Full Year 2024 ANZ Group Holdings Ltd Earnings Presentation Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Jonathan Mott - Barrenjoey Markets Pty. Ltd. - Analyst : First question to Shayne. You spent quite a lot of time talking about Plus and Transactive and you put some numbers out. I just wanted to consolidate them and make sure everyone is on the same page with how this is all going. $2.5 billion has been spent so far on Plus and Transactive. You're saying that it's 35% cheaper to serve the customers and you're going to start decommissioning your old systems from 26 but then really kick in in 27. So I wanted to get a feel for that because it would imply as you start to decommission these systems and move over and over, costs are rising the next year or two, that you should get absolute cost reduction from 27 onwards. to offset the NIM pressure that you're anticipating as AI and everything else kicks in. Is that correct? And I just wanted to get that feel for the outer use.

Question: Jonathan Mott - Barrenjoey Markets Pty. Ltd. - Analyst : Thank you. And a second question, if I could, and this goes to slide 32, which shows the capital efficiency. The one line that really sticks out to me is the $2.2 billion that you've generated in excess capital from model updates, one of my pet topics. If you think about that, it's about a third of the profit of the group was generated, equivalent of, from model updates. It generated more capital than the profit from retail, commercial and New Zealand divisions. and more than offset the credit risk-weighted assets that you got from coming over from Suncorp Bank, which have 1.2 million customers. So when we step back and think about this the banks are very reliant on models. How do we get confident that the old models were so wrong? In effect, they were out by so far, and that the new models, we're not going to see this constant change, that you're so reliant. And if you look at it, the organic capital generation didn't cover the dividend and growth of the business. Do you need more model updates to be able to pay the dividend going forward?

Question: Jonathan Mott - Barrenjoey Markets Pty. Ltd. - Analyst : Thank you.

Question: Ed Henning - CLSA Australia Pty. Ltd. - Analyst : Hi, thanks for taking my questions. Just following on the first one, just on ANZ Plus, look, I fully understand future benefits of lower cost to serve. But can you just touch on the near term, the impact of the migration and the cost of that will be? Will there be any revenue impact from that when REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 07, 2024 / 11:00PM, ANZ.AX - Full Year 2024 ANZ Group Holdings Ltd Earnings Presentation you've got to migrate on to potentially higher-costing products on the revenue side? And can you just touch on thoughts on any attrition as you migrate your Suncorp customers across, is the first question.

Question: Ed Henning - CLSA Australia Pty. Ltd. - Analyst : Just to clarify on that, as you move some people across, they might be going on to some higher rates. There could be a little bit of near-term revenue pressure, but obviously the cost benefits outweigh once they come through. Is that how to think about it?

Question: Ed Henning - CLSA Australia Pty. Ltd. - Analyst : Thank you for that detailed answer. Just the second question, you talked before about the risk appetite in Suncorp and increasing the risk appetite. Can you just run through what you've done there and does that mean you potentially see a little bit more growth coming through Suncorp in the near term, if you think of that as standalone?

Question: Ed Henning - CLSA Australia Pty. Ltd. - Analyst : Okay, great. Thank you very much.

Question: Richard Wiles - Morgan Stanley & Co. LLC - Analyst : Thank you and good morning. Shayne, do you think the outlook for revenue growth is better across your Australian retail and commercial banking divisions or

Question: Richard Wiles - Morgan Stanley & Co. LLC - Analyst : Okay, thank you. And just a second question is another one on ANZ+. I just want to get a bit of an understanding for how many customers need to migrate. You say on slide 10 that there's 2 million customers to migrate, or have you got 5 or 6 million to migrate? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 07, 2024 / 11:00PM, ANZ.AX - Full Year 2024 ANZ Group Holdings Ltd Earnings Presentation

Question: Richard Wiles - Morgan Stanley & Co. LLC - Analyst : Thanks for the opportunity to ask a question. First of all, just looking at the margin impact of liquids, I was hoping you could give us a bit more guidance on what the impact was for the reduction in liquids over the half. How much of that plus four from asset and funding mix was driven by the change in liquids over the half?

Question: Richard Wiles - Morgan Stanley & Co. LLC - Analyst : And in terms of the impact on that's neutral for revenues, right? It's just supporting?

