ANZ Group Holdings Limited (ANZ.AX) Earnings Call Transcript & Summary

All right. Good morning, everyone. I'm Kylie Bundrock, ANZ's Head of Investor Relations. Thank you for joining us for our strategy update. On behalf of all of the ANZ speakers, I would like to acknowledge the traditional custodians of the land on which we meet today, the Wurundjeri People of the Kulin Nation. I pay my respects to Elders, past and present, and extend that respect to Aboriginal and Torres Strait Islander peoples joining us today. I recognize their enduring connection to land, waters and cultures. You will have seen that the relevant materials were lodged this morning with the ASX and are also available on the ANZ website in the shareholder center. A replay of this presentation, including the Q&A, will be available on our website shortly after the session concludes. The discussion presentation materials and the presentation itself will contain forward-looking statements or opinions. And in that regard, I draw your attention to the disclaimer in the front of the slide pack. Our CEO, Nuno Matos; and CFO, Farhan Faruqui, will present for around 45 minutes. After that, we'll go to Q&A in the room. With that, I'll hand over to Nuno. Thank you.

Thanks, Kylie. Good morning, everyone, and welcome. Thank you so much for joining us this morning. I'm going to do an exception today. As you will see, I will allow more than 5 slides on the presentation. I hope you will forgive me for that. Let's see how it goes. All right. So today, it's an important date for ANZ, for our customers, our people and our stakeholders. The purpose of today's session is to update you on ANZ's strategy for the next 5 years and set a very clear ambition for the future of the bank, ANZ 2030. This includes our immediate priorities, which are already underway, as well as our broader areas of strategic focus out to 2030. I will then hand over to our CFO, Farhan Faruqui, to cover the financial section of today's presentation before wrapping up and taking your questions. To help set the scene, for our strategy, I want to share my thoughts on the Australian banking sector and ANZ's position in the market. First, some reflections on my early days as CEO of ANZ. It has been nearly since a year since I was announced in this role and just over 5 months since I started. In that time, I have spoken with many of you and reflected on your feedback and insights. I also have met thousands of our people, hundreds of our customers, many of our regulators and a range of government leaders. I have spent time in our key markets across Australia, New Zealand, Hong Kong, India and Singapore, while carrying out an extensive strategic review across the bank. This has helped me develop a clear view of our business and our position across our markets, the strength of our franchise as well as the opportunities and the areas for improvement to realize our untapped potential. During this time, I announced 4 new members of the Executive Committee, who, combined with my existing strong leadership team, are the right people to deliver our [Audio Gap] Decisions have helped me clear the path for the future. To help set the scene for our strategy, I will now share some of our reflections on the industry. Banking in Australia and New Zealand, it's highly competitive with a 30% decline in returns across the major banks over the last decades. The Australian market, in particular, is operating in a highly commoditized way, will limit the differentiation among propositions, few value-added services such as wealth management offerings, and an increasing level of disintermediation. It also has a much higher reliance on net interest income at more than 80% of the industry bank's operating income compared, for example, with 50% of the major banks in the U.K. or Canada. There is also a high reliance on third-party distributors relative to many other markets. In parallel, Australia has also some of the highest bank capital requirements in the world, which sets a higher bar to deliver returns to shareholders. Having said that, the Australian market offers great opportunities. It's a large market with a growing population and customer base, a stable economy and strong governance. The stronger asset quality and higher capital requirements for Australian banks support better ratings relative to our global peers. This allow us to be competitively positioned in terms of our customers trusting us with their payments and cash management needs. Within this competitive landscape, I'm absolutely convinced ANZ has the portfolio and potential to deliver better outcomes for customers and strong growth for shareholders. With 197 years of heritage, today, we serve 8 million customers in Australia retail; 700,000 customers in commercial; and we have 30% market share in New Zealand. We are the #1 bank in New Zealand, the #1 institutional bank in Australia and New Zealand, and we have a global footprint across 29 markets. We are and have a fantastic combination of 2 scale markets, 2 market-leading positions in Institutional and New Zealand, and a well-diversified business model, which includes Asia, the fastest-growing economic region in the world. Well executed, this combination is certainly more powerful than a single market or single segment concentration. We have 4 divisions, and we have the right strategic perimeter. And we are the banking -- we are banking the right customers and the right segments in the right geographies. Now 2 divisions have performed consistently well: Institutional New Zealand with solid returns and contributing to around 50% of the group revenues. However, and to be clear, the other 2 divisions, Australia Retail and Commercial, have underperformed. In these divisions, which at industry level represent around 75% of the revenue pool in Australia, we see a significant opportunity to grow, materially enhance our returns and deliver better to our customers. In addition, our company, overall, has become too complex. And at times, disintermediated from our customers, and we clearly need to improve how we manage our nonfinancial risks. I am fully committed to driving the changes required to significantly simplify the organization and see all 4 divisions performed well and deliver material growth in line with their potential. This is our time to deliver and we are excited to execute our ANZ 2030 strategy. Our ambition is for ANZ to unlock our potential to win the preference of customers, shareholders and the community. Our strategy is focused on 4 strategic pillars. Number one, customer first. With market-leading differentiated and superior propositions, we will raise the standard of every digital and human interaction for our customers. Number two, simplicity. To set the market standard for productivity, we will deliver organizational simplification, divest noncore assets and improve efficiency. Number three, resilience. Leading the industry in trust, safety and risk management, we will adhere to the highest standards of nonfinancial risk and strengthen end-to-end accountability across the bank. As a consequence, number four, delivering value to sustainably improve our financial performance, we will create lasting value by delivering a higher return in growth and results that matter for our stakeholders. In delivering these priorities, we are supported by our core enablers, culture, our people and our technology. Today, I'm laying out this in 2 clear phases. The first phase across '26 and '27, it's about delivering on our immediate priorities in order to get the basics right, including a substantial improvement in productivity and initial investment for growth. In the second phase, beyond '27, we will realize the benefits of these strong foundations, accelerate growth and outperform the market. Very important, in both phases, since day 1, we will continuously improve our returns and deliver value. I will now move into the first phase of our ANZ 2030 strategy, which is comprised of 5 immediate priorities, which I expect to be at the forefront of your minds. My first immediate priority is to embed my new leadership team, and together, we will continue to drive a cultural reset. Having the right people and the right culture are key to executing our strategy. I have announced 4 new leaders joining my executive committee, bringing significant global and local experience, complementing well the existing bench strength. My team has the mandate to execute our strategy at pace and to continue to promote a culture reset. We are building a culture of clarity, decisiveness, self-awareness, execution and accountability; a culture based on talent and performance that focus on customer needs, promotes healthy and sustainable ambition, external competitiveness and a desire to outperform while ensuring compliance with no shortcuts. It's about pursuing a culture that attracts both those who seek excellence and those that engage with the bank. Our culture will become the biggest selling point for attracting and retaining talent. Our people will know they are part of something special, a journey to become the best bank for customers and shareholders in Australia and New Zealand. Our second immediate priority is to bring forward the integration of Suncorp Bank to accelerate creation for our shareholders -- value creation -- to benefit our customers and to significantly reduce operational complexity. In August '24, we acquired Suncorp Bank with its high-quality customer franchise of 1.1 million retail customers, of whom 40% are NFI, and more than 100,000 SME customers. That also gave us increased exposure to Queensland, a state where we were materially underweight. As noted at our half year results, Suncorp continues to perform well. However, to achieve the benefits of scale, we absolutely need to bring the 2 banks together and faster. We will complete a safe and secure migration of Suncorp Bank to ANZ by June 2027. As you expect, this work is already well underway. On migration, Suncorp customers will be moved into our existing stable and safe system stack and ANZ-branded channels and products. They will immediately benefit from access to a wider range of products and ANZ-expanded nationwide branch network. When we announced the acquisition, we estimated full run rate annualized cost synergies of $260 million. We are now updating these estimates to the full run rate NOI cost synergies of approximately -- sorry, annualized synergies of approximately $500 million per year, cost synergies, of which the vast majority will be captured in 2028. Throughout this journey, we will meet all of our federal and Queensland government commitments. I will now turn to our third immediate priority, which is accelerating the delivery of ANZ Plus digital front end to all of our retail and small business customers. Stepping back, let me remind you what ANZ Plus was designed to do. It was a full replatforming of our retail and SME business, including the front-end channels, products and all platforms other than the core banking platform. The need to modernize and replatform these 2 business remains an undeniable fact. Having undertaken a comprehensive review, I am confident that our ANZ Plus technology, architecture and platforms provide the right foundation to deliver a market-leading customer experience. However, the pace of the rollout of ANZ Plus has been too slow. This has led to structural and system duplication, brand and channel ambiguity and created a financial burden for the group. This was due to 2 major factors. On one hand, the sequence of development was predominantly vertical, product by product, which put the customer at the end of the journey, meaning, we would only have a viable end-to-end proposition when all products were built in our middleware and subsequently reflected in our front end. Second, our delivery model was inefficient. It was expensive with complex processes, a lack of prioritization and capability gaps. To be clear, we are fully committed to delivering ANZ Plus but in a different sequence and through a new much more efficient delivery model. We are prioritizing the development of the front end of ANZ Plus, and we'll upgrade all 8 million retail customers in Australia to this new superior single channel experience by September '27. As a result, the experience for ANZ customers will be significantly modernized and improved while also providing better security and features. We are bringing the comprehensive and competitive ANZ Plus front-end experience to all of our Australian retail and small business customers across all of our retail and small business products, including credit cards and home loans connected to all of our channels. In terms of tangible outcomes for ANZ, this plan delivers a profound and simpler and stronger Australian Retail and Commercial division. There will be 1 team with 1 brand, 1 single customer front end, 1 system stack instead of almost 3 of everything, and much sooner than previously planned. Once we have all of our Australia retail and small business customers on to the single customer front end, we will move to the next phase post '27, completing the replatforming of the middleware and eliminating existing legacy platforms with the exception of our core banking system to be very clear. Importantly, this will be done with minimal impact to customers. Our fourth immediate priority is to reduce duplication and simplify the organization. We are stopping initiatives that are not aligned with our strategy and prioritizing what will make the most difference to our customers. Across the group, we have identified substantial opportunities to radically improve productivity through a simple organizational structure and operating model. This is already reflected in our announcement that we'll reduce 3,500 roles by September '26 as well as a further 1,000 managed service contractors. Around 60% of the ANZ rules are from group technology and Australia retail as we merge 2 teams and streamline support functions. The remaining roles come from consolidating middle office roles across the whole organization. There will be very limited impact on frontline roles in branches, contact centers, RMs or customer support in general. And there will be no overall impact to ANZ's known financial risk and management capability. In fact, that capability will be strengthened to ensure that ANZ meets its obligations and commitments. We have also stopped projects and platform developments that don't serve our strategy or deliver tangible benefits for