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2017 ANNUAL REVIEW
ANZ 2017 ANNUAL REVIEW
WE WANT OUR CUSTOMERS TO VALUE US AND THE COMMUNITY
TO TRUST US. FOR THIS TO HAPPEN WE KNOW THAT THINGS
NEED TO CHANGE AT ANZ.
This Annual Review tells the story of the changes we are making. Why we’re here, the benefits
we bring, the challenges we face and what the future holds.
Cover story — Latrobe Valley Bus Lines
Rhonda Renwick and her dedicated team at Latrobe Valley
Bus Lines are rolling out new buses that are at the leading
edge of transport technology in Australia.
Since 2015 Latrobe Valley Bus Lines has been investing in
low emission technologies which improve the efficiency and
environmental impact of its buses.
The newest vehicles in the fleet have been designed to
dramatically reduce particulate emissions in the atmosphere.
Latrobe Valley Bus Lines has been trialling new hybrid technology
and will introduce eight new hybrid vehicles into the fleet over Rhonda Renwick, Managing Director
the next three years.
As the company focuses on its mission of helping the community, We are proud to be supporting a business like Latrobe Valley
and providing the highest quality and safest service for its Bus Lines — a Certified B Corporation — which shares our
customers and employees, it has benefitted from its long-term commitment to helping communities thrive. It supports
relationship with ANZ. local manufacturing, is dedicated to fostering an inclusive
and safe workplace and promotes a number of grassroots
“ANZ’s proactive team has a genuine understanding of our
community organisations.
business goals, providing flexibility along with competitive
banking options,” Rhonda explains.
CONTENTS
Our 2017 Reporting Suite 3 Our External Environment 16
2017 Highlights 4 Our Strategy 18
Chairman’s Message 6 Governance 22
CEO’s Message 8 Remuneration Overview 28
About our Business 10 Five-year Summary 32
What Matters Most 12 Shareholder Information 33
How we Create Value 14
2
OUR 2017 RERPORTING SUITE
OUR 2017
REPORTING
SUITE
THIS IS A REPORT ABOUT HOW WE CREATE VALUE —
FOR
SHAREHOLDERS, CUSTOMERS, EMPLOYEES AND THE COMMUNITY.
About this report We produce a suite of reports to meet the evolving needs
We recognise that stakeholders want a more holistic and requirements of a wide range of stakeholders. Our 2017
understanding of how we are creating value — beyond the Annual Report at anz.com/annualreport principally details
short or medium-term — and the opportunities and challenges our financial information. Our 2017 Corporate Governance
impacting our future. That is why this year’s Annual Review Statement discloses how we have complied with the ASX
marks the start of our progression towards integrated reporting. Corporate Governance Council’s ‘Corporate Governance
A strong financial performance each year, while critical to the Principles & Recommendations — 3rd edition’. We also provide
success of the bank, is not of itself the whole story and does not our Principal Risks and Uncertainties. Both are available at
fully reflect who we are as an organisation and the role we play anz.com/corporategovernance.
in society. In addition, we publish a Corporate Sustainability Review,
The aim of this Review is to communicate transparently and through which we inform stakeholders about our performance
concisely about how we manage our business, including the way against our material social, environmental and economic
in which we incorporate social and environmental considerations opportunities and challenges. This report will be available
into our decision-making. We have drawn on aspects of the at anz.com/annualreport in December.
International Integrated Reporting Framework to describe how Throughout this Annual Review, KPMG has considered common
our business model, strategy, governance and risk-management content* which will be disclosed in the 2017 ANZ Corporate
processes are addressing our most material issues and delivering Sustainability Review. A copy of KPMG’s assurance statement
value for our shareholders and other stakeholders. over the 2017 ANZ Corporate Sustainability Review is contained
This Review covers all ANZ operations worldwide over in that report.
which, unless otherwise stated, we have operational control We will continue to evolve and improve our reporting
for the financial year commencing on 1 October 2016 and suite over the coming years and welcome feedback on
ending 30 September 2017. Monetary amounts in this document this report. Please address any questions, comments
are reported in Australian dollars, unless otherwise stated. or suggestions to investor.relations@anz.com.
* Common content includes the following sections: sustainability related 2017 Highlights, What Matters Most, Our Corporate Sustainability Framework, Improving
Our Climate-Related Financial Disclosures and Non-Financial 5-year Summary
2.
There are three other reports available for stakeholders.
1. 2017 Annual Report anz.com/annualreport
2. 2017 Corporate Governance Statement anz.com/corporategovernance
3. 2017 ANZ Corporate Sustainability Review anz.com/cs
Other financial disclosures are available on shareholder.anz.com
1. 3.
3
ANZ 2017 ANNUAL REVIEW
2017
HIGHLIGHTS
$6.9 $3,415M
taxes paid2
11.9
BN
cash profit1
% cash return on equity1
$131M
20%
reduction in 496,900+
Greenhouse Gas people reached through
in community investment emissions4 our financial education
(includes foregone revenue)3 program MoneyMinded5
1.
Cash profit excludes non-core items included in statutory profit and is provided to assist readers in understanding the result of the ongoing business activities of the Group.
2.
Total taxes borne by the Group, includes unrecovered GST/VAT, employee related taxes and other taxes.
3.
Figure includes foregone revenue of $107 million, being the cost of providing low or fee-free accounts to a range of customers such as government benefit recipients,
not-for-profit organisations and students.
4.
From premises energy against a 2013 baseline.
5.
This is the estimated number of people who have benefited from ANZ’s MoneyMinded financial education program since 2003.
4
2017 HIGHLIGHTS
“THE MARKETPLACE GAVE
VISITORS A CHANCE
TO LEARN ABOUT THE
IMPORTANT JOB OUR
LOCAL FARMERS DO IN
PRODUCING OUR FOOD”
— Christine Linden, General Manager,
Regional Business Banking, ANZ
During the year we held a Regional Marketplace at our
head office in Docklands, where staff and visitors had
the opportunity to sample and purchase the produce
of several of our Victorian and Tasmanian customers.
