Shayne Elliott's legacy after ASX: ANZ scandals as new CEO Nuno Matos takes over
Elliott has certainly left a cleaner bank and importantly a far less risky one that delivers fewer financial shocks, but Australia's perennial number four bank is still a long way from meeting its potential.
Former HSBC top executive and Santander banker Nuno Matos takes charge on Monday. It's by no means a broken business, however, where Elliot has unfinished work getting ANZ into shape, Matos' mandate will be all about execution.
When he took charge at the start of 2016, Elliott set himself four strategic priorities: creating a simpler bank; focusing ANZ on businesses where it can win; driving a cultural transformation; and building a digital platform to get the bank's aging technology in shape.
Elliott, the former institutional banker, moved quickly on the first two. He sold 30 businesses, mostly across Asia, and exited ANZ's problematic wealth management operations.
In doing so, he raised about $8bn for shareholders. This started the journey of ANZ becoming a transaction led bank in Asia, processing currency flows. Importantly, it ripped risk out of ANZ's accident-prone balance sheet.
'The one that I wouldn't give myself a perfect score on was the digitisation of the business. I think we've made progress. I think in hindsight, what I was a bit naive about was how hard that would be,' Elliott tells The Australian.
ANZ is today a lower risk bank than the one Shayne Elliott inherited. Picture:Getty Images
He is talking about the massive rebuild of ANZ's tech network, a project that has cost billions and was years late.
Only now Elliott's ANZ-Plus project is being switched on with nearly a million retail banking customers and all their banking data gradually being moved onto the new cloud-based platform. So the benefits of having a lower cost to serve is yet to be seen. A digital platform for business customers has also being built and is also being rolled out.
Elliott says 'life got in the way' for ANZ with events like the 2018 banking royal commission and Covid pandemic which each caused major distraction for the bank.
'I'm not making excuses, but I'm just saying if you'd asked me in 2016 where I would hope to be in 2025 we would have hoped to be further down that track. Some of it's environmental and some of it is just a lot harder than it looks'.
Elliot was speaking as ANZ posted a March half cash profit of $3.57bn, flat on the same time last year. The result was struck on record revenue and boosted by the first-time contribution of regional lender Suncorp bank, acquired by Elliott for $4.9bn. Stripping that contribution out, the headline result would have gone slightly backwards. The bank is generating record revenue and credit losses remain grounded near historic lows despite the interest rates hitting a cyclical high.
ANZ trading scandal
There's no doubt Elliott's legacy has been tarnished by the past year, when a bond scandal in his Sydney dealing room has attracted the attention of regulators. Several traders have since been sacked for behaviour issues, while market regulator ASIC has an investigation underway into more serious allegations of pricing manipulation in Australian government bond issues. ANZ has investigated the claims forensically and is expected to defend its position. However, it is waiting until ASIC finalises its investigation, expected next month.
The bank regulator APRA has now told ANZ to set aside $1bn in additional capital for now due to concerns about persistent risk governance and culture. This is more than any other bank, and would be funds otherwise that could be converted into loans.
A separate review into culture has made, and chairman Paul O'Sullivan has taken charge of non-financial risk.
Incoming ANZ CEO Nuno Matos (right) with chairman Paul O'Sullivan. Picture: Aaron Francis
Elliot says where ANZ has turned financial risk management into a strength, moving from a position of having the highest provisions and volatile credit exposures to the lowest there is work on non-financial risks. 'I'm also confident in the team's ability to get on top of that (non-financial risk) pretty quickly,' he says.
ANZ v Westpac, CBA
In many ways, the lack of acute regulatory shocks over the past decade has worked against ANZ. Both Commonwealth Bank and Westpac were shaken to the core by their respective hits from financial crimes regulator Austrac and forced to get their cultural houses in order. Then National Australia Bank went through the fire when its top management and board was singled out for criticism coming out of the Hayne financial commission.
By comparison, ANZ sailed through, allowing a degree of complacency to set in around non-financial risks. ANZ's federated structure of managing risk at a business level rather than a group-wide level, may have served it through targeted issues like anti-money laundering and the banking royal commission, but it still allowed cracks for non-financial risks and poor behaviour. ANZ is now reverting to a group-wide risk management, allowing it to join the dots.
The 61-year-old Elliott acknowledges he could have moved faster in some areas, this echoes the reflections both public and private company leaders have often told him.
'When people look back they never say, 'In hindsight, I was far too bold, and I was too fast'. They always say, 'I should have gone faster, and I should have had more courage' And I would say the same thing'.
johnstone@theaustralian.com.au
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