Australia and New Zealand Banking : ANZ 2019 Annual Review

ANZ

2019

ANNUAL REVIEW

Our success depends on improving the financial wellbeing of our customers

COVER STORY

Supporting drought affected communities in rural Australia

Brian and Heather Coxon established BJ & HD Coxon Oyster Farmers in 1985 - a time when stocks were plentiful and business was booming. Since that time, the business has faced some difficult times.

An ANZ customer for 10 years, Brian has appreciated the bank's support through those times. "During the algae bloom in 2010 I went to ANZ and pleaded relief. We did not know when things would pick up. I am grateful for ANZ sticking with us through that time".

Fast forward to 2019 and Brian's business is once again facing difficulties, this time as a result of the drought impacting much of Australia.

"Oyster farming needs fresh water," says Brian. "Famine on the land means famine in the sea. The oysters have poor growth, it's difficult to maintain their condition and they're harder to sell."

Last year in response to the drought ANZ donated $500,000 to the Financial Counselling Foundation for use by rural counselling agencies working in drought affected communities.

Brian recently found himself seeking the assistance of one of those agencies, reaching out to the Rural Financial Counselling Services (Southern NSW). The service, which is free, supports rural businesses through ongoing drought, poor production or anything else affecting their business and their life.

"When you're doing it tough it's all too hard, and the state you are in does not always lead to rational decisions," says Brian. "The financial counsellor looks at you as a person, as well as a business."

Brian looks forward to building up the business again, but he doubts things will ever be as good as they were in 1985. "This business is mostly about loving the lifestyle. People who want to be on the water and love working outdoors in Australia's oldest aquaculture industry."

Image: Brian Coxon

Contents

2019 performance snapshot	1
Our 2019 reporting suite	2
What matters most	3
Chairman's message	4
CEO's message	6
About our business	8
Our strategy	9
How we create value	10
Working with our stakeholders	12
Our operating environment	14
Becoming a fairer and more responsible bank	16

Our customers	17
Our divisions	21
Our people	24
Our community	28
Governance	32
Risk management	44
Performance overview	52
Five year summary	64
Remuneration Overview	66
Important dates for shareholders	69
Contacts	70

ANZ 2019 ANNUAL REVIEW

	$
2019	6.5 b
performance
snapshot	Cash profit1	10.9%
		Cash return on equity1
160¢		228¢
Dividend for FY19
per share

9.2%

total shareholder

return

Cash earnings per share 1

$19.59

Net tangible assets

per share2

CO

42.4%	11.4%
Tier 1 Capital3
	Common Equity

of employees volunteered

$

>90,000

people have been reached	32.5%
through our financial
wellbeing programs,	of women in leadership4
MoneyMinded and Saver Plus

1. On a cash profit (continuing operations) basis. Excludes non-core items included in statutory profit and discontinued operations included in cash profit. It is provided to assist readers in understanding the result of the ongoing business activities of the Group. For further information on adjustments between statutory and cash profit refer to page 53.
2. Equals shareholders' equity less preference share capital, goodwill, software and other intangible assets divided by the number of ordinary shares.

1. APRA Level 2.
2. Measures representation at the Senior
   all employees regardless of leave status but not contractors (who are included in FTE).
3. Figure includes forgone revenue of $109 million, being the cost of providing low or fee

free accounts to a range of customers such as government benefit recipients, not for
profit organisations and students.	1

Our 2019 reporting suite

2019 Annual Report	2019 ESG Supplement	2019 Climate-related Financial Disclosures	2019 Corporate Governance Statement
anz.com/annualreport	anz.com/cs	anz.com/shareholder/centre	anz.com/corporategovernance

About this Annual Review

The Annual Review provides key sections from our 2019 Annual Report. It includes information on our financial and non-financial performance, giving readers a holistic view of the Australia and New Zealand Banking Group Limited's1 performance.

The complete 2019 Annual Report is available at anz.com/shareholder/centre.

