1 00:00:04,280 --> 00:00:07,480 Speaker 1: Welcome to Shared Lunch, brought to you by Chase's. I'm 2 00:00:07,480 --> 00:00:10,320 Speaker 1: Brook Roberts, one of the co founders and co CEOs 3 00:00:10,480 --> 00:00:13,480 Speaker 1: at shas EA's. In today's episode, I'll be speaking to 4 00:00:13,520 --> 00:00:15,600 Speaker 1: one of the big bosses of one of the big 5 00:00:15,600 --> 00:00:19,080 Speaker 1: four banks, A and Z Group CEO Shane Elliott will 6 00:00:19,120 --> 00:00:21,400 Speaker 1: cover the banks for your results, the hot topic of 7 00:00:21,400 --> 00:00:25,000 Speaker 1: competition and where the sector is headed. But before we 8 00:00:25,040 --> 00:00:28,680 Speaker 1: get started, has some important information investing involves. 9 00:00:28,680 --> 00:00:30,800 Speaker 2: For risk you might lose the money you start with. 10 00:00:31,080 --> 00:00:34,840 Speaker 2: We recommend talking to a licensed financial advisor. We also 11 00:00:34,880 --> 00:00:38,839 Speaker 2: recommend reading product disclosure documents before deciding to invest. Everything 12 00:00:38,880 --> 00:00:40,920 Speaker 2: you're about to see and here is current at the 13 00:00:40,920 --> 00:00:41,640 Speaker 2: time of recording. 14 00:00:41,680 --> 00:00:45,240 Speaker 1: Hey Shane, let's start with some of your backgrounds. You're 15 00:00:45,280 --> 00:00:47,680 Speaker 1: a key we now in charge of one of the 16 00:00:47,800 --> 00:00:50,160 Speaker 1: largest banks in Australasia. 17 00:00:50,320 --> 00:00:52,479 Speaker 3: Has banking always been part of your DNA? 18 00:00:52,680 --> 00:00:53,880 Speaker 4: Oh? By accident? 19 00:00:54,080 --> 00:00:54,360 Speaker 3: Has? 20 00:00:54,440 --> 00:00:56,640 Speaker 4: I mean? Wasn't necessarily a plant when I let school 21 00:00:56,680 --> 00:01:00,240 Speaker 4: in the UNI. But after university I I literally fell 22 00:01:00,280 --> 00:01:04,720 Speaker 4: into banking by accident. I responded to a advert in 23 00:01:04,760 --> 00:01:07,520 Speaker 4: a newspaper to work at City Banker as a trainee, 24 00:01:07,560 --> 00:01:10,680 Speaker 4: and so I've always liked sort of numbers and finance 25 00:01:10,720 --> 00:01:13,480 Speaker 4: and things. But yes, and ever since then I've sort 26 00:01:13,480 --> 00:01:14,280 Speaker 4: of stuck it out. 27 00:01:14,400 --> 00:01:16,679 Speaker 1: And now you're the CEO of A and Z group 28 00:01:17,120 --> 00:01:20,120 Speaker 1: that spans across Australia and our teiro. 29 00:01:20,800 --> 00:01:23,440 Speaker 3: How different does A and Z operate in those two markets? 30 00:01:23,800 --> 00:01:26,000 Speaker 4: Well, actually all we operate in twenty nine markets, so 31 00:01:26,120 --> 00:01:29,760 Speaker 4: just to be kid, so all around the world, and 32 00:01:29,800 --> 00:01:31,760 Speaker 4: we've done so for a long time actually, I mean, 33 00:01:31,800 --> 00:01:33,200 Speaker 4: and just to give you a sense of history, we're 34 00:01:33,240 --> 00:01:35,440 Speaker 4: almost two hundred years old. We started here in Australia 35 00:01:35,480 --> 00:01:39,200 Speaker 4: in eighteen twenty eight, in New Zealand and eighteen forty, 36 00:01:39,959 --> 00:01:42,720 Speaker 4: Fiji in eighteen eighty, Papua New Guinea in eighteen ten, 37 00:01:42,840 --> 00:01:46,400 Speaker 4: and then right and now we operate right across Asia Pacific, 38 00:01:47,000 --> 00:01:49,680 Speaker 4: including all the big money centers you know, Tokyo, New York, 39 00:01:49,760 --> 00:01:53,920 Speaker 4: Do Bai, London, Hong Kong, et cetera, and right across 40 00:01:53,920 --> 00:01:56,920 Speaker 4: the Pacific islands, so twenty nine countries. But you know, 41 00:01:57,080 --> 00:02:00,600 Speaker 4: our home sort of, I guess it's what it says 42 00:02:00,600 --> 00:02:03,480 Speaker 4: on the ten right A Z. That's our home, Australia 43 00:02:03,480 --> 00:02:05,280 Speaker 4: and New Zealand. We've been here a long time. We're 44 00:02:05,320 --> 00:02:09,080 Speaker 4: big in both places. What's different lots and then not 45 00:02:09,200 --> 00:02:10,440 Speaker 4: very much. I mean, at the end of the day, 46 00:02:10,440 --> 00:02:12,920 Speaker 4: people want the same basic things, right and certainly from 47 00:02:12,919 --> 00:02:16,680 Speaker 4: an AMZ strategy point of view, people want help saving 48 00:02:16,760 --> 00:02:20,280 Speaker 4: for finding, buying and owning a house, or starting running 49 00:02:20,320 --> 00:02:23,240 Speaker 4: and growing a small business, or at the beginning of 50 00:02:23,280 --> 00:02:25,799 Speaker 4: TOUN if you're a really large company, you want help 51 00:02:25,880 --> 00:02:29,840 Speaker 4: connecting with the rest of the world and moving goods, 52 00:02:30,680 --> 00:02:33,400 Speaker 4: whether that's scairy products, iron or whatever it might be, 53 00:02:34,000 --> 00:02:36,440 Speaker 4: and money around the world. And those are the three 54 00:02:36,480 --> 00:02:38,120 Speaker 4: things we do, and that's what we help people on 55 00:02:38,160 --> 00:02:40,600 Speaker 4: both sides of the Tasman do. So not really a 56 00:02:40,639 --> 00:02:45,920 Speaker 4: lot of differences. They're obviously regulations different, consumer preferences can 57 00:02:45,919 --> 00:02:48,880 Speaker 4: be a little bit different, competitions different, but you know, 58 00:02:49,040 --> 00:02:51,520 Speaker 4: at the fundamental you'd say there's a lot of similarities. 59 00:02:51,880 --> 00:02:54,079 Speaker 1: First off, let's not ignore the A and Z four 60 00:02:54,120 --> 00:02:56,959 Speaker 1: year results. So revenue was similar to last year, down 61 00:02:57,000 --> 00:03:00,280 Speaker 1: two percent to twenty point five to five billion, is 62 00:03:00,320 --> 00:03:02,800 Speaker 1: that four percent to ten point five to five billion, 63 00:03:03,320 --> 00:03:05,880 Speaker 1: and cash profit down around nine point three percent to 64 00:03:06,120 --> 00:03:09,480 Speaker 1: six point seven three billion. There's a ton of change 65 00:03:09,520 --> 00:03:13,480 Speaker 1: happening across banking with open banking and more neo banks 66 00:03:13,480 --> 00:03:15,799 Speaker 1: popping up. How is A and Z placed to keep 67 00:03:15,840 --> 00:03:17,800 Speaker 1: its position and prosper. 