ANZ avoids second strike on remuneration report; says mortgage business recovery will extend into 2020

Shareholders at its annual meeting respond positively to changes made to ANZ’s remuneration structure.

ANZ chairman David Gonski at the company’s 2019 AGM. Picture: AAP

ANZ Bank has easily avoided a second strike on its remuneration report, after a “no” vote of only 10 per cent against the report.

The corresponding vote last year was 34 per cent, which was comfortably ahead of the 25 per cent threshold for a first strike.

Since then, ANZ has made a number of changes to its remuneration structure and was spared the wrath of investors at its annual meeting in Brisbane.

All three major banks with a September balance date earned a first strike last year in the wake of the financial services royal commission.

Westpac copped a second strike at its 2019 annual meeting last Thursday.

However, the subsequent vote for a board spill was easily defeated.

Earlier in the meeting, ANZ said it expects the second-half recovery in its home loan business to continue “well into 2020”, as measures put in place to resolve one of the black spots in the bank’s performance take effect.

The bank also revealed it had formally inscribed the importance of looking at the long term in its board charter, after identifying short-termism, complexity and accountability in ANZ’s self-assessment as three areas requiring more board attention.

CEO of ANZ Shayne Elliott speaks at the annual general meeting at the Brisbane Convention & Exhibition Centre. Picture: Getty Images

Group chief executive Shayne Elliott also told shareholders at the annual general meeting that ANZ was well-placed to meet the higher capital requirements announced by the Reserve Bank of New Zealand without raising additional capital.

Without any management intervention, ANZ will be required to hold a further $3bn in New Zealand over the next seven and a half years.

Chairman David Gonski said in his speech that 2019 was a difficult year for the bank, with intense competition, lower interest rates and slower credit growth having a “significant” impact.

“We have also needed to respond to more regulatory attention and heightened community expectations following the royal commission, as well as increased remediation costs,” Mr Gonski said.

After announcing an additional $682m in remediation charges, ANZ now had 1000 people dedicated to returning customers’ money “as quickly as possible”, he said.

It was estimated that more that more than 3.4m bank accounts needed fixing in the retail and commercial banking divisions.

Of those, ANZ had made good on more than a million of those accounts.

While each issue was unique, customers on average were refunded about $60 each.

Mr Elliott reiterated that, contrary to the experience of Commonwealth Bank and more recently Westpac, ANZ was not aware of any impending litigation from the financial intelligence regulator Austrac.

On climate change, Mr Gonski said a range of stakeholders were interested in the alignment of the bank’s policy position with its industry associations.

“In light of this we will conduct a review in 2020 of those matters and publish the outcome in next year’s annual report,” he said.

The chairman also outlined steps taken by the bank to ensure auditor independence, given KPMG has been the group auditor since 1969.

ANZ’s policies, he said, went further than the requirements of the Corporations Act in Australia and the Securities and Exchange Commission in the US.

First, any non-audit services had to be signed off by the audit committee, and such services had to be limited to less than 5 per cent of audit billings in any one year.

In 2019, the figure was $116,000, or 0.6 per cent of the KPMG audit fee.

“We also require that the lead partner involved in the external audit should not remain in a key audit role longer than five years, and should not return to the audit team for a further five years,” Mr Gonski said.

The board, he said, expected challenging trading conditions for all banks to continue “well into the foreseeable future”.

Competition would remain intense, regulation would continue to intensify, and ANZ needed to continue to “work even faster fixing the failures of the past”.

“Despite the tough conditions we are facing, your board believes we remain well-placed to navigate these challenges given the strong progress we have made in transforming our business,” Mr Gonski said.