Source : THE AGE NEWS
Outgoing ANZ Bank boss Shayne Elliott says moves during his tenure to sell dozens of businesses and slash the number of major corporate clients on the bank’s books will set it up for a more volatile world and the next inevitable financial crisis.
Elliott, who will be replaced by Nuno Matos next week, delivered his last result as chief executive on Thursday, as the bank posted flat half-year profits of $3.6 billion.
ANZ chief executive Shayne Elliott is bowing out after more than nine years in the role.Credit: Arsine Houspian
After more than nine years leading ANZ, Elliott cited a phrase often used in the industry – that in banking, it’s better to be “boring” – especially when the world is heading into a more disruptive era of rising geopolitical tensions and the unwinding of globalisation.
As CEO, Elliott made major shifts at ANZ including selling about 30 non-core businesses and scaling back ANZ’s presence in Asia; shrinking the number of big business clients on its books; and buying Suncorp’s retail bank for $4.9 billion. The Melbourne-based bank has also been slapped with a $1 billion capital charge over governance failings in its markets division, and critics say its digital transformation has been underwhelming.
Elliott, the longest-serving current big four bank boss, argued changes under his tenure had made ANZ a less risky and simpler bank, and it was much more picky about its biggest clients than when he joined as the head of ANZ’s institutional bank in 2009. He said at that time, the 10 biggest clients of the bank were “vibrant and exciting”, but higher-risk and “not a world for banks”.
“I think banks are much better to be boring,” he said.
“I’d be very happy to say we’re boring and safe in terms of our customer selection, and I sleep better at night because of that, and I know our shareholders do.”
During Elliott’s time as CEO, banks have also faced major changes from events including the COVID-19 crisis and what Elliott called the industry’s “crisis around culture” – the 2018 royal commission into banking misconduct.
Elliott said crises were “the norm” throughout the history of banking, so banks needed to have strong balance sheets, strong cultures and adaptability.
“My job is to make sure that the bank’s in the best possible shape to handle whatever comes, because we know… there’ll be another crisis of some way, shape, or form,” he said.
Jarden analyst Matt Wilson said Elliott’s move to wind back the “super-regional” Asia strategy that he inherited made sense, as did moves to shed riskier institutional clients. On the other hand, Wilson said ANZ’s technological transformation had been slower than hoped, and the recent governance problems were a slight blemish. All up, however, he said Elliott had been “the man for the times” at ANZ.
“He has dramatically reshaped the credit profile of the institutional bank – that’s a tick. The non-financial risk in the last 12 months was disappointing given that up until then, their conduct had been the best of the big four,” Wilson said.
Atlas Funds Management chief investment officer Hugh Dive said Elliott had been more bold than his rivals in buying Suncorp’s bank, adding most big Australian banks had become more predictable in recent times by ditching “non-core” businesses. “Five or six years ago there was a lot more volatility. Something could go wrong offshore, or something would happen in insurance or wealth management,” Dive said.
In the March half, ANZ’s profits were flat compared with a year earlier but 12 per cent higher than the six months to September.
Profits were slightly ahead of expectations, but the result confirmed bank earnings are being pressured by competition, with a 2 basis point contraction in ANZ’s net interest margin – funding costs compared with what banks charge for loans – compared with the September half.
Charges for impaired loans fell sharply compared with the September half, from $336 million to $145 million. ANZ shares were down 1.8 per cent in afternoon trade.
Elliott did not predict what banking’s next crisis might be, but he raised concerns about the fast- growing financial sector that sits outside the tightly regulated banking industry, such as private credit funds, buy now later operators, and other non-bank lenders.
“History says that the shadow banking sectors historically have generally ended up causing harm,” he said.
“I’m not predicting that we’re there yet. I’m not saying it’s all going to blow up tomorrow, I’m saying it’s an area of concern. History does repeat in banking, and we’ve seen this time and time again.”
ANZ will pay a dividend of 83¢, the same as the first half of last year. The dividend will be franked at 70 per cent and paid on July 1.
The Market Recap newsletter is a wrap of the day’s trading. Get it each weekday afternoon.
