​ANZ bank's profit takes a 24 percent dive amid 'digital transformation'

ANZ posts AU$5.7 billion statutory net profit for the 2016 financial year as it focuses on competing in the 'digital age'.
Written by Asha Barbaschow, Contributor

Australia and New Zealand Banking Group (ANZ) has released its 2016 financial results, posting AU$5.7 billion in statutory net profit, representing a 24 percent tumble year-on-year.

The bank has attributed the profit dive to, amongst other things, its current focus on competing in the "digital age".

On its balance sheet, the bank itemised AU$1.1 billion as spending on specified items, AU$522 million of which it said was related to a change in the application of the software capitalisation policy. This was explained as costs, including accelerated amortisation, that resulted from the policy changes.

Providing a rationale for the AU$522 million software-related costs, ANZ said it reflects the rapidly changing technology landscape and increased pace of innovation in financial services, resulting in increasingly shorter useful lives for smaller items of software in the "digital world".

ANZ highlighted four priorities it has been focusing on in order to build a "better bank", which it plans to execute into the new financial year: Create a simpler, better, and more agile bank; focus where it can win; drive a purpose and values-led transformation; and build a superior customer experience in order to compete in the digital age.

In a bid to demonstrate the bank's commitment to community responsibility, chief executive officer Shayne Elliott told shareholders Thursday that ANZ is making changes to ensure it is fairer and more balanced in the way it deals with customers.

"The current discussion about the banking sector in Australia, however, shows that we still have more to do to shift our culture and evolve the way we do business," he said.

"We are pleased with the initial progress that has been made this year in reshaping our strategy and setting ANZ on a path towards a sustainable improvement in customer outcomes and shareholder returns."

Speaking of the bank's digital achievements in FY16, Elliott pointed to ANZ becoming the first bank in both Australia and New Zealand to launch Apple Pay.

ANZ was the only member of Australia's big four to embrace Apple Pay by leaving the group of banks requesting collective bargaining rights with Apple. ANZ is currently the only bank in New Zealand offering the service.

ANZ said it was also the first to work with Android Pay.

"[ANZ] took steps to create a better experience for our customers and to compete efficiently in the digital age," Elliott said.

"This included the successful launch of Apple Pay and Android Pay in Australia and Apple Pay in New Zealand. These are market-leading initiatives that have delivered good growth in new-to-bank customers."

Looking forward, ANZ said it wants to gain more digital customers, and an increased number of digital transactions and functionality.

As such, ANZ told shareholders it has also been working on improved banker tools, reducing customer application times, and simplifying data capture. It also said it delivered improved customer experience through the refresh of ANZ.com and its mobile banking application.

Currently, ANZ claims to have over 1 million customers using its goMoney apps on the bank's new digital banking multi-channel platform, with AU$72 billion in transactions processed per annum over goMoney mobile.

In 2016, ANZ launched Digital Identity Verification, which saw 65 percent of customers applying for a savings account online and having their identity verified via a digital channel.

ANZ experienced 32 percent growth in digital logins since 2014; 60 percent "digitally active" retail customers, up from 55 percent in 2014; and 47 percent growth in digital sales transactions since 2014. It achieved the highest penetration of customers adopting mobile payments amongst the major banks.

ANZ recently extended its contract with Singtel and its subsidiary Optus Business, which will see the telco giant provide telecommunications and managed services to the bank throughout Australia and Asia out to 2020.

At the time, Elliott said Singtel's services have "played an important role" in the bank's adoption of technology to simplify and enhance banking, as well as advocating staff collaboration.

In July, Peter Mullin, ANZ managing director of pensions and investments, said that the days of a bank owning every piece of technology are now gone. The bank announced it was exploring options for its online share investing strategy, which it indicated may include the sale of its share trading platform.

"We believe we can achieve better outcomes for our customers by partnering with a specialist provider committed to the technology investment and product innovation needed to provide a world-class offering," Mullin said previously.

ANZ CIO Scott Collary recently said it is not rushing to head to a new core banking platform, which has existed for quite a while now, and is one the bank believes will suffice for the near term.

"We're going through the technology stack and capability, picking off the things that are more naturally aligned to that, but we'll get to them, there will be CI/CD [continuous integration/continuous delivery] in that area as well," he said.

"Right now, as you look at the capability we have on the core system, it's not a hindrance for us ... actual development in the core is not slowing anything down; it's a fairly flexible environment."

Collary said the bank would only look at upgrading its core banking once it hit a point where it couldn't do something or scale properly, was hitting its support end-of-life, or would slow down development of new features.

In September, ANZ announced a reshuffle of its tech execs after its COO Alistair Currie announced his departure, slated for later this year.

Deputy CEO Graham Hodges will take on Group Hubs, Enterprise Services, and Group Property responsibilities; COO for Enterprise Services Craig Sims will take on the role of group general manager of Operations and Services; and general manager for Transformation Projects Nigel Dobson will be appointed to Wholesale Digital Strategy and Payments Transformation , and report to group executive of Digital Banking Maile Carnegie, who joined the bank from heading up Google Australia earlier this year.

An ANZ spokesperson confirmed with ZDNet on Thursday that its chief technology officer Patrick Maes also left the organisation.

The bank's new structure will help it to continue its technology progress, Elliott said at the time, adding that under the former COO, ANZ had "significantly improved" the quality of service and undergone a "digital transformation".

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