ANZ2019
ANNUAL REVIEW

Our successdepends on
improving thefinancial wellbeingof our customers

COVER STORY

Supporting drought
affected communities
in rural Australia
Brian and Heather Coxon established BJ & HD Coxon Oyster Farmers in 1985 –a time when stocks were plentiful and business was booming. Since that time,
the business has faced some difficult times.
An ANZ customer for 10 years, Brian has appreciated the bank’s
support through those times. “During the algae bloom in 2010
I went to ANZ and pleaded relief. We did not know when things
would pick up. I am grateful for ANZ sticking with us throughthat time”.

Brian recently found himself seeking the assistance of one ofthose agencies, reaching out to the Rural Financial Counselling
Services (Southern NSW). The service, which is free, supports
rural businesses through ongoing drought, poor production or
anything else affecting their business and their life.

Fast forward to 2019 and Brian’s business is once again facing
difficulties, this time as a result of the drought impacting muchof Australia.

“When you’re doing it tough it’s all too hard, and the state you
are in does not always lead to rational decisions,” says Brian. “Thefinancial counsellor looks at you as a person, as well as a business.”“Oyster farming needs fresh water,” says Brian. “Famine on the landmeans famine in the sea. The oysters have poor growth, it’s difficult
to maintain their condition and they’re harder to sell.”

Brian looks forward to building up the business again, but hedoubts things will ever be as good as they were in 1985. “Thisbusiness is mostly about loving the lifestyle. People who want to
be on the water and love working outdoors in Australia’s oldest
aquaculture industry.”

Last year in response to the drought ANZ donated $500,000 to
the Financial Counselling Foundation for use by rural counselling
agencies working in drought affected communities.

Image: Brian Coxon

Contents
2019 performance snapshot

1

Our customers

17

Our 2019 reporting suite2

Our divisions

21

What matters most3

Our people

24

Chairman’s message

4

Our community

28

CEO’s message

6

Governance32

About our business

8

Risk management

44

Our strategy

9Performance overview

52

How we create value

10

Five year summary

64

Working with our stakeholders

12

Remuneration Overview

66

Our operating environment

14

Important dates for shareholders

69

Becoming a fairer and more responsible bank16

Contacts

70

ANZ 2019 ANNUAL REVIEW$
2019
performancesnapshot

6.5

b

10.9%

Cash profit1

Cash return on equity 1

160¢

228¢

Dividend for FY19
per share

9.2%
total shareholder
returnCash earnings per share 1$19.59CO2

Net tangible assets
per share 2

11.4%

42.4%

Common Equity
Tier 1 Capital 3of employees
volunteered$19.1bfunded and facilitatedin environmentally
sustainable solutions
since 2015$
>90,000
people have been reachedthrough our financial
wellbeing programs,
MoneyMinded and Saver Plus

1.

2.

$142.2m

32.5%

in community investment5of women in leadership4

On a cash profit (continuing operations) basis. Excludes non-core items included instatutory profit and discontinued operations included in cash profit. It is provided to assist
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 53.
Equals shareholders’ equity less preference share capital, goodwill, software and otherintangible assets divided by the number of ordinary shares.

3.
4.

5.

APRA Level 2.
Measures representation at the Senior Manager, Executive and Senior Executive levels. Includes
all employees regardless of leave status but not contractors (who are included in FTE).
Figure includes forgone revenue of $109 million, being the cost of providing low or fee
free accounts to a range of customers such as government benefit recipients, not for
profit organisations and students.

1

Our 2019
reporting suite2019 Annual Reportanz.com/annualreport2019 ESG Supplement
anz.com/cs

2019 Climate-related Financial Disclosuresanz.com/shareholder/centre

2019 Corporate Governance Statement
anz.com/corporategovernance

About this Annual Review

Reporting suite

The Annual Review provides key sections from our 2019 Annual
Report. It includes information on our financial and non-financial
performance, giving readers a holistic view of the Australia and New
Zealand Banking Group Limited’s1 performance.

We produce a suite of reports to meet the needs and requirementsof a wide range of stakeholders, including investors, customers,
employees, regulators, non-government organisations and thecommunity.

The complete 2019 Annual Report is available atanz.com/shareholder/centre.

Our 2019 Corporate Governance Statement discloses how we havecomplied with the ASX Corporate Governance Council’s ‘Corporate
Governance Principles and Recommendations – 3rd edition’ available
at anz.com/corporategovernance.

KPMG provides limited assurance over Environmental, Social andGovernance (ESG) content2 within this Annual Review. A copy of
KPMG’s limited assurance report will be contained in our 2019
Environment, Social and Governance (ESG) Supplement to be
published in December 2019.
This Review covers all ANZ operations worldwide over which, unlessotherwise stated, we have control for the financial year commencing
on 1 October 2018 and ending 30 September 2019. Monetaryamounts in this document are reported in Australian dollars, unlessotherwise stated.

Our ESG Supplement will complement our Annual Report, providing
stakeholders with more detailed ESG disclosures, including:
performance against our ESG targets and our approach to ourpriority areas of fair and responsible banking, financial wellbeing,environmental sustainability and housing.
The following additional documents are available atanz.com/shareholder/centre:•• News Release•• Consolidated Financial Report, Dividend Announcement &Appendix 4E•• Results Presentation and Investor Discussion Pack•• The Company Financial Report•• Principal Risks and Uncertainties Disclosure•• APS 330 Pillar III Disclosure•• Climate-related Financial Disclosures
We are continually seeking to improve our reporting suite andwelcome feedback on this report. Please address any questions,comments or suggestions to investor.relations@anz.com.

1.
2.

2

Group: Australia and New Zealand Banking Group Limited (the Company) and the entities it controlled at the year end and from time to time during the financial year (together, the Group).
ESG content includes the following sections: 2019 Performance Snapshot, What Matters Most, Working with our stakeholders, Becoming a fairer and more responsible bank, Our Customers,
Our People, Our Community, Risk Management: Our approach to climate change and ESG metrics on page 65.

ANZ 2019 ANNUAL REVIEW

WhatmattersmostCustomer story icon

A focus on fair and responsible banking
Through our annual materiality assessment we engage with internaland external stakeholders to inform our identification of ESG risks
and opportunities. We seek to identify those issues that have themost potential to impact our ability to operate successfully andcreate value for our stakeholders.

These insights were presented to the Board Ethics,
Environment, Social and Governance Committee, themanagement Ethics and Responsible Business Committee
and the management Royal Commission and Self-Assessment
Oversight Group, and are informing our continuing work on
improving customer outcomes.

These issues may change over time, reflecting changes in our
We have drawn on our 2018 materiality assessment to help
business and external operating environment and the expectations
guide the content of this report. After fairness and ethicalof stakeholders. We use the results of the assessment to inform
conduct, stakeholders ranked the following four issues (risks or
our strategy.
Most material
issues icons
opportunities) as having the most potential to impact our value
This year, we focused our assessment solely on fairness andcreation in the short, medium and long-term.
ethical conduct, which has been ranked as our most material
issue for the last three years. Specifically, we sought external
Fraud and data security: ensuring we have strong
stakeholder views on the actions we are taking following the Royal
internal controls and risk management frameworks
Commission into Misconduct in the Banking,SuperannuationandMostmaterial issues
icons
in place is critical as a breach could significantly
Financial Services Industry (the Royal Commission).
impact the bank’s operations and reputation.

Customer experience: ensuring a positive
Most material issues icons
customer experience is key to delivering
New icons/infographics
Stakeholders provided us withsustainable business performance in the long-term.

three key insights:

1 They expect
us tofocus on long-termvalue creation,
Most
material
issues icons
not short-term profit maximisation;New
icons/infographics
2 While the actions we have taken to datein responsetothe Royal Commission are considered good and necessary,
they want us to do more. In particular, they expect Boardand management to demonstrate customer-centric
actions in line with theNew‘spirit’icons/infographicsof the Royal Commission’s
findings; and3 They see a broader role for the Board in overseeing conductand culture and an expectation that real and lasting change
icons/infographics
happensNew
as a resultof the Royal Commission.

Corporate governance: organisations with strong
corporate governance processes and policies inplace are likely to perform better in the long-term.

Cu

Digital innovation: core to our strategy and a key
factor in driving positive customer experience.

A full list of ANZ’s key material risks is available on pages 46–47.
The key steps undertaken in our 2019 materiality process, as wellas the full list of our material ESG issues, is discussed in our 2019
ESG Supplement available at anz.com/cs in December.

Stakeholder icons

3Chairman’s
message

DAVID GONSKI, AC

Challenging conditions continued in 2019 and our statutory profit of $6.0 billion was down
7% on the previous year. Cash profit from continuing operations (which excludes non-core
items and the discontinued Wealth businesses from statutory profit) was $6.5 billion, flat
when compared with the same time last year.

Despite those tough conditions, we held our
FY19 full year dividend at 160 cents with thefinal dividend of 80 cents franked at 70%.
We recognise how important the dividend, franking and predictability is to shareholders.
The Board’s decision to reduce franking to a new base reflects the changed shape of ourbusiness and the earnings in our Australian geography.
This has been a difficult year for us and Australian banks generally. Intense competition,
slow credit growth and increased regulation have combined with lower consumer
confidence to create this.
While this is reflected in our financial performance – particularly within our Australian Retailand Commercial business – the actions taken in recent years to improve the structure ofour bank has us well-placed to meet the industry’s challenges.

4

ANZ 2019 ANNUAL REVIEWThese actions include returning our Institutional business to
profitable growth as well as the progress we have made to simplify
the products and services we offer our retail customers in Australia
and New Zealand.
We started early on our simplification agenda and this work
continued throughout the year. Simplification continues tounderpin improvement across ANZ.
A major milestone was the completion of the sale of our Life
Insurance business in Australia to Zurich Financial Services Australia
and we have also made significant progress in the sale of ourPensions & Investments business to IOOF. Subject to approval fromthe Australian Prudential Regulation Authority (APRA), we expect tocomplete this transaction in the first quarter of 2020.
Another highlight was the sale of some of our non-core assets
outside of home markets, including our retail banking joint venture
in Cambodia, our retail business in Papua New Guinea and our Life
Insurance business in New Zealand. This continues the stronger
focus on investments and resources in our core strategic retailand commercial businesses in Australia and New Zealand and our
Institutional business in Asia Pacific.
Unfortunately there have also been challenges. This year we haveannounced an additional charge of $682 million as a result of anincrease in our provisions for remediation work. While our Chief
Executive Officer (CEO) Shayne Elliott addresses this in his CEO
message, I want to assure shareholders that the Board understands
the impact fixing the failures of the past has on shareholders and
we are working proactively and as quickly as possible to remediate
impacted customers.

Our self-assessment
During the year, APRA asked a range of banks, superannuation
funds and insurance companies to take a closer look at their own
behaviour and operations.
There has been some attention given to the fact ANZ has notreleased its self-assessment. APRA requested these self-assessments
on a confidential basis to ensure institutions responded in a waythat was full and frank. We have respected that request, noting
particularly the fact that people contributed openly to the process
on that basis and we will continue to do so. To assist those interested
in our self-assessment we have published a summary which can befound on bluenotes at anz.com.
The self-assessment was a useful exercise where we identified many
critical issues across culture, accountability and governance. As weoutlined to APRA, the Board and executive team are determined
to use this as an opportunity to deepen our self-awareness andto learn from our failings. Importantly, we do not see this as just acompliance measure but as an opportunity to make ANZ a more
efficient, more sustainable bank.
We will be a simpler, less complex bank once we have implemented
our road map for change.

We will have fewer products and more
effective systems and processes. For
customers, we will be easier to deal withand when things do go wrong we will befaster to resolve them.
Critically, our regulator will recognise issues identified in our annual
attestation are being resolved in a timelier manner and this will flow
through to improvements in our comprehensive review.

Executive remuneration
ANZ recorded its ‘first strike’ last year when around 34% of shareswere voted against our Remuneration Report. The Board took thisresult very seriously and shareholders will note there has been asignificant differentiation this year in the remuneration awarded to our
Disclosed Executives. Our Chair of the Human Resources Committee,
Ilana Atlas, provides more detail in the Remuneration Report.
You will note our CEO despite a solid personal performance, has
had his remuneration impacted by the broader performance of theGroup. In fact, variable remuneration for our Disclosed Executives
ranged between 0 and 74% of maximum opportunity. We alsoenhanced our approach to accountability and consequence
management during the year and will continue to hold people toaccount who fail to meet our standards.

Capital management
We continued our focus on capital efficiency this year by returning
excess capital to shareholders as a result of our simplification
agenda. We did this while also maintaining capital levels above
APRA’s ‘unquestionably strong’ requirements. In the financial yearof 2019 we reduced shares on issue by 42 million (equivalent of$1.1 billion) as part of our $3 billion buy-back. That program
concluded in March 2019.

Outlook
While the Australian housing market is slowly recovering, we expect
challenging trading conditions to continue for the foreseeable future.

Record low interest rates in Australia
and global trade tensions will continue
to place pressure on earnings while
increased compliance and remediation
costs will be closely managed.
Competition will also remain in focus with the recently announced
inquiry into mortgage pricing. We have acknowledged we have notalways done a good job in explaining our position and hope theinquiry enables the opportunity to provide facts on a complex matter.
On the regulatory front, both APRA and the Reserve Bank of New
Zealand have announced proposals that could lift the amount of
capital required to support our New Zealand subsidiary. The final
impact of these changes depend on a number of factors. This
includes the outcome of consultation, particularly the amount of
capital required, the time allowed to achieve it, and the instruments
we are permitted to use.
Management will maintain its focus on capital efficiency. However,
our strong ongoing capital generation capacity will assist in meetingany additional capital requirements.
Despite the industry’s challenges, I’m confident we have the team,
the balance sheet and the oversight in place to execute effectively
against a strategy that will benefit all our stakeholders. On behalf of
the Board and myself, I thank our more than 39,000 people for their
hard work in supporting our customers and our shareholders.

David Gonski, AC CHAIRMAN

5

CEO’smessage

SHAYNE ELLIOTTThis has been a challenging year of slow
economic growth, increased competition,
regulatory change and global uncertainty.

Our progress
The core of our strategy has not changed. Put simply, we will generate decent returns
by improving the financial wellbeing of our customers.
This year we continued to focus on balance sheet strength, improve our culture, simplify
the business and rebuild our team’s capabilities. In doing this, we significantly reduced thecost and risk of operating the bank despite the strong headwinds facing the sector.
We are determined to have the right people who listen, learn and adapt. We will put thebest tools and insights into the hands of our customers and people. Importantly, we willconcentrate our efforts on those particular things that add value to customers – and dothem right the first time.
This means we must continue to simplify our business, improve our customer proposition
and invest in innovations that deliver better customer outcomes and improve the efficiencyof our operations.
Retail and commercial in Australia had a difficult year. Increased remediation charges,
intense competition and record low interest rates have had a significant impact on earnings.

6

ANZ 2019 ANNUAL REVIEWWhile yet to flow through to the balance sheet, management
actions and operational improvements have seen a steady recovery
in home loan applications in recent months. These volume
improvements are expected to be maintained into 2020.
New Zealand delivered a solid underlying result in a more competitiveenvironment. As in Australia, compliance and remediation costs
contributed to higher operating expenses, while a focus on
operational efficiency offset inflation in business-as-usual expenses.
There are challenges ahead in New Zealand, particularly in relation
to the amount of capital we may be required to hold. However, we
are well-advanced in our preparations to manage these proposed
impacts in an orderly way.
Institutional continued its transformation with a return to profitable
growth. While macro conditions had an impact on financial
performance in the second half, the business is now generating
returns above our cost of capital that provides important
diversification given the lower growth in our home markets.

Customer remediation
The Royal Commission highlighted many failures the Australian banksneeded to quickly remedy. ANZ is not immune from this challenge.
This year we announced an additional charge of $682 million as aresult of an increase in our provisions for remediation work. We know
this is real money and has a real impact on shareholders. But we also
know it’s important to fix the mistakes of the past and return money
owed to customers as quickly as possible.
We are currently resolving identified fee or interest discrepancies
with over 3.4 million Australia Retail and Commercial customers.
To date our Responsible Banking team has remediated over one
million customer accounts.
If there is a positive from this work, it is that much of the time andresources being invested in remediating our systems and processes
will make us a better bank for our customers and shareholders.
It means the mistakes of the past are unlikely to be repeated andwhen issues arise they will be easier to fix.

Customers and community
Our purpose of shaping a world where people and communities
thrive guides our decisions. An example of this is the program
we have in place to proactively contact more than one million
customers to help them get more value from our products andservices, including those eligible for Centrelink or Veterans’ Affairs
benefits or those with persistent credit card debt. This is to makesure customers are using the best products given their individual
circumstances and that they are aware of all the options available.
Another issue we care about is providing affordable and sustainablehousing for Australians and New Zealanders. We do this byencouraging investment in the sector – including our role leading
the largest social bond issuance for housing in Australia.

We also know we have a role in enhancing environmental
sustainability and we are focusing our efforts on energy,
water and waste.

We have committed to fund andfacilitate $50 billion by 2025 towards
sustainable solutions for our customers,
including initiatives that help improve
environmental sustainability, increase
access to affordable housing andpromote financial wellbeing.
This is not philanthropy. It’s really good business for ourcustomers and shareholders given the growth opportunities
available in the sector. It’s also a business we are good atgiven our network and capabilities and an area we expect togrow rapidly in the coming years as the world grapples withenvironmental challenges.

Changing how we reward our people
This year we introduced wide-ranging reforms to the way wepay people. Variable remuneration is now a smaller part ofour people’s take-home pay and these reduced bonuses are
determined by the overall performance of the bank.
This is not about paying our people less. It is an industry-leading
initiative that will positively enhance our culture and become an
important point of differentiation. It also addresses the negative
impact an over-emphasis on individual bonuses within a bankcan have on customers and the community.
Redesigning how we reward our staff was one of the 16 key
initiatives we announced as part of our initial response to theRoyal Commission recommendations. As part of this, we also
strengthened our accountability frameworks to ensure there areappropriate consequences for the small number of people who
do not meet standards of behaviour or performance.
Finally, despite this difficult environment, we have made good
progress this year and I’d like to thank the more than 39,000
people who turn up for ANZ and work hard every day for ourcustomers. I’m confident we have the right strategy and team todeliver great, sustainable results in the future for our customers,
our shareholders and the community.

Shayne C Elliott CHIEF EXECUTIVE OFFICER

7

About our businessWe provide banking and financial products and services to around eight million
individual and business customers, and operate in and across 33 markets.

Our culture and values
Our values are the foundation of how we work and are supported by our Code of Conduct. All employees and contractors must comply
with the Code, which contains guiding principles and sets the standards for the way we do business at ANZ.

We care about:Integrity

Collaboration

Accountability

Our purpose
Our purpose is to help shape a world in which people andcommunities thrive. That means striving to create a balanced,
sustainable society in which everyone can take part and build
a better life.
One of the ways we are bringing our purpose to life is throughhelping to address complex issues that matter to society and arecore to our business strategy. We are focusing our efforts on:•• 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,business and financial practices that improve environmental
sustainability; and•• housing – improving the availability of suitable and affordable
housing options for all Australians and New Zealanders.
We are contributing to these challenges by: developing innovativeand responsible financial products and services; participatingin relevant policy development and research; strengthening
stakeholder partnerships; and harnessing the skills of our people.
Fundamental to our approach is a commitment to fair andresponsible banking – keeping pace with the expectations of
our customers, employees and the community, behaving fairly
and responsibly and maintaining high standards of conduct.
Throughout this report we illustrate how we are embedding
purpose into our business strategy, including through ourEnvironment, Social and Governance (ESG) targets andperformance objectives.

8

ANZ 2019 ANNUAL REVIEW

Respect

Excellence

The United Nations Sustainable Development Goals (SDGs)
seek to respond to the world’s most pressing challenges.
Business has an important role to play in helping achieve theSDGs. Recognising this we have identified our targets which
are making a contribution to the achievement of the SDGs
in our 2019 ESG Supplement available at anz.com/cs
in December.

Our strategy
Our strategy is focused on improving the financial wellbeing of ourcustomers; having the right people who listen, learn and adapt; putting thebest tools and insights into their hands; and focusing on those few things
that really add value to customers and doing them right the first time.
We believe that the execution of our strategy will deliver decent
returns for our shareholders, while achieving a balance between
growth and return, short and long-term performance and financial
and social impact.

Within our Institutional business we are creating an integrated
trade, cash and markets experience, while developing andappropriately scaling our capabilities across geographies todeliver connectivity for our customers.

While our focus has evolved over the past four years, the strategic
imperatives remain the same: creating a simpler, better balanced
bank; focusing our efforts where we can carve out a winning
position; building a superior everyday experience to compete in thedigital age; and driving a purpose and values led transformation.

Our strategy has driven significant improvement in our businessover the past four years. We have strengthened our balance sheet,
improved our culture, simplified the business and rebuilt ourpeople’s capabilities. In doing so we have reduced the costs andrisks associated with running the bank.

In our Australian and New Zealand businesses we are: delivering
improved customer outcomes, while rationalising our products
and services; developing new compelling services and distribution
options; and developing new initiatives to enhance our homeowner and small business owner propositions.

PurposeOur purpose is to help shape a world in which people and communities thrive
Strategic Imperatives

Strategy

Target Outcomes

Create a simpler,better capitalised,better balanced bank

Improving the financial
wellbeing of customers...

Improve thefinancial wellbeingof our customers

Build a superior
experience for ourpeople and customers
in order to compete in
the digital age
Focus our efforts
where we can carve out
a winning position
Drive a purpose
and values led
transformation of
the bank...looking tosave for,buy andown ahome...looking
to start,
buy andgrow abusiness...with people
who listen,learn and adapt...looking tomove capitaland goods
around theregion...with thebest tools
and insights...with flexible and resilient digital
infrastructure that supports greatcustomer experience at lower cost

Deliver decent returns
for our shareholders- targeted growth- low cost
- capital efficient
Resilient, adaptable
and capable workforce
Improve housing,environmental andfinancial wellbeing
outcomes for thecommunity

9

OUR VALUE DRIVERS
Customers
Trusted relationships
with our ~ 8 million retail,commercial andInstitutional customers.

$

OUR OPERATINGENVIRONMENT¢

The risks and opportunities
in our operating environment
impact our ability to create value.

Finance

Lower credit growthenvironment

How wecreatevalue

Access to capital throughcustomer deposits, debt and equity
investors and wholesale markets
enables us to run our operations
and execute our strategy.

Increased
regulatory
oversight andstakeholder
scrutiny

By transforming our business –embedding a purpose and values
led culture and simplifying our
products and services – we aim
to create long-term value forall of our stakeholders.
Our value creation model
outlines how we create value forour key stakeholders through ourbusiness activities, and identifies
the inputs – or value drivers –that we rely on to enable us todeliver that value and meet our
strategic objectives.

PeopleEmployees and contractors
with the key competencies
and right behaviours todeliver our strategy.

Digitaladvancement
and technologicalchangeRisk management
Demographic
changes

Reducing the risk of doing businessfor our customers and the bank,with systems and processes thatare less complex, less prone toerror and more secure.

Environmentand climate

Globalisation

Technology anddata capabilities
Flexible, digital–readyinfrastructure to provide
great customer experience,
agility, scale and control.

