Three years after setting out our super regional ambition, our 2010 results have demonstrated that ANZ is now consistently delivering on the promises we made to our shareholders as well as to our customers and the community.
While our statutory profit for the full year was $4.5 billion, up 53% our underlying business has performed strongly across the board. We reported an underlying net profit1 after tax of $5 billion which was up 33%.
Our performance was assisted by the improved economic environment in Australia and New Zealand, and by Asia's continued growth. The improved credit environment saw provisions for bad and doubtful debts fall by 41% to $1.8 billion. Importantly though, we had good growth in underlying profit1 before provisions which was up 6%.
Our balance sheet management remains a strength. We have a strong capital position and increasing diversity in our sources of funding including continued growth in deposits in Australia and in Asia.
Regional Performance
Our 2010 result shows that ANZ has momentum in every area of our business.
In Australia underlying profit1 grew 42%. Market share growth was a feature, Retail lending was up 12% driven by a strong performance in mortgages and household customer deposits was up 11%. We have achieved this while continuing to improve our number one ranking on overall customer satisfaction in our Retail business. Commercial Banking also made a strong contribution with profit up 34%.
In Asia Pacific, Europe and America, although 2010 was a year of consolidation following the acquisition of businesses from the Royal Bank of Scotland and the six business integrations we have completed in Asia during the year, earnings from our partnership investments and Institutional resulted in a 21%2 lift in underlying profit1 to US$620 million.
During the year we also achieved a number of milestones in our regional expansion plans including regulatory approval for new or expanded banking licences in China, Singapore, the Philippines and India.
Our Institutional business is now performing well with underlying profit1 up 23% to $1.8 billion. Institutional’s strategy is totally aligned to our super regional ambition and it is providing a compelling and differentiated proposition for our clients. We are investing strongly in the business’ future and the results are showing though with inter-region client flows up 10% in 2010 and flows into Asia from elsewhere in the network up 20%.
In New Zealand, the economy began to stabilise during the year, and a 48%2 decline in the provision charge was the main driver of a 40%2 rise in underlying profit1 off a low base in 2009 to NZ$882 million. I’m optimistic about what our business can do in New Zealand in 2011.
1. Adjusted for material items that are not part of the normal ongoing operations of the Group including one-off gains and losses, non-continuing businesses, timing differences on economic hedges and acquisition related costs. 2. Measured in foreign currency terms.
Distinctive Growth Strategy
We are also now making significant progress with our strategic ambition to become a leading super regional bank in Asia Pacific.
In addition to our strong financial performance, we completed the acquisitions in Australia, New Zealand and Asia which strengthened our activities in banking and wealth management, and we continued to grow our existing business.
By remaining strong through the financial crisis, we have been able to continue supporting our customers and to look at further opportunities for growth.
Our strategy is clear and differentiated and it now makes even more sense in the post-Global Financial Crisis world where Asia, excluding Japan, is growing at around 8% while economic growth in developed markets such as the United States and Europe is around 2.5%.
ANZ is the only Australian bank to give shareholders a material exposure to Asia’s growth combined with significant domestic businesses in Australia and New Zealand.
It’s pleasing that we are now increasingly recognised for our geographic diversification, which focuses on the world’s best performing economies and the linkages that our corporate and personal customers have with the Asia Pacific region.
To support this, we’ve continued to build a world-class team of experienced bankers throughout the Company to take advantage of growth opportunities and to deliver on our strategy.
Growing Sustainably
While performance often tends to focus on financial results, over the long-term it is a reflection of how effectively we are serving our customers and contributing to the communities where we operate. Our commitment to growing our business responsibly is fundamental to our aspiration to become a super regional bank.
In practice, this means understanding and responding to the issues that matter to our customers and communities; committing to the highest standards of corporate behaviour in order to build trust with governments and regulators seeking responsible businesses to operate in their countries; and prioritising those investors targeting well-managed companies with superior prospects for medium to long-term growth.
And, of course, increasingly the best employees want to work for companies that are both financially successful and making a sustainable contribution to society.
A commitment to growing responsibly, however, isn’t without its challenges and at times can raise unrealistic expectations about our ability alone to solve significant issues facing society. During the year we responded to concerns raised by stakeholders, including shareholders, regarding some of our financing decisions.
These issues bring into focus the complexity of what it means to be a banker in today’s rapidly evolving world. It involves managing the financial risks and opportunities and carefully balancing the economic, social and environmental aspects of our decisions, giving due consideration to the short, medium and long-term impacts.
I am proud of our work to support customers facing financial difficulty; assist communities affected by natural disasters; and improve financial capability among people on low incomes; together with the progress we have made in further developing a culture of respect in our relationships with our customers, employees, suppliers and communities in every region where we operate.
Our Operating Environment
Looking ahead, there is continuing uncertainty in the global environment, particularly for the US and European economies. At the same time, higher funding costs are here to stay and there are regulatory uncertainties associated with new capital and liquidity requirements. All in all, this remains a challenging environment to navigate.
The result is we will have to continue to think differently about our business. Lower credit growth and higher costs of doing business mean we’ll need to drive productivity and innovation to stay ahead of the game. We need to streamline our structures and do things in new and different ways.
At the same time, our 8 million customers want simpler processes, convenience and more innovation from us and this also helps drive medium and long-term value for shareholders.
Our performance in 2010 shows that after having weathered the global financial crisis in 2008 and 2009 we are now putting runs on the board and we are well placed to meet these challenges – and indeed to take advantage of them – and to continue delivering on the commitments we have made to all our stakeholders.
Michael Smith
Chief Executive Officer
Management Board
GRAHAM HODGES
Deputy Chief Executive Officer
DAVID CARTWRIGHT
Chief Operating Officer
PETER MARRIOTT
Chief Financial Officer
PHILIP CHRONICAN
Chief Executive Officer,
Australia
CHRIS PAGE
Chief Risk Officer
Alex Thursby
Chief Executive Officer,
Asia Pacific, Europe and America
SUSIE BABANI
Group Managing Director, Human Resources
DAVID HISCO
Chief Executive Officer,
New Zealand
ANNE WEATHERSTON
Chief Information Officer
SHAYNE ELLIOTT
Chief Executive Officer,
Institutional
JOYCE PHILLIPS
Group Managing Director,
Strategy, M&A,
Marketing and Innovation
Full biography details can be found on our website: anz.com/about-us/our-company/executive/management