68 00:03:18,080 --> 00:03:20,840 Speaker 4: Yes, So when I started done nine years ago as CEO, 69 00:03:20,960 --> 00:03:23,680 Speaker 4: we basically did a lot of sort of soul searching 70 00:03:23,760 --> 00:03:26,520 Speaker 4: about what the environment we felt was going to be 71 00:03:26,680 --> 00:03:29,840 Speaker 4: like and how would you thrive as a large, comprehensive, 72 00:03:29,840 --> 00:03:32,080 Speaker 4: pretty diverse, wide organization like A and Z do you know, 73 00:03:32,080 --> 00:03:34,200 Speaker 4: with ten billion customers across twenty un markets. And what 74 00:03:34,200 --> 00:03:35,880 Speaker 4: we said what we found is and it's not I 75 00:03:35,880 --> 00:03:38,040 Speaker 4: don't think this is rocket science. We said, the world 76 00:03:38,080 --> 00:03:41,720 Speaker 4: we live in, consumers want more, and consumers want more, 77 00:03:41,720 --> 00:03:43,000 Speaker 4: and they don't want to pay for it, right, and 78 00:03:43,040 --> 00:03:46,160 Speaker 4: they're being trained, which is a good thing to want. 79 00:03:46,200 --> 00:03:50,680 Speaker 4: Twenty four x seven amazing services always getting better, largely 80 00:03:50,720 --> 00:03:54,320 Speaker 4: for free. You know, So consumers want more, the community 81 00:03:54,360 --> 00:03:56,880 Speaker 4: wants more. The community expects us to behave differently, you know, 82 00:03:56,920 --> 00:04:00,000 Speaker 4: it's not good enough community expectation to say, well, though 83 00:04:00,000 --> 00:04:02,440 Speaker 4: things are legal, therefore I do it. And so people 84 00:04:02,440 --> 00:04:04,560 Speaker 4: have higher standards at a community about how we behave. 85 00:04:04,840 --> 00:04:07,000 Speaker 4: You know, regulators want more, whether it's about more capital, 86 00:04:07,080 --> 00:04:11,040 Speaker 4: more liquidity, better behavior, all of those things. And then Lastly, 87 00:04:11,120 --> 00:04:12,920 Speaker 4: competition was going to be more intense. I mean, we 88 00:04:13,760 --> 00:04:16,520 Speaker 4: live in a world that is protected to some degree. 89 00:04:16,520 --> 00:04:18,520 Speaker 4: We have a moat you can use in that sort 90 00:04:18,560 --> 00:04:21,840 Speaker 4: of language for good reasons, because you know, we as 91 00:04:21,880 --> 00:04:24,200 Speaker 4: a community who don't want just anybody running a bank, 92 00:04:24,240 --> 00:04:27,440 Speaker 4: because these banks are looking after our deposits and we 93 00:04:27,440 --> 00:04:29,760 Speaker 4: don't want it to fail. So there were reasonably high 94 00:04:29,839 --> 00:04:32,240 Speaker 4: barriers to intrigue yet to be bed, yet to have 95 00:04:32,279 --> 00:04:34,239 Speaker 4: a lot of capital, you had to be well run. 96 00:04:34,680 --> 00:04:36,440 Speaker 4: Some of those barriers have actually come down a little 97 00:04:36,440 --> 00:04:39,760 Speaker 4: bit for good reasons, to encourage more you mentioned neo banks, 98 00:04:39,800 --> 00:04:43,400 Speaker 4: but probably more importantly more people doing payments and people 99 00:04:43,400 --> 00:04:46,200 Speaker 4: like revolution Wiser and or you know, buying our pay 100 00:04:46,240 --> 00:04:48,919 Speaker 4: later and all these sorts of things. So way more competition. 101 00:04:49,240 --> 00:04:53,600 Speaker 4: What do we do well, We said, well, we need 102 00:04:53,640 --> 00:04:56,680 Speaker 4: to be more nimble. We as a big organization have 103 00:04:56,880 --> 00:05:01,120 Speaker 4: historically run ourselves on big FIS systems. You know, we 104 00:05:01,160 --> 00:05:04,719 Speaker 4: invest billions of dollars in big, big computer systems, big 105 00:05:04,760 --> 00:05:07,880 Speaker 4: branch networks, big things. But they're fixed and they're really 106 00:05:07,880 --> 00:05:10,479 Speaker 4: really efficient, but really hard to change. And so when 107 00:05:11,040 --> 00:05:13,800 Speaker 4: competition comes out with something new, or regulated wants something new, 108 00:05:14,160 --> 00:05:18,159 Speaker 4: both things were really difficult to change and we were slow. 109 00:05:18,839 --> 00:05:21,280 Speaker 4: So we said, if we want to stay relevant, we 110 00:05:21,320 --> 00:05:23,800 Speaker 4: need to be nimble, and so we set about basically 111 00:05:24,040 --> 00:05:28,240 Speaker 4: changing the way we operate to be more agile and nimble. 112 00:05:28,560 --> 00:05:31,159 Speaker 4: And that really comes down to two and a half things. 113 00:05:31,240 --> 00:05:34,160 Speaker 4: One thing is people. We need people who have a 114 00:05:34,200 --> 00:05:37,640 Speaker 4: growth mindset, people who think differently, people who are excited 115 00:05:37,640 --> 00:05:40,000 Speaker 4: about change. People are courageous, people who know how to 116 00:05:40,440 --> 00:05:42,039 Speaker 4: see something out in the market and say, hey, I 117 00:05:42,080 --> 00:05:43,400 Speaker 4: know what that means. You are our business. So we 118 00:05:43,440 --> 00:05:46,200 Speaker 4: call that growth mindset. And then we need our systems 119 00:05:46,240 --> 00:05:49,880 Speaker 4: and processes that enable us to embed that change quickly, 120 00:05:49,960 --> 00:05:53,360 Speaker 4: make that change, get that feature to market quickly, you know, 121 00:05:53,920 --> 00:05:56,960 Speaker 4: make that change from a regulation fast in the residnient, 122 00:05:57,040 --> 00:06:00,240 Speaker 4: low cost way. And the half bit was we need 123 00:06:00,279 --> 00:06:01,880 Speaker 4: our people to be able to talk to our systems 124 00:06:01,880 --> 00:06:03,880 Speaker 4: really well. So that was really when we looked at 125 00:06:03,920 --> 00:06:05,680 Speaker 4: what we had and where we started, we said, wow, 126 00:06:06,080 --> 00:06:08,160 Speaker 4: you wouldn't want to be starting from here. So we've 127 00:06:08,160 --> 00:06:11,520 Speaker 4: actually actually replatform our bank and we're now on this 128 00:06:11,720 --> 00:06:14,640 Speaker 4: two platform business where we say we've got these two platforms, 129 00:06:14,640 --> 00:06:16,960 Speaker 4: one for retail and small businesses and one for institutional 130 00:06:17,080 --> 00:06:19,960 Speaker 4: big end of customers, and we're building a whole new 131 00:06:20,000 --> 00:06:23,800 Speaker 4: banking system that is fast, reliable, safe, and really really 132 00:06:23,839 --> 00:06:27,520 Speaker 4: low cost. But from your from a shareholder's point of view, 133 00:06:27,800 --> 00:06:30,559 Speaker 4: probably the two really important ones there. Yes, low cost. 134 00:06:30,640 --> 00:06:34,040 Speaker 4: It has to be low cost. We're in a commoditized 135 00:06:34,080 --> 00:06:36,600 Speaker 4: industry and the systems we have that we can talk 136 00:06:36,600 --> 00:06:39,120 Speaker 4: about it later are dramatically lower cost than where we 137 00:06:39,160 --> 00:06:41,919 Speaker 4: are today. But I think probably the most valuable point 138 00:06:41,960 --> 00:06:44,839 Speaker 4: in terms of competitive differentiation is needs to be fast. 139 00:06:44,880 --> 00:06:46,520 Speaker 4: We need to be able to launch new features and 140 00:06:46,560 --> 00:06:50,039 Speaker 4: functions quickly to stay ahead and satisfy customer needs. 141 00:06:50,400 --> 00:06:52,719 Speaker 1: I remember last time you're on Sheed Lunch, we talked 142 00:06:52,760 --> 00:06:56,960 Speaker 1: a bit about sun Court and acquisition there. That's one 143 00:06:56,960 --> 00:07:00,040 Speaker 1: of the biggest bank acquisitions in a decade and we 144 00:07:00,120 --> 00:07:03,080 Speaker 1: just finalized in June after the Australian regulated the Triple 145 00:07:03,120 --> 00:07:08,000 Speaker 1: acc RAN the ruler over the deal. Can we just 146 00:07:08,040 --> 00:07:10,720 Speaker 1: remind listeners what the advantages this brings and also how 147 00:07:10,760 --> 00:07:16,240 Speaker 1: you've addressed acc concerns about ACCC concerns about competition and 148 00:07:16,320 --> 00:07:21,520 Speaker 1: the national home loan markets, smaller medium sized business banking 149 00:07:21,680 --> 00:07:23,960 Speaker 1: and agricultural banking services in Queensland. 