Half Year 2025 ANZ Group Holdings Ltd Earnings Presentation Transcript

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

Question: Ed Henning - CLSA - Analyst : Congratulations, Shayne. All the best. A couple from me. Firstly, on capital. You've reached the capital floor. Is there any scope to adjust the capital floor through optimization to help your capital position? And you're issuing shares under the DRP unlike peers. Can you just talk about your credit growth ambitions and your ability to hold the dividend at current levels? That's the first question, please? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 08, 2025 / 12:00AM, ANZ.AX - Half Year 2025 ANZ Group Holdings Ltd Earnings Presentation

Question: Ed Henning - CLSA - Analyst : And can you just touch on the -- issuing the DRP shares and the ability to hold the dividend at current levels?

Question: Ed Henning - CLSA - Analyst : Perfect. And just a second one, just on your margin. If you adjust for the swing in markets, your net interest income looks to be down about 5 basis points. Can you just touch on the impact of remediation in the actual margin impact of U.S. rate cuts? And just give us a little bit more on some of the moving parts on the outlook of the actual NIM, not the banking NIM, please?

Question: Ed Henning - CLSA - Analyst : Yes, please.

Question: Ed Henning - CLSA - Analyst : 20.

Question: Ed Henning - CLSA - Analyst : Okay. And can you provide any comments on any changes or some of the moving parts on the outlook that you're seeing margin at the moment, please?

Question: Matthew Wilson - Jarden - Analyst : All the best, Shayne.

Question: Matthew Wilson - Jarden - Analyst : A few questions, if I may. Firstly, Slide 77. Gross in (inaudible) have gone from 1.69 to 2.25, so up sort of 33%. When you look at it, it looks like it's restructured loans. It then looks as though it's coming from Australian retail. So when you get to the last bucket, it looks as though it's coming from loans in the $10 million to $100 million size exposure. Maybe it's just the graph, but those sort of loans in Australian retail look unusual. Could you add some color to that, please?

Question: Matthew Wilson - Jarden - Analyst : Okay. And then secondly, if we look at revenue ex Suncorp, it's down 1% half-on-half in an environment where you have much better market outcomes. Looking through the -- and you had 3% net interest income growth. And the fees look to be really soft despite good volumes. You point out that there's timing differences in cards and loans and what have you. But we saw it at other banks this period as well. Are there other things driving softness in noninterest income across the sector? Is it competition discounting to try and get volume growth? How should we think about that trend?

Question: Matthew Wilson - Jarden - Analyst : Yes. Okay. But those earnings would have come in net interest income. And maybe if I can push my luck, Shayne, given you mentioned it in your opening remarks. If you're thinking about the institutional bank, how and will changes in global capital flows impact the revenue in transaction banking and trade, et cetera?

Question: Matthew Wilson - Jarden - Analyst : Shayne, as I said all the best (inaudible).

Question: Richard Wiles - Morgan Stanley - Analyst : So I also had some questions on the institutional business. Shayne, you just talked a little bit about how the geopolitical changes may impact the institutional business. Can you talk about how you think international will perform versus Australia. Do you think international has much better growth prospects in the Australian arm of the Institutional division?

Question: Richard Wiles - Morgan Stanley - Analyst : Okay. And my second question also relates to institutional. The margin ex markets in the division, I think fell about 12 basis points, 2 36 to 2 24. Can you maybe talk to the drivers of that and give us an update on how you think low cash rates are going to influence the margin in the division over the next while? I know there are a whole lot of other factors including competition. But if you could talk about the impact of lower cash rates, your updated view on that. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 08, 2025 / 12:00AM, ANZ.AX - Half Year 2025 ANZ Group Holdings Ltd Earnings Presentation

Question: Richard Wiles - Morgan Stanley - Analyst : Okay. And Shayne, I'll just echo what some of my peers have said. Congratulations. You made some very bold decisions at ANZ. So well done and all the best.

