Retired Officers’ Club 2013 Christmas Luncheon

– 12 December 2013

CEO Australia Phil Chronican

Introduction

Good afternoon, thank you for joining us today.

I would like to acknowledge two past ANZ CEO’s, Will Bailey and Don Mercer, former Managing Director Charles Rennie – who turned 100 this year - and several past senior leaders who are with us today.

Mike Smith and Graham Hodges are disappointed they couldn’t join us, but have asked me to pass on to you and your families their best wishes for the festive season ahead.

I’m delighted to be addressing the Retired Officers Club for the second time.

Today, I would like to update you on a topic I have been talking about quite a bit recently at external presentations and with analysts and media - the future of banking in the digital age.

Nothing is as constant as change and banking is certainly no exception to this rule, something I don’t need to tell this group. Today, it’s rapid changes in technology that’s shifting the goal posts and challenging the way we do things at ANZ.

I’d like to give you a snapshot of how these changes are impacting the way consumers want to interact with companies and what this means for banks.

Then, I’d like to update you on Banking on Australia – ANZ’s plan to transform and reshape the way we do business in Australia, to help us embrace the next era of banking and meet the changing needs of our customers.

The digital revolution

You may remember Roy Amara, researcher, scientist and past President of the Institute for the Future, who is credited with what is known as Amara’s law:

“We tend to overestimate the effect of a technology in the short run and underestimate the effect in the long run.”

The internet is an outstanding example. As household access to the internet took off in the 1990s, hundreds of businesses were formed to take advantage of this new technology.

Most of them failed to live up to their founders’ vision and we all witnessed the “Dot Com” boom and bust.

Now over a decade has passed and the world is being transformed in ways that Silicon Valley couldn’t have dreamt about in 1999.

What has allowed the internet to be so revolutionary is a combination of a number of technology related changes:

Much greater bandwidth available at lower and lower prices

The growth in mobile data capability and widespread use of Wi-Fi

Increased analytical capability allowing customer specific analytics

Widespread access to the Global Positioning System network, allowing location specific services

A massive and ongoing uplift in the number of internet enabled devices.

Today, there are around 12 billion devices that are able to be connected to the internet. This includes traditional wired computers, as well as smart phones and tablets. Cisco estimates this number will increase four-fold over the next seven years as we find more and more uses for tools and appliances to leverage the communications capabilities of the internet.

We’ve already seen industries being transformed – and disappearing! – and new opportunities presenting themselves as a result of this revolution.

The entire music industry had been organised around the economics of physical distribution, however, Internet distribution of songs, videos, movies and TV shows led to the collapse of the traditional music store industry.

The Google Now service combines information that Google knows about you from your device as well as your search and location history to automatically suggest information you may need. Arrive at an airport in a new city and Google Now can automatically offer directions to hotels you searched on Google the week before.

The banking industry is not exempt from these changes and it quickly became clear that our customers expected us to embrace and adapt to the digital world.

So, when we launched the Banking on Australia program last year, it was grounded in our view that digital and mobile technologies would continue to grow in importance for both banks and our customers.

If anything, the past twelve months have just reinforced how powerful this trend is.

The “Age of the Customer” and what it means for banks

Although customers’ banking needs remain relatively constant, technology is changing the way they want to interact with their bank. Our customers have told us they expect to grow their usage of digital banking channels in the future, with the largest growth in tablet and mobile.

External sources show that by 2015, digital will be the preferred channel for simple product origination.

Customers who regularly use digital and online banking options generate more revenue and are less likely to switch banks. A recent Google study found that two in five mobile users will turn to a competitor’s site if their bank is not mobile-optimised.

The case for digital banking is clear.

Banking on Australia is our response to this changing world

Twelve months ago we launched Banking on Australia, to reshape the way we do business in response to the technology transformation taking place around the world and changing customer preferences.

A significant part of the program is the investment we’re making in our digital capability – and we’ve made good progress: ANZ goMoney – has grown dramatically in 12 months.

We’ve conducted a significant number of real-time chats with customers researching our home loan pages on anz.com via ANZ Live Chat – the conversion rate has been encouraging.

Many small business customers are now being paid ‘on the go’ with our merchant app, FastPay while Institutional and Corporate & Commercial user groups are managing cash transactions on the go with ANZ Transactive for mobile.

We’re deepening customer reach and loyalty with our mobile and digital banking and we have seen a 19% increase in sales via digital channels.

Digital is not an ‘either/or’

However, digital is not an ‘either/or’. Despite the popularity of digital services, customers continue to interact with banks across all channels – while digital is critical for more routine transactions, customers tend to prefer face-to-face for life’s big decisions.

Our customers don’t think of channels. They expect a seamless, personal experience at every touch point - regardless of whether they choose to interact with us online today and in a branch tomorrow.