160 113,127
hours volunteered
by employees
CENTS
fully franked dividend for FY17
250
people employed from
under-represented groups6
NET PROFIT NET PROFIT PROFIT NET CUSTOMER
AFTER TAX AFTER TAX BEFORE LOANS AND DEPOSITS7
$M (Cash1) PROVISIONS ADVANCES7 $BN
$M AND INCOME $BN
TAX (Cash1)
$M 575.9 580.3
11,041
10,155 467.6
449.6
$6.9 BN
6,938
6,406
5,709 5,889
funded and facilitated
in low carbon and
sustainable solutions
2016 2017 2016 2017 2016 2017 2016 2017 2016 2017
since 2015
12% 18% 9% 1% 4%
6.
Includes Aboriginal and Torres Strait Islander people, people with a disability and refugees.
7.
Includes assets and liabilities held for sale.
5
ANZ 2017 ANNUAL REVIEW
CHAIRMAN’S
MESSAGE
DAVID GONSKI, AC
I am pleased to introduce Rapid economic, technological and social changes are a hallmark
of the world we live in. As one of the region’s major banks, we
our first Annual Review, which have a clear strategy, which is being supported by bold action,
brings together reporting to make sure ANZ is fit and ready for this future.
on our financial performance In 2017 we made good progress to becoming a better balanced,
better capitalised and more efficient bank. This has seen the
as well as a broader story new shape of ANZ emerge. Our retail and commercial businesses
about the benefits we bring in Australia and New Zealand now account for 53% of our capital,
to our stakeholders and up from 44% at the end of 2015. Our Common Equity Tier One
capital ratio reached 10.6% at the end of the year and our cost base
the wider community. has reduced in absolute terms with annual costs down for the first
time since 1999.
This reflects our first steps towards comprehensively
describing how our strategy creates value, and the Community Engagement
challenges and opportunities we face in the short, Banks are facing significant challenges to re-establish the trust
medium and longer term. of the community. We need to own up to our mistakes and swiftly
make things right. We have been slower than the community
In 2017 ANZ produced good results for shareholders, expects to be more transparent, to listen and to treat our customers
our customers and the communities in which we operate. fairly and responsibly.
Financial Outcomes What is particularly pleasing about 2017 is we have not only
Our statutory profit was $6.4 billion, up 12%. Cash profit (which delivered better outcomes for shareholders, we are also making
excludes non-core items from statutory profit) was $6.9 billion, genuine progress in delivering better outcomes for customers
up 18%. The final dividend of 80 cents per share brought the and in rebuilding community trust.
total dividend for the year to 160 cents per share fully franked, This has been supported by the establishment of the Responsible
unchanged compared to 2016. This reflects a dividend payout Business Committee, led by the Chief Executive Shayne Elliott,
ratio of 68% of cash profit with $4.6 billion in dividends paid and the revision of the charter for the Environment, Sustainability
to shareholders, moving ANZ closer to our target fully franked and Governance Board Committee (ESG). The aim of both
payout ratio of 60-65% of cash profit. Committees is to advance ANZ’s core purpose and increase focus
on ESG issues.
6
CHAIRMAN'S MESSAGE
“IN 2017 WE MADE GOOD
PROGRESS TO BECOMING
A BETTER BALANCED, BETTER
CAPITALISED AND MORE
EFFICIENT BANK. WE PAID
OUT $4.6 BILLION IN DIVIDENDS.”
We have committed to support the Australian Bankers’ Outlook
Association Better Banking initiatives and to implementing the We expect the revenue growth environment for banking will
21 recommendations from Stephen Sedgwick’s independent continue to be constrained as a result of intense competition
review of product sales commissions and product-based payments and the effect of regulation, including the full impact of the
in Australian retail banking. The Board and the CEO are overseeing major bank levy in Australia.
the implementation of the recommendations, with management
providing regular program updates to the Board Human This environment is not new to us and our strategy is ensuring
Resources Committee. we focus only on those areas where we can deliver exceptional
customer outcomes, solve real customer needs and, in doing
All recommendations are expected to be met within intended so, make a decent return for our shareholders.
timeframes, with progress this year including; Branch and
Contact Centre staff incentive plans being changed to As a result, ANZ’s capital position has improved significantly
balanced scorecard plans, creating a strong alignment between and we already meet APRA’s ‘unquestionably strong’ 2020 capital
performance management and incentive rewards. All roles target. In 2018, as we receive the proceeds from the already
in the scope of the Sedgwick review are on track to have the announced divestment of non-core businesses, we will have
financial objective weighting in scorecards at less than 33% the flexibility to consider capital management initiatives.
for FY18 and staff recognition programs that were focused on
As we continue to deliver the benefits of our strategy, we are
recognising and rewarding sales outcomes have also been
well positioned to create value for our shareholders, customers,
changed or closed. We are also working actively with the industry
employees and the community in 2018 and beyond.
as part of the Combined Industry Forum in relation to responding
to the Sedgwick recommendations for third parties and ASIC’s The Board is pleased with what has been achieved in 2017
proposals for mortgage broking. and takes this opportunity to thank all of the employees
of ANZ for their hard work and dedication.
We have also delivered a range of initiatives for customers
to make banking fairer and simpler. For example, in Australia
we have introduced a lower interest rate credit card and
removed ATM fees.
We still have much to do to rebuild community trust,
however we know we need to change and we are changing. David Gonski, AC
Chairman
7
ANZ 2017 ANNUAL REVIEW
CEO’S
MESSAGE
SHAYNE ELLIOTT
Two years ago it was clear that we This has included the divestment of our pensions and investments
business in Australia, our retail and wealth businesses in six Asian
needed to reshape ANZ’s future. countries, UDC asset finance in New Zealand, and our minority
We had a strong and successful investments in China’s Shanghai Rural Commercial Bank and
Metrobank Card Corporation in the Philippines.
business, however in recent times
These choices have also involved a significant reshaping of our
the external environment was Institutional Banking business as part of improving the capital
changing faster than we were and allocation and improving returns. This year it has involved a further
our customers, the community $18 billion reduction in Credit Risk Weighted Assets, bringing the
total reduction since September 2015 to $46 billion or 27%. We are
and our shareholders expected also focusing on a smaller number of customers who most value
much more from us. our capabilities and our network, including our presence in Asia.
