News Release
For release: 1 May 2018

Transcript: bluenotes interview with ANZ Chief Financial
Officer Michelle Jablko on ANZ’s 2018 Half Year Results.
The following is a transcript of a video interview with ANZ Chief Financial Officer MichelleJablko discussing ANZ’s 2018 half year results.
The interview was conducted by Andrew Cornell, Managing Editor of bluenotes, ANZ’s digitalpublication for news, opinion and insight and can be viewed at www.bluenotes.anz.com
Andrew Cornell: Morning Michelle. Thanks very much for speaking again with bluenotes on
this, the morning of the bank’s interim result. It’s a story of an ongoing transformation of
the bank, the simplification process, the rebalancing process. From your position as Chief
Financial Officer, when you look at these results today are there things you can point to in
the result to show that that process is playing out or playing out well?
Michelle Jablko: I’ll point to three things. The first is our capital. We’ve increased ourcapital to 11 per cent, which is a really, really strong outcome. This is partly driven bydivestments, but also driven by the work we’ve done within the business to generate more
capital and use it more effectively. So that’s the first thing.
The second thing is that as a result of that, our risk adjusted returns continue to increase
and that is a really important measure as we look at our business. That’s saying, are webeing paid enough for the capital we’re putting to use. And then finally, is when I look at
costs, what we’re trying to do is be simpler and more focused and you can see that ourcosts are down and they’re down for the fourth half in a row. But at the same time as thatwe’re investing more proportionately in our ongoing businesses. That shows we can take thebenefits of simplification and really put our dollars to work where they most count.
Andrew Cornell: And is it fair to say that that simplification has had a benefit on the credit
quality line as well? Because credit provisions are very good in this result – one of thestrengths of this result. And people say ‘well that’s because the external environment isbenign’ but is some of this what you’ve been doing with the bank?
Michelle Jablko: Yes, it is a combination of both. So our provision charge was lower thishalf, our loss rate was 14 basis points on an annualised basis and clearly the credit
environment has been relatively benign which has helped us. But we’ve also done somereally serious work over the last couple of years.
We’ve done things like selling Esanda, the dealer finance business in Esanda; we’ve sold
Asia retail both of which had quite high loss rates. We’ve exited, or largely exited, emerging
corporate in Asia. We’ve tightened our risk appetite in a number of areas, like unsecuredloans in small business and personal loans, and also in commercial property. And the otherbig thing we’ve done is we’ve been prioritising Owner Occupied Principal and Interest
mortgages above Interest Only and Investor.
So, it’s really a combination of those things as well as the environment that I think has
helped us to the result today.
Andrew Cornell: And is that something that’s sustainable, that level of provisions?

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Michelle Jablko: As I look at it I think we will benefit from having a lower risk portfolio into
the future.
Andrew Cornell: Given that the external environment is, it’s a good external environment,
but it’s certainly not like bull run years, costs are always going to be then a focus; how is
the cost story unrolling?
Michelle Jablko: I think what you can see with us is that we’ve shown really good
discipline and execution in how we manage costs, but it really is a focus on sustainablesimplification and sustainable cost reductions. We want to do things that are right for thebusiness and by that I mean making sure we don’t have duplication where we don’t need to,that we simplify our processes. We have a lot of manual processes that are just way toocomplicated and we can really simplify those. And what we’re doing, while cost is really an
outcome of all of those and is a big area of focus, the things we’re doing are really being
done to have good customer outcomes and good outcomes for our people as well. Because
it really is about being simpler, rather than just short-term cost focus.
Andrew Cornell: Looking back again at capital, you talk about the capital efficiency thatthe bank’s working towards, the other side of that is obviously regulators and what’shappening with prudential standards and things. Can you talk us through the moving partsof the capital picture and how it may play into dividends or capital returns?
Michelle Jablko: So the way we look at it, and we’ve worked really hard to get to a strong
capital position early – so we’re at 11 per cent core equity capital today – and that’s comefrom, like I said at the start, how we’ve managed our business in terms of where we put ourcapital as well as selling assets that are no longer core to ANZ. That gives us enormous
flexibility going forward. And as we look at it there are a number of things we ask. So as
divestment proceeds come in, for example, and we’re sitting on well above the regulatory
minimum, first question we ask is, well what’s the level of capital we think we need to holdfor the current time? What could we better do in our business? Because if we can use capital
more effectively in our business for strong returns then we’ll do that.
But, likely as you saw when the SRCB capital was paid to us, we looked at it, we set ourlevels we were comfortable with. We didn’t have an alternative use in the business and so
we commenced a buyback and gave it back to shareholders and we continue to assess onthat same basis.
Andrew Cornell: Again, when we look at the sort of external factors that are playing for allbanks, funding costs particularly at the short end have started to – rose anyway in the firstquarter. We’re also seeing probably coming out of the Royal Commission more scrutiny ofresponsible lending, of credit growth. So how does this play out in the overall terms of credit
growth and margins do you think?
Michelle Jablko: There’s probably two questions there, so I’ll start maybe with credit
growth and credit growth has been slowing for the system. And we look at it and say, it
probably will continue to slow a bit. That’s for the industry and system as a whole, different
players and different participants in the industry will be able to do a bit better or a bit worse
than that based on what their starting point is and things they’re doing in their business.
If I then go to margins, you’re right, short term funding costs have really picked up inrecent weeks. It didn’t have a big impact in the first half. In terms of the future impact onthat, there are a few moving parts, not just the level of the costs themselves, but also what
the mix of our balance sheet is and how certain assets and liabilities behave over time. Allthings being equal if I look at it today and say ‘if rates stayed where they were today andour balance sheet mix stayed, it would have an impact in the second half.
Andrew Cornell: Thanks very much for talking through the numbers with us today. Thanks
Michelle.
Michelle Jablko: Thank you. Thanks Andrew.