Transcripts of 2022 Full Year Result interviews

Australia and New Zealand Banking Group Limited
9/833 Collins Street Docklands Victoria 3008 Australia
ABN 11 005 357 522
News Release
For Release: 27 October 2022


Transcript of bluenotes video interview with ANZ Chief
Executive Officer Shayne Elliott

ANDREW CORNELL: Morning, Shayne. Thanks very much for speaking with bluenotes. It's
the bank's annual result and you've described this as an outstanding result. But where did it
come from? There's been COVID, rates are rising, there's war.

SHAYNE ELLIOTT: Well, first of all, it is an outstanding result. And why did we describe it
like that? Because when we look at the underlying profit before provisions, so just revenue
minus expense, the second half was the strongest growth we've had in that metric since
2009. And that tells you a lot about the momentum that's sitting in the business. Now, some
of that is environmental because of the rate cycle we're entering into, the generally good
health of the economy – and I'll talk about that later, undoubtedly – but also because of the
transformation that we've undertaken at ANZ. You know, it's been a lot of years of really
hard work getting the business ready to be simpler and better, and that really came
through. What's pleasing about it is that all of our divisions, the four divisions we run today,
Australia Retail, Australia Commercial, Institutional and New Zealand all contributed in a
really positive way. We've got good volume growth pretty much everywhere and we saw
margins expand, or recover really, after many years of falling. So contributions from right
across the board, good underlying growth and the right sort of metrics. And really, also I
should mention, strong productivity performances as well.

ANDREW CORNELL: So you speak of the diversification of ANZ as something which makes
the bank different to other majors perhaps, and is obviously a strength here. Within that are
there particular businesses that have done well and particular other areas where there
needs to be some focus?

SHAYNE ELLIOTT: Yeah. So just again, we have these four businesses. If you look at the
total contribution of each of those businesses, they each contribute about a quarter of our
group revenue. So pretty nicely balanced. Not necessarily that's by design, but that's the
way they are. And what I really like about our diversification, we are therefore exposed and
are supporting every part of the economy. Right from homeowners through to small
business, mid-sized corporates, and of course, the very large and the multinational
businesses that engage and connect Australia, New Zealand, with the rest of the world. And
so we get really amazing insight through that connectivity right across the economy. Now,
as a result of that, our businesses are exposed to slightly different drivers than others. So,
for example, because we've got a very, very big international business and we're by far the
most international of the Australians, we've got a big exposure to what's going on in US
dollars and that's been a net positive for banks during this period. The strength of the US
dollar, the rising rate environment there, and you saw that come through in our results. And
also similarly our exposure to New Zealand where we're the leading bank in New Zealand
and New Zealand's going through a lot of change like we're seeing here in Australia. But
from the bank’s perspective, that's been actually ve ry, very supportive in terms of our
results.

ANDREW CORNELL: And you touched then on the economic outlook, which isn't great. I
mean, in the Northern Hemisphere, in particular, geopolitical tensions. The question then
becomes, is this sustainable, this ki nd of performance from ANZ?

SHAYNE ELLIOTT: Yeah, it is sustainable certainly for the short to medium term and you
know, the long term and multiple years, who knows? There's lots going on. If we've learned
anything over the last five years, it' s that things change. But the environment, surprisingly
– and I agree with you that there's lots of uncertainty, you know, there's lots of concern
about growth and inflation and cost of living – from the bank’s perspective, we go into that
environment in really, really good shape. We’ve got more capital than we've had before,
we're more liquid than we've been before, our business is better balanced and been de-
risked. So we're sitting in a pretty good position, being able to weather what may come.
Importantly, so are our customers. And again, if we look at the data today, Australian
households and New Zealand households have never been wealthier, they've never been
more employed. And they're also looking at a period of time where their incomes are rising.
So despite those pressures and what might come in the future, despite those concerns,
they’re entering into this period in the best possible shape. Now, of course, in periods of
volatility, whatever that might be, pandemics or just economic uncertainty, that's what
banks do. Banks help and assist customers navigate their way through it. So starting in a
good position, we've got the capacity to help our customers through. We think that we're
actually entering a period when there’s going to be sort of more demand, if you will, for our
services, whethe r that's in the trade finance area, foreign exchange, whether that’s people
thinking about getting a better deal on their home loan or their deposits. So I think it's
go ing to be a pretty good period of time for ANZ over the next year.