Today, we are at the mid-point of executing a multi-year
Our Strategy transformation of ANZ and I am pleased to report that 2017 has seen
To ensure ANZ adapted more quickly, we simplified our strategy better outcomes for shareholders and genuine progress in delivering
to focus on being the best bank for people who want to buy and better outcomes for customers and in rebuilding community trust.
own a home, and for people who want to start, run and grow a
Customers and the Community
business. In Institutional Banking, we want to be the best bank
in the world for customers who move goods and money around For customers our progress includes initiatives to make banking
the Asia-Pacific region. fairer and simpler supported by an increased emphasis on
innovation. For example, we extended our mobile payments
This allowed us to focus our resources on opportunities where leadership, established with Apple PayTM and Android PayTM,
we have a competitive advantage and can win. However, we with the launch of Samsung Pay and FitBitTM Pay. Mobile
have also made some difficult calls. Some say the essence of payments are also important for small business and we
strategy is choosing what not to do. We have chosen to sell introduced BladePayTM to support this growing opportunity.
businesses or investments where we were not in a winning
position or developing our ANZ brand, or where they added We also believe in the value of voice-activated transactions and
unnecessary complexity and risk. launched MyVoice identity and security solutions in Australia and
New Zealand.
8
CEO'S MESSAGE
“I WANT US TO BE KNOWN
AS A COMPANY THAT’S
RESPECTED FOR BEING FAIR
AND BALANCED IN THE WAY
WE THINK ABOUT ISSUES AND
FOR TAKING ACTION TO MEET
THE EXPECTATIONS OF OUR
CUSTOMERS, EMPLOYEES
AND SOCIETY.”
We are also rebuilding trust through a focus on our core purpose: •• Increase digitisation. Focusing on mobile and voice
to help shape a world where people and communities thrive. solutions for customers.
We invested more than $131 million in the communities in •• Culture. Building a stronger sense of core purpose, ethics
which we operate and I am particularly proud of the impact our and fairness, and investing in people who can sense and
financial education and employment programs are having in navigate the rapidly changing world.
terms of creating opportunities for more people to participate
socially and economically. ANZ today is leaner, stronger and fitter; better placed to manage
the changing environment while still investing in new capabilities
We are focused on creating the right culture to support our to deliver long-term sustainable earnings growth.
strategy. The way in which we treat our stakeholders is reinforced
by our values. Our values — the behaviours expected of our We could not have achieved so much in 2017 without the sustained
people — are not just words on a page. They are embedded effort and dedication of our people, and I thank them all for
in how we do things, like how we manage and reward our their contribution.
people's performance. They are also used as a foundation for
good decision-making and are embedded in our operating
rhythm, for example, across our Australian Branch Network.
We took a positive and proactive stance at our appearances
before the Australian Parliament. We have made product, fee Shayne Elliott
and rate changes to benefit customers and the community and
CEO
everyone in the senior management team has spent more time
in branches, call centres and regional and rural areas talking
to our customers and the community. Looking ahead, we are
seeking to deliver value to all our stakeholders through four factors:
•• Simplicity and focus. Choosing a few things to do, doing
them extremely well and stopping everything else.
•• Speed to market. Listening to customers, testing, developing
and launching solutions quickly and repeating at pace.
9
ANZ 2017 ANNUAL REVIEW
ABOUT
OUR
BUSINESS
OUR PURPOSE
Our purpose is to help shape a world in which people and communities thrive. That means striving to create a balanced, sustainable
society in which everyone can take part and build a better life.
One of our key strategic priorities is to drive a purpose and values-led transformation of the bank and our progress towards this is
discussed thoughout this report.
OUR CULTURE OUR CORPORATE
AND VALUES SUSTAINABILITY FRAMEWORK
Our values are the foundation of how we work and how Our Corporate Sustainability Framework supports our business
we bank. We recognise that we must live our values every day strategy and is aligned with the bank’s purpose. The Framework
if we are to execute our strategy successfully and earn back has three key areas of focus:
the community’s trust. • Sustainable Growth
To support our strategic priority to drive a purpose and • Social and Economic Participation
values-led transformation of the bank, this year we refreshed our • Fair and Responsible Banking
values with input from more than 1,000 employees. Our values,
which are discussed further on page 20.
which include a strong focus on speaking up and respectfully
disagreeing, are supported by our Code of Conduct and Ethics.
It is a requirement that all employees comply with the Code,
which contains eight guiding principles and sets the standards
for the way we do business at ANZ.
We care about:
SUSTAINABLE FAIR AND
INTEGRITY GROWTH RESPONSIBLE
BANKING
SHAPE A
WORLD WHERE
PEOPLE AND
COMMUNITIES
COLLABORATION THRIVE
SOCIAL
ACCOUNTABILITY AND ECONOMIC
PARTICIPATION
RESPECT
EXCELLENCE
10ABOUT OUR BUSINESS
Founded in 1835 and headquartered in Australia, we provide banking and financial
products and services to individual and business customers, operating across 34 markets.
OUR DIVISIONS
Our business is structured across the following divisions:
~8 million
Retail, commercial and
Australia: comprises the Retail and the Corporate and
instituitional customers
Commercial Banking business units, providing a full
range of banking services.
Institutional: services global institutional and business
customers located in Australia, New Zealand, Asia,
Europe, America, Papua New Guinea and the Middle
East across three product sets: Transaction Banking,
44,896
Full-time equivalent employees
Loans & Specialised Finance and Markets.
New Zealand: comprises the Retail (including wealth
management services) and Commercial business units
providing a full range of banking services.
Wealth Australia: provides investment, superannuation,
$86.9 billion
Market capitalisation
insurance and financial advice services.
Asia Retail & Pacific: comprises the Asia Retail and
Pacific business units, connecting customers to specialists
for their banking needs.
Digital banking: leads the strategic development and delivery
520,000+
Shareholders. 58% of ANZ’s shares1
of a superior digital experience for the bank’s customers
and staff.
are held by Institutional investors
and the remaining 42%1 by
These divisions are supported by Group-wide functions Retail investors.
including Technology, Services & Operations and
Group Centre. ANZ is listed on the Australian Securties
Exchange (ASX) with a secondary listing
For information on the performance of the above divisions
on the New Zealand Exchange (NZX).
see page 21 of the 2017 Annual Report.
1.
Based on beneficial ownership.
