ANZ’s Super Regional Strategy

ANZ’s super regional strategy is clear, consistent and aligned to the growth opportunities in Australia, New Zealand and Asia Pacific.

A five-year progress report

Five years ago, at the start of the 2008 financial year, ANZ embarked on a strategic journey which recognised there was a unique opportunity to create value for shareholders by becoming a super regional bank—a bank of global quality with regional focus.

The move recognised a once-in-a-century shift underway in the global economy as growth opportunities moved from the developed economies of the West to Asian economies and China in particular.

Five years later, ANZ’s super regional strategy has growing momentum with investors ranking ANZ highly for its long‑term growth strategy.

The scale of transformation at ANZ over that time has been significant, based on five key themes and a systematic and coordinated program of action in every area of the bank.

Super regional building blocks

From early in the 2008 financial year, ANZ undertook a series of fundamental changes to enable us to successfully execute our strategy.

We recognised that ANZ would need a different sort of management team to build a significant international business and we recruited a number of senior international bankers and Asian insiders. This was supported by the introduction of a new management model focused on geographies and customer segments rather than the individual product approach of the past.

At the same time, we have undertaken a multi-year program to shift ANZ’s culture and invest in the training and development of our people to focus more strongly on performance underpinned by a clear set of Group-wide values.

Capital has increased by around $11 billion since 2007 with the Group’s Common Equity Tier 1 capital ratio at 10.0% at the end of 2012 on a Basel III[1] internationally harmonised basis.

We have established an enterprise approach to technology and we have delivered good progress. This includes a significant program to upgrade our technology infrastructure and improve systems security, stability and standardisation, and to respond to growing demand, scale and complexity in the business. This has included delivery of new cross-border systems in trade, cash management, capital markets and foreign exchange.

We also established a strong sense of purpose with a clear five-year roadmap to source 20% of revenues from Asia Pacific Europe and America by end of 2012. In 2011, we extended that roadmap with an aspiration to source 25% to 30% of revenue from Asia Pacific, Europe and America by 2017.

To support this, a new brand and visual identity was created that was relevant in Asia and consistent throughout the region. At the same time, we have continued our focus on corporate responsibility. Our contribution to the community has been guided by our corporate responsibility framework and has included a significant investment in building financial capability. ANZ was recognised as Global Sector Leader in the Dow Jones Sustainability Index in 2007, 2008, 2009, 2010 and 2012.

Global Financial Crisis—remediation and opportunity

These building blocks placed ANZ on a much stronger footing, however the onset of the global financial crisis during 2008 posed a number of challenges requiring significant and, at times, painful remediation.

This involved focus on addressing customer and reputational issues arising from non-core businesses. Subsequently, ANZ exited a number of these non-core businesses including custodian services, securities lending, private equity, institutional stockbroking and wholesale mortgage management.

At the same time, recognising the weaker economic environment and the needs of our super regional strategy, we brought in experienced risk management professionals into key leadership roles and strengthened risk policies and processes throughout the bank.

As business conditions tightened we also simplified the way we ran the bank and started a multi-year process of driving strategic cost reduction. This included reducing the layers of middle management and investing in our offshore operations and technology centres in Bangalore and establishing new centres in Manila and Chengdu.

Despite these issues, our financial strength also allowed us to look at the crisis as a time of opportunity. We:

  • acquired Asian assets from the Royal Bank of Scotland in Taiwan, Singapore, Indonesia, Hong Kong, the Philippines and Vietnam with approximately two million clients
  • purchased the remaining 51% of our wealth management joint venture with ING in Australia and New Zealand
  • acquired the deposit and lending books of Landmark boosting our presence in agribusiness in Australia.

The crisis and subsequent retreat from Asia by weakened banks from Europe and the United States also created significant opportunities for organic growth by using our strong credit rating and balance sheet strength to step in and win business from quality customers.

The end result is that ANZ came out of the financial crisis a stronger bank than we went in. Today we are one of the best capitalised banks in the world with sector-leading capital ratios and one of only a small number of banks in the world rated AA or better.

Establishing a real franchise in Asia

While ANZ had an established presence in Asia in 2007, our country representation was often small and based on limited banking licences. This has required significant investment to build banking capability, introduce new technology, and to obtain regulatory approval for licences to provide a wider range of services to customers.Some highlights have included:

  • increasing our presence in China through local incorporation in 2011 and opening new outlets and branches in Beijing, Shanghai, Guangzhou and Chongqing, a Rural Bank in Liangping and an operations centre in Chengdu. Total staff numbers have now reached 700 compared to 100 in 2007. We also have two partnership investments with Shanghai Rural Commercial Bank and the Bank of Tianjin
  • growing to become one of the largest international banks in Indonesia with 1,100 people working in 28 branches. This compares to just two branches and 150 people in 2007. We have also increased our strategic investment in PT Panin Bank to 39% up from 30% in 2007
  • expanding in the Philippines by obtaining a universal banking licence and establishing an operations centre in Manila. We also have a successful credit card joint venture with Metro Bank
  • locally incorporating in Vietnam, paving the way to expanding the branch network and services with 750 employees now in 11 outlets
  • re-commencing operations in India with the opening of a branch in Mumbai while also continuing to invest in ANZ’s operations and technology centre in Bangalore where we have 5,600 staff compared to around 1,800 in 2007.

