ANZ’s mortgage business is floundering but the bank deserves some credit for seeking new growth levers in sustainable finance, payments processing and a new banking app.
Chief executive Shayne Elliott needs to oversee the rectification of processing issues and bottlenecks in the lender’s mortgage business. But he thinks with better resourcing and automation ANZ can get back to industry average growth rates in the bank’s second half.
The clock is already ticking, and there is little room for error given ANZ’s lingering home loan laggard status.
But the bank is also positioning for the future across its institutional and retail and commercial banking units, investing in the business at the same time as pursuing a bold $8bn annual cost target by the end of 2023. ANZ’s investment spend printed at $1.8bn in the year ended September 30, up from almost $1.5bn a year earlier.
About 22 per cent of the latest year’s investment spend was earmarked for growth initiatives.
One of those is up-ending how ANZ interacts with personal and business customers, a project dubbed ANZx that Elliott tells this column will cost the bank a few hundred million dollars.
ANZ has 800 people – more than half being engineers – working on it and customers should see what it entails in 2022.
Prodded about whether it would actually provide a meaningful difference to customers, or if it was just another bank talking its own book, Elliott says: “You’ll be able to download the app and join ANZ, and be able to have money in your account and the ability to spend within three minutes. That is a big deal.
“While we are all very cynical consumers … that is actually pretty amazing compared to what you can do today and then more importantly is what it allows you to do going forward.
“It’s very different to a relationship you would have with Westpac, CBA or Macquarie.”
ANZ has drawn on the experience of European banks to underpin the project, which will be rebranded and rolled out to customers in 2022 under the ANZ Plus brand.
“It’s a bit like building a skyscraper – all the hard work is beneath the ground,” Elliott told analysts, admitting ANZ’s technology had been an inhibitor to customer growth in the past.
In ANZ’s institutional bank it is positioning to provide more payment services to other banks and for a mega-trend in sustainable financing and the transition by large companies to a net zero emission world.
The bank recently partnered with consultants at McKinsey & Co to undertake more detailed work on the opportunity, identifying eight key areas including electrification, the industrialisation of hydrogen, and the decarbonisation of agriculture.
Mr Elliott handed down the bank’s full-year results on Thursday, kicking off the reporting season for three of the big four.
A key question hanging over the major banks as Covid-19 risks have receded has been their limited growth prospects, and investors will be looking for clues around market share movements and new growth corridors.
That comes as large technology firms encroach on the banking sector and fintechs look to chip away at areas of banking that are ripe for disruption.
Separately, investors will be rightly asking Elliott questions about the large amount of excess capital the bank is sitting on, despite being halfway through a $1.5bn share buyback.
On the potential for acquisitions balanced against the prospect of ANZ returning more capital, Elliott says the bank is holding onto $6bn in excess capital because of the fluid nature of risks linked to the pandemic.
“Things can turn very bad very fast and we’re still at the early stages of this opening up. Vaccination levels are high and I’m very optimistic about that but if you look around at what’s happening in Europe and the US, I think we’ve just got to be a little bit more circumspect.”
On the appetite for acquisitions he adds: “We keep an open mind on acquisitions of all sizes but the point there is it has to be aligned with our purpose and strategy.”
Last week, ANZ was involved in an agreed offer for ASX-listed cashback group Cashrewards at an equity value of $90m.
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Zurich sale
The sale process for Zurich’s Australian general insurance arm is set to ramp up in coming days, although the size of the buyer field may be limited.
Goldman Sachs and PwC are tending to Zurich on the divestment and this column understands the sale’s information memorandum is expected to emerge within the next 10 days.
The auction excludes Zurich’s travel insurance arm after it markedly bulked up through the acquisition of ASX-listed Cover-More Group, a deal completed in 2017. Data lodged with the regulator puts Zurich’s gross earned premium for general insurance – including travel – at $1.26bn.
On the sale process for Zurich’s general insurance unit, Suncorp will run a rule over the business but some are questioning how hard it may swing at an offer.
Allianz and property and casualty insurer Chubb are positioning to take a look at the Zurich division, while offshore-based specialty insurers may also participate in the auction.
It will be interesting to see whether Insurance Australia Group and QBE participate given both are largely internally focused. IAG in July hired Zurich’s local general insurance CEO Tim Plant to the new role of chief insurance and strategy officer, throwing another dynamic into the mix.
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