EARNING COMPOSITION BY GEOGRAPHY
OUR
INTERNATIONAL PRESENCE
New Zealand
$1,740 million
Australia
New Zealand
International
Australia $581 million
International $4,617 million
Asia Pacific
Cambodia, China, Hong Kong, American Samoa, Cook Islands,
India, Indonesia, Japan, Laos, Fiji, Guam, Kiribati, New Caledonia,
Malaysia, Myanmar, the Philippines, Papua New Guinea, Samoa,
Singapore, South Korea, Taiwan, Solomon Islands, Timor-Leste,
Thailand, Vietnam Tonga, Vanuatu
Europe Middle East U.A.E. (Dubai)
France, Germany, United Kingdom United States of America
11ANZ 2017 ANNUAL REVIEW
WHAT
MATTERS
MOST
OUR MOST
MATERIAL ISSUES
Responsible business lending: ranked in the top
Our annual materiality assessment is informed by engagement three again this year, with stakeholders noting that
with internal and external stakeholders. The assessment builds expectations have heightened. Stakeholders spoke
a clear picture of those issues that have the most potential to of the importance of engaging with our business
impact our value creation. These issues may change over time, customers to ensure the social and environmental
reflecting developments in our business and external operating impacts (including those related to human rights
environment and the changing expectations of stakeholders. and climate change) of their operations are minimised.
We use the results of the assessment to inform our strategy, Our business customers also reminded us that policy
reporting and sustainability targets. changes can restrict the availability of capital, in turn
This year, stakeholders ranked the following issues (risks or potentially impacting their competitiveness and the
opportunities) as having the most potential to impact our strength of the economy. NGOs emphasised the
value creation in the short, medium and long-term: importance of reducing the emissions intensity of our
business lending portfolio.
Fairness and ethical conduct: remains the highest Customer experience: customers told us that if they
ranked issue. This year our stakeholders told us to believe their success is important to ANZ and they
work harder to 'get it right every time’, strengthen our feel valued by ANZ, they will stay with us. Stakeholders
processes, lend responsibly and prevent conduct issues. also highlighted fairness, transparency and simplicity
of products as central to building customer and
Fraud and data security: while continued digital community trust.
innovation was identified as a priority, associated with
this was the ongoing need to educate customers and Digital innovation: remains core to ANZ’s value creation,
the wider community about online risks and what with employees citing the challenges presented by
they can do to improve their own data security legacy systems and inherited processes. It is now more
and cyber safety. important than ever that we move at a fast pace to keep
up with digital change and customer expectations or,
better still, lead the way.
The key steps in our 2017 materiality process, as well as the
full list of our material issues, is discussed in detail in our 2017
ANZ Corporate Sustainability Review available on anz.com/cs
in December. Stakeholder engagement (outside of the
materiality assessment), including issues raised and how we
responded, is also discussed.
“IT IS INCREASINGLY
IMPORTANT FOR BUSINESSES
TO ENSURE FAIRNESS IS
PART OF THEIR CUSTOMER
EXPERIENCE AMID AN
ENVIRONMENT OF WAVERING
CORPORATE TRUST.”
— Colin Neave, Customer Fairness Advisor, ANZ
12WHAT MATTERS MOST
Effective engagement with all our stakeholders is essential
if we are to understand and respond to their expectations.
MAKING THINGS FAIRER include better protections. We appointed Colin Neave, the former
Australian Commonwealth Ombudsman, as ANZ’s Customer
FOR OUR CUSTOMERS
Fairness Advisor. Mr Neave has developed customer remediation
Serving our customers fairly and well is at the heart principles to assure our customers that ANZ will acknowledge
of our business and long-term returns for shareholders. and compensate any failures quickly.
During 2017 we have undertaken many changes to better We have strengthened our processes for assessing customers’
serve our customers and make banking fairer. applications for loans. ANZ will start sharing comprehensive
In August the CEO wrote to all of our people about 'The ANZ Way', credit data in the second half of 2018 to help support better
a guide to the way we work and our promises to customers. 'The lending practices across the industry.
ANZ Way' makes it clear that we will raise standards in everything New industry-wide recruitment and checking processes have
we do, going beyond complying with the law. been implemented to make it difficult for bankers or financial
We have changed the structure of our branch and call centre advisors with proven poor conduct records to move from firm
remuneration to a new scorecard that emphasises good to firm.
customer outcomes. We are looking to extend this structure to To deliver better quality financial advice, we are doing more
other parts of ANZ, reflecting the spirit of the banking industry’s audits using inputs from data analytics and providing improved
Retail Banking Remuneration (Sedgwick) Review. training. If we don’t get our advice right, a dedicated ‘Advice
Review Team’ reviews the advice and compensates customers.
We have strengthened governance in our mortgage broker
channel and are working with the industry and stakeholders ANZ has supported Government reforms that will commence
to improve the structure of broker remuneration. in 2018 such as the 'one stop' Australian Financial Complaints
Authority and the Banking Executive Accountability Regime.
We are working with other banks to include new consumer
protections in a shorter and simpler Banking Code of Practice, To assist the Government’s Review into Open Banking, we
following the recommendations of the Independent Review have suggested a simple and safe pathway for data sharing.
of the Code of Banking Practice. We are re-writing our small Open Banking will give customers better information on their
business contracts to make them easier to understand and banking services, and make it easier to compare products.
Nathalie Tram, ANZ Docklands
13ANZ 2017 ANNUAL REVIEW
HOW WE
CREATE VALUE
WE AIM TO CREATE VALUE IN EVERYTHING WE DO.
Our business activities create value for ANZ in the form of income, business growth, a positive culture aligned with our purpose
and values, an engaged workforce performing at its best and strong relationships with our stakeholders. The table below presents
the value created for our shareholders and other stakeholders for each of our main business activities.
STAKEHOLDERS CUSTOMERS
BUSINESS WE PROVIDE WE HOLD WE LEND MONEY WE PROVIDE WE PROVIDE
ACTIVITIES TRANSACTIONAL DEPOSITS FOR OUR TO OUR RETAIL, INVESTMENTS, RISK MITIGATION
BANKING SERVICES CUSTOMERS SMALL BUSINESS SUPERANNUATION PRODUCTS TO
AND CORPORATE AND INSURANCE HELP CUSTOMERS
OUR BUSINESS CUSTOMERS SERVICES, AND MANAGE THEIR
MODEL CONSISTS FINANCIAL EXPOSURE TO
OF THE FOLLOWING PLANNING ADVICE MARKET VOLATILITY
ACTIVITIES:
VALUE •• Making it simple •• Keeping our •• Enabling customers •• Enabling customers •• Allowing business
and easy to for customers’ money to buy homes and their families and institutional
CREATION our customers safe and providing and businesses to to save for the customers to
to manage their competitive returns expand and grow. future and achieve manage risk
WHICH CREATE money. on deposits. personal and associated with
•• Underpinning
VALUE FOR business goals. their businesses.
