Australia's ANZ smaller but better, CEO tells shareholder

[SYDNEY] Australia and New Zealand Banking Group (ANZ) said on Tuesday its strategy of selling non-core business units would help it increase shareholder returns in the face of difficult trading conditions.

Chief executive Shayne Elliott said banks were facing about 3 per cent lower returns on equity due to rapidly changing technology, higher capital and liquidity requirements as well as a new government levy on the sector introduced this year.

"The good news is that we are doing something about it and managing our costs heavily and we are being ruthless about the way we allocate our capital (into higher return businesses)"Elliott told shareholders.

Australia's "Big Four" are among the world's most valuable and most profitable banks. They have underpinned a multi-decade housing and economic boom, racking up strong earnings thanks in part to regulations that have helped shield them from non-bank lenders, overseas rivals and disruptors.

But regulations targeting a property bubble have choked growth prospects, while a series of scandals have cost the banks hundreds of millions of dollars in fines and moved the government to launch a far-reaching inquiry into the sector with the power to recommend criminal charges.

ANZ said on Tuesday at its AGM it would move to put customers at the centre of its strategy and planned to target home buyers with its retail unit, while its institutional lending business would target companies with international trade and capital flows, particularly in the Asia-Pacific region.

Australia's major banks have been selling their wealth management and insurance businesses to meet higher capital requirements, at the same time as they deal with allegations of corporate misconduct including some stemming from those units.

ANZ, Australia's fourth-largest company by market capitalisation, has gone through the most extensive divestment programme, including the sale of its A$2.85 billion (S$2.94 billion) insurance unit to Zurich Insurance last week.

It is now the only major bank in a position to return the excess capital to shareholders via share buy-backs, which also have the effect of increasing share prices.

On Monday, ANZ announced it would start buying back up to A$1.5 billion in shares and hinted there could be more to come, with analysts expecting the bank to retire at least a couple of billion more worth of shares in the next 18 months.

Shares in ANZ were 0.73 per cent higher on Tuesday, in line with slight gains in the wider market.

REUTERS