our customers. We have already exiting known bank activities that lack economic or strategic rationale such as cash rewards or -- and 1835i. We expect the impact of this initial productivity improvements to yield pretax annual gross cost savings of around $800 million in 2026. Our fifth immediate priority and one which is critical across everything we do, it's improving nonfinancial risk management. This is a core part of our strategy and the key component of our third strategic pillar, resilience. A significant amount of work is already underway. I outlined much of it when I spoke with you last month following our settlement with ASIC in relation to matters within our markets and Australia retail business. This is a business and a culture transformation that delivers a better-run bank for our customers and will be executed at pace. In addition, the comprehensive enterprise-wide root cause analysis that was conducted gave critical transparency to the challenges we have in managing nonfinancial risk. We are making strong progress in addressing this. I manage a weekly forum of my executive team to oversee products, drive accountability and remove roadblocks. We are driving better accountability and a culture of constructive challenge. We have appointed the right leadership to deliver this work, including Les Vance, who is reporting to me directly to coordinate the change required across ANZ. Importantly, we will lead an integrated program of work which addresses the requirements under the Court Enforceable Undertaking while also ensuring we address the ASIC Matters Resolution program and other critical risk programs in an integrated and holistic way. Last month, we delivered a comprehensive Root Cause Remediation Plan to APRA as required by the CEU. We expect this work to take 3 years with the first year dedicated to design, followed by 2 years to implement and embed. I want to stress that I am ultimately accountable for making sure we get this right. These immediate priorities in our first phase will ensure we get the basics right while delivering significant cost benefit. This position us well for the second phase of our strategy, attacking the market with confidence and resetting the bank for growth and outperformance. I will now address the strategic pillars that underpin the ANZ 2030 strategy with an emphasis on customer first. Allow me to be direct. It's quite fashionable to claim as the CEO of any organization that you are customer-focused or customer-centric. But stating this versus truly living and delivering on it are 2 very different things. Despite our good intentions, we have not consistently lived up to the expectations of our customers across all our business, in particular, in Australia Retail and Commercial. The most important strategic shift I want to underline today, it's how we are going to get back to growth by relentlessly focusing on customers across every segment and business of ANZ. This is not about a headline on the slide, but rather a mindset we are going to drive throughout the organization that will strengthen loyalty and retention of those we bank with us while attracting much more new customers. We are focused on a set of initiatives, which will make a real difference to our customers and will drive growth and revenue outperformance over time. As you might expect, the level of strategic change in Australia Retail and Commercial is more significant, while in institutional New Zealand, we are focused on extending and accelerating and optimizing our solid competitive position. I will now run through some of these strategic initiatives by the vision starting with our Australia Retail. In this business, our deposit gathering franchise has not been strong, and we have lost share in MFI. We have not put the same level of energy and focus on our own proprietary channels as we have for brokers. We have underinvested in physical proprietary channels and not delivered on time in our digital channels. This will change. First, in order to attract high-quality deposits and accelerate our customer growth, we will design differentiated propositions to customer segments, including the mass affluent segment and the people-relocating-to-Australia segment. The mass affluent segment is nearly -- it's a near $1.7 trillion source of investable deposits in wealth, which offers a high-quality growing source of bank deposits. We already have more than 200,000 customers with the right profile for this segment. And for people relocating to Australia, by far, the largest source of new-to-banking customers in Australia, we have an undeniable advantage in being the only major international Australian bank brand in most of the relevant migrant corridors, particularly Asia and New Zealand. In parallel, we will reinvigorate our transactional banking and credit card capabilities, regaining market share in these portfolios as we improved the quality of our propositions. Second, a retail bank like ANZ needs multiple and strong customer acquisition channels. Without compromising our great broker relationships, we will materially invest and train our own mortgage sales force, aiming to increase the performance and the number of lenders in our branches by up to 50% over the next 5 years. This is already underway. In addition, we are uplifting capacity in our home loan assessment teams and making process improvements to remove friction whilst also investing in automation. Third, we will continue to invest in our branches by improving our banker tools to support the work of our frontline employees. As we speak, we are also replatforming our contact center experience. And as I mentioned, we are developing our single customer front end to provide a leading digital experience. We will have the propositions, products and channel experience to win customers and grow our retail franchise. I want to mention here that we are also aware of our commitments to support the communities in which we operate by improving our case propositions. We also seek to support the inclusion and economic self-determination of First Nations people across Australia through our First Nation strategy. We have also have our Maori economic development strategy in New Zealand. Turning now to our Australian commercial business. This is an attractive segment of the market. It is highly competitive, and we have materially underinvested in recent years. Today, our banker workforce is not matched in scale to meet our ambition, and our product platforms and processes do not meet customer expectations. In order to address these issues, first, we will increase our bankers materially starting now by close to 50%. We'll also boost capability and productivity by giving these bankers much better tools and systems and increasing the strength of our proprietary origination muscle. To support this, we will develop talent from within the bank through a Commercial Bankers Academy. Second, we will deliver Transactive Global, our best-in-class institutional platform to the middle market segment. We'll deliver the Plus front end to our small business customers by the end of 2027, as I said, 3 years early than was estimated. These investments will allow us to capture customers who are heavy users of payments, cash management and FX, the most profitable segment of the wholesale market. We will be leading transactional banking for all business segments in Australia, and we are currently -- as we currently are for institutional. The third initiative I will focus on is in private banking. This business serves 70,500 customers and is growing fast with a focus on generating value through capital-light fee-driven services. We have a strong foothold in family offices and highly experienced private bankers with an average tenor of around 12 years. This financial year, we have grown investment funds by 20%, commercial lending by 17% and mortgages by 11%. We will be increasing the size of our relationship manager workforce, improving the quality of our offering and leveraging the work we are doing in Australia retail with the mass affluent segment. I will now turn to Institutional and New Zealand. I would like to reiterate that these are both market-leading business, and our goal with both is to ensure we invest appropriately so they can maintain and grow their strong positions. Institutional, over the last decade, has transformed its customer relationships, geographic footprint digital capabilities and financial performance. Our starting position is strong. We have developed a capital-light business model having reduced our customer base from 27,000 to 6,000 with a clear focus on transaction banking and market flow products. It is delivering consistent returns above cost of capital while maintaining a low credit risk profile. The 3 most significant actions we'll be pursuing to protect and grow these leading franchises are: first, leveraging our leading platforms and unique footprint to drive target customer acquisition. This includes, specifically, financial institutions and corporates with links to our home markets in Australia and New Zealand and multinationals operating intra-Asia. Our regional footprint is valuable, providing significant opportunities to participate in economic growth within the Asia Pacific region. We will continue to be the bank that connects Australia and New Zealand companies to the rest of the world and vice versa. Of course, growth will be targeted with the right customers in the right markets. Second, continuing to invest in our transaction banking and markets platforms. We are focused on extending our leading position in payments and cash management and market flow products in Australia and New Zealand, and we will broaden these capabilities across our international network. Third, very important, strengthening our capital management muscle to optimize returns. We recently created a capital management structure within institutional which will build and enhance our capabilities in originate to distribute and balance sheet recycling. We are shaping an institutional business that is increasingly resilient to the credit cycle, financial market conditions and interest rates. In New Zealand, we operate the country's biggest bank and serve 1 in 2 Kiwis, while delivering stable resilient growth, efficiency and shareholder returns. We are now about midway through the replatforming much of the business, including, in this case, core banking in train since 2022. This is being delivered on time, on budget and will be substantially completed by 2028. We are creating momentum to accelerate growth in New Zealand, and we are doing this by bringing the customer experience in line with our leadership position in the market by redesigning the customer journey to resolve pain points. Second, delivering bespoke propositions to customer segments, including to affluent and small business banking customers. And third, investing significantly in giving our business RMs, the right tools to outperform in target segments. This work might be furthered by the Reserve Bank of New Zealand's recently announced review of its 2019 capital requirements. As you can see, across of our 4 divisions, all of the initiatives I've shared are focused on delivering for our customers by meeting their needs and driving growth and outperformance. I will now talk about our next 2 pillars briefly: Simplicity and resilience. Our simplicity pillar focused on our continued productivity program. We need to concentrate on meeting core banking needs and on doing work with the highest level of efficiency. To be clear, we'll avoid distractions. We have already taken the first steps to simplify our organizational structure, and we will be reducing the direct reports to the Executive Committee by 20%. We are implementing aligned structures across the enterprise and consistency in role definition, bringing clarity of expectations and improved oversight. We have created cost management units and giving a clear mandate and accountability to our senior leaders to manage enterprise-wide cost reductions. This is driving a culture shift in the organization which is necessary to successfully achieve a step change in cost management discipline. Beyond these organizational simplification efforts, we have identified significant opportunities to be managed through a formal program across 4 areas. These are: first one, process improvements through automation and AI; external spend optimization; organizational change; and investment portfolio review. For example, in our global capability centers in Bangalore and in Philippines, Manila, we will capture a new wave of productivity by running the teams in a horizontal manner, improving efficiency and scalability. We are also reengineering and automating lending submissions and manual processes and using AI to improve, among other things, quality control and complaints analytics. In addition, we are embedding a far more disciplined approach to our external spend, including strength in procurement practices and significantly reducing the number of vendors. In technology, we are challenging our vendor partners to work much more effectively with us to avoid and remove unnecessary expenditure on technology. The program of initiatives is designed to deliver sustained and expanded productivity throughout the full plan until 2030, giving us the flexibility to reinvest in growth initiatives. The next pillar is resilience. It has been a cornerstone of ANZ's strength, resilience, for almost 200 years, and it's our third strategic pillar. We are strong in capital, liquidity and in our credit quality. We have a resilient capital position, and we are highly rated, one of the only 11 comparable banks globally rated in the AA band by all 3 agencies with a well-diversified and high-quality portfolio. The work we have undertaken over a number of years to reshape our lending book continues to drive good risk outcomes, which we firmly believe are structural in nature. We have a high proportion of investment-grade exposure than our -- any of our domestic peers. Around 83% of wholesale exposures are investment grade. We have also delivered peer-leading provision charges. Throughout our plan, we are also driving better returns, improving organic capital generation and further strengthening our resilience. In addition, our NFR program, as I said, is ensuring we have a better-run bank. I will now hand over to Farhan who we will speak further about our fourth pillar, delivering value, which I'm sure will attract a lot of attention. Farhan.