150 00:07:24,200 --> 00:07:26,560 Speaker 4: It's some day that our business is heavily commoditized. Right, 151 00:07:26,560 --> 00:07:28,920 Speaker 4: Our homelands do exactly the same as wespas, our credit 152 00:07:28,920 --> 00:07:31,040 Speaker 4: card does the same as ASP's. You know, I mean 153 00:07:31,320 --> 00:07:33,520 Speaker 4: we're living a commoditized world. That's a good thing from 154 00:07:33,560 --> 00:07:35,520 Speaker 4: a consumer point of view. It means, you know, pretty 155 00:07:35,560 --> 00:07:37,920 Speaker 4: new consumers get pretty good value. It's really really hard 156 00:07:37,920 --> 00:07:39,960 Speaker 4: to compete in that world. And in fact, going back 157 00:07:39,960 --> 00:07:41,400 Speaker 4: to what I just see it as a lot, we 158 00:07:41,480 --> 00:07:45,600 Speaker 4: are very, very dependent on technology. You know, almost everything 159 00:07:45,600 --> 00:07:48,960 Speaker 4: we do today, not quite, but everything is digitized. It's 160 00:07:49,080 --> 00:07:55,080 Speaker 4: real time. You know, at peak on any day, per second, 161 00:07:55,480 --> 00:07:58,160 Speaker 4: we have two hundred customers checking their balance every second 162 00:07:58,200 --> 00:08:01,320 Speaker 4: and making three hundred payments. When you need massive scale 163 00:08:01,360 --> 00:08:03,920 Speaker 4: and technology and all of that doing done digitally, you 164 00:08:04,000 --> 00:08:06,720 Speaker 4: need huge scales to be able to operate that kind 165 00:08:06,720 --> 00:08:10,200 Speaker 4: of machine and that monster rate. But once you build 166 00:08:10,240 --> 00:08:13,440 Speaker 4: that machine, if it's two hundred customers looking every secondiar 167 00:08:13,440 --> 00:08:16,360 Speaker 4: and balance, or it's three hundred, it doesn't really cost anymore, 168 00:08:17,320 --> 00:08:19,560 Speaker 4: or the marginal cost of that scale is much lower. 169 00:08:19,680 --> 00:08:23,560 Speaker 4: So once you've got that agility and that scale, you 170 00:08:23,640 --> 00:08:25,320 Speaker 4: want to be as big as you can because you 171 00:08:25,360 --> 00:08:28,280 Speaker 4: can defray the cost over more customers. And it also 172 00:08:28,320 --> 00:08:29,760 Speaker 4: means that the next time we want to launch a 173 00:08:29,760 --> 00:08:32,680 Speaker 4: new feature and new functions, something really cool that customers want, 174 00:08:33,200 --> 00:08:36,120 Speaker 4: it's cheaper if I can spread that cost over seven 175 00:08:36,160 --> 00:08:39,079 Speaker 4: million customers rather than six million. So what does Sutain 176 00:08:39,120 --> 00:08:41,880 Speaker 4: Corp gave us? Gathers and more customers. It's a court 177 00:08:41,920 --> 00:08:43,679 Speaker 4: band for those who know it. It's got about two 178 00:08:43,679 --> 00:08:46,320 Speaker 4: and a half percent market share in Australia, we're about 179 00:08:46,360 --> 00:08:50,000 Speaker 4: thirteen and a half percent share. Because of scale, so 180 00:08:50,000 --> 00:08:52,600 Speaker 4: we bring one point two million customers onto our systems, 181 00:08:52,840 --> 00:08:56,080 Speaker 4: it just demands that we will get significant economies of 182 00:08:56,080 --> 00:08:58,800 Speaker 4: scale by having them on our platform. And from their 183 00:08:58,840 --> 00:09:01,840 Speaker 4: point of view, we you know, without being arrogant, we 184 00:09:01,880 --> 00:09:04,880 Speaker 4: have better systems in technology than some called bank because 185 00:09:04,920 --> 00:09:07,760 Speaker 4: we're bigger and therefore we're able to bring the power 186 00:09:07,760 --> 00:09:11,560 Speaker 4: of those systems and features and functionality to their one 187 00:09:11,559 --> 00:09:14,640 Speaker 4: point two million customers. That's kind of it a triple C. 188 00:09:14,840 --> 00:09:18,000 Speaker 4: So that's the anti competitive sort of regulator and make 189 00:09:18,000 --> 00:09:19,840 Speaker 4: sure we're not doing any you know, we're not building 190 00:09:19,840 --> 00:09:22,920 Speaker 4: monopolies and oligopolies and all that sort of stuff. Look, 191 00:09:22,920 --> 00:09:25,080 Speaker 4: actually what we see to them as well. First of all, 192 00:09:25,280 --> 00:09:27,880 Speaker 4: we're actually relatively modest today. We're thirteen and a half 193 00:09:27,920 --> 00:09:31,080 Speaker 4: percent market share our biggest competitor in Australia. And again 194 00:09:31,120 --> 00:09:33,720 Speaker 4: remember Sun called Bank's only in Australia and our biggest 195 00:09:33,720 --> 00:09:38,160 Speaker 4: competitor here in Australia are CBA. They're twice our size twice, 196 00:09:39,040 --> 00:09:41,520 Speaker 4: so they're at twenty six percent. Sure, I'm at thirteen 197 00:09:41,880 --> 00:09:44,160 Speaker 4: and after doing some callp I go from thirteen to fifteen. 198 00:09:44,640 --> 00:09:49,720 Speaker 4: That is hardly reshaping the competitive landscape of banking in Australia. 199 00:09:50,120 --> 00:09:52,800 Speaker 4: Oh and Westpac is you know, two thirds bigger than me. 200 00:09:53,760 --> 00:09:55,680 Speaker 4: So we were able to show that even with this 201 00:09:55,840 --> 00:09:58,560 Speaker 4: we get bigger and get the benefits of scale, but 202 00:09:58,600 --> 00:10:02,760 Speaker 4: it doesn't really change the needle, even in Queensland where 203 00:10:02,760 --> 00:10:05,360 Speaker 4: Sun Corp is a little bit more, a little bit 204 00:10:05,360 --> 00:10:08,440 Speaker 4: bigger and share. Even in Queensland, it didn't really shift 205 00:10:08,520 --> 00:10:12,120 Speaker 4: the needle on competition. And they're able to look at 206 00:10:12,160 --> 00:10:14,600 Speaker 4: what they look at the public interest and say, hey, 207 00:10:15,000 --> 00:10:16,880 Speaker 4: is there a broader public interest? So we made the 208 00:10:17,000 --> 00:10:21,280 Speaker 4: argument that having a bigger competitors, funny enough, is actually 209 00:10:21,320 --> 00:10:23,760 Speaker 4: good for competition. You know that we're going to be 210 00:10:23,880 --> 00:10:26,560 Speaker 4: more competitive with fifteen percent share because we'll be able 211 00:10:26,559 --> 00:10:29,560 Speaker 4: to do more tech spending and bring more benefits to 212 00:10:29,600 --> 00:10:31,760 Speaker 4: customers than we are with thirteen. And you know, at 213 00:10:31,800 --> 00:10:34,200 Speaker 4: the end of the day, while it was a long process, 214 00:10:34,800 --> 00:10:35,280 Speaker 4: we got that. 215 00:10:36,160 --> 00:10:39,000 Speaker 1: Earlier this year in New Zealand, the Commerce Commissioner Report 216 00:10:39,040 --> 00:10:42,120 Speaker 1: into personal banking was released, citing that the big four banks, 217 00:10:42,200 --> 00:10:45,080 Speaker 1: including A and Z, have a stronghold on the industry 218 00:10:45,120 --> 00:10:49,160 Speaker 1: with little strategic differentiation and growth targets focused on maintaining 219 00:10:49,240 --> 00:10:53,480 Speaker 1: market share and protecting margins and profitability. Also recently, an 220 00:10:53,600 --> 00:10:56,280 Speaker 1: zed to New Zealand CEO and Tonia defended the company's 221 00:10:56,280 --> 00:10:59,040 Speaker 1: profitability in New Zealand, what do you believe are fair 222 00:10:59,080 --> 00:11:02,079 Speaker 1: profits for banks to make and how do you strike 223 00:11:02,120 --> 00:11:05,920 Speaker 1: the right balance between delivering for customers and shareholders and 224 00:11:05,920 --> 00:11:06,920 Speaker 1: wider stakeholders. 