risks. We are considering the TCFD’s feedback on our disclosures
and will continue to seek to improve their usefulness to stakeholders.

GOVERNANCE

STRATEGY

Our Board has the highest level of oversight for climate change.
The Ethics, Environment, Social and Governance (EESG) Committeeof the Board meets quarterly and is responsible for reviewing
and approving our climate-related objectives and performance,
including goals and targets to support action on climate change.
The Board Risk Committee has responsibility for the overview of
ANZ’s management of new and emerging risks, including climaterelated risks.

Identification and management of our material sustainability
risks and opportunities, including those related to climate change,
supports the achievement of our business strategy. Environmental
sustainability is one of our key priorities and accordingly weare: establishing low carbon financial products and services;
creating policies to guide which customers we bank; training staff
on climate-related risk; and seeking to reduce our operational
footprint in line with our targets.

At an executive level, the Ethics and Responsible BusinessCommittee (ERBC) provides leadership on our sustainability
risks and opportunities, monitoring progress against our targets,
including those related to climate change. The ERBC is also
responsible for:Our business needs to be resilient under a range of climate-related
scenarios. To improve our capacity to use scenario analysis as an
input to our strategy, we joined with 15 other banks this year todevelop methods to improve stress testing of our business lending
portfolio for climate-related risk. This work sought to overcome
some of the challenges facing banks in modelling climate-relatedrisks, for example:-- guiding which industry sectors, customers and transactions
we bank, to align with our purpose, strategy and values, andour public statements on issues such as climate change;-- assessing current and emerging ethical, social, environmental
and governance risks and opportunities.

-- identifying the potential economic impact of climate-related
scenarios e.g. changes to commodity prices or production andimpact on customer revenues; and-- assessing these potential impacts on a customer’s capacity to repay
debt (i.e. credit risk) over a longer period than the usual 2–3 years.

1.
2.

32

IPCC Special Report on Global Warming of 1.5oC – released 8 October 2018https://www.fsb-tcfd.org/publications/tcfd-2018-status-report/

ANZ 2018 ANNUAL REVIEWThe working group was coordinated by the United Nations
Environment Programme Finance Initiative (UNEP FI). During thepilot we developed and tested approaches and methodologies toinform our risk management and identify opportunities to support
our customers, considering both ‘transition risks’ and ‘physical risks’.

What are transition risks?: the technology, policy andregulatory changes that may affect our customers’ businesses
as governments act on their pledges to reduce carbon
emissions under the Paris Agreement. We have developed
methodologies that enable us to examine a particular sector,
e.g. metals and mining, and to conduct portfolio-wide analysis
examining potential impacts on customers’ risk profiles.

Transition opportunities: while changes associated witha transition to a low carbon economy present potential risk,
they also create potential opportunities for organisations
focused on climate change mitigation and adaptation. This
is why we have committed to fund and facilitate at least $15
billion by 2020 towards environmentally sustainable solutions
for our customers, including initiatives that help lower carbon
emissions, improve water stewardship and minimise waste.
What are physical risks?: risks associated with changing
weather patterns, rainfall variability, extreme weather events
such as cyclones or floods, and the impacts on our customers,e.g. change in production of agricultural commodities andprice fluctuations resulting from global supply and demand.
We ‘stress tested’ customers within the mining and metals(transition risk) and agriculture (physical risk) sectors, and results
were in line with our expectations. For example, in our agricultural
portfolio the average customer credit rating remained stable inthree out of four climate scenarios tested, with a downgrade ofone level under a 4°C warming scenario.1 More significant impacts
were identified for customers with weaker credit profiles. These
results will inform discussions with our customers as we seek tosupport them to manage risk and identify business opportunities,
such as investing in assets or commodities that are more resilient
to climate change.
Building on work undertaken in 2017, we continued scenario
testing a select group of customers in the thermal coal supply
chain (encompassing extraction, coal rail transport, coalassociated ports and coal-fired power generation). We re-tested
some customers to look for any significant changes since ourearlier assessment, and included some new customers not tested
in 2017. Our engagement this year with a number of these
thermal coal customers supplemented our scenario testing andimproved our understanding of how they are managing thepotential impacts of climate change, including their ability toadapt their business strategy.
Our analysis revealed varying degrees of preparedness for thermal
coal customers in managing transition risks. In the medium to longterm, risks are higher for companies with higher revenue relianceon thermal coal and with business strategies less prepared foran early shift to a low carbon economy. In the short term, thesecustomers have benefited from robust demand for high quality
thermal coal in Asian markets.
We will continue to engage with our thermal coal and othercustomers to understand how they are preparing theirbusinesses to manage potential transition risks. A number of ourcustomers have begun releasing disclosures in line with the TCFD
recommendations – this is informing our customer conversations.
In 2019, we will seek to enhance our understanding of climaterelated risks associated with our residential mortgage portfolio by:-- undertaking a geospatial analysis of current flood related risks
in a specific location; and-- developing indicators to test the financial capability of homeloan customers to withstand the identified risks.
We have identified several other risks and opportunities
associated with climate change that have the potential togenerate substantive change in our business operations, revenue
and expenditure. These include:
Energy policy/regulation: the introduction of energy policies
and regulations, supporting lower prices, emissions and improved
reliability, provide a more stable environment for investment, andsubsequently revenue opportunities, with existing customers andin new markets.
Changes in precipitation extremes and droughts: we bank alarge number of agribusinesses in rural and regional Australia and
New Zealand. Many of these regions have been impacted in recent
years by drought and high temperatures, adversely affecting
production levels and reducing revenues. This may impact theirability to repay loans.