Thank you. Thank you, Nuno, and good morning, everyone. Today, I'll discuss how we are delivering value from the ANZ 2030 strategy that has just been outlined by Nuno and how we will measure our progress over the next 5 years. And in particular, around the latter, I have connected with many of you and received feedback on the quality and consistency of our disclosures. We have heard your concerns. So going forward, number one, we will report at each result a consistent set of metrics, which are foundational for the performance of the bank and outcomes for our customers and which align to the strategic pillars that Nuno has spoken to, and I will talk about these in a minute. Number two, we will move to providing trading updates at the end of each quarter, starting from quarter 1 '26, in line with our peers. And number three, we will ensure that we include consistent disclosures, including the drivers of performance such as NIM at our half year and full year results. These disclosures will show that the plan we are announcing today drives stronger returns for our shareholders. As Nuno indicated, the first phase of our plan is about getting the basics right and delivering value through a material improvement in productivity, while we execute the Suncorp Bank integration and move to a single customer front end. In that respect, on Suncorp Bank, Nuno outlined $500 million per annum in expected synergies. With clarity on the timing and plan for the migration of Suncorp Bank customers, we now have greater confidence on the increased synergy benefits. This is as a result of rolling off the transitional service agreement, consolidating head office functions, brand consolidation and reduced project spend, et cetera. To give further context, the $500 million synergy number represents around 50% to 55% of Suncorp Bank's cost base, which is in line with the ranges you would see in global benchmarks for similar transactions when well executed. At the same time, while we are delivering greater synergies, we expect higher restructuring charges, which will lead to a 10% increase in integration costs to around $750 million in aggregate. Our productivity program of initiatives, including role reductions and exit of noncore businesses, both of which we just talked about and announced last month, are expected to deliver gross cost savings of approximately $800 million in FY '26. Our productivity focus will continue in subsequent years, of course, and we will report progress at our results. As we progress, we will be able to redirect more resources and investment into our strategic priorities to drive revenue benefits into the second phase of the plan. This includes capital-light revenue from targeting specific cohorts of customers, increasing the effectiveness of our customer-facing staff and scaling our technology and capabilities to improve customer experience. To support these immediate and broader strategic priorities, we will remain within an investment envelope of approximately $1.5 billion annually. Throughout this plan, we will also take a highly disciplined approach to investment spend as we move through our phases of strategy, driving more value per dollar of spend. This will flow from a combination of better prioritization and improved technology productivity. Now moving to capital and dividends. As we execute on our strategic pillars, we will be taking end-of-year specific items that impact capital. 2/3 of those have already been announced, i.e., the restructuring charges and the ASIC settlement. In addition, we are reviewing other large and notable items to be included in our FY '25 results that do not impact our capital. And these predominantly relate to potential adjustments to the carrying value of our Asian investments. These are being finalized and will be disclosed as part of normal year-end process, so we will not be addressing these further today. In order to maintain a resilient balance sheet, including taking into account these items and to further strengthen our capital position, we will be implementing the following capital management actions. First, we will cease the remaining approximately $800 million of the share buyback. This will allow us to return surplus capital of approximately $1 billion from our nonoperating holding company back to the bank. Second, we expect to apply a 1.5% discount on the next 2 dividend reinvestment plans, which we also expect will not be neutralized. Regarding the dividend, the Board recognizes the importance of consistency and stability that our shareholders expect. Our final 2025 dividend is subject to determination by the Board and will be announced with the release of our full year audited results. However, the Board is confident in the strategy and, with the capital actions just announced, expects the final dividend to remain unchanged from the first half. The franking rate for that dividend is also expected to be maintained. The plan we have presented today gives us confidence in the organic capital-generating capacity of the bank. This, and the capital actions I've just announced, ensure that our balance sheet and our capital position are strengthened, enabling us to deliver on our priorities while supporting our customers and delivering value to our shareholders. To be clear, this also includes the impact of the acceleration of the integration of Suncorp Bank as presented today. In terms of our scorecard, we are committed to transparently reporting progress against our strategic pillars. And as I said, we will improve consistency in our disclosures. Accordingly, we have established a set of key metrics aligned with our strategic pillars including our primary targets. Under customer first, we will focus on reporting NPS and relationship strength indicators and on the key measure of MFI growth. In simplicity, we will report progress on our gross cost savings of $800 million in FY '26 and on delivering the Suncorp Bank synergies. We will also report our cost-to-income ratio for the group. For resilience, we will report progress against our NFR remediation plan and common equity Tier 1 capital ratio. And in delivering value, we will report on our return on tangible equity and revenue to risk-weighted assets. These will be included in our regular disclosures with updates provided at each results announcement. In addition to these clear metrics, we are, today, committing to a set of critical targets that will deliver value for our shareholders, and these are: Increased return on tangible equity from 10.3% as reported for FY '24 towards 12% by FY '28 and towards 13% by FY '30; achieve a cost-to-income ratio in the mid-40s percent by FY '28 and sustained through to FY '30 within that range. That will include the impact of the estimated gross cost savings of $800 million to be delivered in FY '26 as well as the impact of the estimated Suncorp Bank synergies of $500 million, with full run rate synergies, as Nuno outlined, realized in FY '29. I am confident that our ANZ 2030 strategy will allow us to deliver on these targets and deliver value to you, our shareholders. Thank you very much. And with that, I'll hand back to you, Nuno.

Thanks, Farhan. We are acutely aware that delivery and execution are central to our ability to meet and exceed the expectations of our shareholders, customers and colleagues. This starts with leadership and how we role model. We have a refreshed leadership team with the right capabilities, and we'll continue to invest in attracting and developing high performance, high-performing talent. And we are committed to transparency around the reporting of clear measures, which we are accountable for, as discussed by Farhan. So to summarize, we will be delivering our strategy in 2 clear phases. In the first phase, we will get back to basics and deliver material productivity through the execution of our immediate priorities while initiating the necessary investments for future growth. As we transition into our second phase, we will see an acceleration in revenue growth with all 4 divisions performing strong as a result of our differentiated propositions, proper origination and channel upgrades, reduce the disintermediation and extend the leadership in transactional banking and market flows products. The group will be positioned to deliver to our full potential with a clear strategy, strong leadership. And this [indiscernible] execution, we are well placed to deliver meaningful value for our shareholders. With that, I will now hand back to Kylie to manage the Q&A session. Thank you so much.