225 00:11:07,200 --> 00:11:11,040 Speaker 4: Sure so, probably unsurprisingly I disagree with that assertion that 226 00:11:11,080 --> 00:11:13,160 Speaker 4: it's not competitive. I mean, you know, I've weeked here 227 00:11:13,240 --> 00:11:15,199 Speaker 4: for fifteen years. I'm on the board in New Zealand. 228 00:11:15,600 --> 00:11:17,400 Speaker 4: I know that Antonia and the team, just like we 229 00:11:17,440 --> 00:11:20,360 Speaker 4: do up here, we wake up every morning paranoid. We 230 00:11:20,400 --> 00:11:22,559 Speaker 4: wake up paranoid about somebody's going to come and try 231 00:11:22,559 --> 00:11:24,800 Speaker 4: and steal our business, kind of take our customers. Somebody 232 00:11:24,880 --> 00:11:27,000 Speaker 4: might have a better mouse trap out there, and we 233 00:11:27,080 --> 00:11:30,280 Speaker 4: have to be on our front foot investing heavily to 234 00:11:30,520 --> 00:11:32,800 Speaker 4: delight and retain customers, and that's what we do. So 235 00:11:33,080 --> 00:11:36,600 Speaker 4: Sinny doesn't feel like that from the inside, that assertion 236 00:11:36,679 --> 00:11:40,720 Speaker 4: that people make from the outside, Hey, what's fair. I 237 00:11:40,760 --> 00:11:45,560 Speaker 4: obviously agree with Antonia's ar tatilation of the issue New 238 00:11:45,640 --> 00:11:48,600 Speaker 4: Zealand in particular about Australia too. We rely on foreign capital. 239 00:11:50,040 --> 00:11:52,640 Speaker 4: There are no home loans or small business loans in 240 00:11:52,720 --> 00:11:56,440 Speaker 4: New Zealand. Without foreign capital investing in New Zealand, we 241 00:11:56,480 --> 00:11:59,320 Speaker 4: don't pay our way. That is just the reality. Now, 242 00:11:59,320 --> 00:12:03,080 Speaker 4: that's okay, because we're still a developing country in many ways, 243 00:12:03,200 --> 00:12:05,960 Speaker 4: we have a massive appetite for capital to invest and 244 00:12:06,000 --> 00:12:09,840 Speaker 4: grow and build a better future for ourselves and future generations. 245 00:12:09,920 --> 00:12:12,240 Speaker 4: It's not necessarily a bad thing, but we need to 246 00:12:12,440 --> 00:12:15,120 Speaker 4: in order to attract that capital, we need to generate 247 00:12:15,160 --> 00:12:17,920 Speaker 4: a fair return. What's a fair return? Well, there's sort 248 00:12:17,920 --> 00:12:20,520 Speaker 4: of techy answer to that is cost of capital. There's 249 00:12:20,520 --> 00:12:23,600 Speaker 4: two costs when you're when you're a business, there's the 250 00:12:23,600 --> 00:12:26,360 Speaker 4: cost of operations, and we're clearly we cover that you 251 00:12:26,400 --> 00:12:28,600 Speaker 4: mentioned before. We make about twenty one billion in revenue. 252 00:12:28,679 --> 00:12:30,320 Speaker 4: Is at the group twenty one billion in revenue. We 253 00:12:30,360 --> 00:12:32,480 Speaker 4: spend about ten and a half eleven running the place, 254 00:12:32,520 --> 00:12:35,960 Speaker 4: so clearly there's a profit there, and then we some 255 00:12:36,040 --> 00:12:39,199 Speaker 4: of that's to cover credit costs. So that's the tick 256 00:12:39,520 --> 00:12:41,240 Speaker 4: we do that. The second one though, is we need 257 00:12:41,280 --> 00:12:44,120 Speaker 4: to cover the cost of capital. We've got seventy billion 258 00:12:44,160 --> 00:12:46,800 Speaker 4: dollars of shareholders capital. That capital comes from all over 259 00:12:46,800 --> 00:12:49,920 Speaker 4: the world, About almost thirty percent of it comes from 260 00:12:49,920 --> 00:12:52,680 Speaker 4: outside Australia and New Zealand, and the rest comes here. 261 00:12:53,320 --> 00:12:56,600 Speaker 4: People give us their capital because they expect a fair 262 00:12:56,640 --> 00:12:59,080 Speaker 4: return on it, not just the dividends, but they want 263 00:12:59,120 --> 00:13:01,679 Speaker 4: to see the share price grow as well. And as 264 00:13:01,720 --> 00:13:04,440 Speaker 4: a rule of thumb, and there's a complex way of 265 00:13:04,440 --> 00:13:07,280 Speaker 4: figuring this out, cost of capital for somebody like us 266 00:13:07,320 --> 00:13:11,640 Speaker 4: said is about ten percent. So basically says, hey, if 267 00:13:11,679 --> 00:13:14,600 Speaker 4: we want to continue to be able to attract capital, 268 00:13:14,760 --> 00:13:18,120 Speaker 4: without which we don't survive, we need to be able 269 00:13:18,120 --> 00:13:20,719 Speaker 4: to generate a return of about ten percent return on 270 00:13:20,800 --> 00:13:24,040 Speaker 4: that equity to keep that money and shareholders happy and 271 00:13:24,120 --> 00:13:27,080 Speaker 4: keep the investments coming so that we can continue to 272 00:13:27,160 --> 00:13:29,160 Speaker 4: lend them home loans and small businesses and do all 273 00:13:29,160 --> 00:13:32,400 Speaker 4: the things we do. And guess what that's kind of 274 00:13:32,400 --> 00:13:34,880 Speaker 4: where we are. In fact, at a group level, our 275 00:13:35,000 --> 00:13:37,280 Speaker 4: ROI lust the result we just have was only nine 276 00:13:37,320 --> 00:13:39,240 Speaker 4: point seven, so we're not even quite there, and New 277 00:13:39,320 --> 00:13:41,960 Speaker 4: Zealand's about the same little bit higher. So that seems 278 00:13:41,960 --> 00:13:46,480 Speaker 4: about fair and reasonable if we want, if we want 279 00:13:47,160 --> 00:13:52,000 Speaker 4: a well developed banking system that's safe and continuing to 280 00:13:52,040 --> 00:13:54,200 Speaker 4: invest in the future. Now, if you don't get that 281 00:13:54,240 --> 00:13:56,160 Speaker 4: cost to capital, and by the way, it's not a theory. 