Investor dump of ANZ stock continues as CEO pick fails to excite market

Analysts say the appointment of an outsider to run ANZ doesn’t address existing problems and risks, and it appears investors feel the same way.

ANZ chairman Paul O’Sullivan with the anointed chief executive Nuno Matos. Picture: Aaron Francis

ANZ’s decision to appoint from outside banker Nuno Matos to succeed veteran chief executive of nine years Shayne Elliott has been met with disdain from investors who on Tuesday continued to sell off shares in the banking major.

Analysts and advisers were similarly unimpressed, saying ANZ had failed to address key risks.

Some analysts said Mr Matos’ selection had little mandate for major changes within ANZ, while others said it highlighted a need to strengthen ANZ’s otherwise weak retail banking franchise.

After unveiling Mr Matos – a Portuguese banker with stints at Santander and HSBC – shares in ANZ fell 1.47 per cent, or 44c, on Tuesday after tumbling 3.6 per cent, or $1.12, on Monday.

Ord Minnett analysts said Mr Matos’ appointment did not signal “substantive changes to existing strategy” at ANZ, and that it may trigger the departure of a number of senior executives who were disappointed with the decision.

Mr Matos is due to begin in the role on July 3, a day after Mr Elliott relinquishes the wrapping post.

Ord Minnett analysts said the long period before his start and months before addressing shareholders at the November results would “leave investors wary in the meantime”.

The analysts said ANZ “screens as better value than its larger rivals”, but they cautioned that the Australian listed banking sector was “not fundamentally cheap”.

Ord Minnett analysts said ANZ’s institutional banking business and the commercial and New Zealand arms were all likely to deliver reliable contributions to bank earnings, providing an upside.

But they said the bank’s two major tech projects, ANZ Plus and ANZ Transactive, were likely to “constrain earnings” as the lender poured millions of dollars into development.

Morgan Stanley banks analyst Richard Wiles said ANZ’s move to appoint Mr Matos, a retail banker, highlighted the need for the lender to lift its competitive position and strengthen its retail banking business.

ANZ has been fighting a rearguard against rival lenders for a slice of the Australian home lending market, but delays during the Covid-19 pandemic cost the bank market share.

Nuno Matos is the incoming chief executive of ANZ. Picture: Aaron Francis

The $4.9bn purchase of Suncorp Bank resulted in ANZ regaining some ground.

But Mr Wiles said Mr Matos’ appointment raised “questions about strategic direction” and that he would be “surprised if Mr Matos has a mandate for significant change”.

“We believe his priorities should be to address any legacy non-financial risk issues, manage any potential changes in the executive team, complete the build of ANZ Plus and accelerate the retail customer migration, maintain momentum in Institutional Banking, and deliver an effective AI-adoption strategy,” he said.

Australian Eagle Asset Management senior portfolio manager Alan Kwan said ANZ was a tough investment prospect, there was still little information on the new CEO pick and growth looked limited.

Mr Kwan, who does not own ANZ shares in the portfolio, said the banking sector was “joint expensive relative to history”.

But he said ANZ was among the cheaper listed majors.

“You never say never, we could be interested but we don’t just buy something just because of valuation just because it’s cheap,” Mr Kwan said.

“We are watching to see whether the Suncorp merger delivers better growth prospects.”

ANZ will conduct its annual general meeting on December 19.

The Australian Shareholders Association, the peak body for retail investors, said it would seek to question ANZ over the CEO decision, and the group raised concerns about governance and cultural missteps “leading to regulator intervention”.

The ASA said it would back ANZ’s remuneration report, but rival proxy advisers Ownership Matters and CGI Glass Lewis both took aim at executive pay and said investors should push for a “strike” at the AGM.

Mr Elliott and several other senior executives at ANZ have faced cuts to their bonuses, amid lingering scandal from an Australian Securities and Investments Commission investigation over alleged bond market manipulation by bank traders.

But the proxy groups said the cuts were not enough.