THE IMPORTANCE OF ENERGY EFFICIENCY
Buildings represent around 30% of the world’s energy use, and more than 55% of global electricity
demand – hence the importance of energy efficiency in meeting the goals of the Paris Agreement.
In recognition of this, we will now only consider financing the construction of new large-scale officebuildings which achieve or exceed a National Australian Built Environment Rating System (NABERS) 4.5
star standard (or equivalent international rating), ‘as designed’. Importantly, from a credit risk perspective,
energy efficient buildings generally have lower tenancy vacancy rates and may attract higher rents.
1.

See case study 1, pp. 29-32 UNEP FI report ‘Navigating a New Climate’ at www.unepfi.org/banking/tcfd

OUR CLIMATE-RELATED FINANCIAL DISCLOSURES

33

Changing consumer behaviours: businesses’ response to
climate change, including the adoption of new technologies andpractices, presents a number of risks and opportunities, including
the provision of funding and advisory services to customers
involved in renewable energy generation; construction/
retrofitting of ‘green buildings’ and less emissions intensive
manufacturing and transport.

We are engaging with regulators that are taking steps to ensure
their regulated entities are assessing and responding to therisks posed by climate change. This year we responded to theAustralian Prudential Regulation Authority’s first survey on
climate-related risks.

Liquidity risks: liquidity risk exists for customers exposed toclimate-related risks. This may add risk to refinance events,
something we have recently observed in relation to infrastructure
dependent on the resources sector.
Reputation risks: damage to our reputation as a result of funding
industries seen as contributing to climate change may have arange of impacts, including adverse effects on our profitability,
funding costs, increased regulatory scrutiny and availability of new
business opportunities. Our ability to attract and retain customers
could also be adversely affected if our reputation is damaged, inturn impacting our business, operations and performance.

RISK MANAGEMENTOur most material climate change risks and opportunities result
from our lending to business and retail customers, including
credit-related losses incurred as a result of a customer being
unable or unwilling to repay debt.
Under our risk management framework, our material risk categoryof Credit Risk incorporates the risks associated with lending tocustomers that could be impacted by climate change or bychanges to laws, regulations, or other policies such as carbon
pricing and climate change adaptation or mitigation policies.
It also includes changes to the cost and level of insurance coveravailable to our customers. Climate change risk has been added
to the Group and Institutional Risk Appetite Statements to ensure
the risk is appropriately identified and assessed.
We are developing an organisational culture that encourages
regular discussion and consideration of emerging climate-relatedrisks. Our Risk team is working with our bankers, encouraging
them to talk to their customers about managing the risks andopportunities associated with climate change.

RENEWING OUR SUPPORT FOR PARIS
The transition to a net-zero carbon economy require a ‘wholeof-economy’ approach, with all sectors having a role to play.
This year we reviewed our approach to climate change.
Our focus is on ensuring an orderly and just transition thatgives careful consideration to the impacts on communities
and manages our climate-related risks, while increasing
our ambition to lower emissions in the energy, transport,
buildings and agricultural sectors.
Our revised Climate Change Statement commits us to thefollowing actions:-- encouraging and supporting 100 of our largest emitting
customers in the energy, transport, buildings and food,beverage and agricultural sectors to establish, and whereappropriate, strengthen existing low carbon transition plans,by 2021-- encouraging customers that have coal-fired generation
assets to work towards setting medium and long-termemission reduction targets up to 2050 that contributetowards achieving a ‘less than 2˚C target’-- no direct financing for the development of new coal-fired
power stations that emit more than 0.8t CO2 /MWh-- focusing on existing customers producing coal that whenused for power generation results in lower emissions, andreducing our exposure to thermal coal mining-- providing incentives for customers to reduce emissions,such as facilitating, together with government, concessionalloans for corporate and agribusiness customers to buy
energy-efficient equipment; and-- only financing the construction of new large-scale officebuildings which achieve or exceed a NABERS 4.5 star
standard (or equivalent international rating) ‘as designed’.

METRICS AND TARGETS
We use a range of metrics to assess the impact of climate-related risks on our business activities and set targets in line with our strategy,
in particular around engaging with customers to understand their plans to transition to a low carbon economy.
METRICTARGETPROGRESS

Environmental sustainability target

Fund and facilitate at least $15 billion
by 2020 for our customers’ activities$11.5 billion

Average emissions intensity of financed
electricity generation

Reduce over time

Financed emissions intensity has decreased by
14% in Australia and 68% outside of Australia
since 2014

Emissions from energy use in our commercial
offices, branches and data centres

Reduce scope 1 and 2 emissions
by 24% by 2025 and 35% by 2030

Global scope 1 and 2 emissions have decreased
by 18% since 2015

Sourcing more renewable power for ourAustralian operations

Increase by 13% by 2020

See case study on page 35

We will also provide information on metrics relating to our credit exposure, broken down by industry and credit quality in our future disclosures.
Further detail on these disclosures, including the scenario testing, customer engagement and our revised approach to climate change,
will be discussed in our 2018 Sustainability Review, available at anz.com/cs in December.