ANDREW CORNELL: And one of those businesses is the commercial business which you're
reporting separately for the first time. Can you give us a sort of brief understanding of that
business and how it performed? Because it's very difficult to compare across the Australian
majors. Everyone defines this business a bit differently.

SHAYNE ELLIOTT: Yeah, no, that's true. So first of all, why now? I think it's important.
We've been on this transformation journey for a number of years. We've been cleaning up,
repositioning the bank, getting our footings right. We've launched ANZ Plus, which is really
exciting, which will be the platform for growth. So it was time to turn our attention to
commercial. What do we mean by commercial? Commercial for us is supporting small
businesses. Real ly important bedrock part of the economy. ANZ supports about 650,000
small businesses. That's everything from sole traders all the way up to reasonably, chunky
size, sort of mid-tier corporates who might be in manufacturing or might be in the farming
sector or healthcare. So pretty broad array. What are those people do...certainly the ANZ
customer base, they're generally trading businesses, yeah. And so what they really want to
do is want to get paid and they want to pay their bills and they want to run their businesses.
They're not generally big asset-heavy businesses, so they don't tend to borrow a lot. So
what we do for that customer is we help them run and grow their business. As a result of
that, we get a lot of their deposits and for every dollar of de posits we get in that sector, we
lend back about 50 cents back in to help our small businesses grow. And of that 50 cents,
about 40 cents of it is secured normally against property. So it's a really great business. It's
very diverse, fast growing at this point in the cycle and really well set up for the future. So
it's sort of supporting the lifeblood of the economy and the time was right for us to really
focus on that now that we've got our other three businesses in good shape. So early days
but really pleased, and you would have seen a very, very strong result from commercial in
the second half.

ANDREW CORNELL: And you touched on ANZ Plus there, which is a complete rebuild really
of the technology platform that underpins retail banking. And it's got a maj or product out
there at the moment, a transaction account which has now got, just gone over a billion
dollars in deposits, a home loan’s coming. Are you happy with the pace of ANZ Plus and how
it's performing?

SHAYNE ELLIOTT: Yeah, look, we're really plea sed with where we are. Of course, you always
want to do things faster and bigger, of course, but we're really pleased. We are essentia lly
rebuilding the retail bank. You know, we had a look at the systems and the processes and
the technology we had and sai d, look, it's just not fit for purpose. We're going to have to do
better than this. We could renovate what we've got or we could rebuild. We went down the
rebuild. That's risky, I get that. It's a big investment. We ask the shareholders to support us

in do ing that, but I'm really confident we're building a platform for long term growth and it's
exciting to be where we are today. We are in market, we've built a whole new bank, yeah.
The core system’s the same, but everything on top of that, all the backend banking
technology is new and it's the world's best technology available today. And it's performing
extraordinarily well, both technically, and we can see that in the, you know, hundred odd
metrics we measure every day, but also from a customer perspective. And so I think it's
important to note it's not just about the technology though. It's really a new business
model. And the business model is built around this idea of financial wellbeing. We want to
improve our customers’ financial wellbeing so that they’re better off over the long term and
more secure in their finances. And we know that the single best way that you can improve
somebody's financial wellbeing is getting them to start a savings habit. And so that's why
we started with a savings and transaction proposition in ANZ Plus and it's really, really
pleasing to see how customers are engaging with that. You can join ANZ Plus in three
minutes, get access to a really great simple set of tools that are really intuitive. So it's a
good start and very soon in the next few weeks we'll be launching our first digital home loan
in pilot with staff. And that's a true digital home loan Andrew. There's a lot of stuff written
about digital this and digital that out there. But what you find a lot of it is sort of very sexy
digital front ends and then really pretty much pretty traditional back ends. We're talking
about a truly digital end to end solution right from application all the way through to
settlement. Now not everybody wants one of those. And if you're a first home buyer, for
example, you probably need some help. But we're going to build it digitally and then know
that we can insert human help, coaching, support, advice, etc. where needed . So that's
pretty exciting. Get the pilot out in a few weeks with a launch, a really full launch probably
later next year.