Okay. Thank you, Nuno, and thank you, Farhan. So we'll be taking questions from the room today. When you ask a question, if you could please introduce yourself and where you are from. And please, can you keep your questions to 2 per person. And then if we have time, we will come back to you for further questions. So we've got Cameron with the microphone. And so Cameron, if you could please hand the microphone. Thank you.

Rich Wiles from Morgan Stanley. I have 2 questions. The first relates to the $800 million of cost savings. You want to achieve that by the end of FY '26. Is it reasonable to assume that you'll be targeting additional cost savings through FY '28 and FY '30 in order to drive the higher returns that you're targeting?

Yes. So we wanted to signal the $800 million in 2026, which, by the way, just to be clear. When we say by the end of '26, it doesn't mean that we only achieved that run rate at the end of '26. It means that in the year of '26, there will be cost savings of $800 million, just to be very clear. We want to single that number on the first year to send a clear message that our plan is not about a plan that takes the benefits or puts the benefits at the end of the 5 years. It's a plan that continuously improve returns year after year, starting on year 1, okay? For that, it's fair to say that in the first 2 years, productivity, it's more important than revenue outperformance, to be clear. On the 3 last years, the revenue outperformance is, in relative terms, slightly more important than productivity, okay? So $800 million is just a part of the productivity. $500 million is another part. The Suncorp synergies, they intersect between the $500 million and the $800 million is minimal, to be honest, $800 million is the first year Suncorp, we actually can start synergizing after the merger, which happened in '27. There are some elements we are achieving in the short term, which we have been communicating. So you can have $800 million, $500 million and some additional elements that will be conquering as we automate the company. The first year, the opportunities we have to rationalize the company are so obvious, so obvious in terms of duplication, in terms of things we should not be doing that they add to this possibility of reduce $800 million. Don't expect $800 million every year, but expect productivity to be a quite important component of year 1 and year 2 and continues to deliver in years 3, 4 and 5.

My second question relates to your deposit pricing in the retail bank. I think you've acknowledged that you've had different customer propositions across the Plus products and the classic products. It appears to me that you've got a real challenge with your deposit pricing for many of your customers. The ANZ Progress Saver is well below market, and the Bonus Saver is also well below market or the progress over in the Online Saver below market. Can you talk about how you might address that and whether you should have single pricing for all your customers?

As we said very clearly, very soon, there won't be 2 front doors for customers, there won't be 2 brands, there won't be 2 system stacks, there won't be 2 teams. Actually, on the 2 teams, that's already been addressed, which means that very soon, we'll have 1 pricing scheme and 1 set of products, right? So that's -- I think that answers clearly to the question of are we continuing to have different prices? No. They will be integrated quite obviously. And what I would add is I don't believe that a universe scale back that delivers good services to customers, which is a very big vision of us, should be structurally competing on price. I don't think that's a sustainable long-term strategy by no means, which means that you could say you have 1 competing on price and the other -- on the other side of the equation, as we integrate the 2 brands and the 2 systems and the 2 customer base, if you want, that will be rationalized. And you could say, one, we have to be more generous and the other less generous as we integrate. But as you can imagine, I cannot talk a little bit -- a lot more about pricing, but your point is good. We are on top of it. And it's very clear what we want to do and what we don't want to do. Thanks.

Thank you.

Tom Strong from Citi. I just want to talk about your growth ambitions in the retail and commercial bank over the next couple of years while you sort of build out some of these initiatives on the productivity side. I mean arguably, the deposit franchise has held back profitable growth in the retail bank in recent years. So how should we think about your appetite to grow that division while you make the necessary changes in terms of these new propositions on the technology side?

Full appetite. Okay. And full appetite, not because -- not because I think retail is a nice thing to have, it's that retail and commercial in Australia it's 3 quarters of the revenue pool of this market. So not doing those things in line with the potential, it punishes your company. So undoubtedly, we are fully committed to reset the bar of retail and commercial in many ways and forms, right? The deposit franchise, it's not something you can address in 6 months. It's a long game, as you know. I'll be very simple. For fixing it, you need to have 2 things: more customers; and customers that really like you really engage with you and they really treat you as you're a primary bank. So all the things we are thinking about is to address that. First, to get the basics right. All the services have to be upgraded materially, and we are on it. Second, your 8 million customers, they don't look like the same. If you treat them all the time, you are doing a big mistake. You have to treat according with their needs, which means differentiate and deliver superior propositions, which allows them also to pick you as your primary bank. We are happy to commit to this. Obviously, then your channels have to work in parallel to make that happen. Your brands have to be much more powerful in how do they go up to the markets. Your digital channel has to be one, no confusion and complete. Your call center has to be automated. And to be honest, it's becoming a commodity using AI to make it like that. So we have clear ideas of what to do. It takes time. And this is a plan which is realistic. We're not going to promise you a miracle in the next 2 years. it will be naive. We are silently upgrading our capabilities, making sure the bank is in shape, investing today. In the next 3 years, in the following 3 years, we will outperform because we have clear ideas. You're absolutely right, but we will do it in due time. Okay.

Great. My second question is just around the resequencing of Plus. Does this require new investment into middleware to bring it to the 8 million customers? And will that get captured in the investment spend on the [ what ] of $1.5 billion over the next couple of years?

No, it does not. What we are doing is -- and to be clear, because I know Plus has been obviously a theme, the thesis of replatforming the commercial and the retail bank at ANZ, their thesis was right. We need to modernize the systems that we operate, okay? And as I said, the initial idea was we will replatform everything except the core banking system. So the middleware, the product systems, if you want, the horizontal platforms and the front ends to the market, right? Their thesis was right. As I said, 2 things were not right and made it too slow and too expensive. The number one was the sequence. Plus was built vertically product by product, which means you could only offer a comprehensive front end at the end of the journey. Only at the end of the journey, you will have all the products to show up in your front end, right? That's one. The second is the way we build Plus clearly was not efficient for many reasons, not efficient. So we are saying the obvious thing, the architecture, the technology is the right one. But the way we are going to do this from now on is very different. And it does not need more money, needs less money. We are going first. We are going to build the bank horizontally. What customers see, they see a front end. That's what they see from us. They see our channels. They see the mobile, they see the Internet, they deal with our branch. They do it at the call center. They don't see the rest. So the first thing we have to do is deliver them a best-in-class front end with one brand, don't confuse them. One brand, one front end that is connected with all channels, digital customers, physical customers, doesn't matter, one front end, one way or track with customers. That's Phase 1. That's what we're posing right now. And those customers will be there in '27. After that, you digest the rest of the middleware, at your pace, at the pace that your ambition, your financials, your sustainable investment levels allows. And customers would not feel it because they have the best front end. That's what we should be doing. That's what banks do globally. They deliver transformations horizontally, platform by platform, horizontally, not vertically. So great technology, great platform, let's do it with the right delivery model. Everybody wins.

Just to be clear to your second part of your question, yes, it is part of the $1.5 billion investment envelope, the part that we are following.

There is nothing outside of that envelope.

Andrew Lyons from Jefferies. Nuno, you mentioned in your speaking notes, the retail and commercial in recent years has been somewhat starved of investment, which does appear to have adversely impacted the revenue generation of the franchise. Now what you've announced today, there's obviously a lot in it, but the first phase of the strategy does appear very cost focused. And there's no change in your investment spend at sort of around $1.5 billion. How do you get comfortable that this won't further impact the revenue generation of the broader franchise?

Yes, it's a very important question. Fully confident for the following. If you decompose where we are investing our let's say, $1.5 billion. And the $1.5 billion is what we call our investments like there is much more investment in the total technology volume, if you want. But let's talk about the $1.5 billion. We are fully funding our Suncorp migration. We are fully funding the front end Plus buildup. But it's much less expensive than what we needed to do in the past, just to be clear. We are increasing our commercial investment by 70% in technology, 70%. We are increasing our New Zealand investment in 2026 because New Zealand is in a position where they have their basics right. They can run faster right now, okay? We are investing the same in institutional. And we are investing in the biggest programs in the company. We are doing less, but well. We are investing in re-platforming our call center, as we said. We are investing in a new lending origination for wholesale and new collateral platforms. We are investing more on the things that are important to compensate for this, you would say, well, but then we stopped doing a lot of stuff that didn't make sense for the company. And the productivity of each dollar we'll invest in technology is being increased significantly. We tend to -- and I understand why because that's what you have and that's sometimes what we have. We tend to associate dollars to outcomes. Well, it's a proxy. But our observation is we can be much more successful in squeezing outcomes of each dollar we spend in technology. And by the way, there is a legend that ANZ spends less than the others. It's not true. Absolutely not true in terms of technology. So we thought about that very clearly on what goes up and what goes -- what stays and what is not done.

And then just a second one. You've spoken to the $800 million of gross cost savings by FY '26. Just to help us, I guess, understand the path to your FY '28 targets. Can you maybe just talk to how those gross savings must -- to what extent some of those gross savings might be reinvested in the business? Or to what extent should we see them fall through to the bottom line?