Community andrelationships
Strong stakeholder
relationships are essential
to our brand and reputation.

10

SHAREHOLDER VALUE›	Deliver decent returns enabling shareholders to meet goals› 228 cents earnings per share1› 10.9% cash return on equity1› 	160 cents dividend per share for FY19 with the final dividendof 80 cents franked at 70%› 9.2 percent total shareholder return

CUSTOMER VALUE›	Improving the financial wellbeing of our customers
OUR BUSINESS ACTIVITIESOperating across 33 markets,
we provide banking and financial
products and services to individualand business customers.
Through our business activities
we deliver the following outputs:› we provide transaction
banking services› we hold deposits for our customers› we lend money to our retail, small
business and corporate customers› we help customers mitigate
and manage financial risks›	Provide funding for lending, helping customers to own
homes and run businesses and assist businesses to transact,
trade and invest across our region›	Great customer experience through flexible and resilient
digital infrastructure›	We have contacted > 1 million of our Retail and Commercial
customers to help them get more value from our products
and services› 2
 0,024 FTE supporting our Retail and Commercial
customers, providing $339 billion in home lending and$95 billion in business lending (Australia and New Zealand)› 5
 ,468 FTE supporting our Institutional customers,
providing $165 billion in lending› C ustodians of $512 billion of customer deposits acrossthe business› we support customers withtrade and capital flows› we provide wealthmanagement products› we provide advisory services› we invest in our people to build
a diverse and inclusive workforce› we collaborate with partners
to build capacity and improvefinancial wellbeing

EMPLOYEE VALUE›	Invest in our people to build a resilient, adaptable andinclusive workforce with a strong sense of purpose and ethics› 77% employee engagement (up from 73% in 2018)› E mployed 734 people from under-represented groups(since 2016)› $4.8 billion in employee salaries and benefits› Increasing the skills and capabilities of our people providing
almost 1.5 million hours of training› we pay taxes in the countries
within which we operate› we pay dividends toour shareholders

COMMUNITY VALUE›	Connecting with, and investing in, the communities inwhich we operate to support growth, deliver services anddevelop opportunity› Invested $142.2 million in the community2› $3,172 million in taxes paid to government3› > 90,000 people have been reached through our financial
wellbeing programs, MoneyMinded and Saver Plus
1.

2.

3.

On a cash profit (continuing operations) basis. Excludes non-core items included in statutory profit anddiscontinued operations included in cash profit. It is provided to assist readers in understanding theresult of the ongoing business activities of the Group. For further information on adjustments between
statutory and cash profit refer to page 53.
Figure includes forgone revenue of $109 million, being the cost of providing low or fee free accounts toa range of customers such as government benefit recipients, not for profit organisations and students.
Total taxes borne by the Group, includes unrecovered GST/VAT,employee related taxes and other taxes.
Inclusive of discontinued operations.

11

Most material issues icons

Working with
our stakeholders

al issues icons

Customer story icon

Strong stakeholder relationships enable us Customer
to deliver
ourstory icon
business strategy and create long-term value.

New icons/infographics

Transparent and responsive engagement, combined with a genuine willingness on our part to listen and act, 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.
Summarised below are the key expectations of our stakeholders. For more detailed information on the issues raised bystakeholders this year and how we have responded, refer to our 2019 ESG Supplement available in December at anz.com/cs.

nfographics

Our stakeholders
Customers

Stakeholder icons

Government
andregulators

icons

What they expect from us

Customer story icon•• A customer-centred approach underpinned by ethical, fair andresponsible behaviour•• Financial products and services that are suitable, reliable and secure•• Responsible financial products and services•• Fair and ethical conduct and a strong customer-focused corporate culture•• Effective governance and risk management

Shareholders

How We Creat Value Icons

Employees

at Value Icons•• Sustainable long-term positive financial performance and investment returns•• Effective assessment and management of material risks and opportunities•• Informative, transparent and timely communications•• A safe, diverse and inclusive workplace that encourages engagement,
collaboration and development•• Competitive remuneration and benefits, effective performance management
and recognition

Non-governmentorganisations(NGOs)•• A clear and transparent approach to the management of existing andemerging ESG risks and opportunities•• Minimising adverse social and environmental impacts of our lending
and operations•• Collaborative partnerships and appropriate and evidence-based approachto community investment activities

12

ANZ 2019 ANNUAL REVIEW$

We havematched over
$19 million
in savings
since 2003

COMMUNITY STORY

Celebrating the impact of
our Saver Plus partnership
Saver Plus is a matched savings and financial education program
developed by ANZ and The Brotherhood of St Laurence.
The program is co-funded by the Australian Government and isdelivered by community partners and service delivery agencies
in 60 locations across Australia.

involving community coordinators, ANZ branch staff, government
representatives and partners was a rare opportunity to celebrate
the impact of the program and plan for the future.

From its early pilot of 300 participants in 2003, the program is
rapidly approaching a milestone of 50,000 recruited participants
who have built their financial wellbeing and had over $19 million
in savings matched by ANZ. Saver Plus is life changing, withresearch showing 87% of participants continue to save after
they have completed the program.

“It was so great to see the collaboration between everyone,
regardless of who they worked for, because we all deliver thesame program. To see the team feel so energised and motivatedagain was fantastic to witness,” said Cheryl Allen-Ankins, The Smith
Family, Saver Plus Program Manager.

Partnership has been the key to the continued success andimpact of Saver Plus. The recent Saver Plus National Conference,

Left to right: Saver Plus Co-ordinators, Denise Clark, Graeme Grice andCath Sweeney from The Smith Family at the Saver Plus National Conference

13Our operating
environment
We seek to anticipate and respond to the risks and opportunities arisingin our external environment to ensure that we can continue to create value
for our stakeholders. A summary of the issues influencing our strategy isoutlined below.
These global trends present us with risks and opportunities
RISKS

OPPORTUNITIESLOWER CREDIT GROWTH ENVIRONMENT•• Increasing competition and regulatory requirements
places pressure on margins and customer volumes.

•• New approaches are needed to deliver products and services
to our customers, together with efficient allocation of capitaland resources to generate returns to shareholders.

INCREASED REGULATORY OVERSIGHT AND STAKEHOLDER SCRUTINY•• Trust in the Australian and New Zealand banking industry
has eroded over the past two years.
•• Increased regulatory expectations and focus places pressure
on margins and customer volumes.

•• Community concerns remain high following the Royal
Commission in Australia and a number of regulatory
developments in New Zealand. We can rebuild trust bytransparently working with, and partnering with, government,
regulators and NGOs to deliver improved customer outcomes.

DIGITAL ADVANCEMENT AND TECHNOLOGICAL CHANGE•• Competition from existing and new competitors is increasing,supported by government policy, such as the consumer
data right.
•• With the increase in digitisation, strong cyber security capability
is critical.

•• By improving our digital capabilities and investing incyber security, we can serve our customers in new andinnovative ways, meeting their needs for safe and secure
digital banking solutions.

DEMOGRAPHIC CHANGES•• Demand for home lending in Australia and New Zealand is
impacted by a range of supply and demand factors largely
outside of our control, including population growth, housing
prices and dwelling construction.

•• Community concerns about housing affordability remain high.
We can help by partnering with business, government andNGOs to deliver innovative and practical housing solutions.

ENVIRONMENT AND CLIMATE•• We will continue to experience negative reputational impacts
if we fail to raise standards across all our activities and takecustomer and societal impacts into consideration when making
business decisions.

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

GLOBALISATION•• Community concerns about aspects of trade and investment
can potentially limit opportunities.

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

Our strategic imperatives assist us to respond positively
to this environment and meet societal expectations

14

ANZ 2019 ANNUAL REVIEWOur presence inAsia has helped
Carman’s expand
into overseas
markets
CUSTOMER STORY

Helping our customers
export to the world
Chances are if you have strolled down the supermarket cereal aisle recently
you will have seen shelves stacked with boxes of Carman’s muesli.
Established in 1992 by Carolyn Creswell with a modest $1,000,
Carman’s is now a leader in breakfast and nutritious snacks,
exporting to 35 countries.
Using our international footprint we have helped connect
Carman’s to new markets, particularly in Asia, where there is anabundance of opportunity for Westernised products.
“ANZ’s presence in Asia gives you introductions you would nothave otherwise because of their connections. It is really impressive
for an Australian bank to have that presence,” says Carolyn.
Having had a banking relationship for more than 10 years, thejourney for ANZ and Carman’s is centred on honesty, transparency
and integrity, identifying the ways in which each partner cansupport the other.

Carolyn views Carman’s relationship with ANZ similar to any
other partnership.
“ANZ is a partner with us – the reality is ANZ is trying to make ourbusiness better. If our business is better, we are going to do morebusiness with ANZ. We are all in this together.”
There is much ANZ can learn from Carman’s success, particularly
given Carolyn puts that success down to a focus on the customer
and having an engaged and passionate workforce – both central
elements of ANZ’s own strategy.
Image: Carolyn Creswell15

Becoming a fairer andmore responsible bankDuring this year we have continued to make changes to our culture,
governance and accountability mechanisms to help improve customer
outcomes and restore community trust.
Our response to the Royal Commission

APRA Self-Assessment

The Royal Commission into Misconduct in the Banking,Superannuation and Financial Services Industry (the Royal
Commission) has had a profound impact on our organisation.
We are determined to learn from our failures and build a bank that is
worthy of the trust and respect of our customers and the community.

In late 2018, the Australian Prudential Regulation Authority (APRA)
asked a range of financial services companies, including ANZ, toexamine through a Self-Assessment Report their behaviours andoperations in the wake of highly publicised misconduct in the sector.

The Commission’s report led us to further examine how we serve
our customers. We identified eight lessons from our misconduct
and failures to meet community standards and expectations. Theselessons have informed our response to the ‘spirit and letter’ of theRoyal Commission. We are now identifying measures that will allow
us to be confident that these lessons have been acted on.
Our first step was to identify which Commission recommendations
we could quickly act on. This led to 16 initiatives to improve thetreatment of our retail customers, small businesses and farmers inAustralia. Some of the key commitments we have delivered on are:•• removing overdrawn and dishonour fees on our Pensioner
Advantage account (available to eligible recipients of Centrelink
or Veterans’ Affairs pensions)•• improving our service to Indigenous customers in remotecommunities by setting up a dedicated phone service andgiving them easier options to prove their identity•• publishing principles to help family farming customers infinancial distress•• publishing principles on acting as a model litigant in disputes
with our customers•• implementing pay reforms that replace individual-based bonuses
for most of our employees with an incentive based on the overall
performance of the Group.
In addition to progressing these 16 initiatives, Colin Neave,
former Commonwealth Ombudsman and our first Customer
Fairness Adviser (appointed in 2016), reviewed individual ANZ
cases highlighted at the Royal Commission, taking action whereappropriate to resolve matters.
The majority of the recommendations in the Royal Commission
final report require legislative change and we will continue to workwith government as it implements those changes.

We submitted our Self-Assessment Report to APRA in November
2018, and have since developed a ‘roadmap’ to act on the themes
raised in that report.
We identified five focus areas in which to concentrate our efforts todeliver better outcomes. These areas were identified both throughthe self-assessment as well as issues that were examined by theRoyal Commission.

Focus areas
Simplificationof our business, products
and processes

Cultureincluding the way we reward
and recognise our people

Governanceandaccountability

including how we are held toaccount, and how we manageand execute change

Remediation

including expansion of
our specialist customer
remediation teamManagement ofoperational risk

review and improvement of
our operational risk framework

Executive Committee members have been assigned ‘ownership’of each focus area and they are responsible for monitoring
performance.
We have established a Royal Commission and Self-Assessment
Oversight Group to oversee an integrated response to the Royal
Commission and Self-Assessment.
Further details of our self-assessment can be found on bluenotes
at anz.com.

16

ANZ 2019 ANNUAL REVIEWOurcustomers
Consistently delivering a positive customer experience enables us to create
value for all of our stakeholders and is critical to our long-term success.
We seek to treat our customers fairly and responsibly,
providing them with suitable and appropriate products andservices, supported by strong data protection.
We have identified three customer segments where we believe
we can best achieve this: home owners, business owners andcompanies that move capital and goods across the region.

Providing suitable products and services
We have contacted more than 1 million of our retail and commercial
customers, including customers who:•• are in receipt of eligible Centrelink or Veterans’ Affairs benefits
to offer to help them move to a low-cost, basic bank account.
Since June 2019, we have contacted 128,624 customers (viaemail or letters);

Links to 2019 Group
Performance Framework
We are committed to improving the customer
experience, as highlighted by the implementation of 16
initiatives in Australia in response to the Royal Commission.
There were some challenges during the year including
technology stability issues, and a period of underperformancein respect of assessment and approval times relative to peers
in home lending. Institutional performance in key customer
satisfaction/relationship strength surveys continued to be ahighlight, along with strong digital engagement with customers.
Refer to the Remuneration Report section of the Annual Reportavailable at anz.com/shareholder/centre for further details.

•• are experiencing persistent credit card debt;•• have Interest Only home loans set to expire within 6 months,
reminding them of the expiry period and notifying them of theoptions available at the end of the period;•• have opened an ANZ Access Advantage account within the last
13–16 days, reminding them to credit their account with regularsalary payments; and•• have Progress Saver periodical payment or direct debit due toexpire in the next month to remind them an automated credit
can help them receive bonus interest on their account.

CUSTOMER STORY

Helping customers to get
on top of credit card debt
We have been contacting credit card customers whoare carrying persistent debt1 on their card to help them pay their debt faster.
Customers have been offered financial education, and theopportunity to close their card and repay the remaining debt
at a lower interest rate. We have contacted 9,500 customers as
at 30 September 2019.

Continuing his current repayment behaviour, John would havetaken more than 9 years to pay off the debt – assuming there wasno further spending on the card – accruing at least $12,000 ininterest over that time.

Earlier this year we contacted John*, a long-term customer
who has held a credit card facility with ANZ since 1976. John
had a balance of $9,500 (on a $10,000 limit) and the entirety ofthe balance was on a cash advance interest rate of 21.74% perannum. John had not transacted on the card since 2016 andhad been making payments only slightly above the minimum
monthly repayment amount.

After contacting John and explaining his options, John agreed to
an instalment plan with an interest rate of 7% per annum. This will
enable him to pay off the debt in five years or less, saving morethan $10,000 in interest charges.
This program has been welcomed by many customers,
including John who said, “I wish this had happened a long timeago … it’s such a relief.”

Where for at least the last 12 months a credit card has over 80% of the credit utilised and the customer has been paying 2–3% of the outstanding balance on average each month.
* Customer name has been changed.
1.

17Our customers continued

Home owners
We are committed to fund and facilitate $1 billion of investment
by 2023 to deliver around 3,200 more affordable, secure andsustainable homes to buy and rent in Australia.
We are developing a housing supply pipeline through direct
engagement with our clients (new and existing), supporting
innovative models to finance new supply. This includes:•• jointly arranging the inaugural bond issue of $315 million for
the Commonwealth’s National Housing Finance and Investment
Corporation (NHFIC), the largest social bond for housing inAustralia; and•• arranging the first wellbeing bonds in New Zealand for Housing
New Zealand Corporation (NZ$500 million and NZ$600 million).
We have also established a Housing Virtual Fund (the Fund)enabling us to accommodate non-conforming risk aspects of
new housing models. Emerging housing models generally comewith increased risk for the developer, the bank and the consumer,
preventing innovative models from being brought to market atscale. The Fund ensures that we have a comprehensive internal
review process, allowing us to utilise all of our expertise inunderstanding and managing risk.
Support for first home buyers
Our research shows that 64 percent of first home buyers are
uncertain of what to do when it comes to buying their first
property and they want someone they can trust to guide themthrough the process.1 In response, we are improving the skills of
our frontline staff enabling them to provide tailored guidance andsupport to first home buyers. We have:•• provided more than 3,300 frontline staff with Home Loan Coachtraining across Australia and New Zealand;•• improved our First Home Coach training in Australia – nearly
800 of our frontline staff have completed this training; and•• provided Construction Coach training in New Zealand tosupport customers building or renovating a home – morethan 220 frontline staff have received training.
We have also developed the most accurate property pricepredictor in the market to support customers in establishingthe value of their future home.

In recognition of our commitment to thiscustomer segment ANZ has been named
Bank of The Year for First Home Buyers by
Canstar for three years running (2017–2019).
Industry insights
During the year we have undertaken significant engagementwith industry stakeholders to ensure that as an organisation weare directly linked to the housing policy agenda, offering market
expertise to support government, customers and the community
with relevant insights to inform decision-making.
We have entered into a three-year partnership with CoreLogic todeliver a bi-annual housing affordability report. The report provides
in-depth market analysis of the Australian housing market for bothbuyers and renters.
1.

18

ANZ Home Buying Research, Prescience, May 2015.

ANZ 2019 ANNUAL REVIEW

Making homes healthier in New ZealandAccording to research by the Building Research Associationof New Zealand, about half of the homes built are unsuitable
for the climate – they are not adequately insulated, haveinsufficient heating and are damp with visible signs of mould.
“As New Zealand’s biggest home lender, housing is one area
where we want to make a difference”, says Antonia Watson,
Acting Chief Executive Officer, New Zealand.
We have set aside NZ$100 million so our customers can enjoy
warmer, healthier homes while potentially also keeping energy
costs down. Last year we began offering our home loancustomers (both owner-occupiers and investors) an interestfree home loan top-up (up to NZ$5,000). More than 1,800
interest-free home loans (to the value of NZ$6.3 million) havebeen drawn down as at 30 September 2019. The top-up offer
was also extended to heat pumps in July 2019.
In addition, in April 2019 we launched a Healthy Home Loan
Package, that includes discounts to standard home loan rates,
as well as fee waivers across a range of accounts, for customers
buying, building or renovating a home to 6 Homestar or above,in New Zealand.
Thirty four customers are now on the package (funds undermanagement of NZ$11.7 million) and we are working to
identify existing eligible customers to transition them acrossto the package.
Not only are there health benefits associated with more energy
efficient homes but occupants may also have more disposable
income because they are paying lower power bills.
“When every dollar counts, a lower home loan rate mightswing the decision to go the extra mile on health andsustainability measures.” says Antonia.

Net promoter score
Australia

New Zealand

Retail: ranking 4th

Retail: ranking 4th3

1

(down from 3rd at end of 2018)(no change from 2018)

Commercial: ranking 3rd

Commercial and Agricultural:
ranking of 5th4

2

(no change from 2018)(no change from 2018)

Customer remediation

Customer experience

Fair, responsible and efficient customer remediation is a focus for thebank, with significant investment being made across our Australia,
Wealth and New Zealand Divisions.

One way in which we measure the experience of our customers
is through Net Promoter Score. Net Promotor Score enables us togauge whether we are meeting customer needs and expectations
and how we are performing relative to peers. It is measured byasking customers how likely they are to recommend ANZ (on a 0–10
scale) and is calculated by subtracting the percentage of detractors(those who give a score of 0–6) from the percentage of promoters(those who give a 9 or 10).

We are currently resolving identified fee or interest discrepancies
with over 3.4 million Retail and Commercial customers. To date ourAustralian Retail and Commercial Responsible Banking team has
remediated over one million customer accounts5 and issued refundsof around $62 million.
In Wealth, the team has completed the first stage of a review to
identify instances of inappropriate advice to customers. Over 7,000
advice cases, spanning more than a decade, were reviewed. In
addition, the majority of remediation cases relating to ANZ Financial
Planning ‘fee for no service’ have now been remediated.

$

Wealth has remediated nearly
26,000 cases in total and madepayments of $95.2m as at
30 September 2019.

Over the 12 months to 30 September 2019, the Responsible Banking
team has increased the number of dedicated remediation resources
working on large scale customer remediation matters from around
150 to around 275 people.
Similarly, the team within Wealth has expanded from around 120 toaround 170 over the same time period and is projected to increase
to around 200 by December 2019. Our New Zealand business also
has almost 60 dedicated remediation resources. These additional
resources, together with an increase in infrastructure and capability,
are enabling us to refund impacted customers in a scalable andrepeatable way.

With respect to our Australian and New Zealand Retail andCommercial customers we failed to meet our target to improve
our Net Promoter Score relative to peers. Our Institutional ranking
remains at number one in both Australia and New Zealand.
Managing customer complaints
Listening to our customers and responding to their complaints
in a timely, transparent and fair way is key to maintaining theirconfidence and trust in us.
This year, both the Australian Financial Complaints Authority andthe Australian Securities and Investments Commission identified theneed for significant improvement in our internal dispute resolution.
High complaint volumes and lengthy delays in resolution werehighlighted. We have established a detailed action plan whichsets out the changes we need to make to improve our customers’
experience and we will keep stakeholders informed of our progress.
For further information on our approach to complaints handling,
complaint volumes and the role of our Customer Advocate refer
to our 2019 ESG Supplement available at anz.com/cs in December.

More than 500 people throughout the Australian Retail andCommercial business are also working on a number of smaller
customer remediations, fixes and investigations.
We are delivering an ongoing education program to share ‘lessons
learnt’ and to highlight the impacts on customers when we failto get it right. In creating a collective understanding of the root
causes of our existing remediations, we continue to build a sharedaccountability for the prevention of future issues.
1.

2.

3.

Roy Morgan Research Single Source, Australian population aged 14+, Main Financial
Institution, six month rolling average to Sep’19. Ranking based on the four major
Australian banks.
DBM Business Financial Services Monitor. Base: Commercial Banking (<$100 million annual
turnover) Main Financial Institution customers. Six month average to Sep’19. Ranking
based on the four major Australian banks.
Retail Market Monitor, Camorra Research, six month rolling average to Sep’19.

4.

5.

Business Finance Monitor, TNS Kantar Research. Base: Commercial ($3 million – $150
million annual turnover) and Agricultural (>500K annual turnover) customers. Four quarterrolling average to Q3’19.
In certain instances ANZ makes:• a community service payment in lieu of a payment to a customer account. In 2019charity payments were made for ~111,000 accounts totalling ~$355,000.
• the customer payment via cheque. In 2019 cheques were issued for ~178,000 accounts
totalling ~$11,088,000. A proportion of these cheques remain unpresented.
19

Our customers continued

Offering customers more convenient andengaging banking solutions
Fifteen years ago more than half of all banking transactions occurred
within the branch network; today, that number is down to less than
10 percent. Of the 2.8 million customers using our ANZ app, 36
percent are using mobile banking only – up 30 percent this year,
demonstrating the significant shift in how customers are choosing
to engage with us.
This digital banking evolution brings both opportunities andchallenges for ANZ. We are tailoring our products and services
to the changing habits of our customers, who have told us theywant more flexibility in their banking. Our digital technology now
makes it possible for our customers to serve themselves, anywhere,anytime and we are adapting the way we operate to accommodate
this. Peak usage on the ANZ app is between 4–6pm, and evenduring our quietest time between 12–2am we are serving almost
100,000 customers.

The benefits of open banking
Open banking regulation came into force at the start of July inAustralia, supporting the sharing of generic product data withthird parties, with the aim of making it easier for customers tocompare products. The sharing of customer specific data will
start in early 2020. This will enable consumers to access data
about themselves (personal, account and transaction data) andshare it with accredited third parties of their choice.

