Even so, Mr Elliott warned the retail banking would remain “under pressure for the foreseeable future,” and in response, it would push ahead with a cost-cutting and efficiency drive.
ANZ has already in the last three years cut its absolute costs by more than $300 million, absorbed $550 million in inflation of its cost base, and slashed the number of branches by about a fifth.
On Wednesday, he said the bank wanted to lower its current cost base of about $8.5 billion to $8 billion by 2022 “with a global workforce and branch network to match,” adding that inflation over this period meant the bank would need to find about $1 billion in savings.
“We’ve got to find a billion dollars actually over that three years,” Mr Elliott said.
He had previously signalled an $8 billion cost base would make sense for the bank, but there have been doubts in the market about its ability to continue slashing expenses, and his comments highlight the pressure on banks to lower their expenses.
Mr Elliott said the bank did not have a target for job cuts, and he stressed about half its workforce was outside Australia, but he did not shy away from the need to make the bank more efficient.
“We’re not managing to a target for people numbers, we’re just saying we think in the future, a bank that’s fit for service to our customers, [the cost base] will have to be running at $8 billion because our margins will continue to be under pressure and growth’s going to be challenging, so we’re going to have to work it out.”
The number of full-time staff employed in ANZ’s continuing operations fell to 37,364, compared with 39,655 in the same half last year.
Principal at fund manager Alphinity, Andrew Martin, said the planned cut in its cost base was a “big number,” but it was the right move for ANZ in response to the soft conditions.
“I think it’s absolutely the right call,” he said. “It’s not new for them, it’s a continuation of what they’ve been doing.”
Macquarie analysts also backed ANZ’s cost-cutting but said the market would “increasingly question the sustainability of ANZ’s superior cost management in light of weak revenue trends”.
Mr Elliott described the bank’s bottom line result as “solid” but warned of “headwinds,” and said it was concerned more customers were getting into difficulty with mortgage payments.
ANZ kept its interim dividend on hold at 80c a share. The dividend will be fully franked and paid on July 1, 2019.
Bell Potter analyst TS Lim said the bank’s underlying performance appeared to be holding up, despite the weak outlook for retail banking. Mr Lim expected dividends would remain on hold until the bank had greater certainty about capital requirements in New Zealand, where the central bank has flagged tougher rules for the major banks.
“Until the New Zealand capital rules are finalised they will just play it safe,” Mr Lim said.
ANZ said its net interest income fell 1 per cent in the year, mainly due to a narrowing in its net interest margin, which measures the bank’s cost of funding compared with what it charges for loans, and fell from 1.82 in the September half to 1.8 per cent in March.
Clancy Yeates is a business reporter.