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Chairman`s AGM Address to Shareholders

Document date:  Fri 15 Dec 2000
Published:  Fri 15 Dec 2000 11:16:30
Document No:  171316
Document part:  A
Market Flag:  N
Classification:  Chairman's Address to Shareholders

AUSTRALIA & NEW ZEALAND BANKING GROUP LI      2000-12-15  ASX-SIGNAL-G

HOMEX - Melbourne                                                     

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CHAIRMAN'S SPEECH

Ladies and gentlemen, good morning. I am Charles Goode. As your
Chairman, it is my pleasure to welcome you and to declare a quorum
present and open the 32nd Annual General Meeting of the Company. I
also welcome shareholders listening on anz.com.

I trust you enjoyed hearing the ANZ Staff Choir singing Christmas
carols as you arrived, and on your behalf I thank them. I would also
like to thank those shareholders who have submitted questions in
advance of this meeting. I will endeavour to cover a number of the
questions raised as part of my address, but if I have not answered a
query or you would like a further explanation, there will be an
opportunity when questions are taken from the floor.

The final dividend of 35 cents per share is being paid today into the
bank accounts of those electing direct credit; while cheques,
Dividend Reinvestment Plan and Bonus Option Plan notices are in the
mail. The Shareholder Privilege Card will be mailed to eligible
shareholders with our publication, Shareholder Contact, in January.

After we have handled the items of business on the Agenda, and the
shareholders' questions, I hope you will join us for refreshments,
which will be served in the foyer, after the meeting.

Now allow me to introduce to you the members of your Board, and the
executives on the podium.

Starting on your far right, Jerry Ellis. Jerry has extensive mining
and manufacturing experience both in Australia and overseas notably
during his long career with BHP. He is Chairman of Sandvik Australia,
the Australia-Japan Foundation, the Australia Minerals & Energy
Environment Foundation and Black Range Minerals; a Director of Aurora
Gold, GroPep Limited and Pacifica Group; and also Chancellor of
Monash University. Jerry chairs ANZ's Risk Management Committee.

Next, Dr Roderick Deane. Roderick lives in Wellington and is widely
recognised as one of New Zealand's leading business executives with
experience in both the public and private sectors. Roderick is the
Chairman of Telecom Corporation of New Zealand Limited, Fletcher
Challenge, the Museum of New Zealand and he is a director of
Woolworths Limited, TransAlta Corporation, and other companies. He is
the Chairman of ANZ Banking Group (New Zealand) Limited.

Next to me on my left is the Chief Financial Officer, Peter Marriott.
Peter joined ANZ in 1993 from KPMG where he was a partner involved in
their banking practice. Before being appointed to his current
position Peter was head of Risk Management.

On my right is John McFarlane, the Chief Executive Officer. John
joined us in October 1997. Before joining ANZ he had 23 years
experience in banking with Citibank and Standard Chartered. In 1995
John was awarded an OBE for his services to banking.

Then, Dr Brian Scott. Brian lives in Sydney and has wide experience
in consulting particularly in human resources. He is Chairman of
Management Frontiers and the Foundation for Development Co-operation.
He is also a Director of Air Liquide Australia and the James N Kirby
Foundation. Brian chairs ANZ's Human Resources Committee.

Next, John Dahlsen. John's background is in the law and he was a
partner at Corrs Chambers Westgarth. He is Chairman of Woolworths and
has other directorships including Southern Cross Broadcasting and The
Smith Family. He is Chairman of ANZ's Audit Committee.

Finally, Gary Toomey. Gary joined the Board in March 1998. Gary has
been appointed Chief Executive Officer of Air New Zealand. He was
formerly Deputy Chief Executive Officer of Qantas Airways.

Margaret Jackson unfortunately is unwell and therefore unable to be
with us today. Margaret is Chairman of the Victorian Transport
Accident Commission, Qantas Airways and Methodist Ladies College.
Margaret is also a Board member of the Howard Honey Institute and the
Brain Imaging Research Foundation. She chairs the Advisory Board of
ANZ Funds Management.

I believe that with this collective experience and broad reach of
business and community involvement we have a well-qualified and
balanced board to fulfil its responsibilities and meet the
expectations of ANZ shareholders.

Behind me from left to right are: Peter Hawkins, Group Managing
Director of Personal Financial Services, David Boyles, Chief
Information Officer, Roger Davis, Group Managing Director of
Corporate Financial Services and Elmer Funke Kupper, Group Managing
Director of Strategy and International. These four with John
McFarlane and Peter Marriott form the Executive Management Committee
of the Bank.

Next is Bruce Brook, Deputy Chief Financial Officer, Jane Slatter,
Group General Counsel and Peter Mathews, Assistant Company Secretary.