ANDREW CORNELL: And you’ve also asked shareholders to supp ort you with the acquisition
of Suncorp Bank in Queensland. The capital raising’s already been done, but you're awaiting
regulatory approvals and things. Where do you see Suncorp fitting then into the picture over
this next year?

SHAYNE ELLIOTT: Well look, we really love this transaction. Suncorp Bank is a good bank
and I think that's really important to note. It's well-run, it's a low risk, strong franchise with
great customers. You know, everything that Suncorp Bank does today, we like. And we want
to use this as a platform for growth. So we're really excited about the opportunity. We've
still got a lot of work to do to get this approved. We take that very seriously. We're going to
be put through a lot of tests with the ACCC, and government and regulators to make sure
that, you know, in terms of the acquisition, we can show that this will be better for
consumers, it will be better for competition, and we're highly confident about that. But we
can't take that for granted. So we're really focused on going through and making our case to
the various bodies that need to approve the transaction. If we're successful, we are ready
and able to go and invest behind this acquisition to make it a platform for growth, not just in
Queensland, but importantly in Queensland and right across. We're going to acquire 1.2
million new customers. That's really exciting. So we’re really excited about the opportunity.
But as I said, lots of hard work ahead of us.

ANDREW CORNELL: And at the half year you shared the intention to reorganize ANZ into a
non-operating holding company, a NOHC structure which is common around the world. But
can you talk to us about how this fits in with the strategy and why it's so important.

SHAYNE ELLIOTT: Yeah. So the first thing is we are a bank and we know that and we want
to be a better bank. But the way that we're a better bank for our customers is to help our
customers get ahead – own their home faster, run their businesses better. And so we want
to be able to add a lot of ancillary tools to those customers – insights, the use of data,
better technology. In order to be able to do that, we need to be able to hire the very best
technology people, apply the very best technology. And, you know, doing so within a
banking legal structure just slows all of that down because the regulation that we're subject
to just isn't appropriate for some of those things. So we're still going to be extraordinarily
well regulated as a bank, but we want to have a different arm of the bank, which will be
extraordinarily well regulated for the technology services it provides. We need to have that,
and a more appropriate legal structure. So look, it's not about changing our business. It's

not about changing our strategy. It's about being more effective in the way we go about our
strategy. I see this as a really important low-cost option for the future, and so we are
seeking shareholder support. To your point, it is a very common structure internationally for
financial institutions. So we're going down a very well-trodden path. And in fact there are
some examples here in Australia as well. So we're excited about it and it really will help
unlock shareholder value an d make us a faster, more effective customer focused
organization.

ANDREW CORNELL: Well, thanks very much for your time today, Shayne.

SHAYNE ELLIOTT: Thank you.

For media enquiries contact:

Stephen Ries
Head of Corporate Communications
Tel: +61 409 655 551

Lachlan McNaughton
Senior Manager Media Relations
Tel: +61 457 494 414


Approved for distribution by ANZ’s Continuous Disclosure Committee

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Australia and New Zealand Banking Group Limited
9/833 Collins Street Docklands Victoria 3008 Australia
ABN 11 005 357 522
News Release
For Release: 27 October 2022


Transcript of bluenotes video interview with ANZ Chief
Financial Officer Farhan Faruqui

ANDREW CORNELL: Morning, Farhan. Thanks very much for joining us on bluenotes the
morning of the bank’s annual results. It's a very strong result. From your position as Chief
Financial Officer, where did you see the highlights and perhaps where did you need to see
the bank going from here?