34

ANZ 2018 ANNUAL REVIEWCASE STUDYENVIRONMENTALSUSTAINABILITY

THE POWER OF PARTNERSHIPSIn December 2017 ANZ announced its participation in a Telstraled collective to execute a renewable energy power purchaseagreement (PPA) for the Murra Warra Wind Farm, located near
Horsham in North-West Victoria. Coca Cola Amatil and the
University of Melbourne also joined this collective.

“As well as reducing energy costs, the project will provide
significant environmental benefits and substantial support to the
local community and regional economy, ” said RES Australia CEO
Matt Rebbeck the PPA project developer and operator.

An electricity supply contract between a renewables project andan energy buyer, a PPA typically has a long contract term of aroundsix to 12 or more years. They require an upfront agreement on thecost of electricity and/or green products for the life of the contract.

Stage one of the project is currently under construction and due
for completion in early 2019. Once both stages are complete
the wind farm will have 429 megawatts of capacity, making it
larger than any wind farm currently operating in the Southern
Hemisphere.

As a result, PPAs can generate substantial energy cost savings while
delivering new and additional renewable energy onto the grid.

Entering into this PPA is one of the ways ANZ is supporting thetransition to a low carbon economy.

INDUSTRY ASSOCIATIONS
We work in a collaborative and open way as members of associations that have similar policy interests. In 2018 our key
memberships and payments to them were: Australian Banking Association $5,274,041, Business Council of Australia $93,500,
New Zealand Bankers’ Association $284,241 (NZD), Business New Zealand $40,250 (NZD), Financial Services Council $214,154,
Association of Superannuation Funds of Australia $69,300 and Insurance Council of Australia $28,3181.
Payments to the Australian Banking Association include the annual fees as well as expenditure related to communications
activity, contributions by major banks to the establishment of a not-for-profit Debt Repayment Service, industry initiatives in
response to the Royal Commission’s work, and industry reform activity (such as the new Banking Code of Practice).
HOW WE REVIEW OUR ALIGNMENT WITH INDUSTRY ASSOCIATIONS
We understand our stakeholders are interested in the position
we take on issues such as climate change and energy policy,
and our membership of industry associations that undertake
advocacy on these issues.
Some associations have broad memberships, such as theBusiness Council of Australia, and develop policy agendas
on a wide variety of matters, such as tax, education, businessregulation, climate change and energy.
We understand it is not possible for industry associations
to obtain a consensus on every issue. There is sometimes
disagreement amongst members about the final positions

taken by industry associations. Even if we do not agreewith every position taken, we will retain our membershipprovided we are able to have constructive dialogue within
the association, and they are receptive to members’ feedback
regarding their approaches to lobbying or advocacy.
It is also important to note that industry associations do not
represent the views of any single member. On some issues
we will communicate our views directly, through submissions,media comment, speeches by senior executives at industry
forums and public reports.
1.

The membership of the last three will cease in March 2019

OUR CLIMATE-RELATED FINANCIAL DISCLOSURES

35

REMUNERATIONOVERVIEW
The following pages provide a summary of the remuneration for the Non-Executive Directors (NEDs), Chief Executive Officer (CEO) andDisclosed Executives ­– Key Management Personnel (KMP). The detailed Remuneration Report is contained in the Annual Report frompage 40 onwards. The report can be accessed via the ANZ website at anz.com/annualreport.

NON-EXECUTIVE DIRECTOR (NED) REMUNERATION
There was no increase to NED fees for the 2018 year (unchanged from 2016). Year-on-year differences in total remuneration relate to changes
in Committee memberships.

Short-Term NED Benefits

Post-Employment

1

Fees

Super contributions1

Total remuneration2

$

$

$

2018

804,831

20,169825,000

2017

805,276

19,724

825,000

2018

324,331

20,169344,5002017

317,776

19,724

337,500

2018

344,831

20,169365,000

2017

345,276

19,724

365,000

2018

277,567

20,169297,7362017

241,063

18,894259,957

J Key4

2018

148,546

11,996

160,542

H Lee

2018

314,831

20,169335,000

2017

315,276

19,724

335,000

2018

345,858

20,169366,027

2017

343,151

19,724362,8752018

298,331

20,169318,5002017

298,776

19,724

318,500

2017

68,225

4,904

73,1292018

2,859,126

153,179

3,012,305

2017

2,734,819

142,1422,876,961

Financial Year
CURRENT NON-EXECUTIVE DIRECTORSD GonskiI AtlasP Dwyer

J Halton3

G Liebelt

J Macfarlane

FORMER NON-EXECUTIVE DIRECTORI Macfarlane5

Total of all Non-Executive Directors

1.
2.

3.
4.

5.

36

Year-on-year differences in fees relate to changes in Committee memberships and changes to the superannuation Maximum Contribution Base.
Long-term benefits and share-based payments do not apply for the Non-Executive Directors. There were no non monetary benefits or termination benefits for the Non-Executive
Directors in either 2017 or 2018.
J Halton commenced as a Non-Executive Director on 21 October 2016, so 2017 remuneration reflects a partial service year.
J Key commenced as a Non-Executive Director for Australia and New Zealand Banking Group Limited on 28 February 2018, so 2018 remuneration reflects a partial service year.
In addition for 2018, in relation to his Non-Executive Directorship from 18 October 2017 for ANZ Bank New Zealand Limited, J Key also received a total of NZD 302,925 as a
Non-Executive Director until 31 December 2017 and from 1 January 2018 as Chairman.
I Macfarlane retired as a NED on 16 December 2016, so 2017 remuneration reflects partial service year up to his date of retirement.