Question: Richard Wiles - Morgan Stanley & Co. LLC - Analyst : Secondly, just around the portfolio, it looks like you've had a reduction in the portfolio in both Australia and New Zealand. You've had an increase in the hedge portion. Can you maybe talk us through those changes? It doesn't seem like there's been a big change in your deposit mix, looking at the slides. Is there a bit of a change in the customers you now consider to be rate-sensitive or what's driving that shift?

Question: Richard Wiles - Morgan Stanley & Co. LLC - Analyst : In the replicating portfolio, you had a decrease in the volumes in the portfolio, but an increase in the hedge rate. But it looks like the deposit mix didn't really change much.

Question: Richard Wiles - Morgan Stanley & Co. LLC - Analyst : Does Suncorp have any impact on that replicating portfolio going forward?

Question: Richard Wiles - Morgan Stanley & Co. LLC - Analyst : Okay. That's not consolidated into the disclosures.

Question: Richard Wiles - Morgan Stanley & Co. LLC - Analyst : I'm just looking at the slide 75, which has the detail of Australia, New Zealand. Is that Exon for the moment? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 07, 2024 / 11:00PM, ANZ.AX - Full Year 2024 ANZ Group Holdings Ltd Earnings Presentation

Question: Richard Wiles - Morgan Stanley & Co. LLC - Analyst : Thanks.

Question: Matt Dunger - BofA Securities Inc. - Analyst : Thank you gentlemen for taking my question. Just looking at slides 60, 61 and around the institutional bank margins, you flagged that the cost of those PCM deposits, the margins on those are back around pre-COVID levels and a pretty low exposure to zero and low-rate deposits? Are you telling us that the institutional net interest margin compression should be minimal on those deposits going forward, given we're almost back at pre-COVID levels and most of the compression could come from the lending side?

Question: Matt Dunger - BofA Securities Inc. - Analyst : Understood. Thank you very much. And if I could just follow up to ask about the non-financial risk practices which you've addressed today, and I understand you have the APRA capital add-on and independent review underway. Shayne, what timeline are you looking at to resolve these issues and what additional programs of work might be required from here?

Question: Matt Dunger - BofA Securities Inc. - Analyst : Understood. Thank you very much.

Question: Brian Johnson - MST Marquee - Analyst : Fantastic. And thank you very much for the opportunity to ask a question. And also, on the disclosures generally, which are pretty good in a very confusing kind of timeline of results with the acquisition, I'd like to just go back to one of the issues John Mott raised, but perhaps ask it slightly differently. If we have a look at page 35 of the result, we can see that the new impaired assets went up half on half, but the loan loss charge stayed low, which to me feels like it's telling you, quite logically, the loss in event of default is quite low because asset values have generally risen, which REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 07, 2024 / 11:00PM, ANZ.AX - Full Year 2024 ANZ Group Holdings Ltd Earnings Presentation I think Would I be right in thinking that actually flows into those capital models? So what I'd like to understand is just if asset values were to fall, particularly house prices, not only do we get a higher provisioning charge, but do we also get the models reversed and we get a higher capital requirement? So do we get kind of double pro-cyclical leverage on the way up and double on the way down?

Question: Brian Johnson - MST Marquee - Analyst : Kevin, just on that, sorry, I apologize. Page 35 says new impaired assets. that delta which has gone from 6.30 in the first half up to 8.59, that's primarily driven by the acquired Suncorp impaired assets as opposed to genuine new ones?

Question: Richard Wiles - Morgan Stanley & Co. LLC - Analyst : Fantastic. Okay, the next one if I may. Shayne, during The ESG briefing, you briefly mentioned that the ROEs on the total home loan book were barely above the cost of capital from memory. When you think that the home loan book has got two components, it's got the good stuff originated by the branches and the stuff originated by the brokers who get pretty big margins. And I'd like to phrase this in the context that three of your peers are now talking about the need to do something on the branch versus proprietary channel. But if you actually have a look at slide 90, we can see that basically the percentage of the book has gone from 57 to 59 over the year, but the flow has actually gone from 64 to 65. and from memory, Suncorp's flow is about 75%. Yes. Can I just confirm those comments that you made before? The ROE on the front book home lending through the REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 07, 2024 / 11:00PM, ANZ.AX - Full Year 2024 ANZ Group Holdings Ltd Earnings Presentation mortgage broker is probably below your cost of capital because that's what it would appear to be when I look at the retail banking margin, which fell, but I'm sorry, this is a long-winded question, but I can also see the NIM relative to the risk-weighted assets and so on.

