ANZ CEO Shayne Elliott has warned of subdued growth as the bank posts a 3% drop in cash profit to $5.2 billion for the nine months to June.
Releasing the bank’s quarterly report, Elliott says the revenue environment for banking is more constrained and getting harder.
“This means a consistently strong focus on productivity and capital efficiency disciplines is now fundamental to the way we are running the business,” he says.
The bank has been cutting overall staff numbers. Elliott didn’t given details but says the focus is on getting costs under control.
“We’re still growing and we’re still lending more to customers and segments where we feel positive,” he says.
“But at the same time we need to reduce our exposure to some of the other sectors and net-net that actually means we’re down in terms of risk-weighted assets. That’s the right thing to do from a capital efficiency point of view.”
In early trade, ANZ shares were up 2.6% to $26.38.
In May, the ANZ cut its interim dividend by 7% to 80 cents a share, the first time the bank has reduced its shareholder payout since the GFC.
Elliott, who took over from Mike Smith on January 1, has also been refocusing the bank on its domestic business and reducing emphasis on Asia.
The bank has previously warned it had been hit by higher than expected by bad loans in south-east Asia because of slower economic growth and market volatility.
“We basically think we’re in for a lower growth environment for many years to come, which is not necessarily a bad thing by the way,” Elliott says in today’s quarterly report.
“In Australia we’ve had it really good for a long period of time but it’s just getting a little bit harder.
“We think that the banks that are going to win in the future are those that can really excel when it comes to productivity.
“And the good thing about that is a lot of it is to do with adopting new technology, about digitising our own processes and that just naturally drives a better productive output and that’s what we’re seeing.”
Elliott says bad loans have risen from a very low point.
“It hasn’t got any better but hasn’t got any worse and we think that probably feels about right and we’d expect the same to continue for a period of time,” says.
The total provision charge was $1.4 billion.
Profit before provisions was up 5% with income increasing at a faster rate than expenses.
Increased technology costs were offset by productivity savings including lower employee numbers.
Here’s Elliott talking about operating in a low growth environment:
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