From a bank perspective, we delivered a solid financial outcome. Our full-year statutory profit was up 72 per cent to $A6.16 billion. While improving economic conditions meant we were able to release some of the credit reserves we put in place for expected losses, the result also demonstrates the benefits of a diverse portfolio.
"The overall improved performance of the business has been reflected in our decision to restore dividends close to what they were before the pandemic.”
Prudent risk management over many years has resulted in much lower than anticipated loss rates, capital buffers remain at an historically high-level with a CET1 of 12.3 per cent, while earnings have returned to near where they were pre-COVID-19. Total Shareholder Returns have substantially improved.
The overall improved performance of the business has been reflected in our decision to restore dividends close to what they were before the pandemic struck and to lead the industry in returning capital to shareholders.
In fact, on a pro-forma basis we will have approximately $A6 billion of capital above ‘unquestionably strong’ and will continue to consider the best use of any surplus capital.
Highlights this year included New Zealand having a strong year and Institutional providing good returns for shareholders.
However, we did face challenges. Although revenue in our Australia Retail & Commercial business in Australia increased, elevated demand for home loans impacted our ability to process applications in a timely manner which resulted in a loss of market share. There was also a delay with one of our key digital transformation products.
The Board has exercised its discretion to reduce the variable remuneration as a percentage of target for relevant executives and we are confident the systematic actions being taken by management will address these issues.
The bank we’re building
A joint-venture announced with European-based global payments leader Worldline to provide the most advanced payments technology and merchant services in Australia is the latest example of our simplification program. While we still have some non-core assets, namely our minority investments in Asian banks, the Board and management team are now focused primarily on growing our core franchise.
Rapid change and disruption of traditional banking business models are the new normal. At ANZ we are taking advantage of these changes with the ‘Bank We’re Building’ transformation.
We will continue to focus on driving simplification and efficiency in our core business while also making significant investments in our digital platforms and advanced analytics capability so we can offer compelling products and services to our customers.
Investments will also focus on new pivotal partnerships in the emerging digital ecosystems our customers are increasingly using.
We are also acutely aware of the leadership role we play in relation to climate change. While the rapid decarbonisation of the global economy will be a significant business opportunity, there are financial risks associated with lending to customers impacted by climate change. We are committed to play our part in the path to net zero by 2050 and will work with customers to assist them with their transition.
Supporting our communities
COVID-19 has reinforced the importance of community and I’m proud of the way ANZ has supported those in need through the pandemic.
The early days rightly prioritised supporting those who had been most impacted by various lockdowns, through loan deferrals. These deferrals provided tens of thousands of customers with the critical time required to manage their cashflow through this difficult period.
There was less demand for customer deferrals this year, however equally important has been our support of the Government loan guarantee programs in Australia and New Zealand. We also utilised our long experience with financial education to set up a program to specifically help Pacific islanders, arriving in Australia to fill labour shortages, better understand how to manage their money.
ANZ of course has large operations in some of the countries hardest hit by COVID-19. India, for example, a country in which we have a deep history, was devastated by its Delta outbreak this year.
While we worked hard to support our staff in India, we also donated $A1 million to World Vision’s India COVID-19 appeal as well as setting aside a further $A1 million to match customer and staff donations.
We have also taken action to ensure our people across our network are supported. Despite almost two years of remote working, our people remain highly engaged and we were pleased to be awarded the Number 1 position in the Australian Financial Review’s ‘Best Place to Work’ awards within our sector.
Firstly, I’d like to acknowledge our former Chairman David Gonski. David retired from the ANZ Board in October last year having made an enormous contribution to our bank during his seven years as Chair. He helped build an organisation with a strong focus on governance, accountability, culture and better customer outcomes.
There is no doubt ANZ is in much better shape as a result of his stewardship and on behalf of all shareholders, I thank David for his leadership.
Paula Dwyer will retire from the Board following our Annual General Meeting (AGM) on 16 December 2021. Paula is one of Australia’s most respected non-executive directors and we have been incredibly fortunate to have her serve on our Board for the past nine years, particularly in her role as Chair of the Audit Committee. From a personal perspective, I feel privileged to have been able to serve with her and on behalf of all shareholders thank Paula for her dedicated service to our company and wish her well with her future endeavours.
We are very fortunate to be welcoming Christine O’Reilly to the Board. Christine is an outstanding company director and she will make a significant contribution on behalf of all shareholders. While Christine formally joins the Board on 1 November 2021, she will stand for election as a Director at our AGM.
Finally, as a relatively new Chairman of ANZ, I would like to thank our shareholders for their support through the year. I also acknowledge the hard work and dedication of the 40,000 professionals working at ANZ.
The pandemic has meant it has been another challenging year but our team has again stepped up for our customers and shareholders.
Paul O’Sullivan is Chairman of ANZ
This article was adapted from O'Sullivan's note in ANZ's 2021 Annual Report. Click here to read the full report.