282 00:13:56,200 --> 00:13:57,920 Speaker 4: You can go and have a look in Europe where 283 00:13:57,920 --> 00:13:59,920 Speaker 4: they don't generate cost to capital, what do you end up? 284 00:14:00,040 --> 00:14:02,800 Speaker 4: You end up with banks going backwards in terms of 285 00:14:02,840 --> 00:14:06,040 Speaker 4: actually not being able to support growth and not being 286 00:14:06,040 --> 00:14:08,160 Speaker 4: able to invest in the future. And that's a really 287 00:14:08,160 --> 00:14:10,400 Speaker 4: really bad As they say, there's only one thing worse 288 00:14:10,440 --> 00:14:13,080 Speaker 4: than a profitable bank, and that's an unprofitable bank. Yeah, 289 00:14:13,120 --> 00:14:15,880 Speaker 4: because then the whole economy ends up. You really end 290 00:14:15,960 --> 00:14:18,800 Speaker 4: up in diastrates. And so I think it's about balancing 291 00:14:18,840 --> 00:14:20,040 Speaker 4: pretty much where it is today. 292 00:14:21,480 --> 00:14:25,000 Speaker 1: Could you give a bit more insight in terms of 293 00:14:25,480 --> 00:14:28,000 Speaker 1: the cost of capital here for banks in Australia, New 294 00:14:28,040 --> 00:14:32,840 Speaker 1: Zealand compared to globally and maybe dive into that European 295 00:14:32,880 --> 00:14:33,760 Speaker 1: example a bit more. 296 00:14:34,720 --> 00:14:37,720 Speaker 4: The way you calculate it, you say, well, what would 297 00:14:37,720 --> 00:14:40,280 Speaker 4: a shareholder in or if a shareholder was going to 298 00:14:40,920 --> 00:14:43,960 Speaker 4: give A and Z capital, what would they expect or 299 00:14:44,000 --> 00:14:45,920 Speaker 4: any bank or anybody for that matter, what would they 300 00:14:45,960 --> 00:14:47,840 Speaker 4: expect in return? Whether they said, well, if you're a 301 00:14:47,840 --> 00:14:50,840 Speaker 4: New Zealand investment, the lowest risk thing you can do 302 00:14:50,920 --> 00:14:53,720 Speaker 4: with your money is by government bombs because the government 303 00:14:53,760 --> 00:14:55,960 Speaker 4: can always print enough money to pay you back. So 304 00:14:56,000 --> 00:14:58,480 Speaker 4: it said, okay, if I was going to put my money, 305 00:14:58,560 --> 00:15:00,720 Speaker 4: I remember capital is a long term so what's the 306 00:15:00,760 --> 00:15:03,280 Speaker 4: current Say take the five or ten year bond rate 307 00:15:03,360 --> 00:15:05,240 Speaker 4: in New Zealand and say I can do that all 308 00:15:05,280 --> 00:15:08,680 Speaker 4: day long. So in order to encourage me to invest 309 00:15:08,720 --> 00:15:12,160 Speaker 4: in somebody else, whoever that might be, I want more 310 00:15:12,200 --> 00:15:15,960 Speaker 4: than that. Otherwise it'd be stupid. Why would I accept 311 00:15:16,000 --> 00:15:18,760 Speaker 4: lower to invest in something that's inherently risky and banks 312 00:15:18,800 --> 00:15:23,520 Speaker 4: a risky. Let's not forget banks are leveraged seventeen times now. 313 00:15:23,520 --> 00:15:26,360 Speaker 4: I mean most of the corporates that your shareholders, that 314 00:15:26,440 --> 00:15:28,600 Speaker 4: your people who are buying shares might think, you know, 315 00:15:28,640 --> 00:15:31,160 Speaker 4: companies are leveraged two to one, banks are seventeen to 316 00:15:31,240 --> 00:15:34,080 Speaker 4: one times leveraged. Right, they're risky, so you go, oh, 317 00:15:34,160 --> 00:15:36,960 Speaker 4: I want more than that. So that's your starting point, 318 00:15:37,240 --> 00:15:39,160 Speaker 4: and then what you do is you basically there's a 319 00:15:39,200 --> 00:15:42,840 Speaker 4: way of figuring out over long term, what's the premium 320 00:15:43,280 --> 00:15:48,520 Speaker 4: historically the market has expected for that risk and basically 321 00:15:48,560 --> 00:15:52,520 Speaker 4: what it's you know, again, roughly the market is expected 322 00:15:52,640 --> 00:15:54,600 Speaker 4: in order to invest in a bank like anz and 323 00:15:54,640 --> 00:15:58,200 Speaker 4: not just an zid WESPAC or whoever, about a five 324 00:15:58,520 --> 00:16:01,720 Speaker 4: percent premium on top of that risk free rate. So 325 00:16:01,760 --> 00:16:03,720 Speaker 4: that's kind of the cost of capital. Now, if you're 326 00:16:03,760 --> 00:16:08,480 Speaker 4: in Europe, interest rates are lower because their bond rates 327 00:16:08,480 --> 00:16:10,560 Speaker 4: are lower for a whole bunch of different reasons we 328 00:16:10,560 --> 00:16:13,240 Speaker 4: can talk about if you're interested, but the risk premiums 329 00:16:13,960 --> 00:16:16,880 Speaker 4: are also about. They're actually not that vastly different, so 330 00:16:16,920 --> 00:16:20,400 Speaker 4: their cost of capital is a little bit lower than now's. 331 00:16:20,440 --> 00:16:23,320 Speaker 4: And if you're in Japan then your cost cabalis are 332 00:16:23,400 --> 00:16:25,720 Speaker 4: much lighter because they're bond rates of close to zero. 333 00:16:26,400 --> 00:16:29,640 Speaker 4: So it's really just about the investor's preference on how 334 00:16:29,640 --> 00:16:31,720 Speaker 4: they evaluate the risk of investing in a band con 335 00:16:31,760 --> 00:16:34,120 Speaker 4: saying what's a fair return that I would given the 336 00:16:34,200 --> 00:16:38,120 Speaker 4: risk associated with investing in any company? I want more 337 00:16:38,120 --> 00:16:40,320 Speaker 4: than risk free rate? And as I say, long, long, long, 338 00:16:40,320 --> 00:16:43,280 Speaker 4: long term says that number generally is about five ish 339 00:16:43,280 --> 00:16:44,880 Speaker 4: sixtish percent over the long term. 340 00:16:45,560 --> 00:16:49,280 Speaker 1: You mentioned at a conference earlier this year around how 341 00:16:49,320 --> 00:16:53,040 Speaker 1: in Australia we don't bank the middle anymore. Could you 342 00:16:53,040 --> 00:16:55,520 Speaker 1: elaborate on what that meant and does that ring true 343 00:16:55,520 --> 00:16:56,680 Speaker 1: in New Zealand also. 344 00:16:56,760 --> 00:16:59,680 Speaker 4: In a long time ago, and again I'm exaggerating to 345 00:16:59,680 --> 00:17:02,200 Speaker 4: make it, but just you know, a long time ago 346 00:17:02,280 --> 00:17:05,440 Speaker 4: to many of your many of your listeners here or viewers, 347 00:17:06,280 --> 00:17:07,639 Speaker 4: you know, if you wanted a homeowner, you want to 348 00:17:07,640 --> 00:17:09,480 Speaker 4: start a business, you'd put on your best suit or 349 00:17:09,520 --> 00:17:11,840 Speaker 4: your best outfit. You go down to the bank, You 350 00:17:11,880 --> 00:17:13,760 Speaker 4: meet the bank manager, you talk to them about what 351 00:17:13,800 --> 00:17:15,440 Speaker 4: you wanted to do, and they would probably look you 352 00:17:15,520 --> 00:17:17,119 Speaker 4: up and down, ask you a few questions, and they 353 00:17:17,240 --> 00:17:21,120 Speaker 4: judge you on character and all sorts of things, including 354 00:17:21,160 --> 00:17:26,000 Speaker 4: the numbers, and they'd make an assessment right, and they'd 355 00:17:26,040 --> 00:17:28,520 Speaker 4: back people with initiative and good ideas and those sorts 356 00:17:28,520 --> 00:17:31,600 Speaker 4: of things who wanted to have a go today for 357 00:17:31,600 --> 00:17:34,280 Speaker 4: a whole bunch of good reasons. The systems moved on 358 00:17:34,400 --> 00:17:36,879 Speaker 4: and regulation has said, well, we don't like that. We 359 00:17:36,920 --> 00:17:39,199 Speaker 4: want we want you to be safer in your choices. 