ANZ 2018 ANNUAL REVIEWREMUNERATION AT A GLANCEANZ’S PURPOSE AND STRATEGY 1
IS UNDERPINNED BY:

OUR REMUNERATIONPOLICY/REWARD
PRINCIPLES:

Attract, motivate andkeep great people

Reward our people for doing
the right thing having regard to
our customers and shareholders

Focus on how things
are achieved as much
as what is achieved

Are fair andsimple tounderstand

WITH REMUNERATION DELIVERED TO OUR CEO AND DISCLOSED EXECUTIVES THROUGH:OUR COREREMUNERATIONCOMPONENTS2:

Variable remuneration delivered as

Fixedremuneration

Cash

Deferred shares

Performance rights

AT RISK
REINFORCED BY:

Assessing
ALIGNING
behaviours based
REMUNERATION on ANZ’s Values and
AND RISK:
risk/compliancestandards

Risk is a key input in determining Applying Board
discretion onvariable remuneration including
as a multiplier in determining performance andremuneration
the ANZIP3 variable
outcomes
remuneration pool

Being able todownward
adjust deferredremuneration(including to zero)

Prohibiting thehedging ofunvested equity

WHILE SUPPORTING THE ALIGNMENT OF EXECUTIVES AND SHAREHOLDERS THROUGH:SHAREHOLDERALIGNMENT:

Substantial
shareholding
requirements

Use of relative and absolute
Total Shareholder Return(TSR) hurdles

Significant incentive
deferral (up to four
years) in ANZ equity

Use of Economic Profit as a
key input in determining thevariable remuneration pool

DRIVING PERFORMANCE THROUGH OBJECTIVES WITHIN THE
GROUP PERFORMANCE FRAMEWORK TO DETERMINE THE VARIABLE REMUNERATION POOL:GROUPPERFORMANCECATEGORIES:

Risk(overall adjustment)

ANZ’S 2018
PERFORMANCE OVERALL:(see sections 5.1 and 5.2 of
the Remuneration Report)

2018 FIXEDREMUNERATIONCHANGES:

Financial and Discipline(50% weighting)Customer(25% weighting)People and Reputation(25% weighting)

Combined weighting 100% including both annual and longer term strategic measures

Despite solid performance against the majority of metrics in the 2018 Group Performance Framework,
the ANZIP variable remuneration pool for 2018 is significantly down on prior year, in recognition of the
failures highlighted in the Royal Commission and their reputational impact.

No change to the CEO’s fixed remuneration for 2018.
Fixed remuneration for new appointments has been set lower than prior incumbent.
No change to NED fees for 2018 (reduction of 20% to the Chairman fee and NED member fee(for current NEDs) in 2019).

INDIVIDUAL OUTCOMES REFLECT THE PERFORMANCE OF THE GROUP, DIVISION AND INDIVIDUAL:

2018 VARIABLE
REMUNERATIONOUTCOMES4:(see sections
5.4 and 5.5 of theRemuneration Report)
1.
2.

CEO Variable Remuneration
75% of target which comprises:
Annual Variable Remuneration:
83% of target (56% of max); andLong Term Variable Remuneration:
67% of target(subject to shareholder approval).

See the ‘About our Business’ and ‘Our Strategy’ sections of the Annual Report.
The structure of our remuneration framework is aligned with our reward principles
and has been designed to support ANZ’s purpose and strategy.

3.
4.

Current Disclosed Executives
Variable Remuneration outcomes:

Nov 2014 performancerights fully lapsed.

% of target % of max

Executives received novalue from this award.

Average:

78

53

Range:

60 – 91

40 – 60

ANZ Incentive Plan (ANZIP) is our main variable remuneration plan.
Variable remuneration outcomes appropriately reflect the Group’s performanceagainst the indicators in the Group performance framework, and also the individual’s
performance against their own targets, which are appropriately stretching.
REMUNERATION OVERVIEW

37CEO AND DISCLOSED EXECUTIVES’ REMUNERATION
2018 VARIABLE REMUNERATION AWARDED
This table shows the VR awarded to the CEO and current
Disclosed Executives for the year ending 30 September 2018,
and what this represents as a % of their target opportunity andmaximum opportunity.
The average variable remuneration awarded to the CEO andcurrent Disclosed Executives is 78% of target (53% of maximum),S Elliott

VR1 $3,150,000(75% of target, 60% of max2)

VR $1,600,000

M Carnegie(80% of target, 53% of max)

VR $499,500

K Corbally3(83% of target, 55% of max)

VR $1,075,000

A George(61% of target, 41% of max)

VR $1,952,719

D Hisco(83% of target, 56% of max)

VR $1,750,000

M Jablko(88% of target, 58% of max)

VR $1,200,000

F Ohlsson(60% of target, 40% of max)

VR $2,175,000

M Whelan(91% of target, 60% of max)

Cash
1.
2.
3.
4.

which appropriately reflects ANZ’s overall performance andthe impact to the overall ANZIP variable remuneration pool.
Only the cash component will be received this year. The deferredshares will vest evenly over four years. The performance rights may
or may not vest when tested against the performance hurdles inthree years’ time.

