ANZ 'willing to lose Asia clients' in bid to lift returns

SYDNEY • Australia & New Zealand Banking Group's chief executive Shayne Elliott has reshuffled his top team and unveiled a drive to improve the bank's profitability, saying he is prepared to lose customers in Asia to boost returns.

Mr Elliott, the bank's former chief financial officer, became CEO this month. He said yesterday that ANZ will have "hard conversations" with clients unwilling to pay for the regional service and funding the lender provides. He added that he would prefer to reduce the number of Asian lenders ANZ held stakes in.

"We provide access to our balance sheet and services to multiple countries," Mr Elliott said. "That is only of value to some clients and, unless clients are willing to pay for it, then we really can't have them as our clients."

Mr Elliott inherited extensive operations across Asia from his predecessor Mike Smith, who pursued an expansion strategy that has dragged down returns on equity and hurt the share price. He joins banking CEOs including Deutsche Bank's John Cryan in signalling a loss of patience with the difficulty of generating fees in Asia.

"It is not about exiting product areas or geographies in Asia," to boost returns, Mr Elliott said. "It is about having some hard conversations with some customers, and if that means some of those customers say they will take their banking elsewhere, so be it."

Mr Elliott flagged his focus on improving returns on equity from the region last October when ANZ reported its slowest growth in annual profit since 2008.

The bank said then it will shrink its Asian trade finance exposure by A$9 billion (S$9 billion). That move would "buy time" for the new management to turn around the business, Mr Elliott said.

ANZ's overseas operations, primarily the business in Asia, consumed nearly a third of the bank's capital in the year to September, while accounting for less than one-fifth of profits.

Mr David Ellis, an analyst in Sydney, said: "Elliott's concentration on returns is a good story, given ROE (returns on equity), profit growth and dividend are the main focus for an investor. While losing clients may reduce revenue, the possibility of increased ROE outweighs it."

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A version of this article appeared in the print edition of The Straits Times on January 28, 2016, with the headline 'ANZ 'willing to lose Asia clients' in bid to lift returns'. Print Edition | Subscribe