ANZ has opted for a low-risk portfolio strategy. It’s not free
The Australian retail division increased revenue by 6%, Australian commercial revenue increased by 20%, institutional revenue increased by 10% and New Zealand revenue increased by 12%.
One thing that stands out from the results is the traction gained by the digital bank, ANZ Plus, which attracted $1.25 billion in deposits thanks to a very competitive demand deposit rate of 3.25%.
Of course, the growth in deposits is mainly due to the switch of existing ANZ customers to the new digital platform, but the fact that around a third of customers joining ANZ Plus are new to ANZ indicates that this offers advantages by compared to what other banks offer.
As a trial and in the interests of readers, Chanticleer signed up for ANZ Plus on Thursday afternoon.
The process was simple, fast and secure. It took about two minutes, including multifactor identification. Also, it was worth it considering it meant transferring money from another bank that offered a transaction account interest rate of 1.1%.
This rate differential is not surprising given that ANZ has exceeded the Reserve Bank of Australia’s official rate increases of 175 basis points since June by 25 basis points.
“We believe ANZ Plus is more attractive to customers, more engaging, more efficient to manage, more secure and resilient with a more attractive economics for shareholders,” Elliott told analysts.
Earlier, he told Chanticleer that it would take several more years before the four key businesses in the ANZ portfolio were operating at optimal levels.
“The fundamentals in good condition”
“We use the term ‘the bank we’re building’ here because we’re basically saying we never get to finish well,” he says.
“We will always build the bank we build. What we have is that we have the fundamentals in good shape, we have set up our four activities, we have a clear strategy, a clear objective.
He says staff know their target markets and have a vision for the future.
“Now some companies are more established than others, like the institutional ones in New Zealand, which are much more advanced because we started in New Zealand.
“Now what we do is we invest in these strategies to make sure they are based on the right contemporary technologies.
“We are in the very early stages of leveraging this investment in ANZ Plus.
“We have a long way to go. We are far from being at full capacity in terms of growth. We have much bigger aspirations for each of these companies.
“It will take a few years to unfold. But that’s why we have to stay disciplined and focused on investing in the right companies. And with good growth prospects.
Analysts agree that ANZ’s earnings will continue to benefit from improving net interest margins, but this is tempered by concern over the impact a possible recession will have on its loan book .
This is where the de-risking of Elliott’s loan portfolio should be highlighted. For example, the number of high quality business loans has increased by 50% since 2016.
ANZ will face upward spending pressure in 2023 as it rolls out ANZ Plus, a move that requires the bank to run two parallel retail systems until all customers are switched to the platform. -digital form.
Elliott expects costs to increase by about 5% in 2023 or about $458 million due to “headwinds from wage and supplier cost inflation,” as well as “the annualized impact of the acquisition of CashRewards and stranded costs after formal separation from the Wealth Business.
“However, all things being equal, we expect revenue growth to outpace cost growth in year 23,” he said.
Capital expenditure leads to a more efficient bank. For example, ANZ now has over 30% of its applications in the cloud. Its goal is to move 70% of applications to the cloud in the next few years, which will result in “better resiliency, more efficient software spending and better capacity management”.
Elliott is more than likely to move on to a successor in 2023. This timing could make its final performance assessment difficult due to growing fears of a recession in Australia.
He was quizzed by veteran banking analyst Brian Johnson of Jefferies on whether ANZ’s bearish economic scenarios are sufficiently bearish compared to those used by Commonwealth Bank of Australia and National Australia Bank.
Elliott said that with unemployment around 3.5%, ANZ’s 7.75% drop was a “reasonable assumption”. If Elliott’s successor inherits this dire scenario, he or she will be happy with the profound reduction in risk over the past seven years.