By James Eyers and Angira Bharadwaj
ANZ chief executive Nuno Matos says that the country’s fourth-largest lender will turn around lagging mortgage growth and catch up with its rivals within four months as it rolls out a major restructure and cost-cutting strategy that pushed the bank’s profits down by 14 per cent.
Investors appeared to embrace Matos’ plans to overhaul the bank, sending shares to record levels despite a loss of market share and a deep slump in profits. ANZ’s Australian retail division took the brunt of heavy write-downs for redundancies and legal costs, which meant its smaller New Zealand operations reported a bigger cash profit this year.
But “better products, people and productivity will build a much stronger retail engine, and that is happening as we speak,” Matos said. “What we are observing is a significant upgrade of our talent capabilities in retail, together with a clear strategy to ensure our returns will be significantly better.”
The bank’s full-year cash profit fell 14 per cent to $5.8 billion for the year to September, after it slashed more than 3000 staff and was hit with heavy penalties by the corporate regulator. The one-off costs dragged its performance below rivals; National Australia Bank’s net profit for the year was down 3 per cent, while Westpac slipped by 1 per cent.
The regulatory fines forced ANZ’s board to dock the bonuses of former chief executive Shayne Elliott and other senior leaders by a combined total of $32 million as the board moved to impose accountability for governance failures to avoid a second strike at the annual shareholder meeting on December 18.
Competition for deposits and home loans squeezed lending margins, although these recovered in the second half of the financial year, after ANZ eliminated a mortgage cashback that had been put in place to entice new borrowers. Mortgages and deposits have grown around half the rate of the broader banking system over the past year, with ANZ losing ground to its three larger rivals and rapidly growing Macquarie.
Matos said he had appointed first-class leaders to fix this, including Pedro Rodeia, who will join to run ANZ’s retail banking operations this month after almost three decades at McKinsey. Another recruit announced on Monday was Guilherme Bueno, who will be managing director for digital channels and joins from HSBC, where Matos had been an executive.
A key focus will be accelerating the integration of Suncorp Bank, delivering ANZ Plus as a single, customer front end, and reducing duplication.
Business lending and deposits grew by 3 per cent over the past year, also well below the average of the system. ANZ remains last in terms of the “net promoter score”, a measure of whether customers are likely to refer others to services, in both business and retail banking, which Matos is keen to lift.
ANZ shares opened lower but bounced as Matos explained his plan to analysts. They continued to rise in the afternoon to close up 3.2 per cent, or $1.18, at $37.98, stronger than the other major banks.
The S&P/ASX 200 Index rose 0.8 per cent on Monday.
“The market is listening to Nuno, and that is being reflecting in the share price,” said Jamie Hannah, deputy head of investments and capital markets at VanEck Australia. “If ANZ wants to propel itself, it needs to build out all its books and not just rely on some successes in New Zealand. It needs to focus on Australian retail in particular, grow the margin if possible, and compete against the other three majors and Macquarie, especially in home loans. They are in position to be able to do it. Now, it is a matter of delivering on it.”
Matos said problems with the bank’s capacity to process new loans had caused “significant attrition” at the end of 2024 and the start of this year, which “will be fixed in the next three or four months [when] we expect to be in line with the market”. “We certainly want to flow with the system [in mortgages] and we don’t want to compete structurally on price,” he added.
Wilson Asset Management portfolio manager Matthew Haupt said the real question was whether Matos would be able to grow the retail bank.
“Their residential mortgage share has been really, really weak, and Nuno says it will be weak until March next year,” he said. “Their growth in the short term is pretty challenged. [Matos] is doing all the right things, but how do you grow this thing? Everyone is still willing to give Nuno a go.”
ANZ, like the other major banks, wants to boost in-house lending, in contrast with Macquarie, which will continue to make almost all its loans through mortgage brokers given it has no branches.
ANZ said it would strengthen proprietary origination, including lifting the number of lenders in its branches by 50 per cent over the next five years. However, ANZ still relies on mortgage brokers to arrange two-thirds of its loans and Matos said he realised it will need to remain attractive to them.
“We are not targeting a ratio of brokers versus property origination at all,” he said. “We don’t see one versus the other, or one or the other. We see the need to be good in both of them … We need to do both very well.”
Morningstar analyst Nathan Zaia said ANZ would have to focus on improving its own brands and still remain attractive to brokers. “Improving the broker and customer proposition, and simultaneously bringing down costs, is key to ANZ returning to earnings growth,” he said.
Competition saw ANZ’s net interest margin fall 2 basis points over the year to 1.55 per cent. The bank said total credit impairment charge for the year was $441 million, up from $406 million, and credit quality “remained sound” with a modest increase in individual provisions over the half.
Expenses grew at 11 per cent to $11.8 billion, faster than revenue, which was up by 7 per cent to $22.2 billion. “[There are] question marks are around the more immediate revenue outlook,” said UBS analyst John Storey.
ANZ will pay a final dividend of 83¢ per share, franked at 70 per cent. The total, full-year dividend is $1.66, also partially franked at 70 per cent.
At a strategy day last month, Matos unveiled a plan to “materially” increase the number of business and mortgage bankers after slashing costs and cancelling an $800 million share buyback program. If Matos meets the targets, ANZ’s cost-to-income ratio – a measure of how efficiently a company is operating – will be similar to the Commonwealth Bank’s by 2028.
ANZ set out a target for return on tangible equity, a measure of profitability, of 12 per cent by the 2028 financial year and 13 per cent by 2030, up from 10.2 per cent posted in its first half of 2025. It is also targeting a cost-to-income ratio in the mid-40 per cent range by the 2028 financial year, sustained through to 2030, compared to 52 per cent posted at the end of March.
On Monday, it reported both metrics going in the wrong direction: cost-to-income ratio was 53.4 per cent, almost 2 percentage points higher, while return on tangible equity was 10.5 per cent, down 12 basis points. But Matos said growth would accelerate and ANZ would outperform from 2027. “If you try to sprint when you are not in shape, you will not get there,” he said.
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