So a key element of Banking on Australia is also about transforming our distribution channels, simplifying our processes and giving our people access to insights, tools and training to free them up to spend more time with customers having the right conversations.

We’ve invested thousands of hours into training our frontline staff (Retail and C&CB) to focus on more complex customer needs and have introduced new-look sales-focused branches and video conference facilities. As a result, branch sales have increased in 2013, despite experiencing falls in branch traffic.

Smart ATMs are now up and running with increased functionality in selected locations , enabling more customers to ‘self serve’ simple transactions such as cheque deposits.

In our Corporate and Commercial business we’ve deployed mobile tablets to our front line bankers, featuring new apps to bring the whole of ANZ’s capabilities to our customers. Our bankers have also received super regional training, supporting a significant increase in cross border referrals from Australia.

ANZ was also recently recognised by the Corporate Executive Board for leading the way in mobile relationship banking as a result of our iPad strategy. A new Business Response Team is giving our Corporate & Commercial frontline bankers more time to spend in the market with customers writing business and ensuring a customer’s experience with us is easier and consistent.

Underpinning these initiatives is a continuing focus on improving our operations to ensure a seamless, faster and more efficient customer experience at every customer touch point. Our Operations teams have absorbed hours of frontline work, giving our frontline people (in our Retail and Corporate & Commercial businesses) more time to spend with customers.

We’ve introduced new workflow tools to reduce manual work, automate tasks, and improve reporting and analytics – resulting in improved customer turnaround times.

We’ve reduced Retail customer complaints by 11%, beating our target of 10% for 2013.

Banking on Australia is translating into good financial performance

Banking on Australia is helping us to position ANZ for growth in a changing environment and embracing the next era of banking by building a business that’s:

connected through mobile and digital channels;

delivers a customer and staff experience that’s easy and insightful; and

helps us bring the whole of ANZ to our customers.

This is flowing into our financial performance, helping us acquire and retain more customers and deepen our relationships with them. Examples:

We’re lowering cost to serve - we reduced costs in our Retail business during the year - while freeing up our frontline staff to focus on more complex, value-add conversations.

We’ve grown our home loans faster than the market for the past 14 quarters and delivered an increase in branch home loan sales, we increased the number of Wealth products sold through our retail distribution network by 19% and welcomed many new Corporate and Commercial customers. Lending growth has grown faster than the market for the past 6 quarters.

Our Corporate & Commercial frontline bankers generated substantial cross-sell revenue through the sale of Institutional, Retail and Wealth products to business customers.

Banking on Australia is engaging our people

The investment in Banking on Australia has also been incredibly motivating for ANZ’s people, mobilising them around a clear vision of the future for ANZ in Australia and providing a strong link between the transformation we’re undergoing and the Group’s super regional strategy:

Thank you

So, we have been busy at ANZ in the past year and I hope my address today has given you a good sense of how we’re taking on the challenges of the future, just as you all helped ANZ navigate significant changes in the past.

With Christmas around the corner, there is only one thing left to do – on behalf of ANZ’s Management Board, I would like to wish you and your families a Merry Christmas and the very best for 2014.

Thank you.

Phil Chronican CEO Australia

265 turned up to attend the anzroc Victoria Xmas lunch at the ANZ Pavilion on Thursday Dec 12. Photos from the event are in the album below..

Toast to ANZ Bank – ANZROC Christmas Lunch 2013

Mr President, honoured guests, ladies and gentlemen, it is a privilege and pleasure to propose the toast to ANZ for this Christmas of 2013.

I was surprised to be invited to do this as I didn’t think my career was really typical for an ANZ banker. I spent most of my time overseas and had never worked in the branch network in Australia or New Zealand. Perhaps it would be a fair question to ask what is a typical ANZ banker? In my case, I lived and worked in 14 different countries, not counting visits to a good many more. Each one had its attractions and frustrations but I was fortunate to be present in South Asia, Africa and the Pacific when some big changes were taking place.

ANZ came into my life when it bought Grindlays Bank in 1984. That was a momentous year in London – the Big Bang deregulating the UK financial markets was imminent. The market was in turmoil, with banks merging and diversifying into new businesses like share broking. While some at Grindlays may have regretted the loss of our independence, there were clear advantages to being part of a much bigger ANZ group. It was a time of great optimism.

My first visit to Melbourne came in 1985. I had just become Assistant Group Inspector at Grindlays when the takeover was announced. The following year I was invited to work with Don Jeffrey and Jim Borthwick to harmonize the credit review process between the two banks. Melbourne was a very different city in those days – Southbank was still mainly derelict warehouses but deregulation was under way in Australia too. Business was booming and there was a real sense that ANZ was in the vanguard.