Of the 2.8 million customers
using our ANZ app, 36 percent
are using mobile banking only –up 30 percent this year
With increasing digitalisation, a strong
cyber security capability is critical
As our customers choose to move their banking to digital platforms
we are focused on safeguarding their money and personal
information. We have invested heavily in our cyber security
capability, and are in a strong position to keep our systems, data andcustomers safe from the increasing pace, scale and sophistication of
cyber-attacks.

At the heart of open banking is trust in how open banking
participants manage their customers’ data. We will continue
to invest in our customers’ security and privacy, and apply our
ethical principles to all data use and the outcomes that result.

Recognising humans play a significant role in the security‘ecosystem’, we are delivering comprehensive education programsfor employees and customers, simplifying cyber security, andmaking it easier to understand and implement. This year we havedeveloped workshops to help small businesses stay safe online,
raised awareness of online scams and reached millions of customers
through our campaign to help them protect their ‘virtual’ valuables.
We are also helping to develop the cyber security curriculum forAustralian high schools to ‘grow’ the next generation of cybersecurity workers.

Our Data Ethics Principles put our customers’ interests first in
how their data is collected, used and disclosed; and provide
mechanisms for transparency and choice to help our customers
understand and control their personal information.

Promoting a culture where security is everyone’s business means weare better placed to protect our systems, data and our customers,
and can actively contribute to digital innovation and the economic
opportunities a secure online world offers.

We will uphold these principles as the open banking regime
begins, ensuring our customers can request the sharing of theirdata, while also maintaining control over where and how theirdata is used.

Biometric authentication protecting
customer payments in Australia
and New Zealand“The emerging Australian data economy, sustained by customerdriven data sharing frameworks, should give customers more
control in sharing information with confidence. Also, it should
create opportunities for business to leverage their expertise,
experience and technology into new areas to serve theircustomers. Businesses that engage with the data sector will
have the opportunity to offer better services, and a more precise
product to meet customer needs. Their customers should have theopportunity to benefit from enhanced choice and convenience.
The efficient use of data, in a secure ecosystem with a strong
governance structure, could be tremendously beneficial forbusinesses and customers alike.”
Scott Farrell, Chair of Open Banking Review

20

We are implementing digital solutions to assist our customers to
improve their financial wellbeing. We have developed new featuresin the ANZ app to help our customers work towards their financial
objectives by setting and tracking goals. Currently in the pilot phase,
new features include data-driven ‘nudges’ (messages) to customers
via the app, with milestones and tips to help them meet theirsavings goals.

ANZ 2019 ANNUAL REVIEWANZ was the first Australian bank to enable its
customers to make high value payments (up to$25,000) via the ANZ app using their voice. Our
voice ID technology allows customers to verify
their identity using their voice, rather than a PIN or password. Whilestill an emerging technology, we currently have almost one million
customers in Australia registered for voice ID. To date there havebeen no instances of fraud from a voice biometric breach.

Supplementary disclosures
Refer to our 2019 ESG Supplement available at anz.com/cs
in December for further disclosures, including historical
data tables.

Our divisions
Australia Retail and Commercial“While this year has had its challenges, I’m pleased
our recent actions have restored momentum in ourhome loans business and with the progress we’ve
made in fixing the failures of the past.”
Mark Hand – Group Executive Australia Retail and Commercial Banking

External operating environment

Business strategy outcomes

Performance1

In Australia credit growth is slowing, revenue
growth is negligible, interest rates are atrecord lows and regulation has increased
substantially.

Momentum has returned in home lending
with applications up 34% in the second
half of 2019 (compared with the first half ),through improving turnaround times
and greater clarity on lending policies,
adjustments to lending caps and a major
marketing campaign to restore confidence
across our distribution channels. We
are confident this will flow through tosettlements.

2019 was a challenging year for Australia Retailand Commercial, impacted by continued
margin erosion, lower average lending
volumes (a combination of the external
environment and ANZ conservative businesssettings) and reduction in fee Income.

Competition too is intense, particularly in thehome loan market. New competitors built tomake the most of digital innovations to serve
customers are also having an impact.
The housing market activity is improving off
the back of the lower interest rates, and theremoval of investor and interest only lending
caps, but it is too soon to call a recovery.
Businesses remain cautious and are taking a‘wait and see’ approach with the economy.
Investment continues to be below longterm averages.

More than half of our customers now bankdigitally and the ANZ App has 2.8 million
users making more than $380 million worthof transactions every day.
Our ANZ Business Growth Program
has created more than 1,300 jobs andparticipants have increased their revenue
by 374% and profit by 461%.
Through our network and insights, ourcustomers continue to succeed in Asiaand more than 200 have joined us fordelegations to China, Hong Kong,
Singapore, Vietnam and Japan.

The home loan portfolio, down 3%, wasaffected by slowing system credit growth,competition and more conservative homeloan origination risk settings. Commercial
Lending, also down 2%, was driven by lower
volumes in Small Business Banking.
Customers grew by more than 130,000 in theyear to 6.4 million, with 3.6 million customers
now digitally active. Deposits also increased
in 2019 to $208 billion, with Retail deposits
up 1% and Commercial up 5%.
Productivity initiatives, including workforce andbranch optimisation delivered cost savings andoffset increased investment spending.
Financial Performance for Australia Retailand Commercial is provided within the Our
Performance section on pages 52 to 65.
1.

Financial PerformanceCommercial includes Small Business Banking,Business Banking and Private Bank

Cash continuing1
Cash profit ($m)

% of Group Profit FY19

2019
49%

% of Group Net Loans & Advances

1.

3,195

2018

3,626

2018

2019

332

2018

341

Customer Deposits ($b)

Return on Avg. RWAs (%)
2019

54%

Net Loans & Advances ($b)

2.0

2019
2.2

2018

208
203

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 activities of the Group. For further information on adjustments between statutory and cash profit refer to page 53.
21

Our divisions continued

Institutional“Institutional is smaller but better – we’re in the rightmarkets, with the right customers and at the right
returns. Our focused strategy is delivering results, andwe’re staying vigilant in managing risks relating togeopolitics, global trade and consumer retail trends.”
Mark Whelan – Group Executive Institutional

External operating environment

Business strategy outcomes

PerformanceMarket conditions have been challenging,particularly in the second half of this financial
year. This is due to a combination of record
low interest rates, high liquidity, low volatility,and heightened geopolitical tensions.

Institutional is focused on customers whovalue us, working within clear priority sectors,
sharpening our geographic focus, simplifying
products and technology and driving
structural efficiencies.

China has been adapting to a slowing
economy, while the inverted US Treasury
yield curve sparked fears of a potential
economic recession in the world’s largest
economy.

Following our decision to exit lower
returning and non-core customer
relationships, Institutional is now in theprocess of pivoting to responsible anddisciplined growth. We have also maintained
our focus on reducing costs and capitalefficiency.

Institutional continued to deliver the benefitsof a simpler and more disciplined businessin 2019, reporting an increase in Cash Profit
and growth in the balance sheet. Net Loans
and Advances were up 10% while customer
deposits grew 6%.

Shifts in trade and supply chains due tothe US-China trade war have had a positive
impact on some markets, particularly inSouth-East Asia, where ANZ has a presence.
ANZ is also well prepared for Brexit with ourEuropean branch network and licensing
arrangements meaning customers do
not need to make changes or open new
accounts in order to continue to bank with
us in Europe.

This has delivered leading market positions
across key geographies (#1 Australia & NZ,#5 Asia) and #1 in overall relationship quality
for the second year running.
The sale of Retail, Commercial and SME in
Papua New Guinea completed in September
2019 has enabled the business to focus on
Institutional banking. The sale of our stakein Royal Bank in Cambodia (completed inJuly 2019) was also an important step in oursimplification strategy.

Financial Performance

Geographically, Australia, New Zealand andAsia Pacific, Europe & America all delivered
profit growth, supported by strong customer
revenue growth.
Transaction Banking and Loans andSpecialised Finance both increased revenue
in 2019, up 8% and 7% respectively. Markets
revenue was down marginally due to lower
Balance Sheet revenue, while Franchise
Sales and Franchise Trading both delivered
stronger revenue outcomes.
Focus on productivity contributed to anotheryear of cost reductions, a result of lower fulltime equivalent staff, decrease in softwareamortisation and property efficiencies.
Credit charges remained below long run trends.
Financial Performance for Institutional isprovided within the Our Performance section
on pages 52 to 65.

Cash continuing1
Cash profit ($m)

% of Group Profit FY19
28%

2019
2018

% of Group Net Loans & Advances
27%

22

1,828

2019
2018

1,480

Return on Avg. RWAs (%)

165
150

Customer Deposits ($b)
1.1

2019
2018

1.

Net Loans & Advances ($b)

0.9

2019

217

2018

206

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 activities of the Group. For further information on adjustments between statutory and cash profit refer to page 53.

ANZ 2019 ANNUAL REVIEWNew Zealand“While it’s been a difficult year reputationally forthe organisation, the business has stayed strong,with staff continuing to focus on doing the rightthing by customers.”
Antonia Watson – Acting Chief Executive Officer New ZealandExternal operating environment

Business strategy outcomes

Performance

The New Zealand economy remains soundwith commodity prices remaining solid,
population growth still strong and continued
low unemployment.

We continued to progress our strategy ofsimplifying the business and improving
customer experience.

Our New Zealand business maintained aleading position in core banking products
this year, with ~31% share of mortgages(August 2019), ~34% share of household
deposits (August 2019) and ~24% share of
KiwiSaver (June 2019).

GDP growth, however, has slowed. Businessand consumer confidence is down due touncertainty in the international economic
outlook. This has resulted in lower business
investment and consumer spending. That
has meant the historically low official cashrate environment has not provided theeconomic stimulus many had hoped for.
The level of regulatory scrutiny is increasingon all financial services entities in New
Zealand and this is increasing compliancecosts for the business.
The proposed RBNZ capital changes – which
are intended to create a stronger and morerobust banking industry and are expected tobe made public in December 2019.

The OnePath Life insurance business sale
was completed in November 2018, as wellas other non-core ANZ New Zealand assets
Paymark and ANZ Securities.
Frontline sales incentives were removed in2019 to give confidence to customers thatany products and services they purchased
were sold to them for the right reasons.
In striving to be the best bank to help Kiwis
own homes, we developed a market leading
proposition that includes a “healthy homes”
package to better insulate and heat houses.
The Commercial and Agri, and Institutionalparts of ANZ New Zealand had a major
focus on environmental initiatives to assist
customers in the economy.
Within the Wealth unit, superannuation
product Kiwisaver continued its strong
growth, surpassing $14.5 billion in funds
under management.

Cash continuing1

22%

Cash profit (NZDm)

Focus in recent years on more conservative
lending standards, together with a benign
credit environment, contributed to provision
charges remaining low this year.

2019

Net Loans & Advances (NZDb)

1,479

2018

% of Group Net Loans & Advances

Customer deposits grew 3% and customer
numbers grew modestly to 2.4 million, of
which 1.5 million customers are digitally
active. Digital sales were up ~4% and now
account for ~ 30% of all retail sales.

Financial Performance for New Zealand isprovided within the Our Performance section
on pages 52 to 65.

Financial Performance% of Group Profit FY19

While the operating conditions were morechallenging, Retail and Commercial bothdelivered balance sheet growth in 2019.
Retail net loans and advances were up
4% (driven by Home Loan growth), andCommercial lending up 2%. Revenue for thedivision was however impacted by marginpressure from lower deposit margins andhome loan mix changes.

1,655

2019

126

2018

122

Customer Deposits (NZDb)

Return on Avg. RWAs (%)

19%
2019
2018

1.

2.4
2.7

2019

90

2018

87

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 activities of the Group. For further information on adjustments between statutory and cash profit refer to page 53.
23

Our
Most material issues icons
peopleCustomer story iconWearedeveloping
Mostmaterial
issues icons the culture, capabilities and behaviours weneed to live our purpose and values and deliver our strategy.

Customer story icon

New icons/infographics

Most material issues icons

Our focus is on the following priorities:
Most
material
issuesinicons
initiatives
support of our
New icons/infographics
desired culture;strengthening our Risk Culture, including
Most material issues icons

New icons/infographics
strengthening our Accountability andConsequence Framework;
New icons/infographics
changing the way in which we reward
our people;

preparing
Stakeholder
icons our people for the future,
New icons/infographics
ensuring we have the criticalcapabilities to succeed; andCustomer story icon
Our desired culture is underpinned by our purpose, values, andCode of Conduct, as well as being focused on delivering greatcustomer outcomes, making things simplerCustomer
and alwaysstory
learning.
icon
Both a strong risk mindset and behaviours are embedded in ourvalues, Code of Conduct and performance expectations, and we arecommitted to providing a safe environment in which all employees
are empowered to ‘speak up’ and raise ideasCustomer
or issues andconcerns.
story
icon
We seek to understand and improve our culture on an ongoingbasis and are continually improving the way we track and measure
our progress. One way we do this is through our Enterprise Culture
Steering Group, whose membership includes the CEO and othermembers of the Executive Committee, which meets twice a year andprovides an opportunity for each Executive to present the cultural
strengths and development areas of their business, and actions
taken and planned to shift the culture.

Stakeholder icons

Culture assessments
We are supported by a team of specialists in our Internal Audit
group who undertake cultural assessments within the bank. These
assessments assist our leaders to understand the culture within thebusiness, how culture impacts the way we support customers andwhere culture could expose us to risk.

Links to 2019 Group
Performance Framework
Stakeholder
icons
How We Creat
Value Icons

The assessments focus on identifying cultural themes, underlying
factors and their impact to support the business to drive sustainablechange toward ANZ’s desired culture. They incorporate a blend ofquantitative data, primarily through an employee survey, as well as
qualitative data through employee focus groups.

Stakeholder
iconsa diverse and inclusive
creating
workplace and building our people’s
resilience and wellbeing.

Highlights during the year include: strengthening
our Accountability and Consequence Framework; evolving
our approach to measurement and governance of culture
initiatives; redesigning and launching changes to how
Stakeholder
icons
How We Creat
Value Icons
we manage and reward our people; solid progress in theinvestment in key skills for our future; launch of a digital
How Weplatform;
Creat Valuelearning
and Iconsa record level engagement survey result.
Refer to the Remuneration Report section of the Annual Reportavailable at anz.com/shareholder/centre for further details.

How We Creat Value Icons

How We Creat Value Icons

24

CultureANZ 2019 ANNUAL REVIEW

More than 20,000 employees
have participated in culture
assessments (since 2016)
Once an assessment is completed, the implementation of actions
to address cultural challenges is monitored, and the effectiveness of
those actions in shifting towards the desired culture is reviewed.

Strengthening our risk culture
During 2019 we have strengthened the way we deal with risk events
through an enhanced Accountability and Consequence Framework,
which is applicable to all of our people.
New Accountability and Consequence Principles set out when andhow an accountability review will be conducted following a material
risk or audit event, define the various categories of accountability(e.g. direct, indirect, collective) and provide guidelines for the
relevant Group Executive to consider in determining appropriate
consequences. Appropriate consequences should reflect theseverity of the issue and may include, for example, one or more of
the following: coaching, counselling, formal warnings, impacts toperformance and remuneration outcomes, impacts on promotion,
application of malus and ultimately termination of employment forthe most serious issues.
The Consequence Review Group (CRG), chaired by the CEO,oversees the implementation and ongoing effectiveness of the
Accountability and Consequence Framework, being cognisant of
its impact on the culture of ANZ. The CRG reviews material risk andaudit events and associated accountability and consequences.
Our ongoing focus on accountability, consequences and drivinga strong risk culture supports our customer commitment thatwhen things go wrong, we fix them quickly and consistently holdexecutives to account where appropriate.
‘Speak up’ culture
We also seek to support a strong ‘speak up’ culture and ensure
managers recognise exemplary risk and audit behaviours. The focus
on ‘speak up’ is being supported through our New Ways of Leading(NWOL) that are aligned with our purpose and values. NWOL
focuses on five behaviours relevant for all employees and imperative
for people leaders: be curious, create shared clarity, empower
people, connect with empathy and grow people selflessly. We areincorporating culture into leader-led team activities to facilitate
open, purposeful conversations about our culture and practices
and create a psychologically safe environment for employees to‘speak up’. We continue to promote and raise employee awarenessof the various ways that employees can ‘speak up’ including throughinitiatives such as the Whistleblower Awareness Week.

We have 39,060 full-time
equivalent employees
Application of consequences
In 2019 across the Group, 151 employees were terminated forbreaches of our Code of Conduct. A further 516 employees received
a formal disciplinary outcome, with managers required to apply
impacts to their performance and remuneration outcomes as part of
the annual review process.

Left to right: ANZ employees,
Sewmee Samarasinghe and Kate London

At the senior leadership level, 30 current or former senior leaders(Senior Executives, Executives and senior managers) had a formal
consequence applied in 2019 for Code of Conduct breaches orfindings of accountability for a material event, or otherwise left thebank after an investigation had been initiated. The 30 employees
represent ~ 1% of the senior leader population. The consequences
applied included warnings, impacts to performance and/or
remuneration outcomes and cessation of employment.
Senior leader consequences in 20191

Performance and remuneration consequence

23

Formal warnings

12

No longer employed

7

1.

Individuals are included under all categories that are relevant meaning one individual
may be reflected in multiple categories.

Changes to remuneration
A key focus this year has been the redesign of the way wefinancially reward and manage the performance of our people
to better support our purpose, culture and values. The changes
include rebalancing the way we pay our people so that variable
remuneration is a smaller part of take home pay. For the majorityof employees, variable remuneration will be based on Group
performance only (i.e. no individual bonuses). These changes will
apply from financial year 2020, and are more closely aligned to ourdesired culture, with increased focus on collaboration and teamperformance, as well as individual growth and development.
We are implementing the recommendations from Stephen
Sedgwick’s ‘Retail Banking Remuneration Review’, which is focusedon strengthening the alignment of retail bank incentives, sales
practices and good customer outcomes. Recommendations that
ANZ is delivering independently are 90% complete and will befully implemented well ahead of the October 2020 deadline. We
continue to work with industry to progress the recommendations
for third parties and principles to underpin customer metrics.
Management provides regular updates to the Board Human
Resources Committee on progress.

25

Our people continued

Building workforce capability

Diversity, inclusion and wellbeing

We are creating an environment where our people can learn
and grow every day, helping us to build organisational agility
and capability to remain competitive.

We are making progress on our priority to build an engaged, diverse
and inclusive workforce. We want our workforce to reflect thecommunities we serve and believe that leveraging the diversity of ourpeople will allow us to innovate and improve customer experience.

We are building the capabilities of our leaders through theintroduction of a new leadership feedback survey giving ourleaders tangible and actionable feedback on their strengths
and development opportunities. We continue to track thedemonstration of our NWOL behaviours and our people aretelling us through the leadership and engagement surveys thatthey are seeing their leaders demonstrating improvements acrossall five behaviours.

Employee engagement: 77%(up from 73% in 2018)1
In addition, we are building the capabilities critical to delivering
our strategy and to future-proofing our workforce, with a focus on
investing in our pipeline of data and engineering talent with newroles and development opportunities in data analysis and science.
During the year we launched a new social learning platform – Our
Way of Learning (OWL). Combining the functionality of a searchengine and a social learning network, OWL offers employees freeaccess to internal subject matter experts at ANZ and external
content providers and user-generated content. OWL can beaccessed by our people anywhere, anytime, and on any device.
In 2019 our people undertook almost 1.5 million hours of learning
to increase their skills and capabilities, including self-directed
learning through OWL.

This year our efforts have focused on enabling social and economic
participation through providing employment opportunities forpeople from under-represented groups (including Aboriginal andTorres Strait Islanders, people with disability and refugees). Overall,
we are broadly on-track to meet our target to recruit >1,000 people
from these groups by the end of FY20, reaching 734 since 2016.
Our Spectrum Program is designed to offer employment
opportunities to the autism community (sometimes described aspart of the neurodivergent community) to build fulfilling careers
in areas such as cyber security, coding and testing. This year wewelcomed additional participants and nearly half of our original
cohort moved into permanent ongoing employment with ANZ.

?

734 people employed fromunder-represented groups(since 2016)

We recognise that addressing the barriers preventing womenfrom being fairly represented in senior roles is the key to closing
our gender pay gap. We have a target in place to increase therepresentation of Women in Leadership to 34.1%2 by the end of thefinancial year 2020. This year representation has increased by 0.5%
(up from 32% as at September 2018). Our progress is monitored
monthly by the CEO and an Executive Committee.
A summary of our policy position on Diversity and Inclusion canbe found at anz.com/corporate governance.
We continue to make strong progress in supporting our people’ssafety and wellbeing. Our Health and Safety policy, and associatedprograms, ensure that we provide an environment that enables
employees to participate fully in the workplace and perform at theirbest. This year we have increased our focus on employee wellbeing,encompassing the areas of mental, physical, social and financial
wellbeing.
We also provide opportunities for our people to contribute to thecommunities in which they live and work through our giving andvolunteering programs. For further detail see page 30.

Supplementary disclosures
Refer to the Remuneration Report section of the Annual
Report available at anz.com/shareholder/centre forfurther details.
Refer to our 2019 ESG Supplement available at anz.com/cs
in December for further disclosures, including histroicaldata tables.

1.
2.

26

Against a target of improving by 6% to 80% by 2020 (against a 2016 baseline score of 74%).
Measures representation at the Senior Manager, Executive and Senior Executive levels. Includes all employees regardless of leave status but not contractors (who are included in FTE).

ANZ 2019 ANNUAL REVIEWSince 2009
STREAT has helped
more than 1,500
young people
COMMUNITY STORY

Cafe partnership helping to breakthe cycle of disadvantage
Social enterprise STREAT provides a bridge to employment
for young people experiencing disadvantage.
Since it was founded in 2009 it has helped more than 1,500 young
people build stability and health back into their lives, while gaining
work experience and hospitality qualifications from regular training
across STREAT’s businesses.
“We have seven cafes, a bakery, a coffee roastery and a daily
catering business and we generate 80 percent of our own income
through these businesses,” says Bec Scott OAM, STREAT co-founderand Chief Executive Officer.
STREAT’s newest location is a café housed inside ANZ’s campus
at 839 Collins Street in Melbourne.
Our decision to partner with a social enterprise was a deliberateand considered one. With the opening of our new building thisyear there was an opportunity to look at the tendering process
differently and select a partner that aligned directly with our own
values and purpose.

Having a large group of our employees within such close quartersof the café helps the young people with their work experience.
“STREAT works to create healthy people and a healthy planet.
When you buy a coffee from us you’re creating training andemployment opportunities for marginalised young Victorians,
helping create change in coffee farming communities around theworld and saving tonnes of disposable paper cups going to landfill
each year.” says Bec.
Trainees completing STREAT’s six month intensive program will
spend two shifts a week at one of STREAT’s cafés. Bec says a strong
rapport is built within the office environment over that time andcorporate staff often ask about the trainees after they graduate.
Left to right: Ryan McDonald – Cafe Operations Manager, STREAT, Bec Scott OAM –STREAT co-founder and Chief Executive Officer, Elise Bennetts – Chief Relationship
Officer, STREAT

27

Our community
Strong relationships with our stakeholders and the broader community are
critical to our success. Banking is based on trust and we are working hard toregain the community’s trust following the Royal Commission.
In 2019$
42.4% of employees
volunteered

We matched employee
donations, collectively
contributing over $2 million
to charitable organisations

Improving financial wellbeing – at the coreof our strategy
Financial wellbeing contributes significantly to overall healthand wellbeing, community connectedness and economic andsocial participation.
Over many years we have invested in community programs,
including Saver Plus and MoneyMinded, which have been provento be an important part of the financial inclusion story for lowerincome people. These programs have helped to build financial skills
and resilience, develop active savings habits and improve overall
financial wellbeing.