Yes. So you have almost everything because we told you how much we're going to invest. We told you our cost savings. We have inflation. So listen, you have almost everything to guide '26, right? It's just mathematics and you put the rest, right? '27, you also have the synergies of Suncorp, which will start to be material in '28, just to be clear. We are not guiding year-by-year, sorry. We're not guiding not -- we're not putting our P&L in front of you. We're not guiding division by division. What I would say is the first 2 years, productivity gains are quite important. But we have clear visibility on how to achieve them. They are not a number, they're not a number. In '26, '27, that's a part -- a significant part of our returns improvement that they are material. And then '28, '29, '30, less -- in relative terms, less productivity improvements, but still and revenues start to outperform, okay? That's what I would say. In terms of composition, some business go faster than others because they have better positions to start this next phase, this race, this next 5 years race or marathon, if you want. And I already addressed which ones.

But Andrew, we will continue to report on a half yearly basis, those metrics. We are being very clear in terms of indicating what our target CTI is by '28, and we will show progress against that. Initially, as Nuno said, that will come from cost in the first couple of years. Productivity has to be part of our DNA going forward forever. It's not a one-off outcome. But we -- but insofar as the reinvestment is concerned, the $800 million of gross product -- gross productivity in '26 to the extent that's offset by inflation should fall into the bottom line as we're keeping investment flat.

That's right.

Ed Henning from CLSA. Just a follow-on from Andrew's questions on the total cost. You've obviously -- you've obviously talked about cost to income, your cost about savings. You talked about inflation coming through. Just as we push forward, can we think about the underlying cost growth of the BAU around inflation costs while you're still pulling up productivities and you're investing in the business? How should we think about that underlying cost number?

We're not guiding year-by-year again. And Farhan, you -- please keep me well behaved here. But you should expect the first 2 years to be very successful in improving our cost to income, right? Our guidance is very clear. By '28, we are saying mid-40s. And by the way, 48 is not mid-40s, okay? Some people yesterday were in the room saying, hey, 48 is mid-40s because I am 48. Am I too old? No. Yes, you are too old. So mid-40s is mid 40s. It doesn't accept a lot of -- there are no tricks on the words, okay? It's just -- it's around mid-40s, but it's not 48, just to be clear, right? So in order to get to that number of mid-40s in roughly 2.5 years, right, let's say '28 is half -- it's average '28, you have to run fast in your productivity program in '26 and '27 because we're not going to have a part in revenues, nobody is probably. So you have to run fast your program, doing it well. And at the same time, you have to invest smartly on the things that matter, the ones we said here, in order then to allow the bank to unlock its full potential. So that's the equation.

And Ed, I think this is a more meaningful conversation at results because when we have the full year result numbers, we can talk more specifically to what '26 would look like.

And so just following up on the cost, is there any change in the investment or capitalized expense of your investment spend? Are you still -- you guys haven't got a big capitalized software balance which is obviously a positive for you now, but is there any change going forward?

Not any material change. That guidance will continue -- will continue to be the outlier versus the rest of the industry. But Farhan, you want to give it?

No, I think that's right. And we will -- obviously, Ed, as you know, with the shape of investments, there could be shift in capitalization levels. But broadly speaking, we're not changing our capitalization policy. We're not announcing any change. And to the extent that there is impact, we will continue to guide at results.

And just a second question. You touched on before about not pulling the price lever too hard. It was a part question. The second leaf out of BJ's book. Just talking about you're not pulling the price lever and you're obviously in 2 segments in the commercial and retail you're underway. To get back there, obviously, you need to -- using technology and you're adding bankers and stuff, but to get in people's -- right in front of them, do you need to pull the price lever initially to help get that momentum going?

There is structural -- there is being a structural discount competitor. And then there is campaigns and, let's say, a moment where you can do A, B and C. I have been very clear to the team, and the team have been executing it clearly, about not competing structurally on discount. Now that will be certainly much more effective as we pull together our capabilities, okay. But you probably saw, for example, in mortgages, we just took out the cash back for refinance for mortgages. We took it out. And it was something that some of you sometimes commented by the way, not because of you, but I certainly didn't enjoy that. As you know, mortgage is a business that came down in [indiscernible] in terms of returns quite clearly. So we all need to think about how to make it sustainable from a return perspective. And we thought that it was the moment to send a message to ourselves that we need to build advantages on our front and on our processing that takes us to a point where we don't need to compete with those elements, okay? Today, as we all know, we are not flowing in the market in mortgage, market share perspective, and that's conscious because we want to put the house in order in terms of front and the house in order in terms of back, which we expect to be in 2026, middle of the year. So we've been thinking about those things very clearly. And what I would say is structurally, no price discounts structurally. Obviously, we're a competitor. Moments in time, we can have campaigns and stuff and things like that

Jon Mott from Barrenjoey. You talked about before cost to income, mid-40s means mid-40s. You also used the word towards 12% ROTE and towards 13%. I want to play on this because accountability is very important. So are you committing to 12% and 13% ROTE? Are you committing towards because they're very different numbers. So what do you actually mean by that?

12% and 13%.

So that is the word towards...

12% and 13%. Yes.

Or just replace 12% and 13%?

12% and 13%. As you obviously know, there is no trick, just to be clear, no tricks on what we are saying, 0. Towards, this because we are coming from below. So we have to go there. That's -- you know what I mean if it was this is going up. But we're not playing games. It's 12%, 13%. Now obviously, we are not positioned to the point that I can promise a 12% one point. So it's towards, but that's the number, 12% and 13%, no games there.

Yes. Thanks. No, that's exactly right. Our plans are designed to deliver those numbers, Jon. But I think it's also important to mention that it's not a ceiling either. So it's not that we are saying, well, we'll hit 12% and then we'll stop.

Second question around the dividend, and you commented, obviously, it's the Board's decision, but having a 1.5% discount on the DRP for the next couple of JVs and holding it flat, we have seen regional banks use discount DRPs to raise equity in the past. But their justification has always been that they've got excess franking that they need to distribute. You've got the opposite of the shortage of franking. So you're effectively doing a DRP discount on a partially unfranked dividend, which seems completely economically irrational. Can you explain the economic rationality of that decision?

Yes, we can.

Look, I can start and certainly Nuno can add. I would say 3 things at this point, Jon, and we can certainly debate it more at results, if you like. Number one, we are confident in our strategy, the capital generation under the strategy that we've announced, and the ability to not only sustain dividends over this period of the plan period. But as we see NPAT growing faster than dividends, we expect that we should have capacity should the Board agree to pay higher dividends over this period of time. So that's -- so dividends is not the fundamental issue here that we're trying to address. What we're trying to address is the specific items that we've announced, and we wanted to make sure that we had specific solution for those without signaling anything around our capacity because we are very confident around our capacity. The second thing I would say is that we are -- the Board is very clear as is management around making sure that we are very focused on stability and consistency of dividends. But I would say the other aspect of this, which is really important, Jon, is that the Board makes this decision in the context of all of our shareholders and the better interest of all of our shareholders. So it's finding that balance between dividends and potential DRP/equity exercises. The third thing, which is really important because we are raising a bit more capital than we have -- than we are announcing through our specific items at the end of the year. We want to be very clear. We want to take capital off the table. We will have sufficient capacity to not only invest and deliver on our priorities, but have the ability to be flexible and have the ability to manage through any potential shifts in terms of the environment so that we can be confident that we have sufficient capital to deliver on what we have explained today. So it is the combination of those 3 things, Jon, which has driven us to get to that point. We didn't think that a dividend cut of the magnitude that we had to do to deliver that capital strength would have been preferred relative to the exercise we're doing now.

It was undoubtedly the best option to compensate for the one-offs that you just announced, and for the fact that we want to play with capital levels around 12%. So if you combine those 2 things, we want to go through all of this process. It's not a target, by the way, just to be clear, but it's that we are doing this for 2 reasons: obviously, absorb the one-offs, they are one-offs in nature. There is no rationale to do any structural change in our capital, and we want to play with capital levels very much in line with the industry and peers. That was it.

Andrew Triggs from JPMorgan. As the nature of these things, you've given us gross cost-out targets, but could you give us some view of offsetting cost in as distinct from investment spend itself required in the retail and commercial banks? And you've noted, obviously, hiring a business in retail bankers or proper channel bankers. And what should we think about the sequencing of these? I think you said it's quite upfront.

So you're talking about investments, right?

Investment, which goes into investment spend slide. And then there's actual hiring bankers won't necessarily go into investment spend, but it will be an offset to that $800 million gross number you've given us.