ANZ has over 2.6 million customers in Asia Pacific supported by around 8,200 employees and 100 branches and points of representation.

We have also seen growth in other countries in Asia, for example in Japan and in Korea. In Taiwan we now have 1,700 employees working in 18 branches. In our two regional commercial hubs, in Hong Kong we employ around 1,100 people up from 30 in 2007, and in Singapore we employ 2,000 people up from 150 in 2007. We also have an important partnership with Malaysia’s AmBank in which we hold a 24% stake, up from 19% in 2007.

Throughout our international network, including the Pacific, our expansion has been underpinned by a concerted investment in upgrading premises to the standard of an international bank and to accommodate larger numbers of staff. This includes new signature offices in Singapore, Hong Kong, Shanghai and Port Moresby as well as investments in upgrading branches throughout the region.

The end result is that ANZ has built a significant business in Asia Pacific with 2.6 million customers up from 925,000 in 2007. Our customers in Asia are supported by 8,200 employees, and 100 branches and points of representation compared to just 30 in 2007. This has seen ANZ emerge as a leading international bank in the region. For example, in 2012 ANZ was ranked as a top five Corporate Bank in Asia by Greenwich Associates; five years ago ANZ ranked outside the top 20.

Strengthening Australia , New Zealand and the Pacific

A key element of ANZ’s strategy is continuing to strengthen our position in Australia, New Zealand and the Pacific.

In Australia our focus has been on growth in traditional banking in retail deposits, mortgages and commercial banking as well as wealth solutions.

In addition to growing in key segments, our super regional strategy is seeing us build greater connectivity with our network in Asia Pacific. In Retail, ANZ is the bank of choice for customers coming to Australia from the region, for example, Asian students coming to Australia and mortgages for offshore Chinese residents. We have also leveraged our regional network in Commercial where more than two‑thirds of our customers have connections to Asia.

In Institutional, we have focused on our strengths in natural resources, agriculture, infrastructure and financial institutions—segments that are directly linked to Asia’s growth. We have also seen substantial growth in the areas we have invested in to support that strategy—in foreign exchange, trade and cash management.

ANZ has also upgraded its premises in Australia rationalising offices in Melbourne and opening a new 6-Star Green Star global head office. New office premises have also opened in Adelaide and Brisbane, and in Sydney we will move to new premises in 2013.

To capitalise on the momentum in the Australian business, a five-year $1.5 billion investment program was announced in 2012 to upgrade ANZ’s distribution network, simplify products and processes, provide customers with additional mobile and flexible banking options, and initiatives to support local communities.

In New Zealand, ANZ has a leading market position across Retail, Wealth Commercial and Institutional with a relationship with more than two million customers—around 50% of New Zealanders.

Our focus has been on undertaking a major transformation to simplify our business, reduce costs and improve the banking experience for our customers. This has included a transition to one management structure across both the ANZ and The National Bank brands, one customer approval process and one set of products. More recently we have moved to one brand and one core banking system.

We have also renewed our focus on growth opportunities. In Retail for example, we are connecting New Zealanders travelling and migrating to Australia, the Pacific and Asia, and targeting growth in mortgages particularly in the Auckland region. In Commercial and Institutional, we have extended our market leadership by leveraging our international network to support New Zealand’s export sector, particularly in agriculture.

A $100 million investment will also be made over the next two years to ensure ANZ has a well positioned and attractive branch network for customers in current and new communities. ANZ’s head office in Auckland is also undergoing a major refurbishment.

In the Pacific, ANZ provides banking services to 500,000 customers in 12 countries across retail, wealth, commercial and institutional. Our focus has been on continuing to support customers including opportunities associated with growing trade and investment linkages with Australia, New Zealand and Asia, and on operational efficiency.

Adapting to the lower growth environment

While we have been continuing to build on our strengths in our major domestic markets of Australia and New Zealand, and exploiting the growth opportunities in Asia, we have recognised that the global economy will be weaker for some time, with growth in banking more closely following growth in the economy.

The magnitude of the shift the banking industry is facing is significant around the world and we are actively adapting ANZ to this environment. Loan growth is lower and funding costs are higher. At the same time, increased regulation and growth in our business means we now hold almost twice as much capital as we did in 2007.

The implication is that now and for the foreseeable future, we need a much greater emphasis on productivity and on capital efficiency. This means:

  • more actively managing capital across our portfolio of businesses so we continue to build out our super regional strategy in the most capital-efficient way
  • re-engineering the way we operate to drive a long‑term, sustainable cost advantage particularly by using the flexibility provided by our operations and technology hubs.

Delivering on our promises

ANZ’s super regional strategy is clear, consistent and aligned to the economic opportunity in the Asia Pacific region.

Over the past five years we have dramatically transformed ANZ, creating a business portfolio diversified by geography, by business and by industry focus. It provides us with options and choices to deliver differentiated revenue growth—choices that are not available with a domestic‑only strategy.

Since 2007, this transformation has seen ANZ move from being a largely domestic bank to an integrated and growing, regionally focused international bank that is increasingly delivering differentiated value and performance to shareholders, customers, staff and the community.