ANZ, OUR •• Assisting businesses •• Enabling people employment,
to safely transact, and businesses to investment and •• Assisting customers •• Promoting trade
SHAREHOLDERS
trade and invest save, manage their economic growth to manage personal and investment,
AND OTHER
across the community resources and deal in the community. and business risks. and the efficient
STAKEHOLDERS:
and borders. with change. •• Assisting allocation of
•• Efficiently and financial resources.
communities to
•• Preventing financial •• Providing funding responsibly
manage social risks.
crime and money for housing, allocating financial
laundering. personal lending resources to
and businesses. meet customer
and market
demand, and
support changing
community
expectations.
MATERIAL
ISSUES
AND ADDRESS
OUR MOST
MATERIAL ISSUES
(see page 12)
14HOW WE CREATE VALUE
EMPLOYEES COMMUNITY SHAREHOLDERS
WE INVEST WE INVEST IN WE COLLABORATE WE INVEST IN WE PAY TAXES WE PAY
IN DIGITAL OUR PEOPLE TO WITH PARTNERS THE COMMUNITY IN THE COUNTRIES DIVIDENDS
TECHNOLOGY AND BUILD A DIVERSE TO BUILD CAPACITY WITHIN WHICH TO OUR
OUR BRANCHES AND INCLUSIVE AND IMPROVE WE OPERATE SHAREHOLDERS
AND OFFICES WORKFORCE FINANCIAL
WELLBEING
•• Enabling customers •• Enabling us •• Improving the •• Contributing to •• Contributing to •• Providing consistent
to interact with to provide wellbeing of the wellbeing of the provision of returns to
us how and when better services lower income the community public services shareholders.
it is most convenient and products and vulnerable through such as health, We are paying 68%
for them. to customers, customers, volunteering and social services of 2017 cash profit
•• Providing new and meeting enabling them to employee giving. and education. to shareholders.
digital services that community participate more •• Supporting •• Building trust •• Enabling shareholders
are valued expectations. fully in society. customers and through transparent to save and invest to
by customers. •• Promoting diversity •• Contributing the community in tax reporting. meet their personal
•• Contributing to and equality of to the ability of times of difficulty, and business goals.
the cyber safety opportunity. not-for-profit hardship or natural •• Providing funding
and security of organisations to disaster. for lending and
•• Increasing the skills assist and support
our customers. the economy, and
and capabilities of the community. efficiently allocating
the communities in
financial resources.
which we operate.
15ANZ 2017 ANNUAL REVIEW
OUR
EXTERNAL
ENVIRONMENT
THE EXTERNAL ENVIRONMENT IN WHICH WE OPERATE INFORMS
OUR STRATEGY AND IMPACTS OUR ABILITY TO CREATE VALUE.
GLOBAL TRENDS THESE GLOBAL TRENDS
ARE SHAPING PRESENT US WITH RISKS
SOCIETY AND OPPORTUNITIES
Technological change: creating new services and products, Innovation and new technologies: present us with
disrupting established industries and reducing barriers to opportunities to innovate and meet the needs of our customers
communication and trade. Cyber security risks are increasing. for digital banking solutions. Competition from existing and
New competitors to traditional banks are emerging. new competitors is increasing and we must be able to respond
quickly and improve our digital capabilities. We will need to
Globalisation: enabled by new technologies, and the free
serve customers in new ways, and continue to strengthen
movement of capital, goods and people — is increasing growth
our cyber security capabilities.
in new economies and restructuring industries in old economies.
Revenue growth: is expected to be lower than in the past.
Demographic changes: urbanisation, strong population
With increasing competition and regulatory requirements,
growth in Australia and New Zealand, and an ageing population
new approaches are needed to generate returns to
are changing customer demand and reshaping communities.
shareholders and deliver products and services.
Strengthening but still uncertain economic conditions:
Housing: demand for home lending is strong in Australia and
low wage growth and high levels of debt are contributing
New Zealand as a result of population growth. Community
to low rates of economic growth and social unease.
concerns about housing affordability are high and regulators
Environment and climate: communities are placing greater are focused on housing lending standards.
value on protecting the environment and supporting the
Globalisation and the rise of Asia: creates opportunities for our
transition to a low carbon economy.
customers to increase their cross border trade and investment.
Scrutiny of financial institutions: scrutiny of banks and Increased trade and investment leads to higher incomes and
the financial sector is continuing to increase following employment for the communities in which ANZ operates.
well publicised examples of poor conduct. Concerns Community concerns about aspects of trade and investment
about debt levels in the economy are being raised. can nevertheless limit opportunities.
Society’s expectations are high: we need to acknowledge
previous poor practice and raise standards across all our activities.
We are expected to strengthen standards on issues such as
human rights and environmental sustainability. We need to focus
on ways we can contribute positively to the wellbeing of the
communities in which we operate.
16OUR STRATEGY
CASE STUDY
STAUGHTON
GROUP
With our help, the Staughton Group has grown impressively over
the past five years, and now employs more than 200 people.
Its growth is supported by a commitment to constant innovation,
increasing efficiency, and a desire to reduce waste. It has spent
countless hours perfecting methods for packing and storing
pet-food in bulk, resulting in the reduction of thousands of kilograms
of packaging that would otherwise be an additional cost and
would end up in landfill.
As the company has increased in size, our Business Growth
program has been there to help manage its transition. The results
speak for themselves — not only was the Staughton Group
Regional Exporter of the Year, but Edward Staughton was also
New South Wales Young Entrepreneur of the Year.
Edward and Simon Staughton
— Staughton Group, a high-quality food manufacturer,
primarily in the pet food market.