= $875,000 + $875,000 +$1,400,000=$528,000+$528,000+=$164,835+$164,835+$544,000$169,830= $354,750 + $354,750 + $365,500=$644,397+$644,397+=$577,500+$577,500+$663,925$595,000= $396,000 + $396,000 + $408,000=+$717,750$717,750

Deferred shares or deferred share rights+$739,500

Performance rights face value at threshold vesting4

VR for the CEO = AVR + LTVR (LTVR subject to shareholder approval at the 2018 Annual General Meeting).
% of max for the CEO = 150% of AVR target plus LTVR target (face value at threshold vesting). The maximum opportunity arrow for the CEO is not to scale, given there is no max for LTVR.
Remuneration disclosed from commencement in Disclosed Executive role, CRO receives deferred share rights instead of performance rights.
Multiply by two to convert to face value at full vesting for performance rights.

2018 ACTUAL REMUNERATION RECEIVED
This table shows the remuneration the CEO and current Disclosed Executives actually received in relation to the 2018 performance year as cash;
or in the case of prior equity awards, the value which vested in 2018. The final column also shows the value of prior equity awards which lapsed
in 2018 (these awards reflect the 2014 performance rights which failed to meet the performance hurdles when tested in November 2017).
Only the cash component of the 2018 VR award appears in this table, as the other components are deferred and may/may not vest in future years.
Fixed Cash variable
remuneration remuneration
$
$

Total
cash
$

Deferred variable
remuneration
which vested
during the year1$

Other deferredremuneration
which vested
during the year1$

Deferred variable
Actual remuneration which
remuneration
lapsed/ forfeitedreceived
during the year1$$

CEO AND CURRENT DISCLOSED EXECUTIVESS Elliott

2,100,000

875,000

2,975,000

874,666-

3,849,666(1,582,649)

M Carnegie

1,000,000

528,000

1,528,000

34,6101,481,009

3,043,619-

3

K Corbally

486,000

164,835

650,835--

650,835-

4

A George

876,000

354,750

1,230,750

334,044

250,000

1,814,794(153,292)

864,274-

2,679,384(1,383,354)

2

5

D Hisco1,170,713

644,397

1,815,110

6

M Jablko

1,000,000

577,500

1,577,500

34,610428,0842,040,194-

F Ohlsson

1,000,000

396,000

1,396,000

597,403-

1,993,403(404,809)

M Whelan

1,200,000

717,750

1,917,750

856,454-

2,774,204(395,655)

1.

2.

3.

The point in time value of previously deferred remuneration granted as shares/sharerights and/or performance rights is based on the one day VWAP of the Company’s shares
traded on the ASX on the date of vesting or lapsing/forfeiture multiplied by the numberof shares/share rights and/or performance rights. The amount paid as deferred cash is thevalue disclosed. The lapsed/forfeited values relate to the performance rights we awardedin November 2014 which lapsed due to the performance hurdles not being met.
Other deferred remuneration for M Carnegie relates to previously disclosed
compensation for bonus opportunity foregone and deferred remuneration forfeited.
Remuneration disclosed from commencement in Disclosed Executive role (19 March 2018).

4.

5.
6.

A George’s fixed remuneration was adjusted in May 2018 when she commenced in
the expanded role of Deputy CEO and Group Executive, Wealth Australia. As disclosed
in 2017, in relation to A George’s role before her appointment to the Group Executive
Committee, in July 2016 the Board approved a cash retention award of $500,000 withpartial vesting in June 2017 ($250,000) and December 2017 ($250,000).
Paid in NZD and converted to AUD.
Other deferred remuneration for M Jablko relates to previously disclosed compensation
for bonus opportunity foregone and deferred remuneration forfeited.

This table supplements, and is different to, the Statutory Remuneration table which presents the accounting expense for both vested andunvested awards in accordance with the Australian Accounting Standards.
38

ANZ 2018 ANNUAL REVIEWCASE STUDYSUPPORTING
SMALL BUSINESSWATSON BLINDS AND AWNINGS
We understand that running a small business is challenging.
To support our customers while they focus on growing theirbusiness, we facilitate access to Employment Hero for businesscustomers, free of charge.
Employment Hero is an online human resources (HR) platformthat combines various HR functions into one centralised
self-service portal, helping Australian businesses navigate thecomplexity, and reduce the time spent managing HR related
issues.
Watson Blinds and Awnings, marking its 50th anniversary
this year, is one of more than 900 customers benefiting from
Employment Hero this year.
“Since the introduction of Employment Hero, we have reduced
time spent on payroll data entry from eight hours to two. We
have introduced new technology that enables our employees toaccess their information on their mobile devices. As we continue
to grow our business, having a cloud payroll system will allow us
to capture accurate information and process pays seamlessly”.
“In the past, our employee on-boarding process has involved
lots of form filling for our employees – tax file declarations,superannuation declarations, bank account details forms,
emergency contacts and hard copies of employment contracts.
Employment Hero does all of this without the need for paper.
In addition, it’s a more positive on-boarding experience for
employees, which I’m sure will make us more appealing to thenext generation of employees, the majority of whom are digitally
savvy” said Raymond Watson.
Established by John Watson in Canberra, the business is now
owned and operated by John’s sons Raymond and Kevin.
Succession planning is underway, with the third generation
Rohan, Tim and Amanda Watson, buying into the business. We
are working closely with the Watson family and their accountant
to help them manage a smooth succession and realise theirretirement goals.
Supporting businesses such as Watson Blinds and Awnings,
so they can focus on their day to day business, aligns with ourcommitment to helping Australian businesses grow and succeed
in a changing world.
Left to right – Kevin Watson, Raymond Watson, Directors, Watson Blinds
Jarrod Fitzgerald, Senior Relationship Manager, ANZ
39

