Australia and New Zealand Banking : Transcript of bluenotes interview with Mark Hand

News Release

For Release: 31 August 2021

Transcript of bluenotes interview with ANZ Group

Executive Retail & Commercial Mark Hand

Andrew Cornell	Thanks Mark for joining us in what have - again - become more
	challenging times which are quite different across the country. Yet all
	too familiar. How are you seeing things given Victoria and the ACT have
	joined NSW in extended lockdowns while the other states are pretty
	open?
Mark Hand	Thanks Andrew, good to be talking to you. You're right, last year we
	were talking about everything being unprecedented whereas this year,
	as hard as lockdowns are, it feels like people know what to do.
	If I look at home loan deferrals, last year we had customers take them
	out almost as an insurance policy and they did it in large numbers.
	None of us had lived through a global pandemic like this before and
	there was a real sense of shoring up and that gave us all a chance to
	catch our breath. On the whole that approach worked.
	The good thing is almost all those who took deferrals last year are back
	in good shape. With the new wave of lockdowns the banks are offering
	further deferral support this time - albeit with a few more questions to
	make sure it's the right option. The numbers are vastly different though
	with only around 2% of the deferrals we saw last year.
	What does that tell us? Government support is continuing to have an
	impact. Customers are more confident and possibly see a light at the
	end of the tunnel…vaccinations rates are also continuing to rise.
	Households were very sensible last year and boosted savings.
	There was a lot of cash in the system which has set up the economy
	well and this is probably having an impact on how customers are
	managing through differently this time around.
Andrew Cornell	The Treasurer Josh Frydenberg just announced changes to its loan
	guarantee scheme. How important are measures like this given there
	doesn't seem to be strong demand for credit?
Mark Hand	It all helps. Yes, it's true most businesses are just looking to be able to
	open their doors and for those businesses taking on more credit may
	not be the answer. But there are businesses looking to invest or even
	diversifying.
	The changes announced broaden the eligibility for existing schemes and
	that's a good thing. It may not be the right solution for all businesses
	but there are plenty out there where this makes sense.

But yes, I'm sure we'd all agree, the best thing to help get businesses open is to get lockdowns behind us and the only long term path for that is driving up vaccinations.

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

9/833 Collins Street, Docklands VIC 3008

Andrew Cornell	How is all this translating into house prices?
Mark Hand	It's quite remarkable really and only last week our own economists
	bumped up their numbers with prices now expected to rise just over
	20% for the year. Much of last year's bounce was recovering losses
	from 2018 and 2019 but the market is looking strong across the board.
	This time around it's not just capital cities and we've seen strong
	demand in the regions as people reassess where and how they want to
	live. People are also taking advantage of being able to live in one
	location and work in another. Our economists are predicting this price
	growth will soften a bit next year to just over 5%. I should point out
	rising house prices is not unique to Australia. The US, UK, Canada and
	even New Zealand are all experiencing pretty similar conditions.
Andrew Cornell	How is this flowing through to the performance of your own home loan
	book? APRA stats out earlier today would suggest ANZ is finding it
	tougher than your major rivals?
Mark Hand	That's a fair assessment of the last few months. I would point out
	though that APRA stats are a pretty blunt measure of market share and
	we're not necessarily going to chase share at all costs.
	We've done a lot of work over the past 18 months on our processing
	capacity and we saw a very strong performance in the home loan
	business in the second half of last year. What we didn't predict however
	was the huge, sustained rise in application volumes in 2021,
	particularly in the refinance market with customers shifting to take up
	fixed rates. This means we are now handling double the applications we
	were two years ago and unfortunately assessment times moved out to
	a level we weren't happy with.
	So what have we done? We have a dedicated team of people working
	hard to improve assessment times. That's been pretty successful with
	time to first decision - speaking on average here - down to about
	seven days for apps received from brokers. That's even faster for
	simple, PAYG applications and those applications that come through our
	own branches because these customers already bank with us it's a lot
	easier as we already know a lot about them.
	It does then take more time to get to a final decision, but were are
	working on ways to reduce the rework loops and limit to-and-fro to
	collect the information needed to give that final answer. We know that
	is frustrating for the lenders and customers.
	This improvement in response time is largely due to both increased
	resourcing and reallocating existing resources, that is, more assessors
	as well as some process improvements and simplifying some of our
	policies. The next critical step we are working on is automation of
	manual steps and processes, and that is going well and will set us up
	for future volume fluctuations.
	We've had to be really focussed on areas of the market that are key to
	our strategy and that's very much around owner occupiers. Really
	importantly we didn't change our risk settings and we haven't used the
	price lever to chase share for the sake of it. We know we need to be
	competitive with pricing, but it is always with a focus on managing
	returns as well. I can't talk too much to margins and returns until we
	get to the full year earnings release but we've been pretty pleased with
	our disciplined approach here.

Andrew Cornell So when do you expect to get back to growing at system?

Mark Hand It's an interesting question given there are several parts to the market. As you know Andrew we have been more focussed on the Owner Occupier market…you know those who live in their home. The good thing about this market is it's much better from a bank-wide perspective. They also tend to have other products and stick with us for a long time. The nature of owner-occupiers though is they pay their homes off which is great from a financial wellbeing perspective. And while it's a great thing for customers it means we have to work even harder to replace that FUM, those lending assets, on the balance sheet. That's okay, we're up for the challenge but what we are not going to do is change any of our risk standards. We will have levers we can pull but don't expect us to chase unprofitable growth.

As I said before, we understand the impact when our response times are too slow, but pleasingly, with assessment times in the broker space having improved somewhat we are seeing business from that channel starting to return. Brokers are a hugely important part of the market given there are plenty of customers who prefer the independent nature of their advice. We've probably been the most reliant on the brokers of the major banks and I'm pleased we are starting to see the broker business return.

As for when our volumes get closer to system, we are more focussed on growing in a robust and profitable way with an eye on our target segments.

Andrew Cornell Thanks Mark for talking to bluenotes

Mark Hand Thanks Andrew, any time.

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