ANZ Bank CEO Shayne Elliott eyes bigger domestic share

ANZ chief executive Shayne Elliott has set his sights on earning a higher share of the bank's profits from domestic consumer and business banking, after putting his stamp on the lender by restructuring several key divisions.

After announcing an overhaul of ANZ's wealth business that will see wealth boss Joyce Phillips leave the bank, Mr Elliott told Fairfax Media he now had the management team in place to drive an expansion in domestic retail banking, while lifting returns in institutional lending.

ANZ chief executive Shayne Elliott says his mission is to make ANZ Australia's "best bank" in retail and commercial banking.
ANZ chief executive Shayne Elliott says his mission is to make ANZ Australia's "best bank" in retail and commercial banking. Photo: Josh Robenstone

Over the longer term, he said he would look to allocate more of ANZ's capital towards domestic retail and commercial banking, where he believes there is a strong growth opportunity.

Mr Elliott, who began as CEO in January, on Wednesday announced changes that will slice up ANZ's wealth arm, with much of the business being folded into retail banking.

Earlier this week, Mr Elliott also elevated the role of technology by poaching Google's Australian boss Maile Carnegie to fill the newly created position of group executive for digital banking.

In January he had appointed Mark Whelan to lead the challenged institutional banking division, and elevated Fred Ohlsson to oversee retail and commercial banking in Australia.

"This is the go-to-market team that I want and there's not going to be any other changes any time soon," Mr Elliott said, noting he is still in the hunt for a chief financial officer.

While he denied the wealth changes signalled ANZ was walking away from wealth, he said his fundamental mission was to make ANZ Australia's "best bank" in retail and commercial banking, and a world leader in institutional banking in the Asia-Pacific region.

Focus on retail and commercial banking

ANZ currently has about 40 per cent of its capital allocated towards retail and commercial banking. Mr Elliott said he wanted to increase this amount, while allocating less capital towards institutional banking.

"If I'm sitting here in five or six years, I would rather the retail and commercial businesses had a greater proportion of our capital allocated to them. And the institutional business less," Mr Elliott said.

ANZ's market share in domestic banking is about 15 per cent – significantly smaller than the market leaders in consumer banking, Westpac and Commonwealth Bank.

Mr Elliott argued ANZ could boost its share, and digital boss Ms Carnegie would play a key role in this expansion, though he did not nominate a market share target.

"I think that the retail and commercial businesses have a lot of growth opportunity because we are still a fundamentally small bank here at home," he said. "We can grow in almost any environment, and we can grow prudently, responsibly in any environment because we're small."

Mr Elliott said ANZ's institutional business – which has led the bank's push into Asia – faced a more challenging outlook and was likely to become smaller over time.

"There are some return challenges there," he said. "We need to probably get it more fit for purpose. It needs to be leaner, smaller, and more agile in order to be better, and that's what we are going to do."

Well received by investors

The shift towards domestic retail and commercial banking is likely to be well received by investors, who have punished ANZ's share price in part because of concerns over its institutional division and exposure to slowing Asian economies.

ANZ's shares have fallen 35 per cent from last year's peak of more than $37, though on Wednesday they jumped 4.5 per cent to $24.10.

Bell Potter analyst TS Lim said targeting retail and commercial banking made sense because these customers tended to be "stickier" than institutional clients, and earnings were more predictable.

Institutional profits, on the other hand, tend to jump around in response to financial market volatility.

"Retail banks tend to have a better return on equity, institutional is more volatile," Mr Lim said.

The restructure announced on Wednesday will mean key parts of wealth, including financial planning and private banking, become part of ANZ's retail banking division.

Mr Elliott said the changes were not intended to pave the way for a sale of its wealth assets.

Instead, he argued the restructure would improve the bank's ability to sell products such as life insurance, superannuation or financial advice.

"This is absolutely not a retreat away; it's just a next step in the evolution. We want to be more aligned at the front; we want our go-to-market position to be better, and that's what it's about," he said.

"I don't see a future for ANZ that doesn't include us providing those services to customers."

Nonetheless, he also said the bank was looking at ways to improve returns from insurance, superannuation and investment products, which have been weighed down by tougher capital requirements.