Links to 2019 Group
Performance Framework
Regaining the trust of the community, governmentand other key stakeholders remains a major focus – our Reptrak
community sentiment indicator improved over the 12 months
to 58.8 but remains well below pre Royal Commission levels. We
have retained high scores in a number of indices:•• Corporate Confidence Index (CCI)1: Score above peer average•• Dow Jones Sustainability Indices (DJSI)2: 2019 score of 82(2018: 83). ANZ returned to global top ten (#10 overall)
Refer to the Remuneration Report section of the Annual Reportavailable at anz.com/shareholder/centre for further details.

1.
2.

28

Employees
volunteered 134,930
hours to community
organisations

Our financial inclusion program
partnerships change lives
Saver Plus – developed by Brotherhood of St Laurence
and ANZ in 2003, program participants open an ANZ savings
account, set a savings goal and save towards it regularly over
10 months while also attending MoneyMinded financial
education sessions. On reaching their goal, savings arematched by ANZ dollar for dollar, up to $500, which must be
spent on education.
Since 2003, Saver Plus has reached over 43,600 lower-income
participants and is expected to enable over $33 million ofprivate sector funds to be invested in education by 2020.
MoneyMinded – this program supports adults with lowlevels of financial literacy and those on lower incomes across
21 markets, including Australia and New Zealand. It is deliveredby community partner organisations in Australia and New
Zealand, and a mix of community organisations and ANZ
employees in Asia and the Pacific.
MoneyBusiness – operating since 2005, MoneyBusiness isdeigned to build the money management skills and confidenceof Aboriginal and Torres Strait Islanders. In that time it hasreached over 79,500 participants and has been delivered inover 320 communities through either Australian Governmentfunded service providers or ANZ’s partners.

Corporate Confidence Index (CCI): Outcomes of the CCI are provided to ANZ on a confidential basis.
Dow Jones Sustainability Indices (DJSI): Evaluates the sustainability performance of thousands of companies trading publicly, operated under a strategic partnership between S&P Dow Jones
Indices and RobecoSAM (Sustainable Asset Management).

ANZ 2019 ANNUAL REVIEW$More than 87,500
people participatedin our MoneyMinded
program in 2019
COMMUNITY STORY

MoneyMinded –changing attitudes to money
Taghrid participated in MoneyMinded through the Brotherhood of
St Laurence’s Stepping Stones program. Stepping Stones is a microenterprise program offered to women who have migrant, refugee or
asylum seeker backgrounds.
Originally from Lebanon, Taghrid arrived in Australia 10 years
ago with her husband and one-year-old daughter. Keen to start
her own business making special occasion cakes she took partin Stepping Stones, completing MoneyMinded in the process.
MoneyMinded taught her about prioritising her spending anddeciphering between ‘needs and wants’.
She also learned about the value of having ‘emergency money’.
Since completing MoneyMinded Taghrid regularly transfers $50
into a specific savings account, ‘just like paying a bill’. With thesesavings she was able to buy a replacement car when hers broke
down – before MoneyMinded she would have been without acar for several months.

MoneyMinded has also changed her attitude to money. Taghrid iscareful with her money, but she is also finding alternatives so she
and her family are not missing out on enjoying life.
“I’m not cutting anything, I’m not suffering. But at the same time,
if I need something, I have money to buy it in a different way. I cut
my coffee, but I enrolled in a gym,” she said.
Taghrid has clear financial goals now too – a short-term goal ofsaving for materials for her business and a longer-term goal for her
family to buy a home.
Image: MoneyMinded participant Taghrid

29

Our community continued

Community investment

Public policy debate

It is important that we are a part of the communities in which we
operate, and we provide many opportunities for our people toget involved through our community programs – volunteering,funding and participating in community projects, or donating
through workplace giving.

We seek to contribute constructively to policy debate and understandthe perspectives of our community’s elected representatives,
policy makers and regulators. We contribute to debate on business,
economic, social and environmental issues affecting our customers
and shareholders.

The strength of our relationships with partners in the not-for-profit
sector is key to our ability to support the delivery of much needed
services to the community. Many of our partners work in areasaligned to our priority areas of financial wellbeing, housing andenvironmental sustainability.

We work in a collaborative and open way as members of associations
that have similar interests and approaches to ours.

$142.2 million incommunity investment1
Workplace giving
Our workplace giving program enables employees in Australia
to make contributions to around 30 charity partners throughregular pre-tax payroll deductions. This year we introduced‘double matching’ – for every dollar donated by an employee(up to $5,000 per employee in a tax year) through the program,
ANZ donates two dollars.
Our employees in New Zealand and Fiji can also donate throughpayroll to their respective staff foundations (charitable trusts thatprovide small grants) and ANZ double matches donations.
Volunteering
Our Volunteer Leave Policy, which applies to permanent, regularand fixed-term employees provides for at least one day of paid
volunteer leave each year.

Supplementary disclosures
Refer to our 2019 ESG Supplement available at anz.com/cs
in December for further disclosures, including historical
data tables.

1.

30

In 2019 our key membership payments were:Australian Banking Association$4,045,653

Business Council of Australia$93,500

New Zealand Bankers’ Association (NZD)$294,979

Business New Zealand (NZD)$40,250

Payment to the Australian Banking Association includes ourannual fee as well as expenditure related to communications
activity, contribution 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.

Public policy advocacy
We understand that some of our stakeholders are particularlyinterested in positions we hold on issues such as data security,
privacy and climate change and our membership of industry
associations that undertake advocacy on these issues.
It is not the role of any association to represent solely ANZ’s,
nor any other single member’s view. It is also not possible forindustry associations to obtain a consensus on every issue. Thereis sometimes disagreement amongst members about the final
positions taken by industry associations and even if we do notagree with it, we will participate in discussions. From time to time,
we may take positions on certain matters not supported by therelevant industry association. For example, ANZ was the first majorbank to support a ‘last resort’ compensation scheme for victims of
misconduct. Such a scheme is now public policy.
We place high importance on the ability to hold constructive
dialogue within an association’s membership and we expect industry
associations to be receptive to member feedback regarding theirlobbying or advocacy approaches.

Figure includes forgone revenue of $109 million, being the cost of providing low or fee free accounts to a range of customers such as government benefit recipients, not for profit
organisations and students.

ANZ 2019 ANNUAL REVIEWA relatively new
type of financing,social bonds are
structured so theproceeds fund asocial purpose
CUSTOMER STORY

Improving access to social and affordable
housing for those most in needThis year ANZ arranged bonds for both Australia’s National Housing Finance andInvestment Corporation (NHFIC) and Housing New Zealand Corporation (HNZ),
aimed at increasing access and availability of social and affordable housing on
both sides of the Tasman.
Well received by investors, the bonds – a A$315 million social bondfor NHFIC and two wellbeing bonds for HNZ (NZ$500 million and
NZ$600 million) – set benchmarks as the first ever capital markets
issue for NHFIC and the first wellbeing bonds for HNZ.
A relatively new type of financing, social bonds are structured so
the proceeds fund a social purpose. In this case, owning a NHFIC
or HNZ bond is an indirect investment into Australia and New
Zealand’s social and affordable housing sector. The return is basedon the credit-worthiness of the borrower who is responsible fordirecting the financing to social causes, with an obligation toreport accordingly.

According to ANZ CEO Shayne Elliott, “One of the areas in which
we can impact the community is in the area of housing. This is notabout charitable works, it’s about bringing the full force of ANZ,
one of the largest financial institutions in the country to bear; tohave an impact and to shape the world for good.”Partnering with NHFIC and HNZ allowed ANZ to join forces anddraw on each organisation’s expertise in order to deliver better
outcomes for a range of stakeholders.
Left to right: Nathan Dal Bon – Chief Executive Officer, National Housing Finance andInvestment Corporation, Caryn Kakas – Head of Housing Strategy, Group Strategy,
ANZ and Tessa Dann – Associate Director, Sustainable Finance, ANZ.

Access to housing has a huge impact on people’s ability to thrivesocially and economically, as well as to feel secure and be part ofa local community.
31

GovernanceCorporate Governance Framework
SHAREHOLDERS

BOARD OF DIRECTORS

Audit
Committee

Ethics, Environment,
Social and GovernanceCommittee

Risk
Committee

Human Resources
Committee

Digital Businessand Technology
Committee

Nomination and
Board Operations
Committee

BOARD RESERVED POWERS AND DELEGATION OF AUTHORITY POLICYCHIEF EXECUTIVE OFFICERGROUP EXECUTIVE COMMITTEE32

ANZ 2019 ANNUAL REVIEWBoard of 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 sound andprudent management, with specific duties as set out in its Charter
available at anz.com/corporategovernance
There are six principal Board Committees – the Audit Committee,
the Ethics, Environment, Social and Governance Committee, theRisk Committee, the Human Resources Committee, the Digital
Business and Technology Committee and the Nomination and Board
Operations Committee.
Each Committee has its own Charter setting out its roles andresponsibilities. At management level, the Group Executive
Committee comprises ANZ’s most senior executives. There is adelegations of authority framework that clearly outlines thosematters delegated to the CEO and other members of senior
management.

Below from left to right
1 RT Hon Sir John Key, GNZM AC Independent Non-Executive Director
2 John Macfarlane Independent Non-Executive Director
3 Paula Dwyer Independent Non-Executive Director
4 David Gonski, AC Chairman, Independent Non-Executive Director
5 Graeme Liebelt Independent Non-Executive Director
6 Ilana Atlas Independent Non-Executive Director
7 Shayne Elliott Chief Executive Officer, Executive Director
8 Jane Halton, AO PSM Independent Non-Executive Director
Full biography details can be found on our website atanz.com/directors and on pages 38–42 of this report.

For further detail on ANZ’s governance framework see our 2019
Corporate Governance Statement available atanz.com/corporategovernance33

Governance (continued)

Directors’ Meetings
The number of Board, and Board Committee, meetings held during the year and each Director’s attendance at those meetings are set out below:

Board

Ethics,DigitalEnvironment, Business Nomination
Human
Social andandand BoardSpecialRisk
Audit
SharesResources Governance Technology Operations Committee Committee
Committee Committee Committee Committee Committee Committee of the Board1 of the Board1 Committee1

A

B

A

Ilana Atlas

12

12

Paula Dwyer

12

12

Shayne Elliott2

1211David Gonski, AC

12

12Jane Halton, AO PSM

1212Sir John Key, GNZM AC

12

12

8

8

Lee Hsien Yang3

4

4

3

3

Graeme Liebelt

12

12

8

8

8

8

John Macfarlane

12

12

8

8

8

8

8

8

B

8

8

A

B

A

B

A

B

8

8

6

6

5

5

8

8

6

6

8

8

A

B

A

B

A

B

A

B

2

2

1

1

1

1

1

1

2

2

1

1

2

2

3

3

2

2

3

3

4

4

6

5

5

5

5

2

2

3

3

2

2

6

6

5

5

5

5

2

2

2

2

1

1

5

5

4

4

2

2

2

2

1

1
2

2

2

2

2

2

2

2

1

1

1

1

2

2

6

6

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 Governance,
Digital Business and Technology and Nomination and Board Operations Committees.
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.

ANZ 2019 ANNUAL REVIEW

B

6

Column A – Indicates the number of meetings the Director was eligible to attend.

34

A

5

1.

2.

3.

5

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.
The Board meeting Shayne Elliott did not attend was due to his appearance at the Royal
Commission into Misconduct in the Banking, Superannuation and Financial Services Industry.
Lee Hsien Yang retired as a Non-Executive Director on 19 December 2018.

Executive Committee
Below from left to right
1 Maile Carnegie
Group Executive Digital and Australia Transformation
Joined the Executive Committee on 27 June 2016.

7 Mark Whelan
Group Executive Institutional
Joined the Executive Committee* on 20 October 2014.

2 Farhan Faruqui
Group Executive International
Joined the Executive Committee on 1 February 2016.

8 Antonia Watson
Acting Chief Executive Officer New Zealand
Joined the Executive Committee on 17 June 2019.

3 Gerard FlorianGroup Executive Technology
Joined the Executive Committee on 30 January 2017.

9 Shayne Elliott
Chief Executive Officer(appointed CEO on 1 January 2016).
Joined the Executive Committee* on 1 June 2009.

4 Alexis George
Deputy Chief Executive Officer and Group Executive Wealth Australia
Joined the Executive Committee on 1 December 2016.
5 Kathryn van der Merwe
Group Executive Talent and Culture
Joined the Executive Committee on 1 May 2017.
6 Kevin Corbally
Group Chief Risk Officer
Joined the Executive Committee on 19 March 2018.

10 Michelle Jablko
Chief Financial Officer
Joined the Executive Committee on 18 July 2016.
11 Mark Hand
Group Executive Australia Retail and Commercial Banking
Joined the Executive Committee on 15 May 2018.
Full biography details can be found on our website atanz.com/exco*previously known as Management Board

35

Governance (continued)

Board areas of focus in FY19
This year the Board and its Committees have undertaken key
strategic, governance and oversight activities, including:

STRATEGY AND PURPOSE-LED TRANSFORMATIONCUSTOMER•• Approving the development of a new customer focusedsection of the Board agenda, including in relation to:–– Customer satisfaction, complaints and remediation–– Regulatory changes impacting customers–– ANZ’s approach to marketing and specific marketing
initiatives•• Conducting annual Board strategy session, focused on thelong-term success of the company and learning lessons frompast experience•• Regularly discussing ANZ’s strategic priorities, including therefinement and implementation of them, with the Chief
Executive Officer•• Regularly discussing the progress of ANZ’s transformationof its Australian business and ANZ’s approach to it•• As part of the Board’s visit to New Zealand, receiving detailed
reports covering the entire NZ business and its direction•• Continuing its focus on ANZ’s corporate culture, including
reviewing results and key themes of ANZ’s culture
assessments and ANZ’s staff engagement survey•• Providing oversight of the design and implementation of
ANZ’s redesign and simplification of remuneration andreward and Accountability and Consequences Frameworks,
including reviewing and providing input into the Australian
Prudential Regulation Authority’s executive remuneration
proposals•• Discussing future disruptive technologies and potential
business impact on, and involvement by, ANZ36

ANZ 2019 ANNUAL REVIEW•• Providing oversight of ANZ’s approach to customer
remediation and complaints•• Participating in a detailed review of ANZ’s customer service
lighthouse initiative, including meeting with participating
front line staff•• Reviewing ANZ’s approach to communicating customer
initiatives to the front line

FINANCIAL

GOVERNANCE AND REGULATORY•• Reviewing and approving ANZ’s self-assessment ofgovernance, culture and accountability practices andsubsequent roadmap of remediation activities•• Providing oversight of ANZ’s response to the final report of
the Royal Commission•• Reviewing and endorsing ANZ’s operating and strategic plans•• Regularly discussing business momentum matters•• Regularly discussing merger and acquisitions matters,
including in relation to the progress of the transactions
regarding the sale of its Wealth business•• Providing oversight of capital management matters, including
in relation to proposals from the Reserve Bank of New Zealand,
the Australian Prudential Regulation Authority and current andfuture capital management options for ANZ•• Reviewing ANZ’s governance processes for the preparationof its financial statements•• Participating in deep dives into how ANZ approaches
compliance with numerous prudential standards•• Creating a new Nomination and Board Operations
Committee, consisting of all Non-Executive Directors, tofocus on the Board’s own composition and operations•• Embedding the increased remit of the Ethics, Environment,
Social and Governance Committee to focus on ESG matters•• Reviewing and implementing improvements to Board
Committee reporting practices on technology related
matters, including in relation to technology stability andsimplicity, cloud and data governance and information andcyber security.

In addition to the regular meetings of the Board held in Melbourne and Sydney, the Board also met in
Wagga Wagga, Perth and Auckland, and went to Hobart, with each trip including customer, staff andother stakeholder functions, with a distinct focus on engagement matters.

37

Governance (continued)

Directors’ Qualifications, Experienceand Special Responsibilities

As at the date of this report, the Board comprises
seven Non-Executive Directors and one Executive
Director, the Chief Executive Officer. Lee Hsien Yang
was a Non-Executive Director from February 2009
until his retirement in December 2018. The names of
the current Directors, together with details of their
qualifications, experience and special responsibilities
are set out below.

David Gonski, AC
CHAIR
MEMBER

Audit Committee

POSITION

Ethics, Environment, Social andGovernance Committee

QUALIFICATIONS

Risk Committee

Human Resources Committee

Digital Business and Technology Committee

Chairman, Independent Non-Executive Director
BCom, LLB, FAICD(Life), FCPARESPONSIBILITIESChairman since 1 May 2014 and a Non-Executive Director
since February 2014. David is an ex officio member of all
Board Committees and Chair of the Ethics, Environment,
Social and Governance Committee and Nomination and Board
Operations Committee.
CAREER

Nomination and Board Operations Committee

David started his career as a lawyer at Herbert Smith Freehills,
and is now one of Australia’s most respected business leadersand company directors. He has business experience inAustralia and internationally, and is involved in a broad rangeof organisations in the government and education sectors. He
is a leading philanthropist and provides strong community
leadership, particularly in relation to education in Australia.
RELEVANT OTHER DIRECTORSHIPS•• Chairman: The University of New South Wales Foundation
Limited (from 2005, Director from 1999).
•• Director: Sydney Airport Limited (from 2018), Lowy Institute forInternational Policy (from 2012) and Australian Philanthropic
Services Limited (from 2012).
•• Member: Advisory Committee for Optus Limited (from 2013).
•• Chancellor: University of New South Wales Council (from 2005).
•• President: Art Gallery of NSW Trust (from 2016).
RELEVANT FORMER DIRECTORSHIPS HELD IN LAST
THREE YEARS INCLUDE

Former Chairman: Review to Achieve Education Excellence inAustralian Schools for the Commonwealth of Australia (2017–2018),
Coca-Cola Amatil Limited (2001–2017, Director from 1997) and
Sydney Theatre Company Ltd (2010–2016).
Former Member: ASIC External Advisory Panel (2013–2019)
Age 66 years | Residence Sydney, Australia

38

ANZ 2019 ANNUAL REVIEWIlana Atlas

Shayne Elliott

CHAIR
MEMBERPOSITIONPOSITION

Chief Executive Officer and Executive Director

Independent Non-Executive Director

QUALIFICATIONSQUALIFICATIONS

BCom

BJuris (Hons), LLB (Hons), LLM

RESPONSIBILITIESRESPONSIBILITIES

Chief Executive Officer and Executive Director since
1 January 2016.

Non-Executive Director since September 2014. Ilana is amember of the Audit Committee, Ethics, Environment, Socialand Governance Committee and Nomination and Board
Operations Committee.

CAREER

Shayne has over 30 years’ experience in banking in Australia
and overseas, in all aspects of the industry. Shayne joined ANZ as
CEO Institutional in June 2009, and was appointed Chief Financial
Officer in 2012.
Prior to joining ANZ, Shayne held senior executive roles at EFG
Hermes, the largest investment bank in the Middle East, which
included Chief Operating Officer. He started his career with
Citibank New Zealand and worked with Citibank/Citigroup for
20 years, holding various senior positions across the UK, USA,
Egypt, Australia and Hong Kong.
Shayne is a Director of the Financial Markets Foundation forChildren and a member of the Australian Banking Association(which he also Chairs) and the Business Council of Australia.

CAREER

Ilana brings a strong financial services background and legal
experience to the Board. Ilana was a partner at law firm Mallesons
Stephen Jaques (now King & Wood Mallesons), where in
addition to her practice in corporate law, she held a number ofmanagement roles in the firm including Executive Partner, People
and Information, and Managing Partner. She also worked at
Westpac for 10 years, where her roles included Group Secretary
and General Counsel and Group Executive, People, where she
was responsible for human resources, corporate affairs andsustainability. Ilana has a strong commitment to the community,in particular the arts and education.
RELEVANT OTHER DIRECTORSHIPSRELEVANT OTHER DIRECTORSHIPS•• Chairman: Australian Banking Association (from 2017,
Member from 2016).
•• Director: ANZ Bank New Zealand Limited (from 2009) and the
Financial Markets Foundation for Children (from 2016).
•• Member: Business Council of Australia (from 2016).
Age 55 years | Residence Melbourne, Australia•• Chairman: Coca-Cola Amatil Limited (from 2017, Director
from 2011) and Jawun (from 2017, Director from 2014).
•• Director: OneMarket Limited (from 2018) and Paul Ramsay
Foundation (from 2017).
•• Member: Panel of Adara Partners (from 2015).
RELEVANT FORMER DIRECTORSHIPS HELD IN LAST
THREE YEARS INCLUDE•• Former Chairman: The Bell Shakespeare Company Limited(2010–2016, Director 2004–2016).
•• Former Director: Westfield Corporation Limited (2014–2018),
Human Rights Law Centre Ltd (2012–2017) and Treasury
Corporation of New South Wales (2013–2017).
•• Former Fellow: Senate of the University of Sydney (2015–2019)
Age 65 years | Residence Sydney, Australia

39Governance (continued)

Paula Dwyer

Jane Halton, AO PSM

CHAIR

CHAIR

MEMBERMEMBERPOSITIONPOSITION

Independent Non-Executive Director

Independent Non-Executive Director

QUALIFICATIONSQUALIFICATIONS

BCom, FCA, SF Fin, FAICD

BA (Hons) Psychology, FIML, FIPAA, NAM, Hon. FAAHMS,
Hon. FACHSE, Hon. DLitt (UNSW)RESPONSIBILITIESNon-Executive Director since April 2012. Paula is a memberof the Risk Committee, Human Resources Committee andNomination and Board Operations Committee.
CAREER

Paula has extensive experience in financial markets, corporate
finance, risk management and investments, having held
senior executive roles at Calibre Asset Management, Ord
Minnett (now J P Morgan) and at Price Waterhouse (nowPricewaterhouseCoopers). Her career as a company director spans
financial services, investment, insurance, healthcare, gamblingand entertainment, fast moving consumer goods, property andconstruction and retailing sectors. Paula has a strong interest in
education and medical research, having served as a memberof the Geelong Grammar School Council and the Business andEconomics Faculty at the University of Melbourne and as Deputy
Chairman of Baker IDI.
RELEVANT OTHER DIRECTORSHIPS•• Chairman: Tabcorp Holdings Limited (from 2011, Director from2005), Healthscope Limited (from 2014) and Kin Group Advisory
Board (from 2014).
•• Director: Lion Pty Ltd (from 2012) and Allianz Australia Limited(from 2019).
•• Member: Kirin International Advisory Board (from 2012) andAustralian Government Takeovers Panel (from 2017).
Age 59 years | Residence Melbourne, Australia

RESPONSIBILITIESNon-Executive Director since October 2016. Jane is a memberof the Human Resources Committee, Ethics, Environment,
Social and Governance Committee and Nomination and Board
Operations Committee.
CAREER

Jane’s 33 year career in the public service includes the positionsof Secretary of the Australian Department of Finance, Secretaryof the Australian Department of Health, Secretary for the
Department of Health and Ageing, and Executive Co-ordinator(Deputy Secretary) of the Department of the Prime Minister andCabinet. She brings to the Board extensive experience in finance,
insurance, risk management, information technology, humanresources, health and ageing and public policy. She also hassignificant international experience.
Jane has contributed extensively to community health throughlocal and international organisations including the World HealthOrganisation and National Aboriginal and Torres Strait Islander
Health Council.
RELEVANT OTHER DIRECTORSHIPS•• Chairman: Vault Systems (from 2017), Coalition for Epidemic
Preparedness Innovations (Norway) (from 2018, Member from2016) and Council on the Ageing Australia (from 2017).
•• Director: Clayton Utz (from 2017) and Crown Resorts Limited(from 2018).
•• Member: Executive Board of the Institute of Health Metrics and
Evaluation at the University of Washington (from 2007).
•• Adjunct Professor: University of Sydney and University ofCanberra.
•• Council Member: Australian Strategic Policy Institute (from 2016).
RELEVANT FORMER DIRECTORSHIPS HELD IN LAST THREEYEARS INCLUDE•• Former Chairman: OECD Asian Senior Budget Officials Network(2014–2016).
•• Former Public Policy Fellow: ANU Crawford School of Public
Policy (2012–2016).
Age 59 years | Residence Canberra, Australia

40

ANZ 2019 ANNUAL REVIEWRt Hon Sir John Key,GNZM AC

Graeme Liebelt
CHAIR

MEMBERMEMBERPOSITIONPOSITION

Independent Non-Executive Director

Independent Non-Executive Director

QUALIFICATIONSQUALIFICATIONS

BCom, DCom (Honoris Causa)

BEc (Hons), FAICD, FTSE, FIMLRESPONSIBILITIESRESPONSIBILITIESNon-Executive Director since February 2018. Sir John is amember of the Ethics, Environment, Social and GovernanceCommittee, Risk Committee, Digital Business and Technology
Committee and Nomination and Board Operations Committee.