360 00:17:39,200 --> 00:17:41,640 Speaker 4: We want you to have more robust analysis to back 361 00:17:41,680 --> 00:17:46,600 Speaker 4: up any decision that you make. Spreadsheets, credit ratings, track records, 362 00:17:46,640 --> 00:17:48,840 Speaker 4: all of those things. That's great, that's fine, and those 363 00:17:48,840 --> 00:17:52,600 Speaker 4: are sensible things. Over time, those are becoming more and 364 00:17:52,600 --> 00:17:56,359 Speaker 4: more and more complicated, trying to protect so well intended, 365 00:17:56,960 --> 00:17:59,399 Speaker 4: trying to ensure that no nothing ever goes wrong, so 366 00:17:59,440 --> 00:18:02,040 Speaker 4: nobody ever get We don't like it when people lose 367 00:18:02,080 --> 00:18:04,520 Speaker 4: their house or when their business fails. So the way 368 00:18:04,520 --> 00:18:07,120 Speaker 4: to do that is make it as hard as possible 369 00:18:07,119 --> 00:18:09,240 Speaker 4: to get the loan in the first place. I'm not 370 00:18:09,240 --> 00:18:11,760 Speaker 4: saying that that was the design principle, but that's what's happened, 371 00:18:11,800 --> 00:18:15,240 Speaker 4: and so now we have to go through a lot 372 00:18:15,280 --> 00:18:18,399 Speaker 4: of process, which is all good, but what it means 373 00:18:18,520 --> 00:18:20,240 Speaker 4: is the people that would have had a chance in 374 00:18:20,280 --> 00:18:22,600 Speaker 4: the past and missing out. And so we can see 375 00:18:22,600 --> 00:18:25,480 Speaker 4: the data. It's not just me theorizing here. If you 376 00:18:25,480 --> 00:18:28,399 Speaker 4: look at people who have a home loan today, you know, 377 00:18:29,080 --> 00:18:32,159 Speaker 4: and you look at their level of income, relative to 378 00:18:32,200 --> 00:18:35,479 Speaker 4: the average person in Australia and New Zealand. It wouldn't 379 00:18:35,520 --> 00:18:37,720 Speaker 4: be surprising that over time they've always been a little 380 00:18:37,720 --> 00:18:39,960 Speaker 4: bit wealthier, they've always had higher incomes in the average. 381 00:18:40,000 --> 00:18:43,920 Speaker 4: That kind of makes sense. That gap, though, how much 382 00:18:43,960 --> 00:18:47,440 Speaker 4: higher than the average has exploded over the last ten 383 00:18:47,520 --> 00:18:51,040 Speaker 4: or fifteen years. Yeah, so now to have a home 384 00:18:51,119 --> 00:18:53,879 Speaker 4: loan you need not just five ten percent more than 385 00:18:53,920 --> 00:18:55,919 Speaker 4: the average, you know, and I don't know the numbers 386 00:18:55,920 --> 00:18:57,960 Speaker 4: in New Zealand, but they're rough. You know, in Australia 387 00:18:58,000 --> 00:19:00,520 Speaker 4: it's like forty percent higher than the average used to 388 00:19:00,520 --> 00:19:06,760 Speaker 4: be ten Now it's forty Why, Well, because we build 389 00:19:06,800 --> 00:19:09,640 Speaker 4: all these safety factors in now. Some people say, oh, 390 00:19:09,640 --> 00:19:13,360 Speaker 4: that's because house prices are really high. Yeah, perhaps there's 391 00:19:13,359 --> 00:19:16,040 Speaker 4: an element of that in there. But the real issue 392 00:19:16,200 --> 00:19:18,600 Speaker 4: is that banks it's been harder and harder. I'm not 393 00:19:18,640 --> 00:19:20,680 Speaker 4: the only one saying it. My peers have since it's 394 00:19:20,680 --> 00:19:22,320 Speaker 4: harder to get a credit card in Australian and he's 395 00:19:22,359 --> 00:19:24,920 Speaker 4: on today than it has been in thirty years. In fact, 396 00:19:24,960 --> 00:19:27,600 Speaker 4: that getting a credit card is harder and Australian is 397 00:19:27,600 --> 00:19:31,120 Speaker 4: in than almost anywhere else in the world because as 398 00:19:31,119 --> 00:19:33,800 Speaker 4: a community we've decided we're voting for safety, and so 399 00:19:33,880 --> 00:19:36,080 Speaker 4: we don't like you know, and that's fine. It just 400 00:19:36,119 --> 00:19:38,399 Speaker 4: comes at a cost. And the cost is people in 401 00:19:38,440 --> 00:19:41,679 Speaker 4: the middle. That person that we would have given a 402 00:19:41,680 --> 00:19:43,520 Speaker 4: home line to a credit card or a small business 403 00:19:43,520 --> 00:19:47,320 Speaker 4: flane two ten years ago isn't getting it today. And 404 00:19:47,359 --> 00:19:50,120 Speaker 4: that's a cost. I think that's a real cost. It's 405 00:19:50,119 --> 00:19:53,120 Speaker 4: a cost of aspiration and growth and dynamism and the economy, 406 00:19:53,720 --> 00:19:55,440 Speaker 4: and so I just you know, we raise it because 407 00:19:55,440 --> 00:19:57,960 Speaker 4: we've been worried does it affect the bank, not really 408 00:19:58,480 --> 00:20:01,879 Speaker 4: makes us safer. Actually, I'm not proposing a change because 409 00:20:01,880 --> 00:20:05,000 Speaker 4: of it's an A and z's benefit we're trying to make. 410 00:20:05,320 --> 00:20:08,680 Speaker 4: We're trying to make a contribution to the social structure 411 00:20:08,840 --> 00:20:10,800 Speaker 4: and there, and they're cond me to say, is this 412 00:20:10,880 --> 00:20:12,919 Speaker 4: what we signed up for? You know, is this what 413 00:20:12,960 --> 00:20:15,359 Speaker 4: we all agreed as a community. Is that the outcome 414 00:20:15,359 --> 00:20:15,960 Speaker 4: that we wanted. 415 00:20:16,400 --> 00:20:19,800 Speaker 1: Actually, you know, from what I see in New Zealand 416 00:20:19,840 --> 00:20:22,800 Speaker 1: and in Australia, we're really good at paying our debt, 417 00:20:22,880 --> 00:20:26,439 Speaker 1: paying our mortgage, paying our rent of it might be 418 00:20:27,080 --> 00:20:29,040 Speaker 1: you know that is kind of ingrained in our culture 419 00:20:29,160 --> 00:20:30,639 Speaker 1: or the way that we think about money. 420 00:20:32,000 --> 00:20:32,720 Speaker 3: So how do you. 421 00:20:32,680 --> 00:20:35,679 Speaker 1: Go about driving that change so that more people, do 422 00:20:36,280 --> 00:20:37,760 Speaker 1: you know, have the chance to give it a go 423 00:20:37,960 --> 00:20:40,560 Speaker 1: if you know, the numbers don't stack up on day one, 424 00:20:40,760 --> 00:20:45,680 Speaker 1: but they've got the ambition, the appetite and. 425 00:20:44,160 --> 00:20:46,119 Speaker 3: And you know, the ability to make it work in 426 00:20:46,119 --> 00:20:46,640 Speaker 3: the long run. 427 00:20:46,920 --> 00:20:48,640 Speaker 4: We're not allowed to them. That's the that's the point 428 00:20:48,640 --> 00:20:50,640 Speaker 4: we're trying to make the bank. And again I I. 429 00:20:51,160 --> 00:20:54,000 Speaker 3: So the LBR limits as an example. 