FIVE YEAR
SUMMARY
20181
$m

20171
$m

2016
$m

2015
$m

2014
$m

Net interest income
Other operating income
Operating expenses

14,5144,700(9,248)14,875
4,941(8,967)

15,095
5,499(10,439)

14,616
5,921(9,378)

13,797
5,781(8,760)

Profit before credit impairment and income tax
Credit impairment charge

9,966
(688)

10,849(1,199)10,155(1,956)

11,159(1,205)

10,818(989)

Income tax expense
Non-controlling interests(2,775)(16)(2,826)(15)(2,299)(11)(2,724)(14)(2,700)(12)

Cash profit from continuing operations2
Cash profit/(loss) from discontinued operations

6,487
(682)

6,809
129

5,889
N/A

7,216
N/A

7,117
N/A

Cash profit
Adjustments to arrive at statutory profit2

5,805
595

6,938
(532)

5,889
(180)

7,216
277

7,117
154

Profit attributable to shareholders of the Company

6,400

6,406

5,709

7,493

7,271

942,624
59,383897,326
59,075914,869
57,927889,900
57,353772,092
49,284

Common Equity Tier 1
Common Equity Tier 1 –Internationally Comparable Basel 33
Return on average ordinary equity (statutory)4

11.4%
16.8%

10.6%
15.8%

9.6%
14.5%

9.6%
13.2%

8.8%
12.5%

10.9%

11.0%

10.0%

14.5%

15.8%

Return on average assets (statutory)
Cost to income ratio (cash)2

0.7%
51.6%

0.7%
46.1%

0.6%
50.7%

0.9%
45.7%

1.0%
44.7%

FINANCIAL PERFORMANCE CASH2

FINANCIAL POSITION

AssetsNet assets

SHAREHOLDER VALUE – ORDINARY SHARES

Total return to shareholders(share price movement plus dividends)
Market capitalisation
Dividend (cents)

0.6%

13.1%

9.2%

(7.5%)

5.9%

80,979160c

86,948160c

80,886160c

78,606181c

85,235178cFranked portion – interim

100%

100%

100%

100%

100%

Share price– final

100%

100%

100%

100%

100%

– high (dollar)$30.80$32.95$29.17$37.25$35.07– low (dollar)– closing (dollar)$26.08$28.18$25.78$29.60$21.86$27.63$26.38$27.08$28.84$30.92SHARE INFORMATION(per fully paid ordinary share)
Earnings per share (cents)

221.6

220.1

197.4

271.5

267.1

Dividend payout ratio (statutory)

72.1%

73.4%

81.9%

68.6%

67.4%

Net tangible assets per ordinary share5$18.47$17.66$17.13$16.86$14.65

No. of fully paid ordinary shares issued (millions)

2,874

2,937

2,927

2,903

2,757

$27.76-$28.80$29.02$24.82$28.16$31.93$27.08$33.30$32.02509,238

522,425545,256

546,558

498,309

Dividend reinvestment plan (DRP) issue price– interim– finalOTHER INFORMATION

No. of shareholders
1.

2.

During 2018, part of Wealth Australia and TSO and Group Centre division was classified
as a discontinued operation. 2017 comparatives have been restated accordingly. 2016
to 2014 has not been restated. All ratios are presented on a Group basis inclusive ofdiscontinued operations across 2018 to 2014.
Cash profit excludes non-core items included in statutory profit and is provided to assist
readers in understanding the result of the ongoing business activities of the Group. Cashprofit is not audited; however, the external auditor has informed the Audit Committeethat the adjustments have been determined on a consistent basis across each period
presented, and the adjustments for the sale impact of Shanghai Rural Commercial Bank(SRCB) in 2018 and 2017 are appropriate.

40 ANZ 2018 ANNUAL REVIEW

3.

4.
5.

Internationally Comparable Methodology applied for 2015–2018 aligns with APRA’s
information paper entitled ‘International Capital Comparison Study’ (13 July 2015). BaselInternationally Comparable ratios do not include an estimate of the Basel l capital floor
requirement.
Average ordinary equity excludes non-controlling interests and preference shares.
Equals shareholders’ equity less preference share capital, goodwill, software and otherintangible assets divided by the number of ordinary shares.

2018

2017

2016

2015

2014

3

4

2

4

4

FAIR AND RESPONSIBLE BANKINGNet Promoter Score Ranking (relative to peers)
Australia Retail1
Australia Business and Private Banking

3

4

4

4

3

Australia Institutional3

1

2

1

–

–

New Zealand Retail4

4

4

4

5

5

New Zealand Commercial and Agri5

5

5

5

5

5

New Zealand Institutional

1

3

1

–

–

Australia (%)7

61

61

60

58

55

New Zealand (%)8

68

65

62

59

–

Alleged breaches

1,114

1,443

1,408

1,629

1,718

Investigations resulting in termination

226

262

254

294

336

889,135

550,361

453,054––

39,92444,89646,55450,15250,328

73

72

74

76

73

32.0

31.1

29.9

29.5

27.9

2

6

Digitally active customers

Code of conduct

FINANCIAL WELLBEING

Help enable social and economic participation of
1 million people by 2020 (cumulative total)9
Employees
FTE10
Employee Engagement (%)

11

Total Women in Leadership (%)

12

Community
Total community investment ($m)
Volunteer hours
Employee volunteering participation rate (%)13