Question: John Storey - UBS - Analyst : Congratulations, Shayne. Great ANZ, and all the best on the next chapter. I've got two questions, probably more directed at Farhan. The first one is just on costs and the second one is on attendance. Just on the first one with regards to cost guidance that you've given, 4% growth. And we kind of put you at about $12-odd billion for the full year, which I think consensus has largely got -- but noting that you've got -- you've had a step down in terms of your investment spend in the first half, I'd just be interested to get a little bit more color on the nature of the expenses that are going to come through this $500-odd million delta effectively on the first half annualized cost number. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 08, 2025 / 12:00AM, ANZ.AX - Half Year 2025 ANZ Group Holdings Ltd Earnings Presentation

Question: John Storey - UBS - Analyst : Second half --

Question: John Storey - UBS - Analyst : Okay. And just on my second question with regards to impairment and it's quite similar to what Matt Wilson was asking, but you've got this paradox at the moment where your NPLs, your NPEs are going up quite significantly, up 11%. And then clearly, the charge that you carry in is actually quite low. If you go have a look at your Stage 3 charge that came through the $300 million relative to the delta in your impaired, which is $1.2 billion. That charge, as a percentage of that, was 23%. And if you go and have a look at your prior periods, it's close to 32%. I just want to get an understanding of what you guys have seen, what your inputs are going and if it's with regards to expected losses because I mean, if you have to take it back to that 30% level, there's probably about $100 million delta just on that charge alone. So Farhan, if you've got any insight into that, that would be great. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 08, 2025 / 12:00AM, ANZ.AX - Half Year 2025 ANZ Group Holdings Ltd Earnings Presentation

Question: Jon Mott - Barrenjoey - Analyst : Question relates to capital, and we've now seen you're going through the capital floor on the common equity Tier 1 ratio. But if I can just turn you to Page 47 of the 4D and looking at the leverage ratio. Now remembering the leverage ratio was introduced to stop as another constraint against just using the CET1 and optimization and model adjustments that we're seeing around the world. But what you're seeing here is that the Tier 1 capital is unchanged over the last half. But you've seen the exposures rise by another 6%, which has seen the APRA leverage ratio go down from 4.7% to just 4.4%. Are we now getting to a stage where the leverage ratio becomes a binding constraint on your capital position?

Question: Jon Mott - Barrenjoey - Analyst : So what do you still limit -- you're prepared to say this leverage ratio -- this is what's driving the ROE higher is actually the leverage. So where is the --

Question: Jon Mott - Barrenjoey - Analyst : Yes, that's the regulatory, but where would you be comfortable? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 08, 2025 / 12:00AM, ANZ.AX - Half Year 2025 ANZ Group Holdings Ltd Earnings Presentation

Question: Jon Mott - Barrenjoey - Analyst : And with institutional because I know a lot of that you were talking about before that the institutional side as rates go down, volumes go up, it's going to lead to ongoing pressure to your total exposures. Is that where you'd see this show up. The leverage ratio continues to fall from that respect.

Question: Jon Mott - Barrenjoey - Analyst : So turnover volume rather than because obviously, liquidity goes into exposure as well. So what were you referring?

Question: Jon Mott - Barrenjoey - Analyst : Okay. And just a second question. On the NIM, I know there's been a lot of discussion about this already, but (inaudible) out yesterday and said that for every 25 basis point rate cut, it costs them 1 basis point of the NIM over a five-year period -- so in the next period. Have you got any kind of sensitivity to that for the Australian exposure? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 08, 2025 / 12:00AM, ANZ.AX - Half Year 2025 ANZ Group Holdings Ltd Earnings Presentation

Question: Jon Mott - Barrenjoey - Analyst : And congratulations again, Shayne.

Question: Brian Johnson - MST Financial - Analyst : And congratulations, Shayne. I think anyone who has survived a reasonable (inaudible) thanks to (inaudible) predilection for pain. Two questions, if I may. The first one is if we have a look on Slide 23, we can see the Suncorp compact benefited for $35 million from these fair value adjustments. If we have a look on Page 8 of the result, I can see $50 million of that has been reversed apparently through the NIM. The questions that I have on that, what is the -- how much did that impact the NIM? What is the outlook for it going forward? So that's the first one, if I could.

