Bluenotes video interview with ANZ Chief Executive Officer Shayne Elliott and Andrew Cornell
Bluenotes 01/05/2019
ANDREW CORNELL: Morning Shayne, thanks very much for joining bluenotes on the day of the interimresult. The key numbers there, whether we’re talking EPS, cash earnings, ROE, dividend; they’re all flat oreven slightly improved. And yet the overall tone is a very difficult environment, can you talk us through themajor factors there?
SHAYNE ELLIOTT: Sure. Actually every year one of the more difficult conversations we have about the result
is, how do we describe it in a few words. This year we kind of stuck on the word ‘balanced’, because it is abalanced result actually. Because the environment has actually been quite tricky, not everywhere that weoperate, but in much of it and particularly here in Australia. And in that tricky environment, we actually think
we’ve done pretty well. When you look at earnings per share, up. The profit from continuing operations, up
a little bit. Stronger capital. ROE is up. So there is good there, but of course we also have to talk about theenvironment as of now, not just over the last six months but as we’re leading in to the future. And that’s
what’s made this result a little bit more difficult than most to talk about and describe.
ANDREW CORNELL: Because there are a couple, if we look at the positive factors here, there’s a couple ofthings. You talked about the improved consistency of the institutional bank, there’s a sharper focus in thebank, you’ve unwound some of the tighter lending requirements. So there are some actions that you’vetaken and some better than expected results in there. Are they enough to tide through this difficult periodahead?
SHAYNE ELLIOTT: Well, we think so. I think they’re really the dividends of a lot of the hard decisions we’ve
made over the last three years. Whether those decisions were about tightening up and refocusing ourbalance sheet – we sold a lot of businesses that weren’t core to us, we reduced a whole bunch of assets that
we no longer wanted – or whether it’s the focus we’ve done on costs, we’ve got our costs really into goodshape.
Those decisive actions have really given us a dividend in two ways. One, from a financial perspective, we’re
just better able to resource those businesses that really matter and will drive long-term value. And we really
got the results and you saw it in this half; New Zealand, again a solid performance, and institutional isprobably the star performer of the half. And so those are great offsets to some of the areas where we’ve hada bit of weakness, like in Australia.
ANDREW CORNELL: And you talk about Australia, in particular, as being a tough environment and obviously
there’s an election coming, but ongoing it will be a tough environment. That’s where you’ve made the mostsignificant management changes, with Mark Hand and Maile Carnegie coming in. Are you expecting fromthem more policy changes, or is it a genuine wholesale restructure of how the bank operates?
SHAYNE ELLIOTT: It’s probably not really a restructure, we’re going to continue to do the things that we’ve
always done. We’re really focused on being the best bank for people who want to buy and own a home, orstart and run a small business.
But what we recognise is if you stand back and think about the environment, we’ve got a lot of work to putthings right. Remediation. We’ve screwed up in the past and we’ve got to get that money back into ourcustomers’ hands, and it’s a significant amount of work. For us its 2.6 million accounts we’ve got to rectify.
1Now I’m not proud of that number, but we’re going to get on with it. So that in and of itself is a huge amountof work.
Secondly, there is a momentum issue in our business today. More Australians are finding it a little bit tough.
We’re in the middle of an election cycle and we’re hearing a lot about cost of living, wage growth etcetera.
Well those things manifest themselves in our own business and we can see it, so we’ve got to get
momentum right, helping people get into their homes and helping them start and run their businesses. Thatis a big task.
And then of course we’re right in the middle – or maybe we’re only at the beginning – of this hugetransformation happening in our industry. Now, mostly we talk about technology and data and all of those
things but the reality is customer expectations are rising, regulatory scrutiny is increasing, there’s just going
to be a whole new range of competitors – some of them are setting up as we speak – and we’ve got to get
ready for that. So you’ve got these three enormous tasks and what we said is we don’t know that the old
way of running the place was appropriate. And it’s still our biggest opportunity Australia, it’s still our biggest
business. We want to put all our efforts into that and I think having a team with Mark’s experience andMaile’s experience – which are different – coming into that problem, those shared problems is absolutely
the right way to go.
ANDREW CORNELL: So when we look at the result today and you talk about how it was a balanced result
and there was good, consistent performances. What elements, in particular of what we’ve seen in today’s
result are those things that give you the confidence that you’re talking about?
SHAYNE ELLIOTT: So, we’ve had our fifth half of costs down. So we’re actually bringing the cost of runningthe bank down every half and we’re down another one percent. So that means we’ve absorbed inflation,
we’ve absorbed the fact that we’re continuing to invest in the business, we’ve got more compliance costs
and we’ve brought costs down. That’s a great point.
We’ve continued to strengthen our capital. Our capital levels, we are the best capitalised major bank inAustralia. So we’ve got stronger balance sheet than we’ve had before. Our institutional business, that wereally leaned into hard three years ago in terms of transforming it, produced a great result. Strong revenue
growth, costs out again, returns up. So this is about really delivering results from the decisions of the pastand that’s what I feel really good about. And that gives us confidence that if we put that same focus,
attention and weight into dealing with the problems we’re confronted with today, this is a team thatdeserve credit for that and that will, and can, deliver.
ANDREW CORNELL: Bearing in mind that it is a challenging environment, are there any particular elements –the credit cycle or anything – that you’re looking at cautiously?
SHAYNE ELLIOTT: Sure. The credit cycle’s an interesting one and the economy in Australia – and, again it’s
mostly about Australia in terms of the result at the moment – is in really good shape. Unemployment’s low.
Interest rates are low. Inflation is low. Things are not bad from that perspective, but there are a few little
challenges out there.
Wage growth is stubbornly low. Now there’s lots of theories about that and I’m not the right person to talkabout it, but that has an impact on our business. So we are a little bit worried about families out there doing
it a little bit tough. And we see it in our own data.

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Now at some level the data is small. We saw 500 or 600 families in this half get themselves into difficulty interms of not being able to keep up with their mortgage payments. Now, for those 600 that’s pretty
horrendous, but that’s out of about a million customers we have with a home loan so we’ve got to put thosethings into perspective. But that’s a lot higher than we’ve seen in the past, so the question for us is; is this atrend? Is it just a bit of a blip?
Now, I think there’s reasons to be optimistic. The economy is in good shape. We do have a good regulatory
system. We do have good governance overall and I’m confident that we’ll work our way through this. But
that’s the area we are focussed on most, in that home owner area.
I would say secondary would be, there’s a little bit of stress in some areas of small business. Not across theboard, not every industry, not every state, but there’s some emerging signs of weakness there. But inperspective, these things are relatively small.
ANDREW CORNELL: Well, thanks very much for speaking with us today Shayne.
SHAYNE ELLIOTT: Thank you.

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