Elliott: Outstanding result, balanced across all divisions

ANZ released an audited Statutory Profit after tax for the September 2022 financial year of $7,119 million, up 16 per cent on the previous year. Cash profit from continuing operations was $6,515 million, up 5 per cent on the previous year. The dividend was 74 cents a share.

“We've got good volume growth pretty much everywhere and we saw margins expand or recover, really after many years of falling. So contribution from right across the board.”

Speaking with bluenotes on video, Elliott said the underlying profit before provisions for the second half was the strongest growth by that metric since 2009. Some of that was related to the external environment and the current interest rate cycle underpinning the strong performance was ANZ’s longer term program of simplification and de-risking.

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“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 the four divisions we run today – Australia Retail, Australia Commercial, Institutional and New Zealand – all contributed in a really positive way,” Elliott said.                      

“We've got good volume growth pretty much everywhere and we saw margins expand or recover, really after many years of falling. So contribution from right across the board, good underlying growth and the right sort of metrics.

“I should mention strong productivity performances as well.”

Elliott noted diversification also brought benefits in that each business contributed about a quarter of group revenue. That balance and diversification means ANZ is exposed to every part of the economy – from homeowners to small business to mid-sized corporates to large and multinational businesses that connect Australia, New Zealand and the rest of the world.

“We get really amazing insight through that connectivity right across the economy. As a result of that our businesses are exposed to slightly different drivers than others,” Elliott said.

Commercial separation

In the Australian business, the 2022 full year result saw the separation of ANZ’s Commercial division as part of the bank’s transformation, bringing deeper focus to the opportunity with small and medium-sized business. Initially the bank’s transformation focused on the Institutional and New Zealand businesses which were now performing well, Elliott said, and the time was right to focus on Commercial.

The division supports about 650,000 small businesses – everything from sole traders to mid-size corporates in sectors like manufacturing, agriculture or health care.

“Many of these customers are trading businesses that are traditionally “asset-heavy businesses, so they don't tend to borrow a lot,” Elliott said.

“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 deposits we get in that sector, we lend back about 50 cents back to help our small businesses grow. And of that 50 cents, about 40 cents of it is secured, normally against property.

“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. It's supporting the lifeblood of the economy and the time was right for us to really focus on that.”

In Australia Retail, Elliott said the rebuild of the technology platform and the rollout of ANZ Plus, the new retail banking platform, continues apace.

“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 hundred odd metrics we measure every day, but also from a customer perspective,” he said.

“It's important to note it's not just about the technology. It's really a new business model built around this idea of financial wellbeing. We want to improve our customers financial wellbeing so they better off over the long term and more secure in their finances.”

In the next few weeks ANZ Plus will be launching a digital home loan pilot with staff which will be a truly digital end-to-end solution from application all the way through to settlement.

Global outlook

Globally, with an uncertain economic and geopolitical outlook, Elliott said it was important the bank was in good shape with more capital and more liquidity to ensure stability.

“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,” he said.

“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 are entering into this period in the best possible shape. 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.”

Elliott concluded the conversation by outlining the bank’s plans to acquire Suncorp Bank and to establish a non-operating holding company.

“We're really focused on making our case to the various bodies that need to approve the transaction,” he said. “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 right across the entire 1.2 million new customer base.”

On the non-operating holding company, Elliott said as the bank changes and uses new technology, data and insights, it was important to have a legal structure that allows those innovations to flourish.

“We need to be able to hire the very best technology people, apply the very best technology. And 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,” he said.

“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.”

You can listen to the full conversation by watching to the video above.

Andrew Cornell is managing editor of bluenotes.