136.9

131.1

89.8

74.8

75.6

124,113113,127

113,071

108,142

101,801

34.6

29.4

–

–

–

11.5

6.9

2.5

123,056

126,881

136,751

147,499

154,922ENVIRONMENTAL SUSTAINABILITY

Fund and facilitate at least $15b by 2020 towards environmentally
sustainable solutions for our customers (cumulative total)14
Environmental footprint
Australia (tCO2-e)
New Zealand (tCO2-e)

7,887

6,992

7,910

9,189

10,008APEA (tCO2-e)

40,06947,12048,90852,84347,347

Total (tCO2-e)

171,012

180,993

193,569

209,531212,277

Total scope 1, 2 & 3 GHG emissions (tCO2-e)

266,906

273,216

299,224

335,085

322,820

Renewables (%)

76

70

63

60

44

Coal (%)

10

16

19

18

33

Gas (%)

13

13

18

22

23

1,076

1,141

875

881

835

Project finance portfolio

15

Project finance commitment to renewable energy ($m)
1.

2.

3.

4.

5.

6.

7.

Roy Morgan Research Single Source, Australian population aged 14+, Main Financial
Institution, six month rolling average to Sep’14, Sep’15, Sep’16, Sep’17 & Sep’18. Ranking
based on the four major Australian banks.
DBM Business Financial Services Monitor. Base: Business and Private Banking (<$100m
annual turnover) Main Financial Institution customers. Data based on business banking
NPS only (excludes Private Bank NPS). Six month average to Sep’14, Sep’15, Sep’16, Sep’17& Sep’18. Ranking based on the four major Australian banks.
Peter Lee Associates 2018 Large Corporate and Institutional Relationship Banking survey
Australia.
Retail Market Monitor, Camorra Research, Retail: Sep’14, Sep’15, Sep’16, Sep’17 & Sep’18(monthly).
Business Finance Monitor, TNS Kantar Research. Base: Commercial ($3m – $150m annual
turnover) and Agricultural (>500K annual turnover) customers. Q3’14, Q3’15, Q3’16, Q3’17& Q3’18 (quarterly).
Peter Lee Associates Large Corporate and Institutional Relationship Banking surveys
New Zealand 2016–18, ranked against the Top 4 competitors (in 2016 rank based onquestion ‘which bank would you be most likely to recommend’).
Roy Morgan Research Single Source, proportion of ANZ customers aged 14+ conductedInternet banking using ANZ App or Website in last 4 weeks, 12 months rolling average to
Sep’14, Sep’15, Sep’16, Sep’17 & Sep’18.
Proportion of ANZ customers who have used ANZ Internet Banking or ANZ goMoney atleast once in the last 90 days. 12 months to Sep’15, Sep’16, Sep’17 & Sep’18.
9.
Target commenced in FY 2016. Performance includes people helped through our
initiatives to support financial wellbeing, including our financial inclusion, employment
and community programs, and targeted banking products and services for small
business and retail customers.
10.
As disclosed in the Annual Report.
11.
The 2017 engagement survey was run as a pulse survey sent to 10% of the bank’s
employees with a 57% response rate.
12.
Measures representation at the Senior Manager, Executive and Senior Executive levels.
Includes all employees regardless of leave status but not contractors (which are included
in FTE).
13.
Commenced reporting in 2017.
14.
Target commenced in FY 2016. Performance includes funding or facilitation of initiatives
that help lower carbon emissions, improve water stewardship, and minimise waste.
15.
Breakdowns for 2018 and 2017 do not total to 100% due to rounding.
8.

5 YEAR SUMMARY

41

IMPORTANT DATESFOR SHAREHOLDERS 1
MAY 2019

NOVEMBER 2019

1st May

Half Year Results Announcement

12th November

Final Dividend Ex-Date

14th MayInterim Dividend Ex-Date

13th November

Final Dividend Record Date

15th MayInterim Dividend Record Date

14th November

DRP/BOP/Foreign Currency Record Date

16th May

DRP/BOP/Foreign Currency Record DateJULY 2019

1st JulyInterim Dividend Payment Date

DECEMBER 201917th December

Annual General Meeting (Brisbane)

18th December

Final Dividend Payment Date

OCTOBER 2019

31st October

Annual Results Announcement1.

If there are any changes to these dates, the Australian Securities Exchange
will be notified accordingly.

OUR INTERNATIONAL PRESENCE AND
EARNING COMPOSITION BY GEOGRAPHY1International$673 million

Australia$4,069 million

New Zealand$1,745 million
AUSTRALIANEW ZEALAND
INTERNATIONAL

1.

42

Asia
Cambodia
China
Hong Kong
India
Indonesia
Japan
Laos
Malaysia

EuropePacific
Myanmarthe Philippines
Singapore
South Korea
TaiwanThailand
VietnamAmerican Samoa
Cook Islands
Fiji
Guam
Kiribati
New Caledonia
Papua New Guinea
Samoa

Solomon Islands
Timor-Leste
Tonga
VanuatuFranceGermany
United Kingdom
Middle East
United ArabEmirates (Dubai)
United Statesof America

On a Cash profit (continuing operations) basis. Excludes non-core items included in statutory profit and discontinued operations included in cash profit. It is provided to assist readers inunderstanding the result of the ongoing business activitives of the Group. For further information on adjustments between statutory and cash profit refer to page 15 of the 2018 Annual Report.