I encourage shareholders to take the opportunity to approach any one
of us during refreshments and introduce yourselves and to ask
questions.

REVIEW OF 2000

I would now like to review the year 2000. I hope you have taken the
opportunity to read our 2000 Annual Report. We would like to receive
your feedback on the report, the conduct of this meeting and on any
other matter on which you would like to comment. At the conclusion of
the meeting would you please take a few moments to complete the
questionnaire, which was handed to you on registration.

I will discuss the events of the last year under four broad headings:

Firstly, - PERFORMANCE - which incorporates the financial highlights
and other indicators of progress.

Secondly, - CUSTOMER SERVICE AND THE COMMUNITY - it is of critical
importance for us to continue to improve in these areas and I will
outline some of the steps we are taking to do this.

Thirdly, - STAFF AND CULTURE - here I would like to share with you
some of the work being undertaken to develop our people, enhance the
working environment and build a stronger, more innovative and dynamic
organisation.

And finally, - STRATEGY - on which I will make a few introductory
comments about the revised strategy we announced earlier this year -
and then I will ask John McFarlane, the Chief Executive Officer to
provide a more expansive overview of the new strategy and what it
means for ANZ.

REVIEW OF PERFORMANCE

So, let me begin by turning to our performance. Three years ago ANZ
made a number of commitments to shareholders. I would like to remind
you of these and outline our progress and achievements with respect
to each commitment:

* Firstly, we made a commitment to achieve superior financial
performance, which meant delivering double digit earnings growth;
improving the return on equity; and bringing down our cost income
ratio to 53%. I am pleased to say we have achieved cumulative annual
earnings growth of 13.3% over this period including a 15% increase in
2000. Our return on equity has improved from 16.9% in 1997 to 18.3%
before abnormals through a combination of strong earnings performance
and capital management. The dividend was increased to 64 cents per
share and for the first time in recent years dividends have been
fully franked. The cost-income ratio has been reduced from 63.1% to
51.7% - comfortably surpassing the 53% target and this places us
amongst the leaders in Australia.

* Secondly, we committed to re-balance the portfolio and improve the
sustainability of our earnings by increasing our Personal business.
Here we have been very successful with the percentage of profits
generated from Personal increasing from approximately 30% of the
Group profit three years ago to approximately 45% today. This trend
is likely to continue with further investments being made in our
Personal Financial Services businesses where there are considerable
growth opportunities.

* Thirdly, we aimed to enhance our leadership position in Corporate
Banking; This too has been achieved. For several years now our
Corporate Relationship Managers have, according to independent
professional surveys, received the highest ratings of any bank by
customers and it is pleasing to see this rating again achieved in the
latest year.

* Fourthly, we made a commitment to simplify and focus our
International business. Over the last three years we have exited
emerging market bond trading, closed our Latin American offices and
in July we completed the sale of our Grindlays operations in the
Middle East and South Asia. Together, these moves have given us a
much more focussed International business.

* Fifthly, we said we would build momentum in eCommerce. The progress
in eCommerce during the last 12 months has been dramatic and I will
speak more on this shortly.

Finally, we committed to reduce the risk profile of the Bank. This
has been achieved by withdrawing from some higher risk areas,
re-balancing the portfolio toward Personal Financial Services, the
sale of Grindlays, and an increased management focus on risk in
general.

ANZ has delivered on all of these commitments and as a result the
Bank has been positively re-rated in the share market. The
substantial return to shareholders over the last 12 months is very
pleasing, although this more accurately represents the fruits of two
to three years of good work. On behalf of shareholders I congratulate
management and staff on the Bank's progress and achievements.

I would now like to describe in more detail the performance and
achievements of each of the major business areas in the latest year.

Beginning with our Personal business - our efforts to grow and
develop this franchise have gained considerable momentum. Personal
Banking has had a particularly strong year resulting in a 20% growth
in assets and a 25% growth in profits. Highlights of this performance
were good gains in market shares in mortgages, cards and deposits. In
Australia, ANZ increased its number of customers over the year by
3.3%, which was the largest increase of any of the major trading
banks. Approximately one in four of all mortgages originated in
Australia during the last year was handled by ANZ - the largest
proportion by any bank. The year was capped off with ANZ receiving
awards as both Home Lender of the Year and Business Lender of the
Year by Personal Investor magazine.

Also we are very pleased with the investment performance of our Funds
Management business which in recent months has been attracting
significantly higher fund inflows. The Bank is committed to
developing further our Funds Management business, which will from
mid-January be headed by Mr Bruce Bonyhady.

