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Faruqui: Strong financial and strategic outcomes

ANZ’s full-year result was characterised by revenue growth across all four divisions – Australia Retail, Australia Commercial, New Zealand and Institutional, according to the bank’s Chief Financial Officer Farhan Faruqui.

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Three out of those four had revenue growth in double digits at the same time as expanding margins while costs were well managed, Faruqui told bluenotes in a video.

“(The result) has been underpinned by years of simplification of the group, by years of de-risking our portfolio and by years of strong customer, margin and balance sheet management.”

“We've managed costs quite well, particularly given the inflationary headwinds we had to face into throughout the course of this year. We've continued to use that strong run-the-bank cost management to continue to invest and spend in the strategic areas where we want to grow,” Faruqui said.

“It has been underpinned by years of simplification of the group, by years of de-risking our portfolio and by years of strong customer, margin and balance sheet management.”

Click here to read the transcript

ANZ’s audited statutory profit after tax for the September 2022 financial year was $7,119 million, up 16 per cent on the previous year. Cash profit from continuing operations was $6,515 million, up 5 per cent on the previous year. The dividend was 74 cents a share.

In addition to the financial outcomes Faruqui noted the bank has made strong strategic progress, including the launch of the ANZ Plus savings and transaction proposition, the agreement to buy Suncorp Bank and the associated A$3.5 billion capital raising – the largest equity raise for an acquisition this year, globally.

ANZ Plus and the Suncorp Bank transaction remain strategic priorities for the bank in the coming financial year, he said, as the world heads into a more uncertain environment. Faruqui was confident all four ANZ divisions are performing and the bank’s credit portfolio was very strong.

Faruqui observed while no two cycles are exactly the same because they begin at different starting points, this particular cycle is unique given the external factors and rapidly rising interest rates. Of the 60 interest rate rises by central banks in Australia, New Zealand and the US over the last decade, about a third have happened in the last 12 months, he said.

“It's unique because it's coming post-COVID and in that period of time, because of government support and because of prudent financial settings by our customers, I think our customers are coming into the cycle much better positioned to deal into the crisis relative to other cycles,” Faruqui said. “Banks are much stronger. Balance sheets and capital positions are much stronger coming into the cycle, which I think is yet another positive.”

ANZ’s presence in New Zealand and its international business gave it valuable insights into the management of margins because the tightening of interest rates was quicker in those markets than in Australia, Faruqui said.

Improving quality

In terms of the bank’s provisioning levels, Faruqui said it's important to understand what's happening underneath the headline numbers as the credit quality of ANZ’s customers becomes stronger.

“We've actually released a lot of collective provisions over the course of the last five or six years because of that improving quality, which doesn't get reflected in half and full year results,” Faruqui said. “When we ended the half in March 2022, we ended with a lot of COVID overlays still in our collective provision numbers.”

“We feel pretty strongly about the fact that we are provisioned well. But I think also when you think about resilience in a broader context, it's not just about collective provisions,” Faruqui said. “Collective provisions are not our only insurance policy towards resilience. Much stronger portfolio, credit quality, strongly capitalised position, strong balance sheet, better risk settings and a collective provision balance which we think reflects the outlook (are all important).”

Faruqui concluded the bank’s continued focus on cost management allowed it to focus on its strategic priorities after some major regulatory requirements such as BS11 in New Zealand neared completion.

Those priorities include committing about 15 per cent of investment spending to the roll out of ANZ Plus and the continued migration of technology services to the cloud.

“We also continue to be very focused on reinvigorating our commercial business and that's going to be an area where we're going to be spending in technology to support better outcomes and better client experience for our commercial bank customers as well.”

You can listen to the full conversation by watching to the video above.

Andrew Cornell is managing editor of bluenotes.

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