Non-Executive Director since July 2013. Graeme is a memberof the Audit Committee, Human Resources Committee andNomination and Board Operations Committee.

CAREER

Graeme brings to the Board his experience of a 23 year
executive career with Orica Limited (including a period as
Chief Executive Officer), a global mining services company
with operations in more than 50 countries. He has extensive
international experience and a strong record of achievement
as a senior executive, including in strategy development andimplementation.

Sir John was Prime Minister of New Zealand from 2008 to 2016,
having commenced his political career in 2002. Sir John had along career in international finance, primarily for Bankers Trust in
New Zealand and Merrill Lynch in Singapore, London and Sydney.
He was previously a member of the Foreign Exchange Committeeof the Federal Reserve Bank of New York (from 1999 to 2001).

CAREER

Sir John was made a Knight Grand Companion of the New
Zealand Order of Merit in the 2017 Queen’s Birthday Honours. In
2017 Sir John became a Companion of the Order of Australia foradvancing the Australia-New Zealand bilateral relationship.

Graeme is committed to global trade and cooperation, as wellas community education.

RELEVANT OTHER DIRECTORSHIPS•• Director: Australian Foundation Investment Company Limited(from 2012) and Carey Baptist Grammar School (from 2012).

•• Chairman: ANZ Bank New Zealand Limited (from 2018, Director
from 2017).
•• Director: Air New Zealand Limited (from 2017) and Palo Alto
Networks (from 2019).
RELEVANT FORMER DIRECTORSHIPS HELD IN LAST
THREE YEARS INCLUDE•• Former Chairman: The International Democratic Union(2014–2018).

RELEVANT OTHER DIRECTORSHIPS•• Chairman: Amcor Limited (from 2013, Director from 2012)

RELEVANT FORMER DIRECTORSHIPS HELD IN LAST
THREE YEARS INCLUDE•• Former Chairman: DuluxGroup Limited (2018–2019,
Director from 2016).
Age 65 years | Residence Melbourne, Australia

Age 58 years | Residence Auckland, New Zealand.

41

Governance (continued)

Company Secretaries’
Qualifications and Experience

John Macfarlane
MEMBERPOSITION

Independent Non-Executive Director
QUALIFICATIONS

BCom, MCom (Hons)RESPONSIBILITIESNon-Executive Director since May 2014. John is a member ofthe Audit Committee, Risk Committee, Digital Business andTechnology Committee and Nomination and Board Operations
Committee.
CAREER

John is one of Australia’s most experienced international bankers
having previously served as Executive Chairman of Deutsche
Bank Australia and New Zealand, and CEO of Deutsche Bank
Australia. John has also worked in the USA, Japan and PNG, andbrings to the Board a depth of banking experience in ANZ’s
key markets in Australia, New Zealand and the Asia Pacific. He
is committed to community health, and is a Director of the
Aikenhead Centre of Medical Discovery Limited (from 2016).
RELEVANT OTHER DIRECTORSHIPS

Director: Craigs Investment Partners Limited (from 2013), Colmac
Group Pty Ltd (from 2014), AGInvest Holdings Limited (MyFarm
Limited) (from 2014, Chairman 2014–2016), Balmoral Pastoral
Investments (from 2017) and L1 Long Short Fund (from 2018).
RELEVANT FORMER DIRECTORSHIPS HELD IN LAST
THREE YEARS INCLUDE

Former Director: St Vincent’s Institute of Medical Research(2008–2019)
Age 59 years | Residence Melbourne, Australia

42

ANZ 2019 ANNUAL REVIEWCurrently there are two people appointed as
Company Secretaries of the Company. Detailsof their roles are contained in the Corporate
Governance Statement.
Their qualifications and experience are as follows:

Ken Adams
POSITION

Group General Counsel
QUALIFICATIONS

BA, LLB, LLM
Ken joined ANZ as Group General Counsel in August 2019, having
assisted it with major legal issues for over 10 years. Prior to ANZ,
Ken was a Partner of Freehills and later Herbert Smith Freehillsfor 21 years, and for 6 years was a member of the Herbert Smith
Freehills Global Board. Ken is one of Australia’s leading commercial
lawyers with significant experience in class actions, and complex
problems requiring strategic and multi-disciplinary analysis. He
holds a Master of Laws from the University of Melbourne and is a
co-author of Class Actions in Australia.

Simon Pordage
POSITION

Company Secretary
QUALIFICATIONSLLB (Hons), FGIA, FCIS
Simon joined ANZ in May 2016. He is a Chartered Secretary andhas extensive company secretarial and corporate governanceexperience. From 2009 to 2016 he was Company Secretaryfor Australian Foundation Investment Company Limited and anumber of other listed investment companies. Other former roles
include being Deputy Company Secretary for ANZ and Head ofBoard Support for Barclays PLC in the United Kingdom. Simonis committed to the promotion of good corporate governance.
He is a former National President and Chairman of GovernanceInstitute of Australia, and is a member and former Chairman of
its National Legislation Review Committee, and regularly presents
on governance issues.

Most material issues icons

Customer story icon

New icons/infographics

We have had
a bankingrelationship with
Willie Smith’s formore than
100 years

CUSTOMER STORY

Growing business sustainably
Stakeholder icons

Willie Smith’s Organic Apples and Cider is a family-run business in Huonville,
Tasmania. The family started apple farming in 1888 and the business has sinceevolved into a premium supplier of organic apples, cider and spirits.
Over the years they have faced many challenges, including
bushfires and the collapse of Tasmania’s apple export industry
in 1973 (the result of Britain joining the European Common
Market). In response, Ian Smith, a third-generation orchardist, built
controlled-atmosphere cool stores and began exporting to Asia in
How We Creat Value Icons
the 1980s.
More recently his son Andrew has converted the orchard into anorganic farm, in the belief that growing food without the needfor chemical fertilisers and pesticides is better for their land, theircustomers and the Tasmanian environment.
Willie Smith’s has had a banking relationship with ANZ for morethan 100 years. In June this year members of our Board andExecutive visited the cider production facilities and packing shed,meeting with the workers and learning about what matters tothem and their local community.
“I have worked hard to evolve Willie Smiths into a verticallyintegrated agribusiness in the last twenty years. The key
ingredients have been innovation, hard work and good
relationships. I feel confident and comfortable in our working
relationship with ANZ,” said Andrew.
Supporting the agricultural sector is an important part of ANZ’s
history, and banking customers like Willie Smith’s aligns with our
focus on helping our customers grow their business sustainably.
Image: Andrew Smith

43

Risk management
The successful delivery of the bank’s strategy is dependent on sound risk
management. All of the bank’s activities involve – to varying degrees – the analysis,
evaluation, acceptance and management of risks or a combination of risks.
Sound risk management plays a critical role in positioning us toprepare for, and respond to, opportunities and challenges in ouroperating environment.

Our progressThis year we have continued to strengthen our risk management
capabilities, focusing on:
Culture and conduct•• We have initiated a programme of work to build out how we willmeasure, monitor and manage conduct risk to allow us to better
understand and respond to the drivers of poor conduct. This
has included introducing new accountability and consequence
principles for employees found accountable for material
failure and non-compliance as well as recognising positive risk
behaviours in our annual performance and remuneration reviews.
•• We have raised employee awareness about our whistleblower
processes and made it easier for them to ‘speak up’– including
through initiatives such as the inaugural Whistleblower AwarenessWeek this year.
Simplification•• Investment has been made in our risk systems, including
enhancing our data analytics to improve our ability to identify
issues, and more swiftly understand the root causes.
•• Standardisation and simplification of our wholesale risk practices
and policies has helped significantly improve time responsivenessthereby delivering a better banker and customer experience.
Non-financial risk•• We have redesigned our non-financial risk framework in response
to feedback that it was too complex. Significant work has been
undertaken to simplify our language around operational risk,
consolidate our framework documentation, and clarify therequirements and roles and responsibilities of our staff.
•• We have established a Royal Commission and Self-Assessment
Oversight Group to provide oversight of the integrated approachand plans to address the Self-Assessment focus areas and Royal
Commission ‘lessons’. This includes, for example, commissioning
and reviewing reports on progress in addressing the SelfAssessment focus areas, our 16 Royal Commission commitments
and actions by government to respond to the Royal Commission.

“Strong risk management is a necessity
if we are to anticipate and navigate
ANZ through a changing environment.”
Kevin Corbally – Group Chief Risk Officer

Our Risk Management Framework
The Board is responsible for establishing and overseeing the Group’s
risk management framework. The Board has delegated authority
to the Board Risk Committee (BRC) to develop and monitor
compliance with the Group’s risk management policies.
The Committee reports regularly to the Board on its activities.
The key pillars of the Group’s risk management framework include:•• the Risk Appetite Statement (RAS), which sets out the Board’s
expectations regarding the degree of risk that the Group is
prepared to accept in pursuing its strategic objectives and its
operating plan; and•• the Risk Management Statement (RMS), which describes theGroup’s strategy for managing risks and a summary of the key
elements of the Risk Management Framework (RMF) that giveeffect to that strategy. The RMS includes: a description of eachmaterial risk; and an overview of how the RMF addresses each risk,
with reference to the relevant policies, standards and procedures.
It also includes information on how the Group identifies,
measures, evaluates, monitors, reports and then either controls or
mitigates material risks.
The Group operates a Three Lines-of-Defence Model in regard to risk
management that helps embed a culture where risk is everyone’s
responsibility. The business – as the first line of defence – has day to
day ownership of risks and controls and is accountable for identifying
and managing its own risks. The Risk Function is the second lineof defence, providing a strong and independent oversight of thework undertaken to manage the risk, as well as developing andmaintaining the Risk Management Framework.
The final line of defence is Internal Audit and includes independent
assurance that evaluates the adequacy and effectiveness of both firstand second line risk management approaches.

Links to 2019 Group
Performance Framework
We continue to operate in a dynamic and challenging
external and regulatory environment placing significant
demands on the Risk and Compliance function. There were nomaterial breaches of our Group Risk Appetite Statement, andthe number of adverse audits fell by a third with management
demonstrating accountability for fixing issues in a timely
and sustainable manner. While there were many positives
from a risk perspective there were some non-financial risk
shortcomings from a regulatory, customer and community
perspective.
Refer to the Remuneration Report section of the Annual Reportavailable at anz.com/shareholder/centre for further details.

44

ANZ 2019 ANNUAL REVIEWThe governance and oversight of risk, whilst embedded in day
to day activities, is also the focus of committees and regularforums across the bank (see diagram below). The committees
and forums discuss and monitor known and emerging risks,reviewing management plans and monitoring progress toaddress known issues.

Fighting financial crime
Financial crime threats continue to evolve,
as do the regulatory measures required toaddress them. In response we have:•• invested heavily in capturing andunderstanding financial crime data and infrastructure,
upgrading sanctions and fraud platforms;•• implemented a network data analysis tool, improving ourability to collaborate with external parties to fight financial
crime; and•• focused on the growth and development of employees,
developing a gap analysis tool to inform our thinking on
the current and future capabilities required of our people
to combat financial crime.

The risk landscape is continually evolving and we are therefore
constantly reviewing issues to consider their materiality to
the bank’s operations. Two risks we are currently seeking tounderstand further are:
Cyber security risk: while not new, the increasing reliance wehave on information security systems to hold our data and ourcustomers’ data requires us to continually invest in and test theadequacy of our safeguards against evolving cyber attacks andnew technology. See page 20 for further detail,Climate change risk: the financial risks associated with climatechange are subject to increasing prudential and regulatory oversightand are therefore an area of focus for us. See pages 48 to 49 forfurther detail on our approach to climate-related financial risks.

BOARD OF DIRECTORSEXECUTIVE COMMITTEE

Consequence
Review Group

ANZ’s most senior executives meet regularly to discuss performance and review shared initiatives

Group Asset andLiability Committee

Credit Ratings
System OversightCommittee

Capital and Stress
Testing OversightCommittee

Division

Modelling Ratings
Working Groups
and Usage Forums

Divisional Initiatives
Review Committees/Project Advisory
Councils

Regional or Country
Risk Management
Committees

Group

Credit and Market
Risk Committee

Country

KEY MANAGEMENT COMMITTEES
Operational Risk
Executive
Committee

Divisional Risk
Management
Committees

Ethics andResponsible
Business Committee

Investment
Committee

Various Divisional SpecificManagement Committees

Operational
Risk
Committee

Royal Commission
and Self-Assessment
Oversight Group

Divisional
Consequence
Review Groups

Product
Committee

Country Assets
and Liabilities
Committees

45

Risk management (continued)

Key material risks
The material risks facing the group (as per the Group’s Risk Management
Statement) and how these risks are managed, are summarised below:
Description

Managing the risk

CapitalAdequacy
Risk

The risk of loss arising from the Group failingto maintain the level of capital required by
prudential regulators and other key stakeholders(shareholders, debt investors, depositors, rating
agencies, etc.) to support ANZ’s consolidated
operations and risk appetite.

We pursue an active approach to Capital Management
through ongoing review, and Board approval, of thelevel and composition of our capital base against key
policy objectives.
Most material issues icons

The risk of failure to act in accordance withlaws, regulations, industry standards andcodes, internal policies and procedures andprinciples of good governance as applicableto the Group’s businesses.

Key features of how we manage Compliance Risk aspart of our Operational Risk framework include:
Most material issues icons•• centralised management of key obligations, andemphasis on identifying changes in regulations and theMost material
business environment,so as to issues
enable icons
us to proactively
New icons/infographics
assess emerging compliance risks and implement robust
reporting and certification processes.

Compliance
Risk

Credit Risk

including:•• repaying depositors or maturing wholesale
debt; or•• the Group having insufficient capacity tofund increases in assets.

Market Risk

Material
ESG issues1

New icons/infographics
Most material issues icons

icons/infographics•• recognition of incident management asNew
a separate
element to enhance ANZ’s ability to identify, manage
and report on incidents/breaches in a timely manner.
New icons/infographics•• the Whistleblower Protection Policy, allowing
employees and contractors to make confidential,
New icons/infographics
anonymous submissions
regarding concerns relating
Most material issues icons
to accounting, internal control, compliance, audit andStakeholder icons
other matters.
Most material issues icons
Our Credit Risk framework is top down, being defined
The risk of financial loss resulting from:•• a counterparty failing to fulfil its obligations; by credit principles and policies. Credit policies,
requirements and procedures cover
all aspectsof theicons
Most material
issuesorcredit life cycle — for example: transaction structuring,•• a decrease in credit quality of a counterparty risk grading, initial approval, ongoing management andStakeholder icons
resulting in a financial loss.
Newmanagement,
icons/infographics
problem debt
as well as specialist policy
topics.
Credit Risk incorporates the risks associated
Stakeholder icons
with us lending to customers who could be
New icons/infographics
impacted by climate change or by changes
to laws, regulations, or other policies adopted
Stakeholder icons
by governments or regulatory authorities,
Newmaterial
icons/infographics
Most
issues icons
How We Creat Value Icons
including carbon pricing and climate change
adaptation or mitigation policies.
Stakeholder icons

Liquidity and The risk that the Group is unable to meet
Funding Risk its payment obligations as they fall due,

The risk to the Group’s earnings arising from:•• changes in any interest rates, foreignexchange rates, credit spreads, volatility andcorrelations; or•• from fluctuations in bond, commodity or
equity prices.

46

Most material issues icons

Risk TypeANZ 2019 ANNUAL REVIEWKey principles in managing our Liquidity and Funding
Risk include:•• maintaining our ability to meet liquidity ‘survival
horizons’ under a range of stress scenarios to meet cash
How We Creat Value Icons
flow obligations over a short to medium-term horizon;
New icons/infographics•• maintaining a strong structural funding profile; andHow
We Creat
Stakeholder iconsMost material
issuesicons Value Icons•• maintaining a portfolio of high-quality liquid assets
to act as a source of liquidity
in timesof stress.
How
We Creat
Value Icons
Our risk management and control framework for Market
Stakeholder icons
Risk involves us quantifying the magnitude of market risk
How
We
Creat
Value
Icons
within the trading and balanceStakeholder
sheet portfolios
iconsthroughindependent risk measurement. This identifies the rangeof possible outcomes, the likely timeframe, and thelikelihood of the outcome occurring.
Then we allocate an
New icons/infographics
appropriate amount of capital to support these activities.
How We Creat Value Icons

Most material issues icons

Risk Type

Description

Managing the risk

Operational
Risk

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

Reputation
Risk

The risk of loss that directly or indirectly
impacts earnings, capital adequacy or value,that is caused by:•• adverse perceptions of the Group heldby any of customers, the community,
shareholders, investors, regulators, or rating
agencies;•• conduct risk associated with the Group’s
employees or contractors (or both); or•• the social and/or environmental impacts of
our lending decisions.

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.

Technology
Risk

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

1.

Most material issues icons
We operate a Three-Lines-of-Defence Model to manage
Operational Risk, with each Line of Defence having
defined roles, responsibilities andescalation
Most
materialpaths
issues icons
to support effective communication and effective
management of our operational risk. We also have
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ongoing
reviewmechanisms
ensure our Operational
Mostmaterial
issues to
icons
Risk framework continues to meet organisational needs
and regulatory requirements.
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Most material issues icons
We manage Reputation Risk by maintaining a positiveand dynamic culture that:
Newmaterial
icons/infographics
Most
issues icons•• ensures we act with integrity; and•• enables us to build strong and trusted relationships
with customers and clients, with colleagues, and with
New icons/infographics
the broader society.
We have well established decision-making frameworks
Newareicons/infographics
and policies to ensure our business decisions
guidedby sound social and environmental
standards
that
Most material issues takeicons
into account Reputation Risk.New icons/infographics
Stakeholder icons

We consider and manage strategic risks through ourannual strategic planning process, managed by the Stakeholder icons
Executive Committee and approved by the Board. Most material issues icons
Any increase to our Key Material Risks is managed inaccordance with the risk management
specified
Stakeholder
iconsabove.
Most
material issues icons
New
icons/infographics
Consistent with the management of Operational Risk,
we operate a Three-Lines-of-Defence model to manage
material
issuesicons
Technology Risk, Most
with eachLine of
DefencehavingdefinedStakeholder
roles, responsibilities
icons and escalation paths
to support effective communication and effective
management
ourCreattechnology
risk. We also have New icons/infographics
HowofWe
Value Icons
Stakeholder
ongoing review mechanisms to ensure ourOperationalicons
Risk framework, which is also used to manage
How We Creat Value Icons
New
icons/infographics
Technology Risk, continues tomeetorganisational
Stakeholder
icons needs
and regulatory requirements.

See page 3 for information on our material ESG issues

Customer story icon

Most material issues icons
Fairness and ethical conductterial issues icons
Fraud and data security

icons

For further information about the principal risks
icons
How We Creat ValueStakeholder
Icons
and uncertainties
that
Customer story
icon the Group faces, see our‘Principal risks and Uncertainties’ disclosure
How We Creat Value Icons
availableaticonanz.com/shareholder/centre
Customer story
Customer story icon

How We Creat Value Icons
Stakeholder icons

Corporate governance

Stakeholder icons

s/infographics

ics

New icons/infographics
How We Creat Value Icons

Customer story icon

Customer experience

New icons/infographics

Material
ESG issues1

Digital innovation

Stakeholder icons
How We Creat Value Icons

47

Risk management (continued)

Our approach to climate change
We seek to provide investors and otherstakeholders with information enablingthem to assess the adequacy of ourapproach to climate change and ourability to manage the associated risks
and opportunities.
This is the third year we have reported using the recommendationsof the Financial Stability Board Taskforce on Climate-related Financial
Disclosures (TCFD). For detailed information see ‘ANZ 2019 climaterelated financial disclosures’ on anz.com/annualreport.

In 2019 we have focused on:
Training our people on climate-relatedrisks and opportunities
Engaging with our largest-emitting
customers on their transition plans
Feeding the results of our customer
engagement into our assessments of individual
customers and carbon-intensive portfolios,in particular the energy, transport, buildings andfood, beverage and agricultural sectors

Engaging with our customers on their transition plans
Throughout 2019 we have analysed the carbon disclosures of over 80 of our largest emitting customers andengaged with 29 of these to support them to establish, and where appropriate, strengthen existing low carbon
transition plans.
This engagement will inform the development of a model applicable to our broader customer base enabling us to encourage customers
to improve the management and disclosure of their climate-related risks and opportunities.
Within each industry our customers have different starting points. Both through customer discussions and reviews of public disclosures
we are developing a better understanding of our customers’ preparation for, and management of, their most likely climate-related risks
and opportunities. Insights we have gained from these customer conversations include:

EnergyTransport

Energy: our engagement in this sector is initially focused on
customers with thermal coal operations. Some customers see
continuing strong demand for high-quality, low-cost Australian
thermal coal that will be used in recently built or plannedhigh efficiency, lower emissions (HELE) plants across Asia; theirstrategy is focused on developing high quality thermal coalassets and they are committed to improving their external
disclosures. Other customers have undertaken scenario analysis(aligned with TCFD recommendations), revealing that some of
their commodities perform worst under a low-carbon transition;
in response they are directing limited expenditure to thermal
coal and most of this is in maintenance capital rather than
expansion. Some companies are also starting to work with
their suppliers and customers to seek to reduce the emissions
associated with the use of their mining commodities, ie ‘Scope 3’
emissions.