Our Corporate business enhanced its leadership position and grow
profits by 15%. Our corporate product businesses of Structured
Finance, Financial Markets, Capital Markets and Transaction Services
received a number of accolades and awards from independent sources
and made significant contributions to the Group.

Our International business has been substantially re-focused and
simplified with the sale of Grindlays to Standard Chartered. The
transaction was completed on 31 July with ANZ receiving a
pre-transaction dividend of A$900 million and consideration of A$2.3
billion. This consideration represented a A$1.2 billion premium over
book value.

As part of the sale transaction the Group provided Standard Chartered
with indemnities in respect of the dispute with the National Housing
Bank in India and other litigation matters. Resolving these issues
has become quite protracted and the Group considered it prudent to
provide for these claims and ensure, to the extent possible, that
there would be no adverse financial impact in the future. We are
pursuing all avenues to resolve these matters quickly and in the best
interests of shareholders. In relation to National Housing Bank we
have recently obtained approval to expedite the hearing in the
Supreme Court and this is now due to commence in April 2001. We have
also applied to the Court to have the disputed funds deposited with
the Court in order that interest ceases to accrue on the funds.

Looking forward our focus will be on the Pacific where we have
leading positions in eight countries and in East Asia where we will
focus on trade, foreign exchange and servicing multi-nationals in
countries with which there are strong trade flows with our home
markets.

We have made very considerable progress with our eCommerce
initiatives over the last year. Our achievements in this area were
recognised last month when anz.com won the award for the best
financial/investment web site at the Australian Financial Review
Australian Internet Awards 2000.

Our eCommerce services include:

* Internet banking - we now have over 500,000 personal customers
registered in Australia and New Zealand and we are currently
increasing this number by around 10,000 per week. This rapid and
consistent growth has led to ANZ having the highest internet banking
penetration of its customers of any of the major banks in Australia.
14% of our personal customers use this service and 20% of our small
business customers. Of those customers who have experienced the
convenience and flexibility of internet banking, 88% tell us they are
either satisfied or very satisfied with the service.

* e-payments - which incorporates a range of financial e-products
including authentication services and payments facilities to enhance
customer on-line trading 

* anzebiz.com - a set of Business to Business Trading solutions
encompassing online procurement, supply chain automation, and online
auctions

* FX Online - a web based system allowing customers to price
automatically and to execute a variety of foreign exchange
transactions

*ANZ E*Trade - an alliance with E*Trade to offer on-line stockbroking
and associated products to our customers

* eauto - an online automotive and trading service which has over 700
new car dealer franchises and on a typical day over 19,000 used cars
online.

In addition during the year we announced a joint venture with the OCBC
Bank of Singapore to create a new Asian banking concept. We envisage
contributing around US$50 million over three years to this initiative
which will focus on the forecasted market of 40 million affluent and
internet enabled consumers in East Asia by 2005. The joint venture
will use the latest technology and is developing a distinctive
customer proposition. We expect the internet bank will be launched in
its first market around the middle of next year.

These eCommerce initiatives are investments in our future and we
expect them to lead to net after tax charges against profits in the
current year of around $70 million including ANZ's share of the
start-up costs for the OCBC JV.

To increase our return on equity and reduce our excess capital
position we announced in April a A$1.0 billion on-market share
buyback to enhance ANZ's capital management. This buyback is
approximately 60% complete. In October we announced that
participation in the Dividend Reinvestment Plan and Bonus Option Plan
would be capped at a maximum of 50,000 shares for each plan, as
providing unlimited access to these plans would not be helpful to the
management of our excess capital position. We are mindful of not
wishing to unduly impact our shareholders, especially individual
shareholders, who are traditionally supporters of these plans. We
have therefore set the maximum level of participating shares at a
higher level than most other companies in our market which have
similar capital management issues.

CUSTOMERS AND COMMUNITY

One of the more significant issues we need to face up to is the
impact of change on our customers and the community.

Deregulation and increased competition have produced significant
benefits for homeowners, small business and other customers with
borrowing needs.

Lending margins have declined by almost 2% in Australia since 1995
and as a result, the overall cost of banking to our customers is
lower.

Competition has also required banks to reduce costs. This has been
achieved through the application of technology and by providing
customers with lower cost channels of executing transactions.
Approximately 85% of ANZ's cost savings have been passed on to our
customers in the form of lower margins. Our shareholders have also
benefited from our efforts to reduce costs in the form of higher
profits and increased dividends.

We have however to face up to the reality that, through deregulation
and increasing competition in banking and other financial services,
some areas of the community have been adversely impacted. Some
country towns have lost an important piece of their social and
business fabric. Some of the least well off Australians have had to
pay more for basic banking services. Electronic banking, including
the use of ATMs, confuses many older Australians.