430 00:20:54,119 --> 00:20:58,879 Speaker 4: And again, so what's happened since the GFC? Largely, I 431 00:20:58,920 --> 00:21:00,719 Speaker 4: mean on the GFC, terrible thing has happened, I mean 432 00:21:00,720 --> 00:21:03,360 Speaker 4: not nobody's debating that largely. It didn't really happen too 433 00:21:03,480 --> 00:21:05,480 Speaker 4: badly in Australians in but it happened really badly in 434 00:21:05,520 --> 00:21:07,720 Speaker 4: Europe and we know and that was awful, right, And 435 00:21:08,000 --> 00:21:11,399 Speaker 4: as a reaction to that, government's regulators community said, oh, 436 00:21:11,440 --> 00:21:14,560 Speaker 4: we don't want that to happen again, right, absolutely, So 437 00:21:14,600 --> 00:21:17,120 Speaker 4: we put in place all these new rules, all these 438 00:21:17,119 --> 00:21:21,199 Speaker 4: speed bumps, all these controls, all well meaning, and they 439 00:21:21,200 --> 00:21:23,120 Speaker 4: grew up over a whole period of time. And what's 440 00:21:23,160 --> 00:21:26,240 Speaker 4: happened It's not like somebody's sat around and wanted this, 441 00:21:26,320 --> 00:21:27,919 Speaker 4: But what's happened is the people who are paying the 442 00:21:27,920 --> 00:21:29,399 Speaker 4: price of all or that are the people in the middle. 443 00:21:30,320 --> 00:21:32,120 Speaker 4: The people are used who would have got a home 444 00:21:32,160 --> 00:21:33,719 Speaker 4: line or a credit card or a small business loan 445 00:21:34,000 --> 00:21:36,639 Speaker 4: then who can't get one now, who are perfectly decent, 446 00:21:36,760 --> 00:21:42,000 Speaker 4: hard working, honest, well intended people because we've said, oh, 447 00:21:42,480 --> 00:21:44,840 Speaker 4: we want to build all these buffers in learning to 448 00:21:44,960 --> 00:21:48,359 Speaker 4: value buffers, interest rate buffers. You know, we have all 449 00:21:48,440 --> 00:21:51,360 Speaker 4: these things we need to do. And again they're well 450 00:21:51,440 --> 00:21:54,359 Speaker 4: meaning and they protect the bank. So you know, again 451 00:21:54,480 --> 00:21:57,560 Speaker 4: it protects us. And it should be no surprise that 452 00:21:57,640 --> 00:21:59,720 Speaker 4: the credit losses in the bank so kind of it 453 00:21:59,760 --> 00:22:03,680 Speaker 4: all time lows. We've never lost so little, right, So 454 00:22:03,760 --> 00:22:06,479 Speaker 4: that's a good thing. It means less people are you know, 455 00:22:06,520 --> 00:22:09,159 Speaker 4: getting into trouble with their home. But my point is, 456 00:22:09,560 --> 00:22:12,040 Speaker 4: but lest people are having a home loan in the 457 00:22:12,040 --> 00:22:14,679 Speaker 4: first place as a result, so the people in the middle, 458 00:22:15,240 --> 00:22:18,000 Speaker 4: So the average Australian and the average of New Zealander 459 00:22:18,280 --> 00:22:21,760 Speaker 4: cannot afford the average Australian and the average New Zealand home. Right. 460 00:22:22,080 --> 00:22:23,679 Speaker 4: So I give you an example. It'd be like if 461 00:22:23,680 --> 00:22:26,000 Speaker 4: we sat around as a community and said we really 462 00:22:26,040 --> 00:22:28,199 Speaker 4: don't want anybody to get hurt on the roads. I mean, 463 00:22:28,200 --> 00:22:30,320 Speaker 4: we would all agree with that, right, So why don't 464 00:22:30,320 --> 00:22:33,800 Speaker 4: we all just drive at five kilometers an hour? Well, 465 00:22:33,840 --> 00:22:38,200 Speaker 4: we definitely stop road accidents, but the entire economy would 466 00:22:38,200 --> 00:22:40,320 Speaker 4: grind into a halt. And it's kind of what we're 467 00:22:40,359 --> 00:22:42,560 Speaker 4: doing in banking. We see we don't want anybody to 468 00:22:42,560 --> 00:22:45,320 Speaker 4: get into trouble with alone. That's fine, but the result 469 00:22:45,400 --> 00:22:48,199 Speaker 4: of that is we lose dynamism. You know, I go 470 00:22:48,280 --> 00:22:49,760 Speaker 4: back and I look at a lot of our customers 471 00:22:49,760 --> 00:22:54,840 Speaker 4: who are now older, who started business as little businesses, startups. 472 00:22:54,920 --> 00:22:58,000 Speaker 4: They were startups who are big, famous business people in 473 00:22:58,000 --> 00:23:00,359 Speaker 4: Australia and New Zealand today. And you go back, asked 474 00:23:00,359 --> 00:23:03,320 Speaker 4: in how they started. How they started? They literally walked 475 00:23:03,359 --> 00:23:06,320 Speaker 4: into the bank, put on their best suit, had a 476 00:23:06,320 --> 00:23:09,159 Speaker 4: big idea when and they got to go because the 477 00:23:09,800 --> 00:23:12,480 Speaker 4: bank backed them into that aspiration and gave them a 478 00:23:12,560 --> 00:23:16,440 Speaker 4: start that would not happen today. It can't happen today 479 00:23:16,520 --> 00:23:19,200 Speaker 4: because we don't allow it to happen today. So I know, 480 00:23:19,200 --> 00:23:20,520 Speaker 4: if you're a small business you want to line, you 481 00:23:20,520 --> 00:23:22,840 Speaker 4: have to show me your track record. You have to 482 00:23:22,920 --> 00:23:26,760 Speaker 4: prove to me you can repay in all these circumstances 483 00:23:26,800 --> 00:23:27,440 Speaker 4: going forward. 484 00:23:27,720 --> 00:23:31,600 Speaker 1: Obviously there's this movement with open banking. It seems to 485 00:23:31,600 --> 00:23:33,320 Speaker 1: be a lot more advanced in Australia than where it 486 00:23:33,359 --> 00:23:34,960 Speaker 1: is here in New Zealand. And we notice that with 487 00:23:35,119 --> 00:23:41,159 Speaker 1: shareses we can offer roundups and quick deposits in Australia, 488 00:23:41,200 --> 00:23:43,640 Speaker 1: but not here yet. And so let's kind of turn 489 00:23:43,680 --> 00:23:48,560 Speaker 1: our minds to open banking and neo banking. We've seen 490 00:23:49,000 --> 00:23:51,680 Speaker 1: success in the UK and Australia where customers are able 491 00:23:51,760 --> 00:23:54,560 Speaker 1: to be to more easily switch banks or be offered 492 00:23:54,560 --> 00:23:59,359 Speaker 1: more competitive services and products from third party financial companies. 493 00:24:00,000 --> 00:24:03,479 Speaker 1: But how has A and Z approached adopting open banking 494 00:24:03,520 --> 00:24:06,119 Speaker 1: and tech in Australia and will we be taking the 495 00:24:06,160 --> 00:24:07,800 Speaker 1: same approach here in New Zealand. 496 00:24:08,600 --> 00:24:10,840 Speaker 4: So actually, the neo banking thing has largely been a 497 00:24:10,840 --> 00:24:12,520 Speaker 4: failure and I think we should just call it as 498 00:24:12,520 --> 00:24:15,040 Speaker 4: it is. I mean, most of the neo banks who 499 00:24:15,080 --> 00:24:19,159 Speaker 4: started here in Australia have subsequently closed or been a 500 00:24:19,240 --> 00:24:21,440 Speaker 4: quiet yeah. And the reason for that, and again on 501 00:24:21,520 --> 00:24:25,000 Speaker 4: being overly critical probably and overly a bit unfair, is 502 00:24:25,000 --> 00:24:27,200 Speaker 4: because they didn't there's nothing neo about what they're offering. 