48

ANZ 2019 ANNUAL REVIEWBuildings

Food, beverage
and agriculture

Transport: a significant customer has ambitious plans to expand
their electric vehicle fleet in Australia and is building a new
distribution centre that will integrate rooftop solar and electricvehicle charging bays. They also plan to enter a renewable energy
power purchase agreement (PPA) to lower their carbon footprint
and shield themselves from price volatility.
Buildings: a number of customers have established net-zerocarbon targets that will be achieved largely through improved
energy efficiency and onsite solar installations, setting time boundgoals to achieve this by 2030.
Food, beverage and agriculture: for many of our agribusinessand food producers, the physical risks of climate change (e.g.,water availability and supply) represent the most material and
immediate risk to their business, rather than transition risks.
We have observed these customers are increasingly focusedon managing climate-related risks by committing to reduce orremove deforestation from their operations and supply chains.

Our progress on the TCFD
TCFD theme

Our progress to date

Focus areas – 2020/21

Governance•• Board Risk Committee oversees management ofclimate-related risks•• An enhanced risk•• Align with regulatory
management framework
guidance on climate-related
that is responsive
risk governance, including
to climate change,stress testing of selected
and meets financial
portfolios
regulators’ requirements•• Board Ethics, Environment, Social and GovernanceCommittee approves climate-related objectives, goals
and targets•• Ethics and Responsible Business Committee (executive
management) oversees our approach to sustainability
and reviews climate-related risks
Strategy•• ANZ’s Climate Change Statement (available on anz.com)
reaffirms support for the Paris Agreement goals andtransition to a net-zero carbon economy•• Managing the net-zero carbon transition focuses on anorderly and just transition that gives careful consideration
to the impacts on communities

Beyond 2020 vision•• Consider extending scenario •• ANZ business strategy
more closely aligned to aanalysis to incorporate
bushfire, flood and other risks resilient and sustainableeconomy that supports
relating to retail customers
the Paris Agreement•• Possible extension ofgoals and Sustainable
emerging environmental andDevelopment Goals
climate-related risks to other•• Participation in a United Nations Environment Program
segments of the home loan
Finance Industry (UNEP FI) working group on TCFD scenario
portfolio
analysis that issued recommendations and methods to•• Include climate risk reference
assess portfolio transition and physical risks
in agriculture related lending•• Low carbon products and services within our Institutional
guidance documents usedbusiness focused on climate-related opportunities
by our front line bankers•• Analysis of flood-related risks for our home loan portfolio ina major regional location of Australia•• Test-pilot of socio-economic indicators showing financial
resilience of home loan customers with respect to flood risk•• Integrate assessment•• Encouraging customers toof climate-related risks
develop and disclose theirinto our Group risk•• Climate change identified as a Principal Risk and Uncertainty in transition plans in key sectors
management framework
energy,transport,
buildings
our UK Disclosure and Transparency Rules (DTR) Submission
and food, beverage and•• Standard discussions•• Guidelines and training provided to over 1,000 of ouragriculture
with business customers
Institutional bankers on customers’ transition plan discussions
include climate-related•• Customer engagement•• Enhanced financial analysis and stronger credit approvalrisks and opportunities
to identify customer orterms applied to agricultural property purchases in regions
sector-specific transition••
Assessment of customerof low average rainfall or measured variabilityor physical risks
transition plans part•• New agribusiness customers assessed for financial resilienceof standard lending
and understanding of rainfall and climate trends in theirdecisions and portfolio
area, and water budgets considered if irrigating
analysis

Risk•• Climate change risk added to Group and Institutional Risk
management
Appetite Statements

Metrics andtargets•• Support 100 of our largest emitting customers1 to establish
or strengthen low carbon transition plans by 2021, withmetrics developed to track progress•• Exceeded our 5-year $15 billion target to fund and facilitate
low carbon and environmentally sustainable solutions•• Power Purchase Agreement to increase renewable energy
use in our Australian operations•• Ongoing emissions reduction targets for ANZ energy usealigned with the Paris Agreement goals•• Complete transition plan
engagement with highemitting customers andconsider how to integrate
into customer assessments•• New 6-year $50 billion
target to fund and facilitatesustainable solutions•• New metrics for measuring
impact of our progress onenvironmental sustainability•• Monitor industry
standards for lendingaligned with the Paris
Agreement goals•• Reduce ANZ’soperational emissions
in line with thedecarbonisation
trajectory of the Paris
Agreement goals•• New target to procure 100%
renewable electricity for
ANZ’s operations by 2025
1.

In the energy, transport, buildings and food, beverage and agricultural sectors.

49

$

CUSTOMER STORY

Sustainable finance market
continues to grow

Following the growth of green bonds in the past three tofour years, the Australian and New Zealand sustainablefinance market continues to accelerate with the emergenceof loans in both green and sustainability-linked formats.
These loans are differentiated by how the proceeds are used. Green loans
require borrowers to invest in ‘green’ assets such as green buildings, renewableenergy or low carbon transport projects. Sustainability-linked loans can beused for general corporate purposes with pricing designed to incentivise
improved sustainability performance – for example, reducing emissions andimproving employee wellbeing.
In the past year, ANZ has arranged and funded the first ever sustainability
linked loan in Australia for Adelaide Airport, and the first Climate Bonds
Initiative certified green loan in Australia for Investa Commercial Property Fund.
We also acted as joint sustainability co-ordinator and bookrunner on a $1.4
billion sustainability-linked loan for Sydney Airport – the first syndicated facilityof its kind in Australia as well as the largest in Asia Pacific and the airport sector
to date. Pricing of the loan is attached to Sydney Airport’s ESG performance,
as measured by an independent third party. Sustainability initiatives include
investment in electric vehicles, an ambition to achieve carbon neutrality by2025 and cutting carbon emissions per passenger by 50 percent from 2010
levels by 2025.
In a first for the New Zealand market, we also led the successful completion ofa NZ$50 million sustainability-linked loan for dairy company Synlait Milk Ltd.
“Linking our financial arrangements to our ESG performance made perfectsense”, said Nigel Greenwood, Synlait Chief Financial Officer. “It reinforces toour shareholders and stakeholders that we are committed to continuously
improving our performance and disclosure, and aligns with our company
purpose.”
ANZ expects companies will become more receptive to these types ofsustainable finance products as climate change and sustainable development
move into the fore of their corporate strategies and risk assessment.
Images supplied by Synlait Milk Ltd

50

ANZ 2019 ANNUAL REVIEWIn a first for New Zealand, we led
the completion of a NZ$50 million
sustainability linked loan for dairy
company, Synlait Milk Ltd

51

OUR PERFORMANCE (continued)
OUR PERFORMANCE (continued)

Performance
Overview
GROUP PERFORMANCEThe resultsPERFORMANCEof the Group’s operations and financial position are set out on pages 52-64. Page 9 outlines the Group’s strategy and pages
GROUP
10-23 describes in further detail the Group’s prospects in terms of future financial position and performance. Discussion of our approach
The
of to
therisk
Group’soperations
and financial
position
are keyset out
on pages
52-64.
Pageon9 outlines
the Group’s strategy and pages
and results
progressmanagement,
includinga summaryof ourmaterial
risks isoutlined
pages 44-49.
10-23 describes in further detail the Group’s prospects in terms of future financial position and performance. Discussion of our approach
Statutory profit after tax for the year ended 30 September 2019 decreased 7% on the prior year to $5,953 million. Statutory return on
and progress to risk management, including a summary of our key material risks is outlined on pages 44-49.
equity is 10% and statutory earnings per share is 210.0 cents, a decrease of 5% on prior year.
Statutory profit after tax for the year ended 30 September 2019 decreased 7% on the prior year to $5,953 million. Statutory return on
GROUP
PROFITRESULTSequity is 10%
and statutory
earnings per share is 210.0 cents, a decrease of 5% on prior year.
2019

GROUP PROFIT RESULTS

2018

Statutory
Cash
Statutory
Cash
2019
2018
$m
$m
$m
$m
Statutory
Cash
StatutoryCash
Net Interest Income
14,514
14,514
14,33914,339
Income Statement
$m
$m
$m
$m
Other operating income
5,470
4,853
4,446
4,690
14,514
14,514Net Interest Income
14,33914,339Operating income
19,984
19,367
18,78519,0295,470
4,853
Other operating income
4,446
4,690
Operating expenses(9,401)(9,401)(9,071)(9,071)
Operating income
19,984
19,367
18,78519,029Profit before credit impairment and income tax
10,583
9,966
9,714
9,958
(9,401)(9,401)
Operating expenses(9,071)(9,071)Credit impairment charge
(688)
(688)
(794)
(795)
Profit before credit impairment and income tax
10,583
9,966
9,714
9,958
Profit before income tax
9,895
9,278
8,920
9,163
(688)
(688)
Credit impairment charge
(794)
(795)
Income tax expense(2,784)(2,775)(2,609)(2,678)
Profit before income tax
9,895
9,278
8,920
9,163
Non-controlling interests
(16)
(16)
(15)
(15)
(2,784)(2,775)
Income tax expense(2,609)(2,678)
7,095
6,487
Profit after tax from continuing operations
6,296
6,470
Non-controlling interests
(16)
(16)
(15)
(15)
Profit/(Loss) after tax from discontinued operations
(695)
(682)
(343)
(309)
7,095
6,487
Profit after tax from continuing operations
6,296
6,470
6,400
5,805
Profit for the year
5,953
6,161
(695)
(682)
Profit/(Loss) after tax from discontinued operations
(343)
(309)
The
Group
uses
cash profit, a non-IFRS measure, to assess the performance of its businessis an industry-widemeasure which5,805
6,400
Profitfor theyear
5,953 activities. It6,161
enables comparison with our peer group. We calculate cash profit by adjusting statutory profit for non-core items. In general, it represents the
The Group
uses cash profit,
non-IFRS
measure,to assessthecashperformanceof its businessactivities.
is an industry-wide
which
financialperformanceof oura corebusiness
activities.
We useprofit internallyto set targets
and Itincentivise
our Seniormeasure
Executives
andenablesthroughcomparison
with our peer plans.
group. We calculate cash profit by adjusting statutory profit for non-core items. In general, it represents theleaders
our remuneration
financial performance of our core business activities. We use cash profit internally to set targets and incentivise our Senior Executives andRefer to page 53 for adjustments between statutory and cash profit.
leaders through our remuneration plans.
Cash profit is not subject to audit by the external auditor. Our external auditor has informed the Audit Committee that adjustments between
Refer to page 53 for adjustments between statutory and cash profit.
statutory and cash profit have been determined on a consistent basis across each of the periods presented.
Cash profit is not subject to audit by the external auditor. Our external auditor has informed the Audit Committee that adjustments betweenAsa resultandof thesaleof our
OnePathpensions andP&I)eachand ofaligneddealerpresented.
groups (ADG) businesses to IOOF Holdings
statutory
cash
profithavebeen determinedon investment
a consistent(OnePathbasis acrossthe periods
Limited and our life insurance business to Zurich Financial Services Australia, the financial results of these businesses and associated GroupAs a result of thesaleof our OnePathpensions
and investment(OnePathP&I) andfrom
aligneddealer groups(ADG)
businesses
to IOOF
Holdings
reclassification
andconsolidation
impacts
are treatedas discontinued
operations
a financial
reportingperspective(referto page
61).
Limited and our life insurance business to Zurich Financial Services Australia, the financial results of these businesses and associated GroupCONTINUING
reclassification
andOPERATIONS
consolidation impacts are treated as discontinued operations from a financial reporting perspective (refer to page 61).
Income Statement

We believe cash profit from continuing operations is particularly important as we continue to strategically reposition ourselves to create a
CONTINUING OPERATIONS
simpler, better capitalised, better balanced and more agile bank.
We believe cash profit from continuing operations is particularly important as we continue to strategically reposition ourselves to create a
simpler, better capitalised, better balanced and more agile bank.

52

Total Operating
Income – cash1 ($m)

Operating Expenses –cash1 ($m)

Credit Impairment
Charge – cash1 ($m)

Cash profit1 ($m)

2019

19,029

2019

9,071

2019

795

2019

6,470

2018

19,367

2018

9,401

2018

688

2018

6,487

Return on
Equity– cash1 (%)

Earnings per Share –cash1 (cents)

Common Equity
Tier 1 (%)

Dividend pershare (cents)

2019

10.9%

2019

2019

11.4%

2019

160

2018

11.0%

2018

2018

11.4%

2018

160

227.6
223.4

1.

Information has been presented on a cash profit from continuing operations basis. Discontinued operations are detailed on page 61.

1.

Information has been presented on a cash profit from continuing operations basis. Discontinued operations are detailed on page 61.

ANZ 2019 ANNUAL REVIEWOUR PERFORMANCE (continued)

1
ADJUSTMENTS
BETWEENSTATUTORYCASHPROFIT1
ADJUSTMENTS BETWEENSTATUTORYAND CASHAND
PROFIT

99
6,296

2019 Statutory
profit –continuing
operations

77

Revaluationof policy
liabilities

6,470
(2)

Economic andrevenueand expense
hedges

Structured
creditintermediation
trades2019 Cashprofit –continuing
operations

Description of adjustments between continuing operations statutory profit and cash profit:
Adjustment

Reason for the adjustment

Revaluation of policy
liabilities – OnePath
Life (NZ)
2019: $77 million
2018: ($14) million

When calculating policy liabilities, the projected future cash flows on insurance contracts are discounted to reflect
the present value of the obligation, with the impact of changes in the market discount rate each period beingreflected in the Income Statement. ANZ includes the impact on the re-measurement of insurance contracts
attributable to changes in market discount rates as an adjustment to statutory profit to remove the volatility
attributable to changes in market interest rates which reverts to zero over the life of insurance contracts. With thesale completion of the OnePath Life (NZ) Ltd business, the 2019 financial year includes the reversal of life-to-datecash profit adjustments on the revaluation of policy liabilities sold increasing cash profit by $81 million.
The Group enters into economic hedges to manage its interest rate and foreign exchange risk which, in
accordance with accounting standards, result in fair value gains and losses being recognised within the Income
Statement. ANZ removes the fair value adjustments from cash profit since the profit or loss resulting from thehedge transactions will reverse over time to match with the profit or loss from the economically hedged item aspart of cash profit. This includes gains and losses arising from approved classes of derivatives not designated inaccounting hedge relationships but which are considered to be economic hedges, including hedges of foreign
currency debt issuances and foreign exchange denominated revenue and expense streams, primarily NZD and
USD (and USD correlated), as well as ineffectiveness from designated accounting hedges.
ANZ entered into a series of structured credit intermediation trades prior to the Global Financial Crisis with eight
US financial guarantors. This involved selling credit default swaps (CDSs) as protection over specific debt structuresand purchasing CDS protection over the same structures. ANZ has subsequently exited its positions with six US
financial guarantors. The remaining two portfolios with a $0.3 billion notional value are being monitored with aview to reducing the exposures when ANZ deems it cost effective relative to the perceived risk associated with a
specific trade or counterparty.
On 3 January 2017, The Group announced that it had agreed to sell its 20% stake in Shanghai Rural Commercial
Bank (SRCB). The impact of SRCB has been treated as an adjustment between statutory profit to cash profit. The
rationale being the loss on reclassification to held for sale was expected to be largely offset by the release ofreserve gains on sale completion within the 2017 year. The transaction was subsequently completed in the 2018
full year, and the entire impact of the transaction was recognised in cash profit.

Economic andrevenue and expense
hedges2019: $99 million
2018: ($257) million

Structured credit
intermediation
trades2019: ($2) million
2018: ($4) million
Sale of SRCB
2019: nil
2018: ($333) million

1.

Information has been presented on a cash profit from continuing operations basis. Discontinued operations are detailed on page 61.

53
ANZ 2019 ANNUAL REPORT53

OUR PERFORMANCE (continued)

Performance Overview (continued)

CASH PROFIT PERFORMANCE1

CASH PROFIT PERFORMANCE1
6,487

330

98

6,470

(107)

(175)
(163)

2018 Cash
Profit continuing
operationsNet
interest
incomeOther
operatingincomeOperatingexpensesCreditimpairment
chargeIncome tax
expense& noncontrollinginterests

2019 Cash
Profit continuing
operations

GROUP PERFORMANCE – CASH PROFIT
2019
$m

2018
$m

Movt

Net Interest Income
Other operating income

14,3394,690

14,514
4,853

-1%
-3%

Operating income

19,029(9,071)

19,367(9,401)

-2%
-4%

9,958
(795)

9,966
(688)

0%
16%

Income tax expense
Non-controlling interests

9,163(2,678)(15)

9,278(2,775)
(16)

-1%
-3%
-6%

Profit after tax from continuing operations

6,470

6,487

0%

Operating expenses
Profit before credit impairment and income tax
Credit impairment charge
Profit before income tax

Cash profit from continuing operations decreased $17 million (0%) compared with the 2018 financial year.
 Net interest income decreased $175 million (-1%) largely due to lower interest rates and competitive pressures resulting in a 11 basis point
decrease in the net interest margin, partially offset by 5% growth in average interest earning assets. The lower net interest margin reflects
growth in lower margin Markets Balance Sheet activities, higher proportionate growth in the lower Institutional business, customer
switching to principal and interest in Australia home loans, deposit margin compression and lower earnings on capital, partially offset by the
impact of home loans repricing. The increase in average interest earning assets reflects growth in Institutional banking portfolios and homeloan growth in the New Zealand division.
 Other operating income decreased $163 million (-3%) largely as the result of net divestment impacts of $198 million, a $120 million
decrease in net fee and commission income, and $130 million decrease primarily in other income attributable to realised losses on
economic hedges against foreign currency denominated revenue streams (which offset favourable foreign currency translations elsewherein the Group) and a reduction in income from the lenders mortgage insurance business. This was partially offset by higher Markets otheroperating income of $154 million, a $79 million increase in share of associate’s profit and a $52 million decrease in customer remediation
within other operating income.
 Operating expenses decreased $330 million (-4%) primarily due to an accelerated software amortisation charge in the prior period of $251
million, lower restructuring expenses of $150 million, a reduction in expenses following the sale of OnePath Life (NZ) and Asia Retail and
Wealth businesses of $60 million, lower Royal Commission legal costs of $40 million and lower FTE. This was partially offset by higher
customer remediation of $182 million within operating expenses, inflation, the impact of foreign currency translation and regulatorycompliance spend in New Zealand.
 Credit impairment charges increased $107 million (+16%) largely due to higher collectively assessed credit impairment charges, primarily asa result of the prior period benefitting from the release of temporary economic overlays and a greater number of customer upgrades.
1.

54

Information has been presented on a cash profit from continuing operations basis. Discontinued operations are detailed on page 61.

ANZ 2019 ANNUAL REVIEW54
ANZ 2019 ANNUAL REPORTOUR PERFORMANCE (continued)

LARGE/NOTABLE ITEMS INCLUDED IN CASH PROFIT1
Within continuing cash profit, the Group recognised a number of large/notable items. The impact of these items on a post-tax basis is
as follows:
2019
$m

2018
$m

Asia Retail and Wealth businesses
Shanghai Rural Commercial Bank (SRCB)UDC Finance (UDC)
Metrobank Card Corporation (MCC)
OnePath Life NZ Ltd (OPL NZ)
ANZ Royal Bank (Cambodia) Ltd (Cambodia JV)
PNG Retail, Commercial and SME
Paymark
Divested business results

157
10
1
37

85
(86)
11
247
(3)
(42)
(21)
-

Asia Retail and Wealth businesses
MCC
OnePath Life NZ Ltd (OPL NZ)
ANZ Royal Bank (Cambodia) Ltd (Cambodia JV)
PNG Retail, Commercial and SME

10
11

24
10
66
14

7
4

7
5

(475)
(10)
(54)

(295)
(206)
(38)
(159)

Gain/(Loss) on sale of divestments

Paymark
Other large/notable items
Customer Remediation
Accelerated Software Amortisation
Royal Commission Legal Costs
Restructuring
Description of large/notable items:

1.

Item

Description

Gain/(Loss) on sale of divestments

The 2019 financial year included a gain on sale upon completion of the sale of OPL NZ, Paymark,Cambodia JV, and PNG Retail, Commercial and SME businesses. The 2018 financial year included
the gain on sale upon completion of the Asia Retail and Wealth businesses and MCC, and theloss on sale from SRCB. The Group recognised a loss on reclassification of assets and liabilities toheld for sale for Cambodia JV, OPL NZ, and PNG Retail, Commercial and SME. In addition, a net
cost recovery for UDC was recognised in respect of the terminated transaction process.

Divested business results

The 2019 financial year included the divested business results of the Cambodia JV, OPL NZ, PNG
Retail, Commercial and SME, and Paymark. The 2018 financial year included the divested
business results of the Asia Retail and Wealth businesses and a dividend received from MCC.

Customer Remediation

Customer remediation includes provisions for expected refunds to customers, remediation
project costs and related customer and regulatory claims, penalties and litigation outcomes.

Accelerated Software Amortisation

Accelerated amortisation charge of certain software assets in the 2018 financial year,
predominantly relating to the Institutional division following a review of the International
business in light of divestments.

Royal Commission Legal Costs

External legal costs associated with responding to the Royal Commission.

Restructuring

Restructuring to re-shape our workforce and simplify our business. The 2019 financial year
largely related to changes in the Group’s enablement functions. The 2018 financial year largely
related to the move of the Australia Retail and Commercial division and technology function toagile ways of working.

Information has been presented on a cash profit from continuing operations basis. Discontinued operations are detailed on page 61.

55
ANZ 2019 ANNUAL REPORT55

OUR PERFORMANCE (continued)

Performance Overview (continued)

ANALYSIS OF CASH PROFIT PERFORMANCE1
Net interest income1

Cash net interest income
Average interest earning assets3
Average deposits and other borrowings3,4
Net interest margin (%) - cash2,3
2

2019
$m

2018
$m

Movt

14,339813,219
639,144
1.76

14,514
774,883
617,008
1.87

-1%
5%
4%
-11 bps

Net interest income decreased $175 million (-1%) largely due to lower interest rates and competitive pressures resulting in a 11 basis point
decrease in the net interest margin, partially offset by 5% growth in average interest earning assets.
Net interest margin decreased reflecting growth in lower margin Markets Balance Sheet activities, higher proportionate growth in the lower
Institutional business, customer switching to principal and interest in Australia home loans, deposit margin compression and lower earnings
on capital, partially offset by the impact of home loans repricing
Average interest earning assets increased $38.3 billion (5%) reflecting growth in Institutional banking portfolios and home loan growth in the
New Zealand division.
Average deposits and other borrowings increased $22.1 billion (4%) driven by growth in the Institutional and New Zealand divisions, and theimpact of foreign currency movements.

NET INTEREST MARGIN FROM CONTINUING OPERATIONS (BPS)NET INTEREST MARGIN FROM CONTINUING OPERATIONS (BPS)

187

(4)

—

2
182

(1)
(2)

(5)

2018 Cashnet interest
margin continuing
operations
1.
2.
3.

56

Asset andfunding mix

Wholesalefunding
costs

Depositpricing

Assetspricing

Treasury

2019 Cashnet interest
marginsubtotal

Information has been presented on a cash profit from continuing operations basis. Discontinued operations are detailed on page 61.
Includes the major bank levy of -$363 million (2018: -$355 million).
Average balance sheet amounts include assets and liabilities of continuing operations reclassified as held for sale.

