Australia and New Zealand Banking : Transcript of Full Year 2019 Results Presentation

ASX Release

For release: 31 October 2019

Transcript of Full Year 2019 Results Presentation

A transcript of the presentation of ANZ's Full Year 2019 results by ANZ's CEO Shayne Elliott and CFO Michelle Jablko follows.

This document should be read in conjunction with ANZ's Full Year Financial materials released via the ASX, which are available in the Shareholder Centre on the ANZ website.

All results materials are available on shareholder.anz.com

For investor enquiries contact:

Jill Campbell, [phone]

Cameron Davis, [phone]

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

	TRANSCRIPTION
Company:	ANZ - Full Year Results Announcement
Date:	Thursday 31 October 2019
Time:	10:00am (AEDT)
	[START OF TRANSCRIPT]
Jill Campbell:	Hi everybody, good morning. I'm Jill Campbell. I'm the Head of
	Investor Relations for ANZ. Welcome to everyone joining us in
	Sydney today, listening in by phone or webcast for the
	presentation of our full year 2019 financial results. We're live
	streaming today's presentation on social media, through
	Periscope and Twitter and you can access the feed by
	searching at ANZ News.
	The result materials lodged earlier this morning with the ASX
	are all available on the ANZ website in the shareholder centre.
	A replay of the presentation, along with the Q&A, will be
	available via the website from around mid-afternoon. Our
	CEO, Shayne Elliott and CFO, Michelle Jablko, will present for
	around 25 minutes and after that we'll go to Q&A, thanks
	Shayne.
Shayne Elliott:	Thank you. Good morning. Today is about result and it's
	important to cover where we are, but frankly it's more
	important to share what we will do from here. I could spend
	some significant time talking about how challenging the
	environment is, but you all know that. More regulation, intense
	competition, low rates and slow growth, we get it, but we are
	prepared well. Earnings this year were stable, we further
	strengthened the balance sheet, exited more non-core
	businesses and we kept costs flat while absorbing a significant
	increase in investment.

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The number of shares on issue reduced again and earnings per share increased 2% and net tangible assets per share,

6%. I am pleased that we are able to maintain our dividend at $0.80, although I acknowledge that some shareholders will be disappointed that we're reducing franking to 70%. Our decision to reduce franking to a new base reflects the changed shape of our business, but recognises how important the dividend, franking and predictability is to our shareholders.

Our balance sheet has never been stronger. We've delivered significant change in the past four years, rebalancing our portfolio and improving capital efficiency and 2019 was no exception. That allowed us to return $5.6 billion to shareholders while still increasing our capital.

In a large organisation there will always be a lot of things we can do, but it's our job to ensure that our resources are focused on those things that make a real difference. We've tweaked words and tightened up the language, but the strategy we launched in 2016 remains relevant and appropriate. For 2020 we've implemented a six-point plan, modified accountability for our top team, changed governance processes all the way up to the Board, enhanced the metrics we use to monitor results and we've increased pace. We meet more briefly but more often and we make more timely decisions.

As I said, we're focused on the six levers that we think will have the biggest impact: running the business well, maintaining discipline within Institutional, resolving our challenges in New Zealand, investing to prepare Australia for growth, driving further simplification and building the team's resilience and capability.

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It's easy to get distracted, but running the business well is our top priority. It's particularly true in Australia where we have acknowledged our challenges. We've responded appropriately, we've changed the leadership team and the organisational structure. We're refining credit policies and investing to reduce processing times and increased capacity. We're delegating more decisions to the frontline and monitoring operational metrics daily.

We launched an incredibly successful campaign to provide confidence for our channels and our customers and while the resulting in uplift in applications is good, the real benefit was the preparation work that we did to improve operational capacity and reduce approval turnarounds. These actions position us well as we head into 2020. However, while the housing market shows some signs of improvement, system growth remains hard to predict. Low interest rates are also putting pressure on margins and managing that trade-off is complex, but we're focused on managing risk-adjusted margin more than simple market share growth.

Running the business well also requires progress on remediation, because it's the right thing to do, but also because the sooner we finish, the sooner we can apply learnings and refocus on responsible growth. For a range of reasons, ANZ started a little earlier than our peers and from what we can see, we're a little further ahead. We're investing everything required to complete known remediations and identify any new issues. I can't tell you when we will be finished, but we are working as hard as we can to get it done.

Finally, running the business well means strengthening the Bank, operationally, culturally and financially. The work done over four years to simplify and de-risk the Bank has seen our expected loss rates fall again.

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We are not complacent and we do expect to return to more normal credit conditions at some point, but our book is inherently lower risk than before. We have not changed our risk appetite, although we have reduced our assumptions around cost of capital, which will have an impact on the business rating strategy, particularly in Institutional.

Institutional provides diversification to shareholders and unique value to customers. Its returns are now above our cost of capital and as industry returns for the Australian banking peers fall, our Institutional business is increasing in relative value. But we're not done. Our plan for Institutional is simple: keep disciplined.

There is no change in strategy, there is no change in target market, we will continue to do more with the customers we know and trust. We will do more on cost and simplification, while strengthening the franchise and we will stay disciplined on credit and focused on the risk-adjusted returns.

In New Zealand, the Reserve Bank has two major changes on the table: BS11 and the proposed new capital regime. Preparation for BS11 is well advanced but it comes at a cost, which we estimate at around $350 million over three years. We've already invested $42 million in FY19, which explains the increase in New Zealand operating expense. BS11 investment is not called out as a large and notable item. Now Michelle will talk through the proposed capital changes, but I've expressed my concerns about them, but we're not sitting by hoping for the best.

We're taking the proposals as a catalyst to do better, to be leaner and more focused. We meet weekly and we're actively working on a range of initiatives which will lead to a portfolio of actions. We intend to remain the largest and most successful bank for New Zealanders, but how we go about delivering that will change.

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