Transcript of ANZ CEO Commenting on Q1 Trading Update

Australia and New Zealand Banking Group Limited ABN 11 005 357 522
News Release
For release: 17 February 2017

Transcript: Trading Update – BlueNotes interview
with ANZ CEO Shayne Elliott

The following is a transcript of a video interview with ANZ Chief Executive Officer Shayne
Elliott discussing ANZ’s first quarter 2017 trading update which was released today.

The interview was conducted by Andrew Cornell, Managing Editor of BlueNotes, ANZ’s digital
publication for news, opinion and insight and can be viewed at www.bluenotes.anz.com

Andrew Cornell Good morning Shayne. Thanks very much for joining us again on BlueNotes
on the morning of the trading update. It looks a very solid result -
particularly strong growth in retail and commercial in Australia; good
deposits growth; good markets performance. Were you happy with the
composition and is it sustainable?

Shayne Elliott Yes, we’re pretty pleased with the result. I mean it’s early days, it’s the first
quarter of the year and we’re going through quite a transformation at ANZ
but yes, we’re really pleased with how the year has started. We’re getting
growth in right areas – the areas that we committed to, the areas where we
want to grow and we’re seeing the performance, even in global markets, are
coming through exactly where you would expect them to be. There’s been a
little bit more volatility, a little bit more customer activity, and so that is I
think a really pleasing way to start the year.

Andrew Cornell When we look at revenue and growth in particular – for a long time we’ve
warned about a low-growth environment, to expect a low-growth
environment. Given the background of what you’ve said in the past, is it that
we’re growing too fast even?

Shayne Elliott I don’t know that we’re growing too fast. I think that the reality is that the
economy has slowed down a little bit and Australia’s still a great place to be;
New Zealand’s a great place to be; Asia’s a great place to be. But the growth
rates have just tempered down a little bit and we’ve seen that. And that
affects our business – we reflect the state of the economy by-in-large and
you see across the banking sector revenue growth, asset growth, lending
growth – it’s all just been a little bit more subdued than we’ve been used to.
And that puts the onus on us to be just even more focused on productivity
and efficiency to ensure that we can continue to deliver great things for
customers but also deliver a decent result for shareholders.

Andrew Cornell And indeed one of the real strengths here looking at the numbers is that cost
performance. You’ve made significant change in the 14 months or so that
you’ve been here now. Can you talk us through those cost reductions and
should we expect more? You mention that the point of this is to pass on the
cost reductions.

Shayne Elliott We’ve had a view that the world that we live in is just slowing a little bit and
therefore, as I said, in that view we’ve got to be even more efficient if we
want to win and be winning with our customers.

2

So we started early I think, and we delivered a great cost outcome last year
where we kept costs pretty flat and this year, well in this quarter anyway, we
actually got costs down and that’s a pretty big step for large organisations
like this and there clearly has to be more to come. Why? Because that’s the
only way we’re going to have the resources to deliver really competitive
products for our customers and be able to invest in new things, new
technology, the whole kind of digital platform that we want to build to service
our customers better.

Andrew Cornell And that’s the tension isn’t it? You want to take costs out of the ongoing
business but remain the best in digital. Have you got the kind of capacity to
invest in that full slate of digital technology that you want to?

Shayne Elliott I think we’ve got enough, and that’s something that we can never have
enough money to invest in digital. The reality is that it’s about getting the
right cost mix. So we’ve really focused in terms of where the cost out has
been, we’ve really focused around the non-customer-facing costs. Just the
bureaucracy, how we run things at the bank, to simplify the place, to be
doing less things in less places and do those things really really well. We
actually have a cost benefit out of that and that allows us to reinvest some of
that into more customer-focused costs. That’s things like Apple Pay, things
like the whole digital experience that we want to continue to improve.

Andrew Cornell The other area of concern coming into this reporting season, I know not so
much for ANZ but for the environment in general, was that credit quality
story – again a good result here but is that something that we should expect
over the 12 months ahead?

Shayne Elliott So we’ve always got to be cautious when we look at credit quality because,
you know, one quarter doesn’t make a year and we know that historically,
well for our business away, the first quarter is usually a low-point of credit
costs. It’s usually the most benign for all sorts of seasonal reasons. Having
said that, a year ago when we had a full year result we said when looking
forward we would expect 2017 to be more or less the same as 2016 in terms
of credit costs. Sitting where we are today, with that proviso our first quarter
isn’t always the best indicator, you’d have to say it’s looking a little more
optimistic today. So we expect them to be marginally better than that but as
I said it’s early days.

Andrew Cornell Another one that’s perennial in recent years for banks is the capital position,
the regulatory environment is still not certain, we’re getting a bit more
certainty but good capital generation here and some asset sales still
projected for the year ahead. Can you talk us through how you’re looking on
capital?

Shayne Elliott So our number one priority is to have really strong organic capital generation
i.e. that we just run this business really well, servicing customers that will
naturally generate cash that will boost our capital position and that was really
a standout, I believe, in the quarter. And what we’re seeing here is almost a
doubling of that capital generation in this quarter compared to what it has
been over the last number of years. So that alone has put us in a great
position. And then on top of that we’ve been disposing of non-core assets –
businesses and assets that we don’t believe are important for our future
customer franchise and they even add more into that capital position – not in
this quarter but they certainly will come in the future.

3

So we’ve really transformed ANZ from a capital position pretty early on I
think and there’s more to come on that and that says we’re in a very, very
strong capital position. In fact, it’s the strongest we’ve been in for a long
time and I think relative to our peers we’re in an incredibly strong position.

Andrew Cornell Much of that reshaping that you talk about has been in the institutional bank,
how does that play out in terms of customer satisfaction and the
performance of the institution?

Shayne Elliott We made it clear that the right thing to do for institutional was to be a more
focused bank. To be focused on those customers that are really on-strategy
for us. And that’s essentially customers who are in the business of moving
goods and money around the region, and that’s what we do really, really
well. So yes we’ve been shrinking our balance sheet, we’ve been shrinking
our number of customers. There’s always a risk in that - are you shrinking
the right customers and assets? And I think the team here have done a really
fantastic job. Again, it’s early days, but again the right assets are going to
the right customers. What we’re seeing is margin improvement and actually
we’ll be releasing some data soon that will show that the customer
satisfaction, particularly in our Asian franchise, is actually holding up and
improving as a result. And that may seem counter-intuitive but it’s not – it’s
because we’re able to focus our smaller resources against those customers
that we really care about, that we know we can do a great job for and that’s I
think really commendable for the institutional team.

Andrew Cornell Well thanks very much for speaking with BlueNotes again, good luck for the
year ahead.

Shayne Elliott Thank you.


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