ANZ boss shelves $800m buyback in plan to win wealthy customers

ANZ Group chief executive signalled that thousands of job losses and a shelved $800 million share buyback will fund an ambitious transformation of the Big Four laggard to win wealthy ex-pat and local customers and boost shareholder returns.

Nuno Matos said the ANZ 2030 strategy would be focused on offering more tailored services to customers while simplifying the bank’s business, boosting its risk management and delivering value to both customers and shareholders. The latter were promised aggressive financial targets including a return on “tangible” equity of 13 per cent.

Matos said the next few years will be focused on productivity gains “to put the bank in shape” before he looks to grow the business by targeting Australia’s “mass affluent segment” – a market generally defined as households with incomes of more than $150,000 or significant investment portfolios, which he said is worth close to $1.7 trillion.

“In the first phase, we will get back to basics and deliver materially productivity through the execution of our immediate priorities, while initiating the necessary investments for future growth. As we transition into our second phase, we will see an acceleration in revenue growth,” he said.

“We will design differentiated propositions to customer segments, including the mass affluent segment and the people relocating to Australia. The mass affluent segment, it’s a near $1.7 trillion source of investible deposits and wealth,” Matos said.

While thousands of staff face the axe, ANZ plans to increase its roster of actual bankers to help sell its services and products such as mortgages directly rather than relying on third parties.

Management’s immediate priorities are the efficiency gains from 3500 staff cuts – which is expected to help deliver $800 million in cost savings by 2026 – and the integration of the recently acquired Suncorp, in which synergy targets have almost doubled to $500 million, Matos explained.

At the same time, adoption of the bank’s ANZ Plus platform, touted as the future of its retail banking model, has changed. ANZ will pull forward the migration of all its retail and small business customers to the user-friendly platform and will rely on integration with its back-end legacy systems for longer before migrating these services to ANZ Plus.

ANZ shares jumped 3.3 per cent as investors welcomed the strategy, bucking losses on the wider market, which was down 0.6 per cent by early afternoon after a sell-down on Wall Street on Friday.

Matos, who joined the bank in July, has made it clear that the bank needs a significant overhaul to help shed its reputation as the worst performer among the Big Four.

He missed out on the top job at HSBC before joining ANZ and has been employed explicitly to transform an organisation with a poor record of execution. He will have fresh help. Ahead of the strategy reveal, Matos last week announced three big hires, including the appointment of Pedro Rodeia as new head of ANZ’s retail bank to replace Maile Carnegie.

Donald Patra, a former HSBC colleague, steps in as ANZ’s chief information officer, replacing Gerard Florian, who, like Carnegie, departed soon after Matos joined the bank. Meanwhile, Christine Palmer joins from Spanish bank Santander as chief risk officer.

Matos signalled he is prepared to tackle the bank’s poor cost-to-income ratio and a dismal return on shareholder funds compared to the other banks.

The Suncorp bank acquisition means ANZ is the second largest of our Big Four banks by assets, according to Bloomberg. But the bank trails its rivals in relative valuation thanks to weaker revenue and higher costs.

When Matos unveiled the massive cuts last month, he admitted that standing still was not an option for the $100 billion bank.

“We are operating in a rapidly evolving and highly competitive banking environment,” he said. “As we continue our strategic review, we are eliminating duplication and complexity, stopping work that doesn’t support our priorities and sharpening our focus on improving our non-financial risk management practices across the bank.”

Ahead of Monday’s announcement, analysts from Macquarie Equities pointed to ANZ’s retail banking business as an obvious target for the big overhaul.

Comparing ANZ’s staffing levels to its closest peer Westpac “suggests ANZ could potentially reduce retail FTEs (full-time equivalents) by around 30 per cent (roughly 3800),” they said.

Analysts questioned Matos on Monday about ANZ’s loss of market share in home loans and whether the bank would tolerate a further slide in this business. It would not, he replied.

Morningstar’s banking analyst Nathan Zaia warned earlier that ANZ needed to keep delivering on service while keeping a lid on its costs.

“Ripping costs out is one thing, but ensuring it has a competitive service level across its key products is even more critical to long-term success,” Zaia said last month.

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