OUR STRATEGY AIMS TO RESPOND “THE CHALLENGING LOCAL
POSITIVELY TO THIS ENVIRONMENT
AND MEET SOCIETAL EXPECTATIONS AND GLOBAL ENVIRONMENTS
Create a simpler, better capitalised, better balanced and MEAN MANY AUSTRALIAN
more agile bank: we are aiming to reduce operating costs BUSINESSES ARE LOOKING
and risks by removing complexity and exiting low-return
and non-core businesses. TO DIVERSIFY AND THEY'RE
Focus our efforts on areas where we can carve out a FOCUSED ON WHERE THE
winning position: we are making buying and owning a home
or starting, running and growing a small business in Australia WORLD'S LONG-TERM
and New Zealand easy. We want to be the best bank in the GROWTH IS — ASIA. MORE
world for customers driven by the movement of goods and
capital in our region. OF OUR CUSTOMERS ARE
Drive a purpose and values-led transformation of the bank: COMING TO US TO SEEK
we are creating a stronger sense of core purpose, ethics
and fairness, investing in leaders who can help sense and
ADVICE ON REGIONAL
navigate a rapidly changing environment. We are also looking DEMAND FOR THEIR
to do more to address community concerns about housing,
environmental sustainability and financial wellbeing. PRODUCTS OR SERVICES
Build a superior experience for our customers and our people AND TO HELP TO
to compete in the digital age: we are building more convenient,
engaging banking solutions to simplify the lives of customers
IDENTIFY NEW REVENUE
and our people. OPPORTUNITIES.”
— Mark Hand, Managing Director,
Corporate & Commercial Banking, ANZ
17ANZ 2017 ANNUAL REVIEW
OUR
STRATEGY
OUR STRATEGY IS FOCUSED ON BECOMING SIMPLER,
BETTER BALANCED AND MORE SERVICE-ORIENTED TO HELP
PEOPLE AND BUSINESSES RESPOND TO A CHANGING WORLD.
Successful execution of our strategy will deliver consistently strong results for our shareholders, achieving a balance
between growth and return, short and long-term results, and financial and social impact.
CREATE A SIMPLER, FOCUS OUR EFFORTS
BETTER CAPITALISED, ON AREAS WHERE
BETTER BALANCED WE CAN CARVE
AND MORE AGILE BANK OUT A WINNING POSITION
FY17 PROGRESS FY17 PROGRESS
Simpler bank: •• Established banking relationships with ~250,000 net new retail
•• Continued to reshape and simplify the organisation, reducing full-time customers in Australia and New Zealand.
equivalent staff by 4%, including 6% reduction in senior management. •• In Australia, we strengthened our number 3 home loan market share
•• Reduced total costs in absolute terms, down year on year for the first position, introduced First Home Buyer coaches, and for the first time
time since 1999. home loan accounts exceeded 1 million.
Better capitalised: •• In New Zealand, we maintained our number 1 market share position
•• Increased Common Equity Tier 1 capital by 96 basis points to 10.6%. in home loans, held a leading position in overall brand consideration1
(at 51%) and increased our Retail Net Promotor Score2.
•• Generated 229 basis points of organic capital, primarily driven
by earnings growth and reduction in the Group’s Risk Weighted •• Grew small business deposits by 9% in Australia and commercial
Assets (RWA). deposits by 6% in New Zealand.
Better balanced:
•• Further rebalanced the portfolio, with capital allocated to Retail and
Commercial in Australia and New Zealand increasing by 9% to 53%
since 2015.
•• Improved risk adjusted returns in Institutional, through a combination
of $18 billion reduction in credit RWA and improvement in earnings
composition of markets, transaction banking and lending.
•• Progressed the sale of non-core businesses and minority investments,
expected to deliver an estimated 80 basis points of capital
once complete.
FY18 PRIORITIES FY18 PRIORITIES
•• C
omplete transactions in train and further progress the sale of •• M
aintain momentum in our home loan and small business
non-core businesses and minority investments. franchises to deliver consistent, above-system growth in a
•• C
ontinue repositioning the Institutional business, targeting further cautious and responsible way.
RWA reductions and improved returns. •• B
uild Home Owner and Small Business Ecosystems to engage
customers and improve the customer proposition and drive new
•• Deliver a step-change in our cost structure.
revenue streams.
•• Run the bank prudently, balancing growth, return and risk.
•• B
uild our Institutional’s regional trade, cash management and
markets platforms.
•• B
uild a platform that makes payments easier, cheaper and more
integrated for individuals and organisations.
1.
Source: McCulley Research Brand Tracking (online survey, first choice or seriously considered); six month rolling average.
2.
Retail Market Monitor, Camorra Research, Sep'16 & Sep'17 (monthly).
18OUR STRATEGY
“WITH ANZ, WE’VE
FOUND A MORE
PERSONALISED
APPROACH. THEY’RE
INTERESTED IN US
BOTH AS PEOPLE,
AND AS A GROWING
BUSINESS.”
— Kathy Grant
Kathy Grant and Justin Davenport,
Lux Design Group — clothing designers,
wholesalers, importers and manufacturers.
DRIVE A PURPOSE BUILD A SUPERIOR EVERYDAY
AND VALUES-LED EXPERIENCE FOR CUSTOMERS
TRANSFORMATION AND OUR PEOPLE TO
OF THE BANK COMPETE IN THE DIGITAL AGE
FY17 PROGRESS FY17 PROGRESS
•• E stablished CEO-led Responsible Business Committee and revised •• T he only Australian major bank to offer payment options across
Charter of Environment, Sustainability and Governance Board Apple PayTM, Apple Watch Pay, Android PayTM, Samsung Pay
Committee to advance ANZ’s purpose and increase focus on and FitBitTM Pay — backed by the ability to make high-value
ESG issues. transactions easier with the introduction of voice biometrics.
•• C
ontributed $131 million in community investment supported •• E xpanded accessibility features for ANZ Visa Debit cards including
by 113,127 community volunteering hours by employees. features to assist customers with visual impairment and
•• E ngaged our people and continued to build positive advocacy reading difficulties.
for ANZ and the industry through ‘The ANZ Way’, focusing on •• A
cquired online property site RealAs to bolster our digital offering
ANZ’s purpose, strategy, refreshed values and Code of Conduct. in Australia’s property market.
•• Introduced a new ‘balanced scorecard’ incentive plan in our •• A
dded to small business product offerings through our
branches and retail banking contact centres, increasing the Employment Hero partnership while adding payments capability
weighting to good customer outcomes, and established a new with BladePayTM and FastPay® Next Generation.
role of Customer Fairness Advisor.
•• Implemented key priorities of our revised Human Rights
Standards, including strengthened customer due diligence
and employee training.
