Chairman’s Report 1H20

Australia and New Zealand Banking Group Limited ABN 11 005 357 522


28 May 2020

Market Announcements Office
ASX Limited
Level 4
20 Bridge Street
SYDNEY NSW 2000






Chairman’s Report 1H20


Attached is the Chairman’s Report 1H20 which has been approved for distribution by
ANZ’s Continuous Disclosure Committee.



Yours faithfully




Simon Pordage
Company Secretary
Australia and New Zealand Banking Group Limited










Company Secretary’s Office
ANZ Centre Melbourne, Level 9, 833 Collins Street, Docklands Vic 3008
GPO Box 254, MELBOURNE VIC 3001 AUSTRALIA
www.anz.com

CHAIRMAN’S
REPORT
1H20
This financial performance was primarily driven by credit
impairment charges of $1.674 billion. This included credit reserves
of $1.031 billion being set aside to help manage the impacts
of COVID-19, taking our total collective provision to $4.5 billion.
While not impacting our overall capital position, there was also
an $815 million impairment of our investments in two Asian
associate banks related to COVID-19 impacts in those markets.
Cash Earnings per Share decreased 60% to 50 cents with Return
on Equity also decreasing to 4.7% on a cash continuing basis.
While the pandemic is impacting the entire economy, the work
we have done over recent years under the leadership of our
Chief Executive Shayne Elliott to simplify and strengthen our
business has us well placed to support all our stakeholders
during this health crisis.
Our core businesses continued to perform well with targeted
balance sheet growth in our preferred segments. We maintained
a strong capital position with a Common Equity Tier 1 Capital
Ratio of 10.8% at 31 March 2020, even after bolstering credit
reserves to record levels. Liquidity also remained strong.
We continued our focus on running the business as efficiently
as possible with business as usual costs falling again.
Critically, we took decisive action in response to COVID-19
with the implementation of a four-pronged plan focused on
protecting the essential fabric of our bank, including keeping
our staff and customers safe; adapting in a new world; engaging
with key stakeholders; and preparing for the future.
DIVIDEND
The Board announced last month that we will wait until there
is greater certainty around the economic impacts of COVID-19
before determining a final position on an interim dividend
for 2020.
While this may be disappointing given the importance many
of our shareholders place on a regular franked distribution, it
prudently balanced our primary responsibility to shareholders
to ensure our balance sheet is sufficiently robust
for the long term.
This decision was not about our current financial position and
I can also confirm we have not received any concerns from the
Australian Prudential Regulation Authority (APRA) regarding
our level of capital.
Given we are in the eye of a global pandemic not seen for a
hundred years, the Board believed it was prudent to wait until
we had more information about the full impact of COVID-19.
This decision was also in-line with APRA guidance that all
authorised deposit taking institutions and insurers should
seriously consider deferring decisions on dividends until the
outlook is clearer.
Directors will continue to carefully consider all factors over
the coming months, including the severity and duration of
community lock-downs, before determining a final position
on the interim dividend. Shareholders will receive more
information as part of a trading update in August.
COVID-19 has changed all our lives in ways
we would have never imagined just a few
short months ago and has already had
a significant impact on company profits.
ANZ was no exception with Statutory
Profit after tax for the Half Year ended
31 March 2020 of $1.55 billion, down
51% on the prior comparable period.
Cash profit from continuing operations
was down 60% to $1.41 billion.DAVID GONSKI, AC

SUPPORTING CUSTOMERS
COVID-19 has caused significant financial difficulty for many
and I’m proud of the way our team has stepped forward to
support more than 180,000 customers across Australia and
New Zealand with various financial support measures.
This support includes the six-month deferral of interest
and principal repayments on home and business loans.
In Australia, we had around 105,000 requests for assistance
on $36 billion worth of home loans, representing 14% of ANZ’s
home loan portfolio. In New Zealand, we have provided financial
support to more than 30,000 personal, home and business
loan customers through loan deferrals or adjustments with
lending of around NZ$12 billion.
We provided financial assistance to around 15% of our
commercial and small business lending customers in Australia,
as well as providing temporary overdraft increases for ~5,500
business customers. More than $4 billion in lending was
pre-approved to 35,000 small business customers with
existing transactional accounts.
To support those companies which employ a large number
of people through COVID-19, we also provided $16 billion in
additional lending mainly to our long-term investment-grade
institutional customers.
While we recognise this support comes at a cost to shareholders,
it is ultimately in everybody’s interest we support as many
home owners and businesses as we responsibly can to the
other side of this crisis. This is what we are here for and your
bank has demonstrated its commitment in this time of need
for our customers.
PRODUCTIVITY
Given the impact COVID-19 is having on the broader economy,
our business and, of course, our shareholders, we are taking
the necessary steps to ensure our business is run as efficiently
as possible. I particularly note 95% of our staff have been
working productively from home. This is a credit to them
and the work of our technology teams.
There will also rightly be an expectation that the variable
remuneration of our staff, particularly senior executives,
will be materially reduced given the impact COVID-19 has
had on shareholders.
While the Board will make its final assessments as part of the
Full Year results, budgets for variable remuneration and salary
increases have already been significantly reduced and will be
focused primarily on rewarding those who have been working
extremely hard to provide essential services to our customers.
PREPARING FOR THE FUTURE
The coming months will be difficult. The speed at which
COVID-19 has already evolved makes it difficult to predict
how deep the economic crisis will be or how long the
recovery will take.
What I do know however is that we have the team, the financial
strength and the strategy to help cushion our customers and
the broader community through these terrible times as well
as to position us for the benefit of shareholders.
We are preparing ANZ for ‘COVID-normal’ with urgency so we
can continue to deliver long term benefits to our shareholders.
We know the time will come when the crisis will pass. ANZ
will be there to help customers build and invest for future
growth and opportunities, as well as providing returns to
our shareholders.
Finally, as mentioned earlier, I’m proud of how ANZ has
stepped forward and would like to acknowledge the work
of the ANZ team who have worked so hard in very difficult
circumstances to support our customers through these
most challenging of times.
David Gonski, AC CHAIRMAN
anz.com
Australia and New Zealand Banking Group Limited
ABN 11 005 357 522