KPMG provides limited assurance over Environmental, Social and Governance (ESG) content2 within this Annual Review. A copy of KPMG's limited assurance report will be contained in our 2019 Environment, Social and Governance (ESG) Supplement to be published in December 2019.

This Review covers all ANZ operations worldwide over which, unless otherwise stated, we have control for the financial year commencing on 1 October 2018 and ending 30 September 2019. Monetary amounts in this document are reported in Australian dollars, unless otherwise stated.

Reporting suite

We produce a suite of reports to meet the needs and requirements of a wide range of stakeholders, including investors, customers, employees, regulators, non-government organisations and the community.

Our 2019 Corporate Governance Statement discloses how we have complied with the ASX Corporate Governance Council's 'Corporate Governance Principles and Recommendations - 3rd edition' available at anz.com/corporategovernance.

Our ESG Supplement will complement our Annual Report, providing stakeholders with more detailed ESG disclosures, including: performance against our ESG targets and our approach to our priority areas of fair and responsible banking, financial wellbeing, environmental sustainability and housing.

The following additional documents are available at anz.com/shareholder/centre:

•• News Release

•• Consolidated Financial Report, Dividend Announcement & Appendix 4E

•• Results Presentation and Investor Discussion Pack

•• The Company Financial Report

•• Principal Risks and Uncertainties Disclosure

•• APS 330 Pillar III Disclosure

•• Climate-related Financial Disclosures

We are continually seeking to improve our reporting suite and welcome feedback on this report. Please address any questions, comments or suggestions to [e-mail].

1. Group: Australia and New Zealand Banking Group Limited (the Company) and the entities it controlled at the year end and from time to time during the financial year (together, the Group).
2. ESG content includes the following sections: 2019 Performance Snapshot, What Matters Most, Working with our stakeholders, Becoming a fairer and more responsible bank, Our Customers,
   Our People, Our Community, Risk Management: Our approach to climate change and ESG metrics on page 65.

• ANZ 2019 ANNUAL REVIEW

What matters most

A focus on fair and responsible banking

Through our annual materiality assessment we engage with internal and external stakeholders to inform our identification of ESG risks and opportunities. We seek to identify those issues that have the most potential to impact our ability to operate successfully and create value for our stakeholders.

These issues may change over time, reflecting changes in our business and external operating environment and the expectations of stakeholders. We use the results of the assessment to inform our strategy.

This year, we focused our assessment solely on fairness and ethical conduct, which has been ranked as our most material issue for the last three years. Specifically, we sought external stakeholder views on the actions we are taking following the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry (the Royal Commission).

Stakeholders provided us with three key insights:

1 They expect us to focus on long-term value creation,

not short-term profit maximisation;

• While the actions we have taken to date in response to the Royal Commission are considered good and necessary, they want us to do more. In particular, they expect Board and management to demonstrate customer-centric actions in line with the 'spirit' of the Royal Commission's findings; and

• They see a broader role for the Board in overseeing conduct and culture and an expectation that real and lasting change happens as a result of the Royal Commission.

These insights were presented to the Board Ethics, Environment, Social and Governance Committee, the management Ethics and Responsible Business Committee and the management Royal Commission and Self-Assessment Oversight Group, and are informing our continuing work on improving customer outcomes.

We have drawn on our 2018 materiality assessment to help guide the content of this report. After fairness and ethical conduct, stakeholders ranked the following four issues (risks or opportunities) as having the most potential to impact our value creation in the short, medium and long-term.

Fraud and data security: ensuring we have strong internal controls and risk management frameworks in place is critical as a breach could significantly impact the bank's operations and reputation.

Customer experience: ensuring a positive customer experience is key to delivering sustainable business performance in the long-term.

Corporate governance: organisations with strong corporate governance processes and policies in place are likely to perform better in the long-term.

Digital innovation: core to our strategy and a key factor in driving positive customer experience.

A full list of ANZ's key material risks is available on pages 46-47.

The key steps undertaken in our 2019 materiality process, as well as the full list of our material ESG issues, is discussed in our 2019 ESG Supplement available at anz.com/cs in December.

3