LONGREAD: the bank we’re building

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We know, from studying organisations globally, that companies with a clear strategy linked to their purpose outperform, over the long term, in terms of returns to shareholders, contribution to society and value to their customers – and the engagement of their staff.

"Over the last five years, we have made great strides, significantly simplifying the bank well ahead of our peers, enduring a once in a century global pandemic and laid the foundations for growth.”

In fact, ANZ’s motto Tenax Propositi (Tenacity of Purpose), adopted in 1951 when the modern ANZ was formed, holds this idea at its core.

By building the financial wellbeing and sustainability of our customers we will have a better reputation, a more engaged team, acquire customers at a lower cost, grow loyalty, generate better financial outcomes – and deliver more capital to reinvest in the business and continue to improve customers’ lives.

It’s a virtuous cycle, captured in this value wheel chart, and the essential philosophy of the Bank We’re Building. The growth in value of each of our businesses, in Australia, New Zealand or Institutional, can be understood in terms of this cycle.

To succeed we must employ people committed to our purpose who listen, learn and adapt. We need to equip them with the best tools and insights. We need to focus on those few things that really improve the financial wellbeing and sustainability of our customers.

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We’ve come a long way

We are far from starting from scratch with this next phase of our growth.

We’ve made great strides over the last five years, significantly simplifying the bank well ahead of our peers. We do fewer things but do them better than ever before. We focus on the customers who value our services. Our years of simplification, of delivering on our commitments, and building a more sustainable bank, are recognised in the market.

On a range of metrics, operational metrics, productivity, balance sheet strength and returns, the things investors look at, ANZ has generally outperformed our benchmarked peers over that last five-year period.

For the first time in a long, long time, we're delivering better shareholder returns than most of our peers over one year, three years and five-years. So the market is rewarding the strategy as well, they can see it working. We are translating purpose and strategy into better outcomes, not just for our customers but actually for shareholders as well

Amplifying the strategy

But a strategy doesn’t live in a vacuum. It needs to evolve and change as the environment changes. Our customers and the market are expecting more of us, regulation is more complex and competition more intense.

We’ve done a good job reshaping our portfolio but we need to change gears if we want to continue to perform. The rules of the game are changing and that’s why we’ve refreshed our strategy.

Today the competition – from other banks, fintechs, bigtech, non-banks and neo-banks – continues to grow. Customers want the same experience in banking they can get from online shopping or travel – fast, good value, 24/7.

As I’ve said before, the “golden years” of banking, where we could rest on our incumbency to ride a growing economy with familiar competitors, are over. The industry is being reformed, and for the better, by more rigorous customer preferences, tougher regulation and shifting community expectations.

Moreover, this is happening in that lower growth environment where society and our regulators are more sensitive to banks operating in an ethical, environmentally sustainable and transparent manner.

Banks, all companies, can’t just ride the waves of change. They are rightly expected to lead change and shape the future – including climate change, technology and social equity.

Building a bank capable of leading requires a new focus. Put simply, turning purpose and strategy into better outcomes will need a fresh approach to our propositions, partnerships, platforms and people – four Ps.

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At ANZ we have three core businesses: Australia Retail & Commercial, New Zealand, and Institutional. They provide valuable diversification and complementarity. The Four Ps are a way to think about the foundations of those businesses, the way they support that value wheel.

Critically, all this work is in order to better serve our customers.

Five years ago we set out a vision for ANZ after working through our purpose and values, what we are good at, and where we saw opportunity. We distilled that vision into those imperatives you know well:

• Helping people own a livable, affordable and sustainable home – and help investors provide affordable housing for renters and the homeless.
• Helping people start or buy or run and sustainably grow a business.
• Helping companies move capital and goods around the region

Within this framework and focusing on those customers who value our products and services, we have an enormous opportunity – in Australia, in New Zealand and across the region.

To draw on just two of these, we can build a better foundation for improving our customers’ financial wellbeing with ANZx; and help our customers with the transition to a lower carbon future by investing in being the best bank for sustainability.

ANZx

ANZx will reposition ANZ for the long-term. Our technology has been a major inhibitor. Its complexity and its age make it hard to change, prone to error, and less resilient than required. Patching it up made no sense. Moving to a greenfield stack wasn’t practical given our scale and breadth.

We looked at a range of alternatives and based on our starting point - and the experience of European banks in particular - the best path for ANZ was to progressively rebuild our technology starting with sales and service. We have built a team of over 800 people. More than half are engineers, and many joining from leading technology companies like Apple, Amazon and Square.

This work is challenging and it's mostly unseen but this year we made significant progress building a platform for low-cost, scalable, resilient growth. It's a bit like building a skyscraper - all the hard work is beneath the ground but once it emerges, if it is well engineered, it does grow quickly.

With the foundations complete we are now building a range of new customer propositions based around financial wellbeing. We are currently testing our first proposition and will be ready to launch with new customers early in 2022 under a new brand, ANZ Plus.

ANZx will give us a proposition that is far more compelling and will make us far more competitive. We won’t be talking about just moving our capacity a little bit but have a scalable, compelling, low-cost resilient platform to really grow in the market. ANZx will improve the bank we are today but it’s greater power lies in what it will enable in the long term – options and services we can’t even imagine and are just not feasible today.

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Despite the growing importance of technology like ANZx, people remain at the heart of our business. Customers will choose ANZ throughout their life not because of the latest tech or because they like the colour blue but because of the interactions they have with our people. Maybe that’s in a branch or call centre. But it’s also in the way we design products, the way we design our app, the way we do things.

Fundamentally, our customers will know banking with ANZ will improve their financial wellbeing and sustainability.

Low carbon opportunity

The transition to a sustainable environment is an enormous and exciting business opportunity for our institutional business. The transformation in how the world produces, distributes and consumes energy will drive trillions of dollars in global investment. And many of the capabilities required to participate in this flow are in our toolkit.

We are the largest institutional bank at home and Australia's most international bank. We are a leader in banking resource extraction, arranging finance for large-scale infrastructure, connecting buyers and sellers across Asia, distributing debt, and hedging market risk. Based on Bloomberg's data, we estimate we participated in around 5 per cent of global sustainable finance flow in 2021 - which increased our sustainable finance revenues more than 60 per cent.

That’s just the beginning. Opportunities include the electrification of transport, the commercialisation of hydrogen, and financing energy efficient buildings. No other Australian commercial bank has the skillset, customer relationships or the track record to participate as seriously in this global super cycle.

These are just two of the exciting opportunities we have to change our customers’ future – to improve their financial wellbeing and sustainability. There are plenty more. But it will take a different approach and that’s the bank we are building.

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Shayne Elliott is CEO of ANZ