So all our -- our plan takes into account obviously, the productivity that action that we are taking, and they are quite substantial and well sought. And just to be precise, all of those productivity measures that we have in our plan out to 2030, they have clear chapters. We mentioned the 4 major chapters. Beyond -- below those 4 major chapters, they have subchapters, which then have names of people, which has have quantification, which then are sliced between '26, '27, '28, '29, '30. The teams know exactly what they need to execute to get there on the productivity side. Actually, productivity should be about that because it's -- in theory, it's up to you to execute them. It's less difficult when you have to deal with the market on revenues is more complex because it depends on competition, services, et cetera. So that plan, it's very clearly there, right? The plan also defines clearly which of these savings, even though it's in pockets, have to flow into investments. So the plan has all the initiatives I just talked about it. And as you can imagine, I went to 3 major initiatives for each of the 4 divisions. They are the 3 most important ones, but there are others. All those initiatives, they have chapters and subchapters with the amounts of necessary investment and when the outcomes come in revenues year after year, '27, '28, '29, '30, okay? All of this is in the plan. I will not tell you how much we'll invest in each year because then I would start disclosing to levels that we are not guiding today, okay? What I can tell you is that the plan that we have that is supporting the number that we are guiding today, it's a very detailed plan at initiative level, at individual level, accountability level. That's how we operate in this company.

To be clear, is there a material offset to the $800 million gross savings in FY '26 from...

No. No. And I think I was very clear, meaning I told inflation. Inflation. That's what I said for your numbers. So again, no tricks. It wouldn't make sense to tell $800 million then come here and say, but we consume that in -- we're not going to talk with a market like that. if we highlighted $800 million, it's because there is a special meaning of the $800 million, okay? And we were very clear also, the $1.5 billion on tech, which, as you know, typically is the biggest investment item in banks -- in bank's P&L, it's a $1.5 billion. It's basically the same as the previous year, but much more focused on doing the right things and the things that matter, right? So yes, allow me to say there.

And then Slide 15, I think it was on ANZ Plus. Just keen to understand exactly what customers will see. So effectively in the future, ANZ Plus customers their ANZ Plus customers, they'll just be an ANZ customer. In terms of the duplicated or the dual-run costs involved with the platform, when can we sort of think about those starting to come out of the bank?

Sure. '27, we will have evaporated completely the system stack of Suncorp at the end June '27, actually before the end of '27. So today, we have 3 front lines -- 3 front-end systems. We have 3 middleware systems, and we have 2 core banking systems because the core banking for Classic and Plus is the same, okay? That's what we have today. And it's what we have in the first column of the first page. By '27, end of '27, only one front end. So 2 -- all the other mobile and Internet banking is out, only one, okay, which will be the Plus, but completely completed with all products inside, okay? Only one core banking, Suncorp out. And very clearly, we'll have some components of Plus and some components of Classic. '28, '29, '30, without the customer being impacted because now we only deal with us through the channels, the front end, we will continue to replatform and digest the classic going into the modern technology of Plus. Now from a cost perspective, the biggest, biggest delta is in '27, if you want. There will be other components to track as we move from middleware Classic to middleware Plus. But it's one for the other. You decommission one and you got another one, you know what I mean. So again, that's why I'm saying the next is in productivity are quite important to put the bank in shape. That's what we need, less complexity, less systems, less teams, 1 brand, we can be confident to attack, okay.

Matt Wilson, Jarden. Firstly, thank you for being courageous and putting absolute targets out there. This sector is littered with missed targets over the last 2 decades. So good luck. Slides 19 and 20 are interesting with what you want to aspire to from a retail and commercial bank perspective. But to be frank, CBA is already there when we look at all those dot points. How do you think your competitors will respond to where you -- to what you're announcing today? But more importantly, how do you create a distinctive proposition that's in excess of what you aspire to in '19 and '20 to actually win?

So there is this -- obviously, we have competitors, and they are very strong, okay? But I think there is this over perception that there's only space for one. That's not the case, right? Scale is the most determined element in banking returns. And by the way, you can see that in valuations, where the market leaders are also overvalued. But scale, absolute scale, undeniable scale is what everybody looks to, right? And geographic scale is the most powerful one in one single market because we only have one system stack, one regulatory environment, that makes you stronger, right? Now we have 8 million customers. That's undeniable scale. Of course, I would like to have 17 million customers. We have 8 million. Any bank in the world with 8 million customers in a very wealthy market like Australia should be celebrating. Our question is not about trying or what we don't have and the others do have. Our question is do it better, much better. We have what it takes. We have 8 million customers in retail. We have 700,000 customers in small business. That's more than enough to be happy and profitable if we do it well. And what we are saying is do the basics first and then start to put some other elements on the table. The basics is are your services have to operate in a very nice manner. Your customers need to be comfortable with how they receive a credit card, with how they do payments; if they call our call center, how fast you take the phone; if they complain, how fast do you address their complaint. Those are the basics. Those are the basics that makes you a bank that attracts customers. Then you need to go to the next layer, which is treat them according with who they are from a segmentation perspective. And then you define how many you need to have, how deep you can segment and still make it a good equation for customers and shareholders. Your channels have to be very well prepared. 8 million customers. It's a fantastic franchise. I don't need to cry for the others what they have. You know what I mean? What we need is to do it well. That's what we need to do and not overcomplicate things, not -- just do it, the basics. And then add the things that work in many other parts of the world, including Australia.

And just secondly, obviously, a particular consultant has been heavily involved in formulating this strategy. It looks to become a CV for one person. How should we think about the role of consultants going forward? Is this a project that ANZ is going to do? Or how are you going to be relied on third-party experts because it's something that you've arguably done before and it's better off for the owners of the company that you do it rather than help from a consultant?

Yes. Well, you'll be pleased to know I don't like consultants, to be honest. I hate consultants, okay, just so you know.

Not an individual.

Yes, I like some more than others, but my point is the following, and my team has been a victim of this. We're actually reducing significantly -- a significant part of our productivity is to depend less on the [indiscernible] and doing it ourselves. I came from a school where things are done by the teams that are in the company, right? Sometimes, in special moments, you need some help either because they have something you don't have or because you need to do it faster as an accelerator. But I and we don't like structure consulting or third parties or managed services, you saw as 1,000 managed services. It's just a small part of what we are doing. So don't read that in any form as we -- depending on it, it's actually the opposite. Cost management demands, you do your own things, and you never use others unless there is a very special reason for it, which sometimes there is, okay? So yes, that's -- that's how I see it. We are very hands on, and the company will be very hands on.

It's Brendan Spears from Goldman Sachs. My first question is on the integration of Suncorp. I mean you did show on the slide there that you had Suncorp franchise have quite a bit success in growing their loan book and their deposit book since you've acquired them. To what extent do you think some of these customers chose Suncorp, say, over ANZ, which also out in the market? And as you integrate onto 1 platform, 1 brand, 1 set of products, what percentage of those customers do you think will choose to go elsewhere?

Well, Suncorp is a great example of being able to succeed in customer interaction, even not having a tremendous scale in relative terms. Having said that, 1.1 million customers is something very, very attractive, as you can imagine. Suncorp is an inspiration to us in that regard. And Suncorp has also shown that we have talent that we can import and certainly, we are massively into our new bank. Bruce, which is in the room, he has been -- was the CEO of Suncorp. He has been leading our retail division, and he has been leading our first phase of transformation, right? And there are many others like Bruce coming into the bank. We have -- did -- sorry, we did some research with Suncorp customers. There is absolutely no rejection to the ANZ brand. Now to your point -- and being clear, we need to ensure that by the time which is mid-'27, June '27, those customers come to ANZ. Our services are at the right standards. We are very conscious of that because we know there is no rejection. But there is a need of us in the next 18 months, slightly more than that, we put our house in order in that regard. Having said that, that ties nicely with our commitment with regulators. That ties nicely with our strategy, which is to uplift the quality of our services. Actually, what we need to do to Suncorp is what we need to do to ANZ and is what we need to do to our regulators, always aligned, and no doubt about that. So yes, it's certainly a point of attention, but we are fully, fully aligned and fully committed on having to improve our services to welcome Suncorp customers. But above all, to keep the 8 million we have and to grow with them.

And just a second question following on from Matt's question. In terms of, I guess, acquiring new customers, and you've made some very good points today about not pushing them away effectively by your systems and your people and your processes. But in this market, as you point out, it's very highly commoditized. In retail, 3/4 of mortgages have come from third-party brokers. How should we think about your new customer acquisition going forward? And how -- because obviously, that will drive your above-system growth that you're aiming for?

Absolutely. The most critical elements for having new customers are, first, your reputation as a bank is the right one. Your NPS, the way you are perceived as bank that delivers satisfaction to customers is critical. Your propositions are critical also, right? But then your channels, they have to execute. As you know, it's not brokers that bring new customers to the bank. They bring a limited amount because the number of mortgages are limited. So customer acquisition depends on great digital and very friendly journeys to acquire new customers. And our branches going into attack mode, meaning they want to counter new customers because they have -- they are confident to sell the bank. So strong channels, easy to operate, confident and with great services on the back is the critical journey to it. Very easy to say what I just said, very difficult to execute. And that's the difference between great banks and not-so-great banks. We are a great bank, and we will be even a better bank in this regard. Retail and commercial are absolutely critical for us to really outperform the market.

Vik German from Macquarie. Maybe just a point of clarification first, Farhan, just to make sure I get the numbers right. So it sounds like you're delivering $800 million of cost saves in '26, which is actually the actual deliverable number. The run rate Nuno suggested was going to be higher, so you're going to have additional cost saves in '27 on the back of that $800 million plus Suncorp as well. So we're talking about another couple of hundred million dollars and then another couple of hundred million dollars in '27 from Suncorp. And Nuno also said that we're -- or you're going to grow cost at inflation? All of those numbers sound broadly right?