ANZ 2019 ANNUAL REVIEW56
ANZ 2019 ANNUAL REPORT

Marketsbalancesheet
activities1

176
(1)

Large/
notableitems

2019 Cashnet interest
margin continuing
operations

OUR PERFORMANCE (continued)

Other operating income1
2019
$m

2018
$m

Movt

Net fee and commission income2
Markets other operating income
Share of associates' profit2
Other2

2,493
1,286
262
649

2,624
1,129
183
917

-5%
14%
43%
-29%

Total cash other operating income

4,690

4,853

-3%

Total increase/(decrease)
$m

Movt

Explanation

Net fee andcommission
income2

(131)

-5%

Net fee and commission income decreased primarily due to the reduction or removal ofcommercial and retail fees, lower volumes and the loss of income following the sale of
the Asia Retail and Wealth businesses, partially offset by lower customer remediation
impacting Net fee and commission income.

Markets otheroperating income

157

14%

Markets other operating income increased across Franchise Trading, Franchise Sales andBalance Sheet Trading. This was primarily due to tighter credit spreads and Australia and
New Zealand rates, partially offset by a challenging international interest rateenvironment and the lower net impact of derivative valuation adjustments relative tothe prior financial year.

Share of associates'
profit2

79

43%

Share of associates’ profit increased by $79m of which $44 million relates to P. T. BankPan Indonesia and $36 million relates to AmBank.

Other2

(268)

-29%

Other decreased primarily due to the reduction in insurance business income following
the sale of OnePath Life NZ, realised losses on economic and revenue hedges against
foreign currency revenue streams (which are offset by favourable currency translations
elsewhere in the Group) and a reduction in income in the lenders mortgage insurance
business.

Total cash otheroperating income
from continuing
operations

(163)

-3%

OTHER OPERATING INCOME FROM CONTINUING OPERATIONS ($M)

OTHER OPERATING INCOME FROM CONTINUING OPERATIONS ($M)
649
917
262

● Net fee andcommission income

183

2019
2,493
1,286

1.
2.

● Markets otheroperating income

2018
1,129

2,624

● Share of associates’ profit● Other

Information has been presented on a cash profit from continuing operations basis. Discontinued operations are detailed on page 61.
Excluding Markets.

57
ANZ 2019 ANNUAL REPORT57

OUR PERFORMANCE (continued)

Performance Overview (continued)

Operating expenses1
2019$mTotal cash operating expenses from continuing operations2
Full time equivalent staff (FTE) from continuing operations
Average full time equivalent staff (FTE) from continuing operations

9,071
37,58837,480

2018
$m
9,401
37,86040,016

Movt
-4%
-1%
-6%

Operating expenses decreased by $330 million (-4%). Key drivers: Personnel expenses increased $7 million (0%) largely driven by higher regulatory compliance spend in the New Zealand division, higher
employee leave provisions, wage inflation and the impact of insourcing technology services. This was offset by lower FTE, lower personnel
expenses following the sale of OnePath Life (NZ) and the Asia Retail and Wealth businesses ($33 million) and lower customer remediation($58 million).
 Premises expenses decreased $16 million (-2%) primarily driven by the consolidation of our property footprint.
 Technology expenses (excluding personnel) decreased $365 million (-19%) largely due to an accelerated amortisation charge in the priorperiod ($251 million) and the insourcing of technology services.
 Restructuring expenses decreased $150 million (-66%) due to higher spend in the prior period associated with the move to agile ways ofworking in the Australian Retail and Commercial division and technology function.
 Other expenses increased $194 million (+11%) largely due to higher customer remediation ($240 million), partially offset by lower expenses
following the sale of OnePath Life (NZ) and Asia Retail and Wealth businesses ($26 million) and a reduction in Royal Commission legal costs($40 million).

OPERATINGEXPENSES
EXPENSESFROMCONTINUINGOPERATIONSOPERATINGFROMCONTINUINGOPERATIONS($M)($M)
1,706

1,900

● Personnel expenses

227

77

● Premises expenses

2019

2018
4,765

1,534

1,899

795

● Technology expenses● Restructuring expenses

4,758● Other expenses

811

Credit impairment1
Collectively assessed credit impairment charge/(release) ($m)
Individually assessed credit impairment charge ($m)
Credit impairment charge ($m)
Gross impaired assets ($m)2
Credit risk weighted assets ($b)
Total allowance for expected credit losses (ECL) ($m)
Individually assessed as % of gross impaired assets
Collectively assessed as % of credit risk weighted assets3

2019

2018

Movt

17
778
795
2,029
358.1
4,190
40.1%
0.94%

(85)
773
688
2,139
337.6
3,443
43.0%
0.75%

large
1%
16%
-5%
6%
18%

The collectively assessed credit impairment charge of $102 million was primarily driven by a $55 million increase in the New Zealanddivision and a $30 million increase in the Institutional division. The increase in the New Zealand division was primarily due to release of atemporary economic overlay in 2018, followed by a new temporary management overlay in 2019. The increase in the Institutional division was
due to a greater number of customer upgrades in the prior period.
1.

Information has been presented on a cash profit from continuing operations basis. Discontinued operations are detailed on page 61.
In 2019, ANZ implemented a more market responsive collateral valuation methodology for the home loan portfolio in Australia which increased the number of home loans being classified as
impaired rather than past due. Comparative information has not been restated for this change in methodology. Additionally, refinement to underlying data resulted in a transfer from past due
and sub-standard into impaired assets. Comparative information has been restated with a transfer of $126 million for 2018.
3.
On adoption of AASB 9 on 1 October 2018, the Group increased the collectively assessed allowance for expected credit losses by $813 million, comparative information has not been restated.
2.

58

ANZ 2019 ANNUAL REVIEW58
ANZ 2019 ANNUAL REPORTOUR PERFORMANCE (continued)

The individually assessed credit impairment charge increased by $5 million (1%) due to lower write-backs and recoveries in the New
Zealand and Institutional divisions, partially offset by higher write-backs and recoveries in the Australia Retail and Commercial division and adecrease due to the sale of the Asia Retail and Wealth businesses in the prior year.
Gross impaired assets decreased $110 million (-5%) driven by the Institutional division (-$177 million) with repayments reducing a number oflarge impaired assets. This was partially offset by an increase in the Australia Retail and Commercial division ($57 million) primarily driven by anumber of single name impaired loans in the Commercial portfolio. The Group’s individually assessed coverage ratio on impaired assets was
40.1 % at 30 September 2019 (Sep 18: 43.0%).

CREDIT IMPAIRMENTIMPAIRMENT($M)($M)
CREDIT
Collectively assessed
allowance for ECL($m)

Individually assessed
allowance for ECL($m)

Gross impaired assets1
($m)

3,376

814

2,029

38
374
1,169

2,523

3
43
279

920

24

72

160

1
18
81

2,139
50
236

51
245
265

251

● Australia Retailand Commercial● Institutional442● New Zealand● Pacific

1,073
558

1,795

● TSO andGroup Centre

1,411

1,468

569

1,125
2019
1.

2018

2019

2018

2019

2018

During the 2019 financial year, ANZ implemented a more market responsive collateral valuation methodology for the home loan portfolio in Australia which increased the number of home loans
being classified as impaired rather than past due. Comparative information has not been restated for the change in methodology. Additionally, refinement to underlying processes and associate
data resulted in transfer of loans from past due and sub-standard categories into impaired assets. Comparative information has been restated with transfer of $126 million at September 2018.

DIVISIONAL PERFORMANCE1
Australia
Retail andCommercial

Pacific

TSO andGroup
CentreGroup

Net interest margin
Operating expenses to operating income

2.33%
38.8%

3.75%
64.7%

n/a
n/a

1.76%
47.7%

1,828

1,399

59

(11)

6,470

164.5
217.3
5,468

116.7
83.4
6,121

2.1
3.5
1,086

0.1
(0.4)
11,010615.3
511.8
37,588Australia
Retail andCommercial

Institutional

New
Zealand

Pacific

TSO andGroup
CentreGroup

Net interest margin
Operating expenses to operating income

2.69%
40.9%

0.88%
58.3%

2.42%
36.3%

4.11%
55.4%

n/a
n/a

1.87%
48.5%

Cash profit from continuing
operations ($m)

3,626

1,480

1,521

72

(212)

6,487

Net loans and advances ($b)
Customer deposits2 ($b)
Number of FTE

341.3
202.7
13,731

150.1
205.8
6,188

111.3
79.8
6,165

2.1
3.5
1,125

(0.2)
(4.5)
10,651605.5
487.3
37,860Institutional

New
Zealand

2.59%
43.2%

0.82%
50.6%

Cash profit from continuing
operations ($m)

3,195

Net loans and advances ($b)
Customer deposits2 ($b)
Number of FTE

331.9
208.0
13,903

2019

2018

1.
2.

Information has been presented on a cash profit from continuing operations basis. Discontinued operations are detailed on page 61.
TSO and Group Centre includes term deposits, other deposits and an adjustment in Group Centre to eliminate Wealth Australia discontinued operations investments in ANZ deposit products.

59
ANZ 2019 ANNUAL REPORT59

OUR PERFORMANCE (continued)

Performance Overview (continued)

DIVISIONAL PERFORMANCE1
Australia Retail and Commercial
Lending volumes decreased as a result of lower system growth, asset competition and more conservative home loan origination risk
settings. Net interest margin decreased as a result of home loan mix changes and higher discounting, the impact of the official cashrate decreases on low-rate deposits, regulatory impact on credit card pricing and higher customer remediation, partially offset byhome loans re-pricing. Other operating income decreased as the result of higher customer remediation, and lower fee income dueto the removal of fees and lower volumes. Operating expenses were flat with higher inflation, higher compliance costs andincreased technology infrastructure spend offset by productivity initiatives including workforce and branch optimisation. Credit
impairment charges increased primarily due to an increase in collectively assessed credit impairment as a result of a weakening
Australian economic outlook, partially offset by a higher recoveries and write-backs.
Institutional
Lending volumes grew across all Institutional businesses. Customer deposits grew in Markets and Transaction Banking. Net interest
margin decreased due to a reduction in lending margins, partially offset by higher deposit margins. Other operating income
increased as a result of higher Markets income across all businesses. Operating expenses decreased due to a reduction in FTE andrelated costs, and lower ongoing software amortisation charges, partially offset by inflation. Credit impairment charges increased
primarily due to an increase in individually assessed impairment charges driven by lower write-backs and recoveries, and an increasein collectively assessed impairment charges as a result of a greater number of customer upgrades in the prior period.
New ZealandLending and customer deposit volumes grew across all portfolios and funds under management increased during the period. Net
interest margin decreased as a result of compressed deposit margins and home loan mix changes. Operating income decreased
primarily due to the loss of income as the result of the OnePath Life (NZ) divestment, and an one-off insurance recovery in the priorperiod. Operating expenses increased primarily due to higher regulatory compliance spend, partly offset by the OnePath Life (NZ)
divestment. Credit impairment charges increased primarily due to an increase in individually assessed impairment charges driven bylower write-backs and recoveries, and increase in collectively assessed impairment charges in Commercial driven by the release ofan Agri economic cycle adjustment in 2018 followed by a new temporary overlay in 2019.
Pacific
Operating income for the Pacific division was broadly in line with the prior year. Costs were higher largely due to customer
remediation. Credit impairment charges were not significant for the 2019 financial year.
TSO and Group Centre
The 2019 financial year included the gain on sale of OnePath Life (NZ), Paymark, Cambodia JV and PNG Retail, Commercial and SME.
The 2018 financial year included the gain on sale of MCC, loss on sale of SRCB, the loss on reclassification of assets and liabilities toheld for sale for Cambodia JV, OPL NZ, and PNG Retail, Commercial and SME, Royal Commission legal costs, and higher restructuringcosts.

1.

60

Information has been presented on a cash profit from continuing operations basis. Discontinued operations are detailed on page 61.

ANZ 2019 ANNUAL REVIEW60
ANZ 2019 ANNUAL REPORTOUR PERFORMANCE (continued)

DISCONTINUED OPERATIONS
The financial results of the Wealth Australia businesses being divested and associated Group reclassification and consolidation impacts aretreated as discontinued operations from a financial reporting perspective. These businesses qualify as discontinued operations, a subset ofassets and liabilities held for sale, as they represent a major line of business.
The comparative Group Income Statement and Statement of Comprehensive Income have been restated to show discontinued operations
separately from continuing operations in a separate line item ‘Profit/(Loss) from discontinued operations’.
 Sale to IOOF Holdings Limited (IOOF)
On 17 October 2017, the Group announced it had agreed to sell its OnePath P&I and ADGs businesses to IOOF. The aligned dealer groups
business consists of ADGs that operate under their own Australian Financial Services licences. The sale of the ADGs completed on 1 October
2018. On 17 October 2019 the Group announced it had agreed a revised sale price for its OnePath P&I business and ADG to IOOF of $850
million, being a $125 million reduction from the original sale price of $975 million announced in October 2017. The new price of $850
million, includes approximately $25 million that ANZ has already received for the sale of ADGs in October 2018. The revised terms reflectchanging market conditions and include lower overall warranty caps as well as some changes to the strategic alliance arrangements.
Subject to APRA approval the Group expects the transaction to complete in the first quarter of calendar year 2020. The impact of the
reduction in price has been reflected in the 2019 financial results.
 Sale to Zurich Financial Services Australia (Zurich)
On 12 December 2017, ANZ announced that it had agreed to the sale of its life insurance business to Zurich and regulatory approval was
obtained on 10 October 2018. The transaction was completed on 31 May 2019.
Included in the ‘Cash loss from discontinued operations’ is: A $23 million loss ($81 million loss after tax) was recognised in the 2019 financial year. This is attributable to sale related adjustments andwrite-downs, the reversal of the life-to-date cash profit adjustments on the revaluation of policy liabilities sold to Zurich, partially offset by
the recycling of gains previously deferred in equity reserves on sale completion. A $632 million loss (pre and post-tax) was recognised on
the reclassification of Wealth Australia businesses to held for sale in the 2018 financial year; and Customer remediation which includes provisions for expected refunds to customers and related remediation costs associated withinappropriate advice or services not provided in the pensions and investments and life insurance businesses. An amount of $241 million
pre-tax, $207 million post tax was recognised in the 2019 financial year (2018: $181m pre-tax, $127 million post-tax).
ANZ’s lenders mortgage insurance, share investing, general insurance distribution and financial planning businesses which were previously
part of the continuing operations of Wealth Australia now form part of the Australia Retail and Commercial division (previously named
Australia division) and Wealth Australia ceases to exist as a continuing division.
Explanation of adjustments between statutory profit and cash profit
 Treasury shares adjustment
ANZ shares held by the Group in Wealth Australia discontinued operations are deemed to be Treasury shares for accounting purposes.
Dividends and realised and unrealised gains and losses from these shares are reversed as they are not permitted to be recognised as income
for statutory reporting purposes. In deriving cash profit, these earnings are included to ensure there is no asymmetrical impact on theGroup’s profits because the Treasury shares are held to support policy liabilities which are revalued through the Income Statement. With thesale completion of the life insurance business to Zurich, there are no further ANZ shares held by the Group in discontinued operations(2018: 15.5 million shares).
 Revaluation of policy liabilities
When calculating policy liabilities, the projected future cash flows on insurance contracts are discounted to reflect the present value of theobligation, with the impact of changes in the market discount rate in each period being reflected in the Income Statement. ANZ includes
the impact on the re-measurement of the insurance contract attributable to changes in market discount rates as an adjustment to statutory
profit to remove the volatility attributable to changes in market interest rates which reverts to zero over the life of the insurance contract.
With the sale completion of the life insurance business to Zurich, the 2019 financial year includes the reversal of the life-to-date cash profit
adjustments on the revaluation of policy liabilities sold, reducing cash profit by $15 million.
2019
$m

2018
$m

Statutory profit/(loss) from discontinued operations

(343)

(695)

Adjustments between statutory profit and cash profit
Treasury shares adjustment
Revaluation of policy liabilities

34
(11)
45

13
7
6

Cash profit/(loss) from discontinued operations

(309)

(682)

61
ANZ 2019 ANNUAL REPORT61

OUR PERFORMANCE (continued)

Performance Overview (continued)

FINANCIAL POSITION OF THE GROUP – INCLUDING DISCONTINUED OPERATIONSCondensed balance sheet
As at
2019
$b

2018
$b

Movt

Trading and investment securities/available-for-sale assets 1
Derivative financial instruments
Net loans and advances
Assets held for sale
Other

100.3
126.9
120.7
615.3
1.8
16.1

98.0
112.0
68.4
604.5
45.2
15.1

2%
13%
76%
2%
-96%
7%

Total assets

981.1

943.2

4%

18.8
637.7
121.0

18.3
618.2
69.7

3%
3%
74%

Liabilities held for sale
Other

129.7
2.1
11.0

121.2
47.2
9.2

7%
-96%
20%

Total liabilities

920.3

883.8

4%

Total equity

60.8

59.4

2%

AssetsCash / Settlement balances owed to ANZ / Collateral paid

Liabilities
Settlement balances owed by ANZ / Collateral received
Deposits and other borrowings
Derivative financial instruments
Debt Issuances

1.

On adoption of AASB 9 on 1 October 2018, the classification and measurement of financial assets were revised. Available-for-sale classification used in comparative periods ceases to exist under AASB 9
and a new classification of investment securities was introduced. Refer to Note 1 of the Annual Report for further details. Comparative information has not been restated.

Trading and investment securities/available-for-sale assets increased $14.9 billion (+13%) primarily driven by an increase in liquid assets inMarkets and the impact of foreign currency translation movements.



Derivative financial assets and liabilities increased $52.3 billion (+76%) and $51.3 billion (+74%) respectively as interest rate movements
resulted in higher derivative volumes and fair values, particularly in interest rate swap products.

Net loans and advances increased $10.8 billion (+2%) primarily driven by lending growth in the Institutional division (+$10.5 billion),
growth in home loans in the New Zealand division (+$4.1 billion) and the impact of foreign currency translation movements, partially
offset by the decrease in home loans in the Australia Retail and Commercial division (-$9.4 billion).



Assets and liabilities held for sale decreased $43.4 billion (-96%) and $45.1 billion (-96%) respectively primarily driven by the salecompletion of the life insurance business to Zurich, OPL NZ, Cambodia JV and PNG Retail, Commercial & SME.



Deposits and other borrowings increased $19.5 billion (+3%) primarily driven by increased deposits from banks and repurchaseagreements (+$9.9 billion), growth in customer deposits across the Australia Retail and Commercial (+$5.3 billion) and New Zealanddivision (+$2.7 billion) and the impact of foreign currency translation movements. This was partially offset by reduction in certificates ofdeposit and commercial paper issued (-$11.6 billion).



Debt issuances increased $8.5 billion (+7%) primarily driven by senior debt issuances and the impact of foreign currency translation
movements.

Funding
Net Stable Funding Ratio

2019

2018

116%

115%

The Group targets a diversified funding base, avoiding undue concentration by investor type, maturity, market source and currency.
$23.6 billion of term wholesale debt with a remaining term greater than one year as at 30 September 2019 was issued during the year.

62

ANZ 2019 ANNUAL REVIEW62
ANZ 2019 ANNUAL REPORTOUR PERFORMANCE (continued)

Liquidity
Total liquid assets ($b) 1
Liquidity Coverage Ratio (LCR) 1
1.

2019

2018

188.4
140%

191.3
138%

Full year average, calculated as prescribed per APRA Prudential Regulatory Standard (APS 210 Liquidity) and consistent with APS 330 requirements.

The Group holds a portfolio of high quality unencumbered liquid assets in order to protect the Group’s liquidity position in a severely stressed
environment, as well as to meet regulatory requirements. High Quality Liquid Assets comprise three categories, with the definitions consistent
with Basel 3 LCR: Highest-quality liquid assets (HQLA1): Cash, highest credit quality government, central bank or public sector securities eligible for
repurchase with central banks to provide same-day liquidity.
 High-quality liquid assets (HQLA2): High credit quality government, central bank or public sector securities, high quality corporate debt
securities and high quality covered bonds eligible for repurchase with central banks to provide same-day liquidity.
 Alternative liquid assets (ALA): Assets qualifying as collateral for the Committed Liquidity Facility (CLF) and other eligible securities listed by
the Reserve Bank of New Zealand (RBNZ).
The Group monitors and manages the size and composition of its liquid asset portfolio on an ongoing basis in line with regulatory
requirements and the risk appetite set by the Board.
Capital management
2019

2018

Movt

Common Equity Tier 1 (Level 2)- APRA Basel 3
Credit risk weighted assets ($b)

11.4%
358.1

11.4%
337.6

6%

Total risk weighted assets ($b)

417.0

390.8

7%

APRA, under the authority of the Banking Act 1959, sets minimum regulatory requirements for banks including what is acceptable asregulatory capital and provides methods of measuring the risks incurred by the Bank.
The Group’s Common Equity Tier 1 ratio remained at 11.4% based on APRA Basel 3 standards, exceeding APRA’s minimum requirements. Cashearnings and divestments were offset by the impact of dividends and share buybacks during the year.
Dividends
This performance allowed us to propose that a final dividend of 80 cents be paid on each eligible fully paid ANZ ordinary share, bringing thetotal dividend for the year ended 30 September 2019 to $1.60 per share. This represents a dividend payout ratio of 70.1% of cash profit fromcontinuing operations.
The proposed 2019 final dividend of 80 cents per share will be 70% franked for Australian taxation purposes, and carry a New Zealand (NZ)
imputation credits of NZD 9 cents per ordinary share. It will be paid on 18 December 2019 to owners of ordinary shares at close of business on
12 November 2019 (record date).
ANZ has a Dividend Reinvestment Plan (DRP) and a Bonus Option Plan (BOP) that will operate in respect of the proposed 2019 final dividend.
For the 2019 final dividend, ANZ intends to provide shares under the DRP through an on-market purchase and BOP through the issue of newshares.
Further details on dividends provided for or paid during the year ended 30 September 2019 are set out in Note 5 in the Annual Report.
Shareholders Returns
Shareholder Returns
Earnings per
Share (cents)

1.

