ANZ’s profit slides 5% even though it cut more than 1 in 10 staff

• ANZ’s full year cash profit fell 5% to $6.49 billion.
• Statutory Profit after tax was flat at $6.40 billion.
• Return on Equity fell 67 bps to 11% with Cash Earnings per Share down 4% to 223.4 cents.

The ANZ Bank’s full year cash profit fell 5% to $6.49 billion, as housing growth slows and borrowing capacity falls.

ANZ Chief Executive Officer Shayne Elliott described the business environment for banks as tough with revenue growth hard to come by.

“There’s a lot of challenges out there in terms of softening house prices, people are a little less confident than they’ve been in the past, we’ve been tightening up our credit standards,” he says.

“So that’s really about the outlook is a little bit more subdued than it has been.

“And we don’t think that that’s a temporary shift, we think it’s quite permanent and therefore we’ve been simplifying our business,
readjusting our operating methods so that we’re fit and lean and ready to adapt for that future world.”

The results were also subdued by costs badociated with the financial services royal commission, including a $377 million charge for refunds and related costs, and $55 million in legal bills.

But normal overheads have been falling, with staff numbers down 11% to 39,924.

Elliott says the actions taken in recent years to simplify the business have allowed the bank to reduce costs, rebalance capital and better remediate issues.

“This places ANZ in a stronger position to meet the challenges facing the industry,” he says.

“Retail banking in Australia faced strong headwinds with housing growth slowing and borrowing capacity reducing.

“We continued our disciplined approach to home loan growth by focusing on customers who want to buy and own their own home.

“While this meant we sacrificed short-term revenue growth and higher margins in Australia, particularly in the investor and interest-only segments, it was the right thing to do for shareholders.”

The final dividend is 80 cents per share, fully franked, bringing the full year payout to 160 cents, steady on last year.

“Expenses were up slightly for the year due primarily to increased customer compensation and remediation costs in Australia,” says Elliott.

“Excluding large notable items, expenses were down 1.5% for the
year, positioning us to better manage the headwinds impacting the sector.”

The numbers for 2018:

“While there was much to be pleased about this year, we accept the significant community concern as a result of our failures highlighted by the Royal Commission has impacted our standing in the community,” says Elliott.

He says this was behind cutting bonuses by $124 million.

“We are also undertaking the urgent work required to fix the failures that have been highlighted by the Commission and further increased our focus on conduct issues,” he says.

The economy

Elliott says the economy in Australia and New Zealand is sound.

Unemployment is low and corporate balance sheets are in good shape.

“The (banking) industry is experiencing the lowest credit losses, or the lowest levels of risk, we’ve seen in a generation,” he says.

But he says revenue growth is going to be much harder to come by.

“I don’t want people to think that it’s terrible out there in terms of the opportunities,” he says.

“But it’s much harder than we’ve been used to. So we think the right way to win and prosper is to be really, really focused on productivity and cost. And really be selective about where you want to grow revenue.”

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