Question: Richard Wiles - Morgan Stanley & Co. LLC - Analyst : And Shayne, should you be differentially pricing between your digital home loan, and the broker?

Question: Brian Johnson - MST Marquee - Analyst : Thanks Maile.

Question: John Storey - UBS Investment Bank - Analyst : Thanks so much and thanks for giving me the chance to ask a question. I appreciate the opportunity. Shayne, I've only actually got one. I appreciate it's been a long call too. So obviously your institutional business had an exceptional performance during the year. I just wanted to drill down a little bit more into the markets business, particularly the franchise revenue for the second half of the year that was down 22%. I just wanted to get a view from you if there's been any change in risk appetite within the markets division and more importantly wanted to get a sense what are clients saying and what's happening with the actual client franchise itself. To caveat that, I've read the comments around the seasonality in terms of markets so maybe just a little bit broader than that would be appreciated, thanks.

Question: John Storey - UBS Investment Bank - Analyst : Excellent, thanks.

Question: Andrew Triggs - JPMorgan Chase & Co. - Analyst : Thanks, good morning. Just to follow up on Matt Dungar's question actually on slide 60, Shayne or Farhan, what actually drove the compression in deposit NIM, do you think, in the half given you said high deposit beta and really rate cuts didn't start happening apart from New Zealand until right at the tail end of the half?

Question: Andrew Triggs - JPMorgan Chase & Co. - Analyst : Yes. Thanks. Thanks, Farhan. And the previous half, you had a footnote saying that in periods of zero rate interest rate policy, deposit margins have ranged between 75 basis points and 90. It's sort of sitting at the middle of that range at the moment. why wouldn't we expect it to fall towards the lower end of the range, especially as US Fed funds rate falls and the RBA cash rate.

Question: Andrew Triggs - JPMorgan Chase & Co. - Analyst : Thank you. And just a related question to Shayne. I guess you've mentioned a couple of times in the call that you now have the second largest deposit base for the majors, but that position is largely due to markets' deposits and also PCM deposits in Asia. I guess my question is, what gives you the comfort that that mismatch, I guess, between having a big Australian New Zealand home loan and commercial loan book and institutional loan book is somewhat mismatched with liability spreads that are driven by offshore trends?

Question: Andrew Triggs - JPMorgan Chase & Co. - Analyst : Thank you.

Question: Jeff Cai - Jarden Australia Pty. Ltd. - Analyst : Good morning and thank you. Look, a question on Suncorp Bank. If I sort of annualise the Suncorp Bank costs, the cost base looks to be about $900 million per year. That's about 100 million higher than what Suncorp had. Can you talk through why that's the case? Yes, so Jeff- I understand there's some- Sorry, go on. Sorry. No, go on. I was just about to say, I understand there's some timing issues involved.

Question: Jeff Cai - Jarden Australia Pty. Ltd. - Analyst : Okay, got it. And then very quick question on slide 24 on deposit pricing buckets. To what extent do you see that part can be a tailwind to margins going forward? It sounds like some of the pressure in New Zealand is easing and what we're seeing in terms of deposit competition in Australia is also easing. Just interested in how you think about that piece going forward.

Question: Jeff Cai - Jarden Australia Pty. Ltd. - Analyst : Thank you.

Question: Brendan Sproules - Citigroup Inc. - Analyst : Good morning. I just have one question given we've had quite a long conference call. Just in relation to New Zealand banking NIMS, the Reserve Bank in recent months has made comments around how the banking sector has been able to expand its NIMS 30 or 40 basis points during the tightening cycle. I wonder if you can make some comments around your NIM as we go through this rate cutting cycle and whether there has been a structural change to the NIM or has this been a cyclical phenomenon and we can expect that 30 to 40 basis point gain to roll out over time? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 07, 2024 / 11:00PM, ANZ.AX - Full Year 2024 ANZ Group Holdings Ltd Earnings Presentation

Question: Brendan Sproules - Citigroup Inc. - Analyst : Yes. And maybe I could just follow up on that Shane. I mean, it's a very good point you make and I think the Reserve Bank comments were that they had to actually push their cash rate higher than they might have wanted to because partly because of that dynamic that the mortgage rate just didn't keep up. So therefore do you expect on the way down as they cut that you'll get the opposite, that the Reserve Bank will have to push it lower because you just won't get the fall in the mortgage rate, which obviously will affect your overall deposit profitability?

Question: Brendan Sproules - Citigroup Inc. - Analyst : That's right. Okay, thank you.