Yes. So well, we haven't guided to year-on-year delivery of Suncorp synergies. So I think the $200 million you mentioned in '27 of Suncorp, let's put that...

You said majority in '28.

Majority in '28. Yes, of course, there will be some that will be delivered in '27. So yes, $800 million gross cost out in '26. There will be some offsets to that through inflation. So you can do the math on that. In '27, there will be a higher impact as you correctly pointed out, because of the fact that you get the full run rate benefit of the exit from '26. So that's -- I'm not guiding to a number, but of course, there will be a higher impact in '27. And yes, you will start to see some synergy benefits in '27 with full with a much greater number in '28. So all your statements are correct. I just haven't guided to year-on-year deltas as yet.

And assuming inflation is normalizing, it sounds to me like you're guiding to lower costs in than we've got now?

I think it's safe to assume, Victor, that if you look at -- and we can talk more about it at the year-end when we have '25 numbers. But I think it's safe to assume that with $800 million of gross cost benefits, clearly, the inflation is not likely to be offsetting all of it. So there would be a cost down imperative in '26, and that should likely continue in '27.

'27, if our costs would grow with inflation, '27 would be disappointing. So that's in line with your comments.

Another question, Nuno. In the past, as Matt suggested, pretty much every bank that we look at in this market has failed to deliver on costs -- on cost trajectory that you are hoping to achieve. What do you think is putting you in a position to be different? And where do you think that the key risks to missing that target?

Sure. And as you can imagine, I've been listening to all the things about a ROTE targets they missed, cost targets, they missed. So it's kind of incentive for us to actually deliver, right, which is great. Again, I'm not going to look into the others. What I can tell you is the following. Our plan has, in our opinion, the right content. We have the right ideas. We believe we have clear ideas of what we need to do, okay? But as important as that, it has the right conditions to succeed. And that's something I think it's, let's say, at the center of your question. The culture and the leadership team will be put in place and the leadership team will be put in place. The culture is in transition, and it will be in transition for quite some time, as you can imagine. This is a -- cultural transformations are quite difficult to be achieved. And if there is something -- the biggest risk to this plan, in my opinion, is the cultural transformation we need to deliver. It is not about knowing which cost actions or productivity actions we need. It's about making sure that the whole company understands what our -- the rules of engagement in ANZ for the future, okay? The culture we are implementing is a culture of clarity. We know what we do, and we know even better what we don't do. It's a culture of decisiveness. We take the decisions today. We don't continue to talk. There is a moment to talk, there is a moment to take decisions. It's a culture of execution and delivery and being accountable to it. It's also a culture of self-awareness. We should lead with the things we don't do well instead of just celebrating the things we do well, okay? That's the question. That's the culture we are trying to implement. It's difficult, just to be clear, it's difficult. But I believe our management team is fully embracing this culture, and we are constantly, if you want, cascading it down. That's number one on the conditions to be met. The second condition to be met is we have to have the right people. You can have the opinion you want to have on the people we are putting in front of ANZ at this point in time. What I see it is a great combination of people that already did it in the past. So you don't have step-ups here. You don't have people that never did it in the past, and now we are -- they are going to learn on the job. Everybody that has been doing that is there has done significant transformations, migrations, technology integrations at scale. It's also a great combination between local and global knowledge. 3 of the 4 divisions are led by local people on the business side, okay? Commercial, institutional, New Zealand, they are local people, okay? And then you have a combination of local and global knowledge. I also want to highlight that we operate in a much more international environment than the average of our peers. So it's important that we have teams that are able to think in 29 markets and not just in 1 or 2, even though that 1 or 2 are very important and that what they are. So this is what we are building. Culture and transition very difficult to achieve, but persistent is there, the right team with the right skills, and we believe the plan is the right one. It's executable. It has detail. It was well thought. It's not PowerPoint. It has a lot of debate. But nothing is without risk. Nothing is full guaranteed, of course. But I believe this is a pragmatic plan. This plan reads the company well. We know what we are today and what we are not. We know which business perform, which do not perform. We're not telling everything is right. We are telling you this is right, this is not right, and we know that. So those are the lines that we've been debating, okay?

And just -- sorry, just one other point of clarification. Farhan, I think in the $800 million, you've mentioned that there is some optimization -- business optimization. Is there any revenue impact as well that we should be considering?

Very little. Very little, Victor. To the extent that we're exiting noncore activities or nonbanking activities, very little.

On the core bank activities, 0.

Yes. Our noncore banking...

On the noncore banking, we are so small that [indiscernible].

Okay.

Chris representing Australian Shareholders Association. Nuno, no, as a global bank, I'd just be interested in your reflections in relation to the Australian market. In a lot of the banks, your peers and themselves have a large number of small shareholders. In your experience as a global bank is that unique to Australia? Or is that something that you see around the globe where small shareholders are high -- hold a high number of shares?

What I believe is all global banks, they also have an important retail shareholder base, right? What I believe is different in Australia is the stability of that base. I feel that the retail shareholder base is of, by the way, shares in general and banks also, is much more volatile than the one in Australia, aggravated by the fact that are reinforced by the fact that Australian banks have been high in dividends, which makes it a stable source of income. It looks almost looks like an annuity, right? Low cost of capital, pays a dividend, almost like a bond, to be honest. And also by tax considerations, as you know, and with such a rally on the stocks, the moment you are going to sell a stock, even though the stock has clearly outperformed and you might say it's too much, then you say, but I have to now cash, cash in and then pay a high tax consideration. So in that regard, it's a little bit different undoubtedly.

And the fact that you've offered a 1.5% discount, was that taking into consideration the fact you've got such a high number of retail shareholders?

I think so. But Farhan, please.

Yes, that is absolutely correct. And again, one of the reasons why we've done the DRP route rather than anything else was to ensure that it was fair to all our shareholders.

That's right.

Correct.

Brian Johnson, MST. Nuno, congratulations.

Sorry. How are you?

Yes.

Nuno, you've spoken a lot today about costs. But unfortunately, in banking, the bit you can't really control is revenues. So 2 questions that kind of relate to this. But the first one is having followed ANZ for a number of years. ANZ has basically long denied some the other banks have said, which is the front book mortgage pricing through the broking channel is below the cost of capital. Now when we have a look at the ANZ book, even though you can see this very positive pulse on the pricing coming through removing the cash back, you can see the front book rates starting to be tickled up. I'd just be interested with a book that has been originated primarily through the third-party broker channel on the positive pulse of basically the mortgage cash back in a lower rate with no clawback after 18 months. What is the risk that we see a continuation of August that we see the housing market share continue to slide? And if it does -- so it was down quite considerably, Macquarie's was up. So what is the risk that the kind of structural slide in market share could overwhelm any intention on the -- on basically the pricing because it's got to be the risk hasn't it?

To be honest, I know it's not the moment, but I also would like to understand exactly why we -- in our markets are so obsessed with a product that in the profit -- in the return pie of Australia, it's becoming more and more challenged from a return perspective, okay? And I understand that mortgage is a product, if you go 15, 20 years ago. And last week, I was looking into it again. Almost 40% return on equity 20 years ago, it was a mortgage. And today, the debate is on, as you know, because you'll have people doing fully, calculating those returns with full cost allocation, others would use marginal cost allocation, others would use that with the cross-selling that the mortgage brings. So you still have a lot of diversity on how mortgage returns are being calculated, right? It intrigues me, however, and some of you continue to write about it, how relevant in your considerations mortgage are from a competitive position, okay? And I'm not going to -- I'm not guiding you for us to lead share, not the case, by the way. But I think the mortgage product at the current returns, especially when you look into different channels of acquisition, to your point, brokers proprietary. In a market where this is even more intriguing because the Australian market's balance sheet, it's not as liquid as most of the other markets in the world because we are being crowded out by superannuation, right? So in my past experience, U.K., for example, which brokers are also very, very important. But there was always excess of liquidity. Always. Here, it's not the case. All banks depend on some level wholesale funding, which is more expensive, as you know. So I think this conversation needs to go to a different place from a return on balance sheet perspective, but I'll leave it there, just on consideration. Okay. To your more specific question, as we speak today, as we start to not compete on discount and as we still have issues on our back processing, on loan processing, we are not following the market in terms of growth. That's what is going on. Now we are fully committed to address it. So by mid '26, we want to flow with the market. And we are, as we speak, we are increasing the number of our loan processing teams resources. We're increasing it. And we are in a significant process of automation of our processes also, including our platform of communication with brokers, but also a lot of our back-end processing. So we are not, by no means, saying we don't want to flow with the market. We want to flow with the market. But in parallel, I said what I said because it's an interesting conversation. If a bank wants to go to 13 ROTEs as we want to go, what should you accept and not accept from a business perspective to get there? And it deserves serious reflection and less emotion, in my opinion. But no, we want to stay with the markets. We want to grow with the market in that business, but we want to do -- we don't want to do it just to show that we are growing with the market.