FY18 PRIORITIES FY18 PRIORITIES
•• A
ct boldly and aligned with our purpose to re-engage with the •• S implify and standardise our technology landscape in support of
community, regain trust and differentiate ANZ. our ambitions.
•• E mbed our values and 'New Ways of Leading' with all leaders •• Introduce 'New Ways of Working', to more rapidly deliver valuable
across the bank. new features and services to our customers, engage our people
•• C
ontinue to change the way we communicate internally to and attract new talent.
create a more transparent, open culture. •• B
uild the skills required to develop compelling customer propositions,
unlock the value of data and optimise our core processes.
•• B
etter utilise data to strengthen relationships, grow revenue and
improve risk management.
19ANZ 2017 ANNUAL REVIEW
CASE STUDY
BUILDING A
CULTURE OF RESPECT
Simon Giddings, pictured, a Customer Service Consultant
in our Melbourne Contact Centre, is completely blind. He
performs his role with the assistance of screen reading
software and a braille display. As a customer is talking to
him in one ear, a synthetic voice simultaneously reads him
the content off his computer screen, enabling him to deal
successfully with a wide range of customer enquiries.
“Before I was employed by ANZ,
I was not at all confident that I would
be able to provide a secure future
for my family. Not only am I now
confident that I can do so, but I
would say ANZ and its staff have
shown me the utmost respect
and total support. That is why
I try hard to do the same for our
staff and our customers.”
OUR CORPORATE This year we achieved or made good progress against 83%
SUSTAINABILITY of our targets. We fell short of achieving our targets in relation
to women in management, employee engagement, employee
FRAMEWORK volunteering and the roll-out of our ANZ goMoney mobile phone
Our Corporate Sustainability Framework supports our banking app in the Pacific.
business strategy, reflects our most material issues and
is aligned with the bank’s purpose. The Framework has Financial wellbeing — creating opportunities
for social and economic participation
three key areas of focus:
One of the most significant ways in which we contribute to
•• Sustainable growth: create opportunities for all of our
the communities in which we operate is through our long-term
customers and enable sustainable growth for individuals,
investment in financial education programs, assisting people
businesses and industry.
on lower-incomes and with low levels of financial literacy to
•• Social and economic participation: build strong build their money management skills and savings.
customer relationships and connect with our communities,
supporting a diverse and inclusive society in which Lifting levels of financial literacy and inclusion has been shown
everyone can participate. to result in greater economic participation and social benefits
•• Fair and responsible banking: earn trust by keeping for individuals and the community. It has also brought a range of
pace with the changing expectations of our stakeholders, significant benefits to our business. Customers with higher levels
maintaining high standards of conduct and understanding of financial literacy and capability are generally more financially
the social and environmental impacts of our lending decisions. included, tend to hold more financial products and make more
informed financial decisions. Our employees can also benefit
ANZ is committed to the United Nations’ Sustainable
from increased financial capability, leading to greater individual
Development Goals (SDGs) and our Framework, together with
wellbeing and, importantly, a greater ability to respond to the
public targets that we set annually, supports the achievement
diverse financial needs of our customers.
of the SDGs.
20OUR STRATEGY
CASE STUDY
JAMIE’S
STORY
This year, more than 4,000 people in Australia have benefited
from Saver Plus, our financial education and matched savings
program for lower-income earners.
Jamie, pictured, with her three children, completed the
program in January. She heard about Saver Plus through
the school newsletter and decided to join because it provided
the opportunity to receive up to $500 in matched savings
towards her children’s education costs.
“Before Saver Plus, I’d transfer money from one store card
to another and nothing would be reducing,” Jamie said. “Saver
Plus helped me get in control of my debts and taught me how
to actively save for future expenses. I now have a budget on
a spreadsheet, I know when my credit card cycle is and can
better manage my money.”
Participants make regular deposits towards a savings goal
over a 10-month period and attend workshops to build their
financial management skills.
To learn more visit anz.com/saverplus.
“Saver Plus is an amazing program that has
relieved a lot of pressure”.
21
In 2016 we joined a group of 12 ‘trailblazer’ organisations as Our sustainability performance has been recognised on a
the first to release a Financial Inclusion Action Plan (FIAP). number of sustainability indices, including the Dow Jones
The program, managed by Good Shepherd Microfinance and Sustainability Index, FTSE4Good and CDP (formerly the Carbon
supported by the Australian Government, stems from Australia’s Disclosure Project).
commitment to the G20 goal of alleviating poverty through
Further detail on ANZ’s approach to sustainability and
financial inclusion.
performance against 2017 targets, is contained in our 2017
Modelling estimates that over the next 10 years, the FIAP ANZ Corporate Sustainability Review (independently assured
program will play a role in enabling large numbers of Australians by KPMG), available at anz.com/cs in December 2017.
to progress away from financial crisis and hardship.1 This
collective action (there are now 30 organisations committed
to a FIAP) has the potential to contribute to a GDP uplift of
$2.9 billion, government savings of $583 million and increased
household wealth of $11.8 billion per annum.
We are also committed to providing employment opportunities
for disadvantaged and under-represented groups to support
social inclusion and financial wellbeing. This year we employed
250 people from under-represented groups, including people with
a disability, Aboriginal and Torres Strait Islanders and refugees.
1.
SPP (2016). Economic Modelling for FIAP Program Implementation Team, November 2016
21ANZ 2017 ANNUAL REVIEW
GOVERNANCE
ANZ’s strong governance framework provides a solid At management level, the Group Executive Committee
structure for effective and responsible decision making (ExCo) comprises ANZ’s most senior executives. There is
within the organisation. The Board has oversight of a delegations of authority framework that clearly outlines
the risks and opportunities arising from our activities those matters delegated to the CEO and other members
and is responsible for setting the direction, strategies of senior management. In addition, there are a number
and financial objectives for the bank and for monitoring of formally established management committees that
the implementation by management of those strategies deal with particular sets of ongoing issues.
and objectives.
For further detail on ANZ’s governance framework
There are five principal Board Committees — the Audit see our 2017 Corporate Governance Statement available
Committee, the Environment, Sustainability and Governance on anz.com/corporategovernance.
(ESG) Committee, the Risk Committee, the Human Resources
Committee and the Digital Business and Technology Committee.
Each Committee has its own Charter setting out its roles
and responsibilities.