Question: Brian Johnson - MST Financial - Analyst : So it's fair to see that will create a $100 million headwind on the NIM, other things being equal?

Question: Brian Johnson - MST Financial - Analyst : Just in a walk where you were discussing the NIM deltas, $50 million pretax is not a small number. Where would that have flown through in that walk?

Question: Brian Johnson - MST Financial - Analyst : Yes.

Question: Brian Johnson - MST Financial - Analyst : The second one is a somewhat more obscure one. If we have a look historically at the economic profit, it has been falling. So the accounting earnings have benefited from the very low loan loss charge. We can see even in this result, the long run rate has basically increased from 18 to 19 basis points. The disclosure of the economic profit has disappeared. Would it -- is this telling us the economic profit is not what we should be looking for anymore? Is it -- was it negative during the period? Could we get some --

Question: Brian Johnson - MST Financial - Analyst : The only thing I would observe, Shayne, is an important dynamic. The disclosures in the profit release are bigger than they actually are in the annual report. And often, the number that appears in the annual report is different to the one that appears in the profit disclosure. I'd really encourage just because others don't disclose it, doesn't mean that you guys shouldn't. I think it was a point of positive differentiation before -- but anyway, it is what it is.

Question: Brian Johnson - MST Financial - Analyst : I personally think you should bring back.

Question: Thomas Strong - Citi - Analyst : I'll add my congratulations, Shayne. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 08, 2025 / 12:00AM, ANZ.AX - Half Year 2025 ANZ Group Holdings Ltd Earnings Presentation

Question: Thomas Strong - Citi - Analyst : First question is just around the institutional business. If we go back to the first quarter, you saw $28 billion of lending growth in that business that's unwound through the second quarter. Can you just talk to, I guess, behaviorally what drove that and if there's any sort of revenue impact into the second half from that experience in the first quarter?

Question: Thomas Strong - Citi - Analyst : Okay. Okay. And just a second question, if I can, on the asset pricing tile in the NIM waterfall. We had the holding margin in New Zealand offset the other divisions. Can you perhaps just talk about the sustainability of that improvement in the (inaudible) and home lending margin? Is that sort of primary (inaudible) around swaps? Or is that sustainable?

Question: Matthew Dunger - BofA Global Research - Analyst : Slide 18, you've segmented the banking NIM at 14% versus the 10% market's ROE and the cost drag from the group. Just wondering, given you've called out the opportunity to optimize the market's ROE within the pack, what's the size of the opportunity? What should -- return should that markets business be delivering?

Question: Matthew Dunger - BofA Global Research - Analyst : Brilliant. And just a follow-up on capital. I just wanted to understand the impacts predominantly in the first quarter on risk-weighted asset growth, some of the reductions and the capital floor. To what extent -- and around the timing they can unwind. And any reservations on continuing the buyback?

Question: Matthew Dunger - BofA Global Research - Analyst : Fantastic and congratulations again.

Question: Andrew Triggs - JPMorgan - Analyst : And best wishes, Shayne.

Question: Andrew Triggs - JPMorgan - Analyst : We've really always been impressed with your attention to detail still across so many aspects of the firm. I'll ask a quick one given time. But on Slide 50, the risk-adjusted NIM drivers of institutional. If I just look at Australia and PNG specifically, it's come down quite a bit this period to 334 basis points. It's already below the second half '23, despite really only having a small impact from 1 RBA cash rate cut, and those deposits are not hedged in the institutional bank. So what's happening there? And is it really just partly because Westpac become so aggressive in Australian institutional?

Question: Andrew Triggs - JPMorgan - Analyst : Farhan, you're not worried that we've still probably got maybe another 100 basis points of cash rate cuts looking at the history. Is there any reason why you wouldn't go back to a risk-adjusted NIM more akin to the 2022, early 2023 period?