We at ANZ accept that we need to work hard on how to address these
very real problems and we are determined to improve our customer
service and community image.

We realise that despite many very committed staff, and an increasing
focus by management in recent years, service for general banking is
not consistently at the standards expected by our customers.

We understand community concerns about rising bank fees on
transaction accounts, although perceptions are not always reality.
You may be surprised to know that we have not made significant
changes to personal transaction fees since July 1999, other than CST
related increases. In fact the Internet Banking Withdrawals fee, for
withdrawals over the free limit, was reduced from 40 cents to 20
cents during this period.

We are examining a number of initiatives for the coming calendar
year. In particular, we are exploring the most effective means of
providing a reduction in banking costs to our existing customers who
are most adversely affected by financial services deregulation and
competition - such as the elderly. However, we have more work to do
before we can make any detailed announcement.

We have also taken some steps in respect to the rural community. In
1998, we announced that from then on we would not withdraw service
from any rural communities in Australia. That moratorium remains in
place two years later.

We realise we need to do more and we are talking to government and
community groups on more creative approaches to some issues like
rural branches. There seems to be a reluctance by the government to
the concept of two or more banks sharing a branch and this is one
matter on which we wish to have more dialogue.

Banks play a critical role, and, may I say, a responsible one, in
Australia's economic well being. It is in no one's long term interest
for the banks to be treated as political footballs, and as we take
action to address community concerns, I hope the debate over banks
will become more balanced.

We have stepped up our general community involvement. For example, we
have committed $1 million over 5 years to support Foodbank
nationally. This organisation assists welfare agencies in meeting the
most basic of needs, food. Staff are also contributing their time
through volunteer activities and I understand there will be a
considerable increase in their involvement in 2001, the International
Year of the Volunteer. We have also contributed $1 million over three
years to the Foundation for Rural and Regional Renewal and have
provided $750,000 over three years for an Intensive Care Research
program. Also, we are providing $1 million over three years to the
Royal Life Saving Society of Australia in support of their Wet 'n'
Wise program, which is concerned with water safety. We are also
supporting Youth at Risk, a group that helps to provide employment
for disadvantaged young people.

STAFF AND CULTURE

Improving our reputation in the community, creating a better
experience for our customers, and delivering on our promises to
shareholders requires leadership from the top and also a positive
performance and service culture among all our staff.

We have made progress in recent years but to take our performance and
service to the next level we are working to develop a more energetic,
passionate, and open culture at ANZ.

We are taking this very seriously, and let me give you a few examples
of the initiatives we are undertaking.

First, we have this year assisted staff to become more familiar with
technology, and to have more ready access to on-line learning, by
providing subsidised home PC and internet access. We were one of the
first companies in Australia and in New Zealand to make such an
offer, and not surprisingly it has proved to be one of our most
popular staff initiatives. Over 10,000 staff have already taken up
the offer.

Second, we are encouraging staff to undertake further training and
education, and we are giving them tools to do so, as never before.
For example a number of innovative new learning initiatives have been
introduced recently, such as our on-line MBA program developed with
Charles Sturt University, and "eTrain", a new on-line learning system
delivered using Max - our intranet system. 

Third, we have doubled the number of graduates recruited by the Bank,
to the point where we are now one of the largest recruiters of
graduates in Australia.

Also retention rates for graduates during their initial five years
with the Bank have greatly improved.

Fourth, there is a Talent Group of 146 promising and able leaders in
the Bank who receive special support and whose views on bank-related
policies and issues are regularly sought.

Fifth, we have provided all of our staff with the opportunity to
become shareholders in the Bank by giving them ANZ shares. So far
shares to the value of $1,000 have been granted in each of the last
two years and an additional grant will be made in January. We have
also introduced a staff share purchase scheme and increasingly
managers are receiving deferred stock as part of their annual
incentive award. All of this better aligns the interests of staff
with those of shareholders.

The impact on staff has been very positive. This year our annual
staff survey showed a record improvement in staff satisfaction and we
are taking steps to increase this further in the year ahead. We are
now creating an environment where people improve their skills through
training and education, and become empowered to be more positive and
pro-active in customer service and business development.

ANZ's NEW STRATEGY

I would now like to turn to ANZ's revised strategy.

As I described earlier, we have made substantial progress over the
last three years. The development of the next stage in the Group's
strategic direction emanates from our desire to better position the
Bank, in a world where the influence of globalisation, the rise of
the internet and the new economy are increasingly reshaping the
competitive landscape. 

Going forward, the Group's strategic direction is being built on
three themes: - specialisation, eTransformation and performance with
growth. I would now like to invite John McFarlane, the Chief
Executive Officer to outline the journey on which we have embarked.


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