So can I go back to the question?

Please.

So in August, you lost about 5 basis points of housing market share. Suncorp is now -- Suncorp's a much smaller bank, but it's also lost reasonable kind of market share since it's been absorbed. Can I come back to the question, how much market share would you tolerate slipping in the...

We don't expect to lose material market share, as simple as that. We don't. And we expect to be back in the market in mid-'26.

Mid-'26.

Okay? Absolutely. Okay. Very clearly, this is what I've been saying internally, and this is what we've been doing internally to get there.

Second question, which I suspect may well be for Farhan. Farhan, believe it or not, it's easy for banks to control their cost order, think it can control your costs, although perhaps Westpac would suggest that wasn't the case. But what have been treated, the 12% to 13% ROEs that you're flagging and it's not towards anymore, it is to, after Jon's question. Could I specifically understand what you're assuming on the RBNZ proposal on loss-absorbing capital? What you're assuming on interest rates? Because it is noteworthy that as rates went up, ANZ's NIM didn't expand as much. So what are you assuming basically in those numbers on forward policy rates in Australia and New Zealand? But the really big one, and this is not my fault, it's your disclosure. In the last half year, the loan loss charge was 3.5 basis points. There was 3.5 basis points of rights of the IAP, okay? So otherwise, it would have been 7, the earnings would have been 2% lower. But the long run loss rate went from 18 to 19 basis points. If it have been 19, the results would have been 21% lower. So I think given that you've given us an ROE target, you've spoken a lot about costs. I don't think it's unfair to ask what are your assumptions on LAC, interest rates and credit? And should we be thinking what is the underlying driver of the ROEs 12 and 13 relative to that 19 basis point long-run loss rate because that's the number that drives the ROE. Nothing else matters.

So listen, I will address some and Farhan will address others, okay, if that's okay. On the New Zealand -- to start to put some to the side, which are easy. New Zealand's changes in capital requirements, potential changes in the capital requirements. In this plan, we are assuming nothing. It's as tough as the one today, which is, as you know, continues to go up and up and up and up until the CET1 of 14, 13.5?

13.5.

Right? That's the plan.

[indiscernible]

No, no, no.

Not in current. The current -- the 2019. But I'll come back to you on your question in a minute after Nuno finishes.

So we are assuming as it is today, which, in our opinion, it's the worst possible outcome in our opinion, okay? So it can be better, but we are not putting that better in the plan. In terms of rates, we are assuming the market rates. So we are basically using the forward curve, using our balance sheet. Our balance sheet is a hedge at 80%, okay? And we have a 25 basis points, we have a $65 million of sensitivity to 25 basis points move, simple as that. And our replicating portfolio is one of the longest in the industry, which means that we will have less benefit in the short term, more benefits in the long term. So it allows us to be more sustainable from a NIM perspective in the years -- in the next years, okay? I think I'm leaving credit losses, which means I will do -- I'll say something and Farhan will say something, and I think we can be very specific because I think there has been debate about this, right? Some of you raise it. And I obviously was interested on it. I read it, and we did a very clear analysis of how do we stand versus competition. We have today -- I could just say our portfolio is better quality and that's it, right? But that's -- it's just the first derivative. We went to the second derivatives. We have today around 24 basis points difference between our provision coverage and the average of the other 3, okay, 24 basis points of coverage.

Can you be specific about how does that...

Sure. So I can give you the breakdown of that a little bit, Brian, and we can debate this more at results when we have final numbers. Half of that delta between us and the average of our peers basically is due to the fact that our business mix is different to our peers where we have less exposure to higher loss rate portfolios. For example, credit cards or midsized corporates and SMEs or personal loans, we have a lower exposure. So that's roughly half of the difference. Of the remaining half, half of that is driven by the fact that our wholesale portfolio is a higher quality portfolio relative to our peers. I'm talking about all our wholesale. So it's institutional as well as the commercial. And our across that wholesale portfolio, our investment-grade rated credits are 83%, which is higher than where our peers are. The remaining half is actually relating to the way we are looking at coverages for mortgage portfolio in Australia. That's the remaining, call it, 1/4 of the total difference is Australian mortgages. And that, we have looked at very, very carefully. And we've gone back to 1980, looking at mortgages losses. And we feel that our -- we are more than adequate in terms of coverage, and I'll explain why, Brian. Firstly, we are -- our current coverage equates to about 11x the average annual loss since the GFC in mortgages -- in Australian mortgages and is almost double the peak loss rate that we experienced in the late 1980s in Australian mortgages at the time when interest rates or mortgage rates were as high as 18%. So overall, our -- we feel that we have sufficient coverage in mortgages. We have a mix benefit that contributes half of the difference. And we have a better wholesale portfolio that contributes to the balance 25%. The fact is that our leading loss provisions have demonstrated for the last 3 years that we are at a lower loss rate. Now of course, we recognize that we have to see that through a cycle, and I totally get that, but we have gone through that detail to arrive at this explanation that I've just provided.

[indiscernible]

Yes.

[indiscernible] Number thing what is the number that you assume [ 12% to 13% ] overall [indiscernible]

We are seeing a move towards more normalization, but not anywhere close to the long-run loss rates because we believe our credit -- quality of our credit portfolio does not justify us going back to long-run loss rates.

[indiscernible]

Okay.

Below, but higher than where they are today.

Okay. And I think...

We have some level of normalization there, I would say a lot of normalization, but -- Brian -- and your point has been very consistent. And I guess I listen to what you said and others, by the way, and I went into this in analytic way, okay? Our business model, for the good and for the bad, is significantly different in terms of portfolio mix. We have much more wholesale so we provision less all the things that Farhan said. And analytically, there is no rationale for us to overprovision something that the models and our business mix does not demand at all, okay?

I just want to complete the final answer to the RBNZ question, and thank you for that, Brian. I think that there are -- as you know, there are 2 options. We don't -- we -- obviously, RBNZ is still considering the options. So we don't know what the impact is going to be depending on where they land. You may have seen today, it was in the media that we've proposed an option 3, which is entirely aligned we propose and ANZ has proposed to RBNZ and option 3, which is basically the same as the APRA current capital requirements. So identical to where we are today with APRA. In Australia, the RBNZ will, of course, consider that. The only update that I wanted to give you, Brian, and for the rest of the market is that APRA has provided clarity that to the extent that there will be lack component in the -- in whichever structure you look at, they would -- this would not constitute a CET1 deduction at Level 1, i.e., they will apply basically a corresponding deductions approach, so Tier 2 for Tier 2 -- sorry, yes, Tier 2 for Tier 2.

I think we'll do one more question and then we'll break for a bit here.

John Storey from UBS. Maybe just 2 quick ones from me. Obviously, a lot of the strategy today is set around cost out. I'd be interested to get your perspective on your discussions with the regulators that you've had and whether or not you see any potential hurdles on being able to execute that cost out strategy.

Good. Well again, the strategy is divided in 2 phases. First phase has a significantly more -- is significantly more dependent on productivity. The second phase is significantly more dependent on revenue outperformance. So I would not say that it's cost out is a timing, as I've been saying. So I would not say 50-50 because I'm not going to any number, but both are very important. But obviously, the first phase, it deals with the company as it is today. And the second phase deals with the company that we expect to have in 24 months, right? If you want, it's pragmatic and realistic, but very ambitious on revenue generation, okay? Just to be clear, very ambitious on building capabilities. Regulators, we have kept a very clear dialogue with our regulators. Well, I can talk since I have been in role, which is from May. We have kept our regulators very well informed of all our steps. We have kept them very well informed of our steps, including productivity steps, including changes in our structure, including reduction in our force, in our working force. We have also keep them very up-to-date in our NFR journey, okay? And I'm not going to talk about them. They have to talk by themselves. But what I can say is that the level of interaction with our main regulators, including other regulators, I think it has been continuous, very constructive. And we have them, if you want, we have them as entities that will oversee and will challenge all our execution. This plan is about executing. And we'll keep everybody up to date in that regard. We'll come here often. We will communicate with you often in a much more transparent way with a set of metrics that will never change. Everybody will see it.

And then just quickly on the retail strategy, I'd be interested to understand how you settled on that strategy. I mean the 2 most successful retail banks in the last few years in so being CBA. Obviously, the scale kind of benefits around that. And Macquarie, right? Was there any thought process that you had about potentially changing the shape of your retail business to potentially look more like Macquarie?

No. Absolutely not, just to be clear. We'll continue to be a universal full-service bank that combines people and technology and digital to deliver to customers.

And branches, obviously?

Absolutely.

Okay. All right. I think that is us done with questions now. It's been a good hour of questions. So I'll hand over to you, Nuno, for any...

Sure. Well, thank you for your questions today. I hope you have found the discussion useful. I look forward to, obviously, updating you on our progress in the coming months and years. In the meantime, I will see you all again in a few short weeks when we report our full year 2025 results. And once again, thank you so much, and please help us and criticize us, but I am sure you will be our judges. Thank you so much.

Okay. Thank you. And we do have just sort of 30 minutes, where we will have a sandwich lunch and you can continue to ask us some questions. So thank you.

Thank you.

Thank you.