ANZ institutional head not done after cutting top ranks by 20%

[SYDNEY] The new head of Australia & New Zealand Banking Group Ltd's institutional business said he's not done with job cuts after the lender parted ways with more than 20 per cent of its top executives at the unit.

Mark Whelan, who took over the role in February, also said he plans to reduce risky assets in the division by 16 per cent, or A$30 billion (S$30.2 billion), in three years as part of a broader strategy of increasing return on equity.

"We had built a model that was not right for current markets and our bank," Mr Whelan said in an interview Wednesday. "If we are going to simplify the organization, it has to start at the top and filter lower. Most of the pain has been taken at the senior level and also at the middle level as we had built it for a global bank instead of a regional bank."

The cuts come as the Melbourne-based lender retreats from a seven-year push into Asia that was aimed at competing with banks such as HSBC Holdings Plc and Citigroup Inc.

The expansion, while boosting revenue, saw ANZ 's return on equity diluted as loan margins fell and costs rose, forcing a rethink.

The senior management at ANZ's institutional bank is made up of 58 so-called Group 1 executives and 200 Group 2 executives, Mr Whelan said.

In the year to March 31, the lender shrunk the number of overall employees at the unit by 6 per cent to 4,056. Those cuts will continue once the bank completes a review of industry and geographic coverage, Mr Whelan said.

The review has already led to a 7 per cent decline in risk-weighted assets over the period to A$181.9 billion, according to filings. Those are assets weighted according to the potential for default. The lender was having "tough conversations" with customers to increase returns, Mr Whelan said.

"Analysts are talking about a A$30 billion reduction in risk-weighted assets over a two to three year period," Mr Whelan said. "I don't think that's too far off the mark. Where it finally ends up depends on some of the discussions we are having with customers about wanting a better return."

Mr Whelan steered clear of a target, unveiled under the watch of the bank's previous Chief Executive Officer Mike Smith, to double the profit contribution of businesses outside of Australia and New Zealand to 30 per cent by 2017. Mr Smith retired from the role at the end of 2015 and handed over the reins to Shayne Elliott, who was previously the chief financial officer.

"We are not setting a target anymore," Mr Whelan said. "We are downsizing there, we are seeing the need to sweat the assets more there and it's less about revenue and more about returns. It's counterproductive to have such a target and Shayne doesn't like it."

BLOOMBERG