Bluenotes video interview with ANZ Chief Financial Officer Michelle Jablko andAndrew Cornell
Bluenotes 31/10/2018
ANDREW CORNELL: Morning Michelle. Thanks very much for joining bluenotes on the morningof the annual result. There’s some notable items, some large items, in this result; remediation
costs, different changes for how you amortise technology. But if we look beyond those items,
how would you describe the sort of major moving parts in this annual result.
MICHELLE JABLKO: Yes, sure. And so first off, I’d say those items are all in our cash profit.
They’re all above the line, we know we are accountable for them. But it is useful to look throughthem, just to understand some of the trends in the business. If I do that, cash profit would beup three per cent. We’ve continued to have really strong capital flexibility, actually 11.8 percent pro forma. So well and truly ahead of where we need to be. We’ve continued to show
discipline on costs. So our costs are down one and-a-half per cent. And we’ve had five halves ina row, I think it is, of absolute cost reduction. So we know that our strategy of trying to besimpler is really paying off there.
From a revenue perspective we did a really good job in New Zealand and institutional. The
Australian business, you know things have been difficult. It’s been a difficult environment,
particularly in the second part of the year. But in that, we’ve been really focused on where wewant to grow. And so while it has the short-term revenue impact, we think that focus is theright thing to do.
ANDREW CORNELL: One of the main drivers of this result in the cash earnings side is the credit
quality again is perhaps surprisingly good and this has been said now for three or four years
running that it’s better and better. How sustainable is that credit quality story?
MICHELLE JABLKO: When I started, I remember my first results and the first discussion I had
with you Andrew, and at that point credit provisions were a real drag on the result actually. We
had almost $2 billion of credit provisions, about three times this year’s number. We had about$160 million of losses for Asia retail – we don’t own that anymore – and we also had a midmarket corporate business in Asia which we’ve run down and that was about $80 million. So
some quite big structural difference from there. Clearly the environment has helped us and weknow that won’t go on indefinitely, but we think we’re making some good strategic choices inour business that do make us less risky in to the future.
ANDREW CORNELL: Part of that, underlying that is the sort of focus on the risk-adjusted returnsof the business, which has been a clear focus. And also, it plays into the return on equity which
has come down in this one. Can you talk us through that sort of return on the assets forinvestors?
MICHELLE JABLKO: I’ll take both of those. If I think about risk-adjusted returns and the work
we’ve done in transforming the institutional business over the last two-to-three years that’s
been a real central part to how we’ve thought about it. And risk-adjusted returns is really about
making sure that for the capital we put to work we’re being paid properly. And what that’s donein institutional is by keeping capital scarce for the team they’ve had to really, really focus onwhere they can create value for customers and therefore customers reward us for that. And
we’ve seen risk-adjusted returns in institutional go up about 20 per cent in that time and wecontinue to see the ability to do that in that business. Our overall ROE, if I then sort of move to1

ROE, has also been impacted by the fact that we’re holding a lot more capital. So when I
compare ANZ to the market more generally, we are holding a lot more capital and that needs tobe taken in to account.
ANDREW CORNELL: If we look at capital. Capital flexibility is something that you’ve called out inthe result as quite a strength. Can you … investors buy companies for a future income stream
so can you talk us through how you’re thinking about that capital flexibility? Is it dividends orsomething else?
MICHELLE JABLKO: The way we think about capital management more broadly, and we’ve had
this approach now for a couple of halves or for a couple of years, is that firstly we don’t spend
the money before we have it. Secondly, we look at what capital we think we need both from a
regulatory perspective and also our assessment of risk. And then finally we look at is there abetter use in the business. If not, then we look at returning excess capital to shareholders. Our
dividend strategy or dividend policy is really part of that overall capital management strategy.
While we’ve got surplus capital it’s less about payout ratios and that sort of thing and more
about what’s the most efficient mechanism to return capital to shareholders. This year it was a$1.60 dividend and an on-market buy back and we announced I think $3 billion worth of onmarket buy backs during the year.
ANDREW CORNELL: Thanks very much for speaking with us. Good luck with the presentation of
the result today.
MICHELLE JABLKO: Thanks Andrew.
ANDREW CORNELL: Thanks Michelle.

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