BOARD OF DIRECTORS
From left to right: David Gonski, AC – Chairman, Independent Non-Executive Director, Graeme Liebelt – Independent Non-Executive Director,
John Macfarlane – Independent Non-Executive Director, Paula Dwyer – Independent Non-Executive Director, Ilana Atlas – Independent
Non-Executive Director, Shayne Elliott – Chief Executive Officer, Executive Director, Jane Halton – Independent Non-Executive Director,
Lee Hsien Yang – Independent Non-Executive Director
Full biography details can be found on our website at anz.com/directors.
22GOVERNANCE AND RISK MANAGEMENT
DIRECTORS' MEETINGS
The number of Board meetings and meetings of Committees during the year the Director was eligible to attend, and the number
of meetings attended by each Director were: Environment,
Sustainability Digital
Human and Business and
Risk Audit Resources Governance Technology Special Committee Shares
Board Committee Committee Committee Committee Committee Committee of the Board1 Committee1
A B A B A B A B A B A B A B A B A B
Ilana Atlas 12 11 5 5 4 4 4 4
Paula Dwyer 12 12 6 6 5 5 4 4 2 2
Shayne Elliott 12 12 3 3 1 1
David Gonski, AC 12 12 6 6 5 5 4 4 4 4 3 3 5 5 1 1
Jane Halton, AO, PSM 11 11 3 3 3 3
Lee Hsien Yang 12 12 6 6 4 4 3 3 1 1
Graeme Liebelt 12 12 6 6 4 4 1 1 4 4 3 3 2 2
Ian Macfarlane 2
4 4 2 2 1 1 1 1
John Macfarlane 12 12 6 6 5 5 3 3
Columns marked A indicate the number of meetings the Director was eligible to attend.
Columns marked B indicate the number of meetings attended. The Chairman is an ex-officio member of the Audit, Environment, Sustainability and Governance, Human Resources,
Risk and Digital Business and Technology Committees.
Any Director is entitled to attend any Committee meetings. Directors sometimes attend meetings of Committees of which they are not a member.
1.
The meetings of the Committee of the Board and Shares Committee as referred to in the table above include those conducted by written resolution.
2.
Ian Macfarlane retired as a Director on 16 December 2016.
EXECUTIVE COMMITTEE
From left to right: Shayne Elliott – Chief Executive Officer, Maile Carnegie – Group Executive Digital Banking, Graham Hodges – Deputy
Chief Executive Officer, Farhan Faruqui – Group Executive International, Alexis George – Group Executive Wealth, Nigel Williams – Chief Risk
Officer, Michelle Jablko – Chief Financial Officer, Fred Ohlsson – Group Executive Australia, Mark Whelan – Group Executive Institutional,
Kathryn van der Merwe – Group Executive Talent and Culture, Gerard Florian – Group Executive Technology, David Hisco – CEO
New Zealand and Group Executive Asia Wealth, Pacific and International Retail.
Full biography details can be found on our website at anz.com/exco.
23ANZ 2017 ANNUAL REVIEW
OUR APPROACH TO ENVIRONMENTAL, This year we established the Responsible Business Committee
SOCIAL AND GOVERNANCE (ESG) (RBC), chaired by the CEO and comprised of senior executives
from business divisions and Group functions, including Risk,
RISK MANAGEMENT Corporate Affairs and Human Resources. The Committee replaces
The ESG Committee (formerly, the Governance Committee), the Reputational Risk, and Corporate Sustainability and Diversity
led by ANZ’s Chairman, has a specific focus on sustainability, Committees, and is a leadership and decision making body that
approving the bank’s sustainability targets and reviewing exists to advance ANZ’s purpose. Among other responsibilities,
progress in achieving them. It also advises management the RBC agrees and sets ANZ’s risk appetite for industry sectors
on ESG issues and reviews minutes from management to align with the bank’s purpose and values. It also oversees
committees regarding sustainability issues. and monitors current and emerging ESG risks and opportunities,
debating and agreeing relevant material matters including
The Board is responsible for establishing and overseeing
breach of Sensitive Sector Policies and exemptions requested
the bank’s risk management framework, with the Board
by the business.
Risk Committee responsible for developing and monitoring
compliance with ANZ’s risk management policies. Management One of the key ways we identify and manage the risks associated
reports concerning the implications of new and emerging risks with our business lending is through the application of our
are reviewed by the Risk Committee. This may include risks Sensitive Sector Policies — consolidated this year into a new
that arise from the social and environmental impacts of our Social and Environmental Risk Policy. This new policy consolidates
lending decisions. the principles and standards previously embedded within our six
Sensitive Sector Policies into one ‘umbrella’ policy.
This holistic policy incorporates social and environmental
“THE RESPONSIBLE BUSINESS considerations into lending decisions for all customer sectors.
Relationship managers are required to respond to a broad range
COMMITTEE IS CHARGED of social and environmental questions before the bank enters
WITH MAKING SURE THAT into a relationship with any customer. Our credit policy requires
customer relationships to be reviewed regularly, which includes
WE EMBED OUR PURPOSE considering any social and environmental issues.
IN EVERYTHING WE DO — The Social and Environmental Risk Policy incorporates relevant
THAT WE ARE THOUGHTFUL content of ANZ’s revised human rights standards including
ANZ’s ‘zero tolerance’ for improper land acquisition and
IN THE WAY WE ENGAGE involuntary resettlement.
ACROSS THE BANK AND WITH
THE COMMUNITY, SO THAT
PEOPLE WILL NOTICE AND
SAY ‘ANZ IS REALLY MAKING
A DIFFERENCE’.”
— Shayne Elliott, CEO
RESPECTING HUMAN RIGHTS
Failing to respect human rights and adequately manage We established a three-year program of work to guide
human rights-related risks can have negative consequences implementation of our revised standards and have met
for our business, eroding trust and damaging relationships our implementation priorities for 2017 by:
with key stakeholders. •• u
pdating the social and environmental screening tool
Last year we upgraded our human rights standards, used by our bankers to include our ‘zero tolerance for
Respecting People and Communities: ANZ’s approach land grabs’ commitment;
to Human Rights, consulting with customers, NGOs, •• p
iloting a strengthened customer due diligence
Government, industry bodies, academics and subject process in a selected country in Asia; and
matter experts within ANZ. •• reviewing and updating employee training programs
to reflect our revised standards.
Our standards are embedded in our everyday business activities,
including through our human resources policies and in customer
and supplier screening tools.
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