FARHAN FARUQUI: Well, good morning, Andrew, and thank you for having me again. I
actually do agree with you, it's a really strong financial result for us in the half. But I think
the highlights in my mind, Andrew, are the fact that we have delivered a strong result
across all of our four key businesses: Australia Retail, Australia Commercial, New Zealand
and our Institutional franchise. It has been characterized by revenue growth across all four
divisions, three out of the four at double digit revenue growth. It's been characterized by a
healthy expansion of margin as well as risk adjusted margin. We've managed costs quite
well, particularly given the inflationary headwinds that we had to face into throughout the
course of this year. We've continued to use that strong ‘run the bank’ cost management to
continue to invest and spend in the strategic areas where we want to grow. So that's
actually been a great outcome this year as well. And we have delivered a portfolio risk
outcome which continues to reflect the high quality of our portfolio, which has been a
function of de-risking over several years. I think while this is a good half outcome and a
good year on year outcome, it has been underpinned by years of simplification of the group,
by years of de-risking our portfolio, and by years of strong customer and margin and
balance sheet and capital management, that gets reflected in the half as well. But I think
outside of our financial outcomes, Andrew, we've also delivered strong strategic progress.
We launched ANZ Plus and we've seen a strong start since the launch to our ANZ Plus save
and transact proposition. We announced the agreement to buy Suncorp and that was a
material transaction for us, and of course we raised capital as to partially fund that
acquisition of about three and a half billion dollars, which was the largest equity raise for an
M&A transaction this year globally, and was very successfully completed and was done
through a PAITREO structure which reflected very fair outcomes for our retail shareholders.
So I think it was a year of getting things done and was a half in particular where we made
very strong progress.

ANDREW CORNELL: It's a very positive outcome obviously for this and, you know, I don't
want to jump ahead, but the year ahead is looking uncertain. So when you look at that
overall performance that you've delivered for the full year result, where does the focus need
to be to maintain that, sustain that in the year ahead?

FARHAN FARUQUI: That's a really good question, Andrew, and it is an uncertain
environment that we're moving into in financial year 23. But the good news is, as I
mentioned earlier, that we are coming into 23 strong, all four businesses performing really
well, our credit portfolio and quality very strong and strong management of revenue margin
and cost outcomes. So we just have to continue to do that with an eye on risk settings and
making sure that we protect us, our balance sheet in this uncertain environment. But in
addition to that, Andrew, the two big areas of focus for us in 23 would be to ensure that we
continue to build on our early successes in ANZ Plus in the save and transact proposition,
but also to launch our home loan proposition in ANZ Plus. And in addition to that, we

obviously have a task ahead of us in terms of completing Suncorp and bringing the two
banks together. And that's going to be a big focus for us in 23.

ANDREW CORNELL: You touched on margin there and we've seen margins improving, which
is not something that we've seen a lot of in recent years. Can you talk us through that
margin outcome? I mean, you've been a banker for you know, well, I won't say how many
decades, but you've seen through a few economic cycles. Is this cycle the same?

FARHAN FARUQUI: That's a that's a great question, Andrew. But maybe I'll start with
answering your second question first. In my 30 plus years of bank ing, I don't think any two
cycles have actually been alike. Again, because you come into cycles at different starting
points. And I think the starting point in this particular cycle is unique. It's unique because
it's coming post-COVID and in that period of time, because of government support and
because of prudent financial settings by our customers, I think our customers are coming
into the cycle much better positioned to deal into the crisis relative to other cycles. Banks
are much stronger. Banks balance sheets and capital positions are much stronger coming
into the cycle, which I think is yet another positive. We're coming off a 0% interest rate and
heading into rapidly rising interest rate environment. It hasn't happened very often in the
past. In fact, we've seen of the 60 rate hikes that have been done by RBNZ, the Fed and the
RBA over the last decade, a third of those have happened in the last 12 months and have
been of higher magnitude relative to the previous ones. So it's a very unique environment
and we're operating in a very almost record low unemployment environment as well. So I
think that it's a very different cycle and that's what makes it very hard to extrapolate the
NIM outcomes and cycle impact as we go forward into the next 12 months. But I think our
focus has been in the course of this year and particularly in the half, is to continue to
manage as optimally as we can, our margin outcomes, our pricing outcomes across
deposits, loans as optimally as we could. And I think that's been the result that we've
demonstrated in the course of the half. But we've also benefited, Andrew, because of the
diversification of our business. Unlike some of our domestic peers, we have a bigger
presence in New Zealand and we have a bigger presence in the international business. And
because the tightening cycles were quicker outside of Australia, that has benefited our
margin outcomes in the half as well, and we expect that that will likely continue as we go
into 23. So it's hard to extrapolate, it's hard to predict what the NIM outcomes are going to
be going forward. But I think we've managed it really well so far and we have to continue to
monitor the markets to react and be proactive in terms of delivering strong outcomes again
going forward.