ANZ 2018 ANNUAL REVIEWCASE STUDYHOUSINGASSEMBLE AND MAKE VENTURES
Housing affordability is a challenge faced by many people inAustralia and New Zealand, particularly younger people andthose on lower-incomes.

for the majority of Australians to own their own home – and is adirect response to multi-level government policies on housing
affordability.”

Assemble, a residential developer, has created the Assemble Model– a new ‘build-to-rent’ hybrid model that bridges the gap between
renting and owning your home. It offers residents the security
and stability of a five-year lease with the opportunity (but not the
obligation) to purchase their home at the end of the lease. The
purchase price is fixed from the start of the lease, giving residents
a set goal to save towards and mitigating the risk of being pricedout of the market during the rental period. It also protects against
rental insecurity, with the rent set at a market rate and agreed up
front, enabling residents to have the ability to plan-ahead while
they save and settle into the local community.

ANZ is financing the development and has worked with Assemble
to refine their model providing advice on funding options,valuation methodology and risk management. Our Retail businesshas assisted Assemble to understand consumer purchasing
profiles, retail mortgage lending parameters and appropriate
strategies to support potential purchasers to save for their deposit
prior to the end of the lease.

According to Kris Daff, Managing Director, Assemble and MAKE
Ventures, “the model aims to address the fundamental desire“We now have over 2,500 aspiring homebuyers interested inparticipating in Assemble’s home ownership pathway and, with
ANZ’s support, we have a pipeline of future projects to cater forthis growing customer base” said Kris.
Caryn Kakas, Senior Manager, Group Strategy, ANZ
Kris Daff, Managing Director, Assemble and MAKE Ventures

43

CONTACTS

REGISTERED OFFICE:SHARE AND SECURITIES REGISTRAR:ANZ Centre Melbourne
Level 9, 833 Collins Street
Docklands VIC 3008 Australia

AUSTRALIA
Computershare Investor Services Pty Ltd
GPO Box 2975
Melbourne VIC 3001

UNITED KINGDOM
Computershare Investor Services PLC
The Pavilions Bridgwater Road
Bristol BS99 6ZZ

Telephone within Australia: 1800 11 33 99
International Callers: +61 3 9415 4010
Facsimile: +61 3 9473 2500
Email: anzshareregistry@computershare.com.au

Telephone: +44 870 702 0000
Facsimile: +44 870 703 6101

Telephone: +61 3 9273 5555
Facsimile: +61 3 8542 5252
Company Secretary: Simon Pordage
INVESTOR RELATIONS:

Level 10, 833 Collins Street
Docklands VIC 3008 Australia
Telephone: +61 3 8654 7682
Facsimile: +61 3 8654 8886
Email: investor.relations@anz.com
www.shareholder.anz.com
Group General Manager
Investor Relations: Jill Campbell
COMMUNICATIONS AND
PUBLIC AFFAIRS:

Level 10, 833 Collins Street
Docklands VIC 3008 Australia
Telephone: +61 2 6198 5001
Email: Tony.Warren@anz.com
Group General Manager
Communications andPublic Affairs: Tony Warren

Austraclear Services Limited
20 Bridge Street
Sydney NSW 2000
Telephone: +61 2 8298 8476
JAPANJapan Securities Depository Center,
Incorporated
1-1, Nihombashi Kayabacho 2-chome,
Chuo-ku, Tokyo 103-0025 Japan
Phone: +81-3-3661-0161 (Main) /+81-3-3661-7193 (Book-Entry Transfer
Department)
LUXEMBOURG
Deutsche Bank Luxembourg S.A.
2, Boulevard Konrad Adenauer
L-1115 Luxembourg
Luxembourg
Telephone: +352 4 21 22 1
NEW ZEALAND
Computershare Investor Services Limited
Private Bag 92119
Auckland 1142
Telephone: 0800 174 007
Facsimile: +64 9 488 8787

44

ANZ 2018 ANNUAL REVIEWUNITED STATESCitibank Shareholder Services
P.O. Box 43077 Providence
Rhode Island 02940-3077
Callers outside USA: +1-781-575-4555
Callers within USA (toll free):+1-877-248-4237 (+1-877-CITI-ADR)
Email: citibank@shareholders-online.com
citi.com/adr
The Bank of New York Mellon
240 Greenwich St, Floor 7E
New York, NY 10286
Telephone: +1 1800 254 2826
Deutsche Bank Trust Company Americas
60 Wall Street, Mailstop NYC 60-1630
New York, NY 10005
Telephone: +1 212 250 2500

MORE INFORMATION
General Information on ANZ can be obtained from our website: anz.com. Shareholders
can visit our Shareholder Centre at shareholder.anz.com. ANZ Corporate Governance:
For information about ANZ’s approach to Corporate Governance and to obtain copiesof ANZ’s Constitution, Board/Board Committee Charters, Codes of Conduct and Ethics
and summaries of other ANZ policies of interest to shareholders and stakeholders, visit
anz.com/governance. Australia and New Zealand Banking Group Limited ABN 11 005 357 522.
This Annual Review (Review) has been prepared for Australia and New Zealand Banking
Group Limited (“the Company”) together with its subsidiaries which are variously described
as: “ANZ”, “Group”, “ANZ Group”, “the Bank”, “us”, “we” or “our”.

FTSE4GoodDISCLOSURE INSIGHT ACTION

shareholder.anz.com
Australia and New Zealand Banking Group Limited (ANZ) ABN 11 005 357 522.
ANZ’s colour blue is a trade mark of ANZ.