Dividends per
Share (cents)

Dividends Payout
Ratio (%)

Total Shareholder
Return (%)

2019

227.6

2019

160

2019

70.1

2019

9.2

2018

223.4

2018

160

2018

71.1

2018

0.6

2017 operations
2017 are detailed on page
2017 has been presented
232.7 on a cash profit from continuing
160 basis. Discontinued operations
69 61.
Information
2016
2015

202.6
260.3

2017

2016

160

2016

79.4

2016

2015

181

2015

71.2

2015

13.1
9.2
-7.5

63
ANZ 2019 ANNUAL REPORT63

OUR PERFORMANCE (continued)

Performance Overview (continued)

FIVE YEAR SUMMARY

Financial performance - cash2
Net interest income
Other operating income3
Operating expenses3
Profit before credit impairment and income tax
Credit impairment charge
Income tax expense
Non-controlling interests
Cash profit from continuing operations2
Cash profit/(loss) from discontinued operations
Cash profit
Adjustments to arrive at statutory profit2
Profit attributable to shareholders of the Company
Financial position
AssetsNet assets
Common Equity Tier 1
Common Equity Tier 1 – Internationally
Comparable Basel 34
Return on average ordinary equity (statutory)5Return on average assets (statutory)
Cost to income ratio (cash)2
Shareholder value – ordinary shares
Total return to shareholders (share price movement plus
dividends)
Market capitalisation
Dividend (cents)
Franked portion– interim– finalShare price– high (dollars)– low (dollars)– closing (dollars)
Share information(per fully paid ordinary share)
Earnings per share (cents) (statutory)
Dividend payout ratio (statutory)
Net tangible assets per ordinary share6
No. of fully paid ordinary shares issued (millions)
Dividend reinvestment plan (DRP) issue price– interim– finalOther information
No. of employees (full time equivalents)
No. of shareholders
1.

20191
$m

20181
$m

20171
$m

2016
$m

2015
$m

14,3394,690(9,071)
9,958(795)(2,678)
(15)
6,470
(309)
6,161
(208)
5,953

14,514
4,853(9,401)
9,966(688)(2,775)
(16)
6,487
(682)
5,805
595
6,400

14,875
4,941(8,967)
10,849(1,199)(2,826)(15)(6,809)
129
6,938
(532)
6,406

15,095
5,499(10,439)
10,155(1,956)(2,299)
(11)
5,889
n/a
5,889
(180)
5,709

14,616
5,921(9,378)
11,159(1,205)(2,724)
(14)
7,216
n/a
7,216
277
7,493

981,137
60,794
11.4%
16.4%

943,182
59,405
11.4%
16.8%

897,326
59,075
10.6%
15.8%

914,869
57,9279.6%
14.5%

889,900
57,353
9.6%
13.2%

10.0%
0.6%
49.5%

10.9%
0.7%
52.0%

11.0%
0.7%
46.1%

10.0%
0.6%
50.7%

14.5%
0.9%
45.7%

9.2%

0.6%

13.1%

9.2%

(7.5%)

80,842
160
100%
70%$29.30$22.98$28.5280,979
160
100%
100%
$30.80$26.08$28.1886,948
160
100%
100%
$32.95$25.78$29.6080,886
160
100%
100%
$29.17$21.86$27.6378,606
181
100%
100%
$37.25$26.38$27.08210
76.2%$19.59
2,835

221.6
72.1%
$18.47
2,874

220.1
73.4%
$17.66
2,937

197.4
81.9%
$17.13
2,927

271.5
68.6%
$16.862,903$27.79-$27.76$26.03$28.80$29.02$24.82$28.16$31.93$27.0839,060506,847

39,924509,238

44,896522,425

46,554545,256

50,152546,558

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 2015 have notbeen restated. All ratios are presented on a Group basis inclusive of discontinued operations across 2019 to 2015.
2.
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. Cash profit is not
audited; however, the external auditor has informed the Audit Committee that 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.
3.
On adoption of AASB 15, the Group reclassified certain items previously netted which are now presented gross in operating income and operating expenses. Only the comparative informationfor 2018 has been restated which increased total operating income and total operating expenses by $153 million for the September 2018 full year.
4.
Internationally Comparable Methodology applied for 2015–2018 aligns with APRA’s information paper entitled ‘International Capital Comparison Study’ (13 July 2015). Basel Internationally
Comparable ratios do not include an estimate of the Basel l capital floor requirement.
5.
Average ordinary equity excludes non-controlling interests and preference shares.
6.
Equals shareholders’ equity less preference share capital, goodwill, software and other intangible assets divided by the number of ordinary shares

64

ANZ 2019 ANNUAL REVIEW64
ANZ 2019 ANNUAL REPORT

2019

2018

2017

2016

2015

Australia Retail1

4

3

4

2

4

Australia Commercial2

3

3

4

4

4

Australia Institutional

1

1

2

1

–

New Zealand Retail4

4

4

4

4

5

New Zealand Commercial and Agricultural

5

5

5

5

5

New Zealand Institutional

1

1

3

1

–

Breaches

784

1,114

1,443

1,408

1,629

Investigations resulting in termination

151

226

262

254

294

998,474

889,135

550,361

453,054

–

77

73

72

74

76

32.5

32.0

31.1

29.9

29.5

Fair and Responsible Banking

Net Promoter Score Ranking (relative to peers)

3

5

6

Code of conduct

Financial Wellbeing

Help enable social and economic participation of
1 million people by 2020 (cumulative total)7
Employees
Employee Engagement (%)8
Total Women in Leadership (%)

9

Community
Total community investment ($m)10
Volunteer hours
Employee volunteering participation rate (%)11

142.2

136.9

131.1

89.8

74.8

134,930

124,113113,127

113,071

108,142

42.4

34.6

29.4

–

–

6.3

–

–

–

–

19.1

11.5

6.9

2.5

–

Housing

Provide NZ $100 million of interest free loans to insulate homes for
ANZ mortgage holders (NZ$ million)12
Environmental Sustainability

Fund and facilitate at least AU$15 billion by 2020 towards environmentally
sustainable solutions for our customers (AU$ billion cumulative total)13
Environmental footprint
Total scope 1 & 2 GHG emissions (tCO2e)

156,568

171,012

180,993

193,569

209,531

Total scope 1,2 & 3 GHG emissions (tCO2e)

250,857

266,906

273,216

299,224

335,085

Renewables (%)

83

76

70

63

60

Coal (%)

9

10

16

19

18

Gas (%)

8

13

13

18

22

1,371

1,076

1,141

875

881

Project finance portfolio

14

Project finance commitment to renewable energy ($m)

1.

2.

3.

4.

5.

6.

Roy Morgan Research Single Source, Australian population aged 14+, Main Financial
Institution, six month rolling average to Sep’15, Sep’16, Sep’17, Sep’18 & Sep’19. Ranking
based on the four major Australian banks.
DBM Business Financial Services Monitor. Base: Commercial (<$100 million annual turnover)Main Financial Institution customers. Six month average to Sep’15, Sep’16, Sep’17, Sep’18 &Sep’19. Ranking based on the four major Australian banks.
Peter Lee Associates, 2019 Large Corporate and Institutional Relationship Banking surveys,
Australia.
Retail Market Monitor, Camorra Research, six month rolling average to Sep’15, Sep’16,
Sep’17, Sep’18 & Sep’19.
Business Finance Monitor, TNS Kantar Research. Base: Commercial ($3 million – $150 million
annual turnover) and Agricultural (>500K annual turnover) customers. Four quarter rolling
average to Q3’15, Q3’16, Q3’17, Q3’18 & Q3’19.
Peter Lee Associates Large Corporate and Institutional Relationship Banking surveys, New
Zealand 2016 – 2019, ranked against the Top 4 competitors (in 2016 rank based on question‘which bank would you most likely to recommend’).

Target commenced in 2016. Performance includes people helped through our initiatives tosupport financial wellbeing, including our financial inclusion, employment and community
programs, and targeted banking products and services for small business and retailcustomers. Refer to the 2019 ESG Supplement for methodology (to be released in December).
8.
The 2017 engagement survey was run as a pulse survey sent to 10% of the bank’s
employees with a 57% response rate.
9.
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).
10.
Includes foregone revenue ($109 million for 2019), being the cost of providing low or fee
free accounts to a range of customers such as government benefit recipients, not-for-profit
organisations and students.
11.
Commenced reporting in 2017.
12.
Target commenced in 2019.
13.
Target commenced in 2016. Performance includes funding or facilitation of initiatives that
help lower carbon emissions, improve water stewardship, and minimise waste.
14.
Breakdown for 2017 & 2018 does not total to 100% due to rounding.
7.

65Remuneration
Overview
The following pages provide a summary of the remuneration for our Key Management Personnel (KMP) - Non-Executive Directors (NEDs),
Chief Executive Officer (CEO) and Disclosed Executives. In this section we have included the remuneration tables that shareholder feedback
has told us are of the most interest. The full Remuneration Report is contained in the Annual Report from page 66 onwards, which includes
details of our remuneration strategy and framework and the remuneration practices that apply to KMP. The report can be accessed via the ANZ
website at anz.com/annualreport.

NON-EXECUTIVE DIRECTOR REMUNERATIONThe Board reviewed NED fees for 2019 and determined once again not to increase their fees (which remain unchanged from 2016). As
disclosed in last year’s Remuneration Report, the NEDs who served on the Board in 2018 agreed to a 20% reduction of their Board fee for 2019(20% reduction to the Chairman fee from $825,000 to $660,000, and 20% reduction to the NED member fee from $240,000 to $192,000) as aconsequence for the shared accountability for the failures highlighted by the 2018 Royal Commission.
2019 STATUTORY REMUNERATION - NEDSSHORT-TERM NED BENEFITS

POST-EMPLOYMENT

Financial
year

Fees1
$

Non monetary
benefits$

Super
contributions1$

Total
remuneration2$

2019639,351-

20,649660,000

2018

804,831-

20,169825,000

2019

275,851-

20,649296,500

2018

324,331-

20,169344,500

2019

296,351-

20,649317,000

2018

344,831-

20,169365,000

2019

246,058-

20,649266,7072018

277,567-

20,169297,7362019

229,131-

20,649249,7802018

148,546-

11,996

160,542

G Liebelt

2019294,851-

20,649315,500

2018

345,858-

20,169366,027

J Macfarlane

2019249,851-

20,649270,5002018

298,331-

20,169318,500

2019

57,258

4,832

5,133

67,223

2018

314,831-

20,169335,0002019

2,288,702

4,832

149,676

2,443,210

2018

2,859,126-

153,179

3,012,305

Current Non-Executive Directors
D GonskiI AtlasP Dwyer
J Halton
J Key

3Former Non-Executive Director
H Lee4
Total of all Non-Executive Directors

1.

2.
3.

4.

Year-on-year differences in fees relate to the 20% reduction to the Chairman fee and the NED member fees in 2019, changes in Committee memberships and changes to the superannuation
Maximum Contribution Base.
Long-term benefits and share-based payments do not apply for the NEDs.
J Key commenced as a NED for Australia and New Zealand Banking Group Limited (ANZBGL) 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 NED until 31 December 2017 and from
1 January 2018 as Chairman. In 2019, J Key also received a total of NZD 382,950 as Chairman for ANZ Bank New Zealand Limited.
H Lee retired as a NED on 19 December 2018, so 2019 remuneration reflects partial service year up to his date of retirement. Non monetary benefits relate to gifts on retirement including
Fringe Benefits Tax.

CEO AND DISCLOSED EXECUTIVES’ REMUNERATIONYEAR-ON-YEAR REMUNERATION AWARDED
These tables show a year-on-year comparison of remuneration awarded to the CEO and Disclosed Executives for the 2017, 2018 and 2019
performance periods. Remuneration awarded includes any cash payments (e.g. fixed remuneration and cash variable remuneration) and thevalue of deferred shares and performance rights awarded for the year but which have not yet vested (i.e. the value which has not yet been
received during the year). These tables also show the Annual Variable Remuneneration (AVR)/Variable Remuneration (VR) as a % of target andmaximum opportunity – this % remains unchanged whether using the threshold or full vesting value of performance rights.
66

ANZ 2019 ANNUAL REVIEW

CEO
AVR
deferredshares
$

Total
AVR
$

Threshold vesting

Full vesting

LTVR1
Total
performance remunerationrightsawarded
$
$

LTVR1
Total
performance remunerationrightsawarded$$AVR as % ofTarget Maximum
opportopportunity
unity

Financial
year

Fixed
remuneration
$

AVR
cash
$

2019

2,100,000

750,000

750,000 1,500,000

2,100,000

5,700,000

4,200,000

7,800,000

71%

48%

2018

2,100,000

875,000

875,000 1,750,000

1,400,000

5,250,000

2,800,000

6,650,000

83%

56%

2017

2,100,000 1,000,000 1,000,000 2,000,000

2,100,000

6,200,000

4,200,000

8,300,000

95%

63%

CEO
S Elliott

1.

Long Term Variable Remuneration (LTVR)

Note the 2019 LTVR has not yet been awarded, approval will be sought from shareholders at the 2019 AGM for the LTVR award shown above.
The 2018 LTVR award was significantly reduced as further acknowledgement of the conduct issues and reputation damage of the mattersraised in the 2018 Royal Commission.
Disclosed Executives
Financial
year

Fixed
remuneration
$

VR
cash
$

VR
deferredshares$Threshold vesting

Full vesting

VR as % of

VR
Total
performance remunerationrights1
awarded
$
$

VR
Total
performance remunerationrights1
awarded$$Targetopportunity

Maximum
opportunity

Current Disclosed Executives
M Carnegie

K Corbally

2019

1,000,000

495,000

495,000

510,000

2,500,000

1,020,000

3,010,000

75%

50%

2018

1,000,000

528,000

528,000

544,000

2,600,000

1,088,000

3,144,000

80%

53%

2017

1,000,000

561,000

561,000

578,000

2,700,000

1,156,000

3,278,000

85%

57%

2019

950,000

478,500

478,500

493,000

2,400,000

493,000

2,400,000

85%

57%

2018

486,000

164,835

164,835

169,830

985,500

169,830

985,500

83%

55%

2019

1,000,000

528,000

528,000

544,000

2,600,000

1,088,000

3,144,000

80%

53%

2018

876,000

354,750

354,750

365,500

1,951,000

731,000

2,316,500

61%

41%

2017

664,000

301,290

301,290

310,420

1,577,000

620,840

1,887,420

76%

51%

2019

726,000

198,000

198,000

204,000

1,326,000

408,000

1,530,000

41%

28%

2019

1,000,000

544,500

544,500

561,000

2,650,000

1,122,000

3,211,000

83%

55%

2018

1,000,000

577,500

577,500

595,000

2,750,000

1,190,000

3,345,000

88%

58%

2017

1,000,000

739,200

739,200

761,600

3,240,000

1,523,200

4,001,600

112%

75%

2019

219,440

170,255

113,504-

503,199-

503,199

65%

43%

2019

1,200,000

874,500

874,500

901,000

3,850,000

1,802,000

4,751,000

110%

74%

2018

1,200,000

717,750

717,750

739,500

3,375,000

1,479,000

4,114,500

91%

60%

2017

1,200,000

1,080,750

1,080,750

1,113,500

4,475,000

2,227,000

5,588,500

136%

91%

843,521---843,521-843,521

0%

0%

2018

1,170,713

644,397644,397

663,925

3,123,432

1,327,849

3,787,356

83%

56%

2017

1,195,013

726,181

726,181748,187

3,395,563

1,496,374

4,143,749

92%

61%

2019

240,000

n/a

n/a

n/a

240,000n/a

240,000

n/a

n/a

2018

1,000,000

396,000

396,000

408,000

2,200,000

816,000

2,608,000

60%

40%

2017

1,000,000

534,600

534,600

550,800

2,620,000

1,101,600

3,170,800

81%

54%

(6.5 months in role)

A George(12 months/4.5 months
as Deputy CEO)(10 months in role)

M Hand(9 months as Disclosed
Executive)

M Jablko

2

A Watson(3.5 months in role)

M Whelan

Former Disclosed Executives
2019

D Hisco2(8.5 months in role)

F Ohlsson(3 months in role)1.
2.

Deferred share rights for the CRO.
Paid in NZD and converted to AUD. The year-on-year difference in 2017 and 2018 fixed remuneration for D Hisco relates to fluctuations in the exchange rate.

67

Remuneration Overview continued

2019 VARIABLE REMUNERATION AWARDED
This table shows the variable remuneration awarded to the CEO and current Disclosed Executives for the year ending 30 September 2019.
Former Disclosed Executives: D Hisco was not awarded and F Ohlsson was not eligible for variable remuneration in 2019.
CEO and Current Disclosed Executives

Maximum opportunity

S Elliott

1

AVR $1,500,000=

48% of max+$750,000$750,000+

LTVR $4,200,000 performance rights face value at full vesting (subject to shareholder approval at the 2019 AGM)

M Carnegie=

VR $2,010,000$495,000+ $495,000 +$1,020,000

50% of max

K Corbally2=

VR $1,450,000+$478,500+$478,500$493,000

57% of max

A George
VR $2,144,000=$528,000=++ $528,000 +$1,088,000

53% of max

M Hand3
VR $804,000
28% of max+$408,000$198,000 $198,000

M Jablko=

VR $2,211,000$544,500+ $544,500 +$1,122,000

55% of max

A Watson3=

VR $283,759+$170,255$113,504

43% of max

M Whelan=

VR $3,551,000
74% of max

Cash
1.
2.
3.

$874,500++$874,500

Deferred shares or deferred share rights$1,802,000

Performance rights face value at full vesting4

Variable remuneration for the CEO = AVR + LTVR
CRO receives deferred share rights instead of performance rights.
Remuneration disclosed from commencement in Disclosed Executive role. Acting Group
Executive and CEO, NZ role awarded 60% of VR as cash and 40% as deferred shares.

4.

The face value of performance rights is disclosed at full vesting, which differs from thedisclosures in previous years. Divide by two to convert to face value at threshold vestingfor performance rights.

2019 ACTUAL REMUNERATION RECEIVED
This table shows the remuneration the CEO and Disclosed Executives actually received in relation to the 2019 performance year as cash, or in
the case of prior equity awards, the value which vested in 2019.
Fixed
remuneration

Cash variable
remuneration

Total
cash

Other deferredremuneration
which vested
during the year1$

Actualremuneration
received$

Deferred variable
remuneration
which vested
during the year1$$

Deferred variable
remuneration which
lapsed/forfeitedduring the year1, 2$$$

2,850,000

1,243,464-

4,093,464(3,038,880)

CEO and Current Disclosed Executives
S Elliott

2,100,000

750,000

M Carnegie

1,000,000

495,000

1,495,000

153,490-

1,648,490-

K Corbally3

950,000

478,500

1,428,500

430,229

573,129

2,431,858(184,676)

A George

1,000,000

528,000

1,528,000

301,609-1,829,609(101,328)

M Hand726,000

198,000

924,000--

924,000-

4

1,000,000

544,500

1,544,500

192,589

318,564

2,055,653-

A Watson5

219,440

170,255

389,695--

389,695-

M Whelan

1,200,000

874,500

2,074,500

704,915-

2,779,415(1,059,695)

654,067-

1,497,588(7,385,293)

433,146-

673,146(191,526)

M Jablko

Former Disclosed Executives
D Hisco2, 5, 6

843,521-843,521

F Ohlsson

240,000n/a

240,000

1.

2.

3.

68

The point in time value of previously deferred remuneration granted as shares/sharerights and/or performance rights is based on the one day Volume Weighted Average Price(VWAP) of the Company’s shares traded on the ASX on the date of vesting or lapsing/forfeiture multiplied by the number of shares/share rights and/or performance rights.
The lapsed/forfeited values relate to the performance rights we awarded in November
2015 which lapsed due to the performance hurdles not being met, and for D Hisco
forfeiture on cessation of unvested deferred remuneration.
Other deferred remuneration for K Corbally relates to a previously disclosed equity

ANZ 2019 ANNUAL REVIEW

4.

5.
6.

retention award relating to his role prior to appointment to the Group Executive
Committee.
Other deferred remuneration for M Jablko relates to previously disclosed compensation
for deferred remuneration forfeited as a result of joining ANZ.
Paid in NZD and converted to AUD.
The vested values for D Hisco relate to deferred shares, deferred share rights andperformance rights awarded in prior years that vested prior to cessation.

Important dates
for shareholders1
APRIL 2020

30th April

NOVEMBER 2020

Half Year Results Announcement

MAY 2020

9th November

Final Dividend Ex-Date

10th November

Final Dividend Record Date

11th November

DRP/BOP/Foreign Currency Record Date

11th MayInterim Dividend Ex-Date

12th MayInterim Dividend Record Date

DECEMBER 2020

13th May

DRP/BOP/Foreign Currency Record Date

16th December

Final Dividend Payment Date

16th December

Annual General Meeting (Adelaide)

JULY 2020

1st JulyInterim Dividend Payment Date

OCTOBER 2020

14th OctoberClosing date for receipt of director nominations

29th October

Annual Results Announcement

Our international presence and earning composition by geography2

International$965 million

Australia$3,640 million

New Zealand$1,865 million
International
Asia
China
Hong Kong
India
Indonesia
Japan
Laos
Malaysia

1.
2.

Myanmar
The Philippines
Singapore
South Korea
TaiwanThailand
Vietnam

Pacific
American Samoa
Cook Islands
Fiji
Guam
Kiribati
New Caledonia
Papua New Guinea
Samoa

Solomon Islands
Timor-Leste
Tonga
Vanuatu

EuropeFranceGermany
United Kingdom

Middle East
United ArabEmirates (Dubai)
United Statesof America

If there are any changes to these dates, the Australian Securities Exchange will be notified accordingly.
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 53
69

Contacts
REGISTERED OFFICESHARE AND SECURITIES REGISTRARANZ Centre Melbourne
Level 9, 833 Collins Street
Docklands VIC 3008
Australia

AUSTRALIA

UNITED KINGDOM

Computershare Investor Services Pty Ltd
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Australia

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

Telephone: +61 3 9273 5555
Facsimile: +61 3 8542 5252

Telephone within Australia: 1800 11 33 99
Company Secretary: Simon Pordage International Callers: +61 3 9415 4010
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
Web: www.shareholder.anz.com
Group General Manager
Investor Relations: Jill Campbell
COMMUNICATIONS AND
PUBLIC AFFAIRSLevel 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

Facsimile: +61 3 9473 2500
Email: anzshareregistry@computershare.com.au
Austraclear Services Limited
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Telephone: 1300 362 257
JAPANJapan Securities Depository Center,
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Phone: +81-3-3661-0161 (Main) /+81-3-3661-7193 (Book-Entry Transfer Department)
LUXEMBOURG

Deutsche Bank Luxembourg S.A.
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Telephone: +352 4 21 22 656
NEW ZEALAND

Computershare Investor Services Limited
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Telephone: 0800 174 007
Facsimile: +64 9 488 8787

70

ANZ 2019 ANNUAL REVIEW

Telephone: +44 870 702 0000
Facsimile: +44 870 703 6101
UNITED STATESThe Bank of New York Mellon
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New York, NY 10286
USA
Telephone: +1 1800 254 2826
BNY Mellon Shareowner Services
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USA
USA Toll Free Telephone: 1888 269 2377
Telephone for International Callers: 1201 680 6825
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Deutsche Bank Trust Company Americas
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Telephone: +1 212 250 2500
GERMANY

Deutsche Bank Aktiengesellschaft
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Germany
Telephone: +49 69 910 31441
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Email: GTO-FFT.SDO@db.com

MORE INFORMATION
General Information on ANZ can be obtained from our website: anz.com. Shareholders
can visit our Shareholder Centre at anz.com/shareholder/centre. ANZ Corporate Governance:
For information about ANZ’s approach to Corporate Governance and to obtain copiesof ANZ’s Constitution, Board/Board Committee Charters, Code of Conduct and summaries of other
ANZ policies of interest to shareholders and stakeholders, visit anz.com/corporategovernance.
Australia and New Zealand Banking Group Limited ABN 11 005 357 522.

Founding Signatory of: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”.
DISCLOSURE 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.