ANDREW CORNELL: You also touched on provisioning for bad and doubtful debts down the
track, what might happen. Now, provisioning actually, relatively speaking, is quite flat
compared with a year ago, compared with the half. And yet the outlook looks a lot worse.
Now, there's obviously moving parts in there. Can you talk us through how provisioning has
worked and what’s come off and what's gone on ?

FARHAN FARUQUI: It's a good question, Andrew, and I think it's important to understand
that rather than looking at the headline number, it's important to understand what's
happening underneath the numbers. And in fact, I would actually take you back even to pre-
COVID and tell you that while the provision levels are higher today relative to pre-COVID,
our portfolio quality, our portfolio mix and the credit quality of our customers is actually far
stronger. So we've actually released a lot of collective provisions over the course of the last
five or six years, because of that improving quality, which doesn't get reflected in half and
half results, because that's been the journey that we've been on for the last few years. The
other thing is that when we ended the half in March 22, we ended with a lot of COVID
overlays still in our collective provision numbers. So when we look at our numbers now, we
released much of those COVID overlays, but we've added on the overlays required to face
into the environment that we're going into, which addresses things like inflationary
pressures, interest rate pressures, as well as a very uncertain geopolitical environment. So
it's the makeup of pr ovisions has dramatically shifted over the course of the last few years
and even in the half. So we feel pretty strongly about the fact that we are provisioned well.
But I think also when you think about resilience in a broader context, Andrew, it's not just
about collective provisions, it's not our only insurance policy towards, towards resilience.

Again, as I said, much stronger portfolio credit quality, strongly capitalized position, strong
balance sheet, better risk settings, and a collective provision balance which we think reflects
the outlook. And I think in totality, I think the group is really well-positioned going into this
period of uncertainty.

ANDREW CORNELL: You talk about being well capitalized. Now obviously, during the year
there's been a capital raising to fund the Suncorp acquisition. If you look through that
acquisition, if indeed it goes ahead, what is the capital position looking like? Are you
comfortable with the balance sheet?

FARHAN FARUQUI: Yeah, Andrew, I think we've ended, as I said, the first half, sorry the
second half, str ongly. Even when pro forma for the Suncorp acquisition, we are above the
APRA unquestionably strong settings. So we feel, I feel comfortable fro m that standpoint.
But also, Andrew, we have demonstrated this half and certainly hope in the next half and
the next year, we continue to have strong organic capital generation which will continue to
buffer our capital position. So yes, Andrew, I feel quite comfortable with our balance sheet
settings right now.

ANDREW CORNELL: And just finally, on the cost front, cost management is something the
ANZ prided itself on for a number of years. Now, a key factor is the investment spend. So
where do you see investment spending going in the year ahead?

FARHAN FARUQUI: Yeah, I think, you know, as I mentioned, we've been very focused on
making sure that our investment spend is directed towards our strategic priorities. For the
last 12 months, one of those strategic priorities was to largely complete our BS11 program,
and we are close to finalizing that now as we come out of 22, which is good news. We've
pledged to commit about 15-odd per cent of our investment spend to ANZ Plus, which as I
said, has already started to deliver strong outcomes and we will continue to invest in that
going forward into the financial year 23. We've been very focused on cloud migration and
we've already migrated at the end of this year about 31% of our total tech estate onto the
cloud. The focus, the goal, is not to get to 100%, we'll probably be targeting closer to 70-
75% of our tech estate to be in the cloud. And of course, as Shayne has mentioned, we
continue to be very focused on reinvigorating our commercial business and that's going to
be an area where we're going to be spending in technology to support better outcomes and
better client experience for our commercial bank customers as well. Aside from that,
sustainability is a very important theme for us overall as a bank, and that's an area that
we're going to continue to invest in building capability as we go into 23.

ANDREW CORNELL: Well, thanks very much for your time again Farhan, commiserations for
Sunday night in the cricket against India.

FARHAN FARUQUI: Thank you for that, Andrew. Not as good a result as we've delivered in
the half, but nonetheless, a very entertaining game. Thank you.

ANDREW CORNELL: Thank you.

For media enquiries contact:

Stephen Ries
Head of Corporate Communications
Tel: +61 409 655 551

Lachlan McNaughton
Senior Manager Media Relations
Tel: +61 457 494 414


Approved for distribution by ANZ’s Continuous Disclosure Committee