We visited major business units in Melbourne and Sydney to gather input on what they wanted from the inspection function. It was a great opportunity to learn about the group and some Australian icons. One branch visit - I think it was to Preston - finished up with lunch at Collingwood Football Club at Victoria Park. At the time I was assured that this was the equivalent of going to Old Trafford to see Manchester United. As an Aston Villa supporter I was never really clear whether this was meant as a compliment or not, but I confess to having followed the Magpies ever since.

I went back to London and spent another year in Credit Inspection, but then returned to the role in the bank I most enjoyed – that of an overseas country head, and in this case to Bangladesh.

While I had spent several years in South Asia this had been in the bad old days when governments resented the presence of foreign banks and were forever threatening to nationalize us. Bangladesh was different. For many people it has never got past Henry Kissinger’s description of it as a “basket case of a country”. It certainly receives little press coverage except when some disaster or other has occurred.

In fact the country was developing rapidly and we had an outstanding team of young local managers. Five of them have since gone on to become CEO’s of local banks and one to be Deputy Governor of the Central Bank. I was to spend four years in Bangladesh and it remains one of the most enjoyable periods of my time in the bank. The country received substantial donor aid but a dynamic private sector was building new industries in garments, seafood and shipbreaking. Some of this could be risky lending – you never really knew how many prawns you had in a pond until they had been successfully harvested, but I would like to think that one day ANZ will return there, as it has to India and more recently to Myanmar.

Of course the optimism I spoke of in 1984 was dented in subsequent years by economic upheavals across the world. The Big Bang was followed by the Crash of 1987. In Australia, banks were to suffer heavy losses in property lending and in 1992 ANZ sold its African network to Standard Bank of South Africa.

I had moved to Zambia in 1990 and at the time this sale came as a big shock and disappointment. After many years of economic stagnation and confrontation with South Africa, Nelson Mandela had been released and the economy in Zambia was being liberalised. For a banker some of these changes were pretty traumatic - when the Central Bank removed exchange controls and interest rates rocketed to 300 percent you suddenly worried less about the capital you had lent than the interest you hoped to collect! I was to spend two years on secondment to Stanbic. Looking back, they were following a super-regional strategy of their own, and it was exciting to play a part in the early stages of that expansion.

In 1999 an invitation came out of the blue from Bob Lyon to join the Pacific projects team based in Melbourne. The main objective was to

establish a presence in the French Pacific territories but a number of other acquisitions and new ventures were being considered.

One place that made a vivid impression was Timor Leste. In 2000 a UN team was in the process of rebuilding the country from the destruction left by the independence struggle. There were no public services, no legal system and the only money was US Dollar notes flown in from Australia. It was against this background that Jacques Fayolle and I went to report on the feasibility of setting up a branch. It was clearly going to be a challenge, but it was also obvious that it was a country that would have close economic ties with Australia. After a tremendous effort by Chris Durman and his team a branch of ANZ was established early the following year. It has since proven to be a difficult market in which to do business, but when many question whether banks contribute anything of value to society, I am glad to have played a part in bringing an ANZ branch to a country that was literally starting from scratch.

In 2001 I moved to Vanuatu for a year. ANZ was buying Bank of Hawaii’s business there and I had the job of managing the integration of the two banks. The main task was to retain the largely French speaking customer base of the Bank of Hawaii and merge the operations with ANZ’s existing branches. This was achieved although a 7.3 earthquake shortly after the deal was completed did make us wonder if we had offended some of the local gods!

We tried three times to open a branch in Noumea. The potential was always clear but it proved impossible to meet the group’s performance benchmarks in an economy that operated like a bit of Europe dropped into the Pacific. A branch would prove to be a bridge too far, but I was honoured to be asked to return from retirement in 2005 to open our representative office there.

In the end I spent 13 years under the Grindlays banner, two under Stanbic and 17 under ANZ, but always felt I was part of the same corporate family. This sense of belonging is perhaps more important overseas, where connections with family and friends are necessarily remote. Over the years ANZ has shown that it can adapt to changing business strategies and still retain its unique identity. Future ANZROC members may well work for many banks, rather than having a single employer, but I am sure the spirit of ANZ will endure and prosper.

It is as a proud ANZ man that I now ask you to raise your glasses in a toast to - the ANZ Bank!

A very successful golf day at Rosebud well organised by Huck Bourke and Alan Lauder. Huck promised at the start that the overcast rainy weather would clear and he was right. There were clear skies for most of the morning. There were 33 starters.

The major winners were the husband and wife team of Bob and Joyce Challis with 44 and 31 points respectively.

Runner- up in the Ladies comp was Sandy Bourke with 28 points

Runner-up in Men's comp was Gordon Paulett with 38, Third was Eamon Veaney with 35

Nearest the pin went to Bob Irvine

The encouragement award went to Denis Grehan

Overall a very enjoyable day finished off with a BarBQ lunch and a glass of wine