503 00:24:27,359 --> 00:24:29,880 Speaker 4: Was to a customer. There was nothing new. They still 504 00:24:30,000 --> 00:24:33,000 Speaker 4: took deposits and made light and you know large. Okay, 505 00:24:33,119 --> 00:24:35,119 Speaker 4: the act was a bit sexier, and you know there 506 00:24:35,119 --> 00:24:39,080 Speaker 4: were some nice features around it, but the fundamental proposition 507 00:24:39,480 --> 00:24:42,359 Speaker 4: was the same. Right. In fact, you could argue it 508 00:24:42,400 --> 00:24:45,760 Speaker 4: was worse because they didn't have the breadth of service 509 00:24:45,760 --> 00:24:48,000 Speaker 4: as a big bank hat and really importantly, they didn't 510 00:24:48,000 --> 00:24:50,480 Speaker 4: have the stability that a big bank hats. Yeah, in 511 00:24:50,560 --> 00:24:54,480 Speaker 4: terms of the credit quality and the diversification benefits we 512 00:24:54,560 --> 00:25:00,359 Speaker 4: had so I and that doesn't mean we should ignore acknowledge. 513 00:25:00,440 --> 00:25:03,560 Speaker 4: But where the really profound change hasn't been neo banking 514 00:25:03,600 --> 00:25:07,639 Speaker 4: per se, has been real innovation, which is truly new proposition. 515 00:25:07,800 --> 00:25:10,120 Speaker 4: So whether it's a revolute or why or the way 516 00:25:10,119 --> 00:25:12,480 Speaker 4: that or bond ow po latter on those sorts of things, 517 00:25:12,480 --> 00:25:16,360 Speaker 4: so different ways. I'm engaging with your financials right, those 518 00:25:16,440 --> 00:25:19,200 Speaker 4: are ready where the innovation has come. Now, the challenges 519 00:25:19,240 --> 00:25:22,119 Speaker 4: on a big bank is how do you engineer yourself 520 00:25:22,560 --> 00:25:27,159 Speaker 4: to have the best of both big, stable, diverse and innovative, 521 00:25:27,240 --> 00:25:31,320 Speaker 4: fast clever propositions. Well that's our strategy. That's why we 522 00:25:31,480 --> 00:25:34,879 Speaker 4: launched a m Z plus, our new retail platform, which is. 523 00:25:35,280 --> 00:25:37,920 Speaker 4: We've got roundups too, but we're the only major bank 524 00:25:37,920 --> 00:25:40,440 Speaker 4: who can do it because we've built ourselves in a modern, 525 00:25:40,440 --> 00:25:43,520 Speaker 4: contemporary stack. Now, everybody criticized us for doing it because 526 00:25:43,560 --> 00:25:45,639 Speaker 4: a cost a gazillion dollars, cost a lot of money 527 00:25:45,640 --> 00:25:48,200 Speaker 4: to do, but once you get there, what we're seeing 528 00:25:48,200 --> 00:25:51,080 Speaker 4: today's the advantage. We're only two years in market. The 529 00:25:51,160 --> 00:25:54,600 Speaker 4: cost to service a customer on Plus is thirty five 530 00:25:54,640 --> 00:25:56,800 Speaker 4: percent lower than it is in our traditional bank. 531 00:25:57,400 --> 00:25:57,520 Speaker 1: Now. 532 00:25:57,520 --> 00:25:59,360 Speaker 4: A year ago it was twenty percent lower. So it's 533 00:25:59,359 --> 00:26:02,679 Speaker 4: getting the gats widen it. So that's our future. I 534 00:26:02,680 --> 00:26:05,120 Speaker 4: think the future is all about how do we embrace 535 00:26:05,240 --> 00:26:08,880 Speaker 4: new technology, So we use open banking and Plus. Using 536 00:26:08,880 --> 00:26:11,840 Speaker 4: open banking, you can go in and you can import 537 00:26:11,880 --> 00:26:15,639 Speaker 4: your balances and transactions to view them from one hundred 538 00:26:15,640 --> 00:26:19,399 Speaker 4: and ten other banks in Australia any and see it 539 00:26:19,440 --> 00:26:22,040 Speaker 4: all and see your consolidated financials. That's really really cool. 540 00:26:22,040 --> 00:26:23,919 Speaker 4: Now we're the only major bank that does that as well, 541 00:26:24,080 --> 00:26:26,520 Speaker 4: because we've invested in the technology stack that allows it. 542 00:26:26,960 --> 00:26:29,280 Speaker 4: So banking has always been about people in tech. We 543 00:26:29,320 --> 00:26:33,920 Speaker 4: don't really have anything else right and the technology actually 544 00:26:33,960 --> 00:26:35,520 Speaker 4: banks get a hard time and I'll give a bit 545 00:26:35,560 --> 00:26:38,040 Speaker 4: of a plug for banks, but that it's actually pretty 546 00:26:38,040 --> 00:26:40,520 Speaker 4: good at rolling out and commercializing technology. You know, think 547 00:26:40,520 --> 00:26:46,320 Speaker 4: about these things. We were pretty good at commercializing mobile technology, 548 00:26:46,320 --> 00:26:49,440 Speaker 4: which is only fifteen years old and now is our 549 00:26:49,560 --> 00:26:53,880 Speaker 4: number one channel for customers engagement on here, a rich 550 00:26:53,960 --> 00:26:57,240 Speaker 4: engaging experience on this, you know. So we're pretty good 551 00:26:58,160 --> 00:27:00,360 Speaker 4: at taking technology. And of course the next big thing 552 00:27:00,400 --> 00:27:03,080 Speaker 4: in my mind is AI and that you know, that 553 00:27:03,200 --> 00:27:06,280 Speaker 4: is going to revolutionize the way we service customers and 554 00:27:06,320 --> 00:27:08,879 Speaker 4: the propositions we bring to market. But you need the 555 00:27:08,920 --> 00:27:12,639 Speaker 4: right technology stack to build on to enable it to 556 00:27:12,680 --> 00:27:13,840 Speaker 4: be something really compelling. 557 00:27:14,080 --> 00:27:16,240 Speaker 1: I read something with it about seven percentage that A 558 00:27:16,280 --> 00:27:19,320 Speaker 1: and Z code written last year was generated by AI. 559 00:27:19,400 --> 00:27:21,600 Speaker 3: I think it's get hub copilot. 560 00:27:21,840 --> 00:27:23,520 Speaker 1: Can you tell us a bit about how you envision 561 00:27:23,560 --> 00:27:27,199 Speaker 1: AI technology changing the operational nature of A and Z 562 00:27:27,840 --> 00:27:29,680 Speaker 1: and also the banking industry as a whole. 563 00:27:30,040 --> 00:27:31,880 Speaker 4: One of my one of our customers who had said 564 00:27:31,880 --> 00:27:35,760 Speaker 4: he passed away now Mark Beeson, founder of the big 565 00:27:36,200 --> 00:27:38,280 Speaker 4: number of the big shopping centers and never here Mark. 566 00:27:39,240 --> 00:27:40,760 Speaker 4: I went to see him a couple of years ago. 567 00:27:40,800 --> 00:27:42,760 Speaker 4: He is ninety, and I was asking about how he 568 00:27:42,880 --> 00:27:44,600 Speaker 4: was Another one of those migrants who came to Australia 569 00:27:44,600 --> 00:27:47,000 Speaker 4: with nothing and ended up You know, has you know 570 00:27:47,119 --> 00:27:50,280 Speaker 4: a billionaire families created an immense wealth and prosperity from 571 00:27:50,320 --> 00:27:52,960 Speaker 4: the thousands and thousands of Australians who work in their company, 572 00:27:53,040 --> 00:27:54,919 Speaker 4: right and really good people. He said to me our 573 00:27:55,040 --> 00:27:58,720 Speaker 4: ninety fifty six in CR National Cash Register Nember Cash Registers. 574 00:27:59,040 --> 00:28:01,399 Speaker 4: They took us on a trip to Boise, Idaho, and 575 00:28:01,440 --> 00:28:04,080 Speaker 4: in nine fifty we saw the future. We saw supermarkets 576 00:28:04,080 --> 00:28:06,520 Speaker 4: and shopping centers, and we came back and that's what 577 00:28:06,600 --> 00:28:08,840 Speaker 4: we did. Right. Well, I've seen the future as well. 578 00:28:09,000 --> 00:28:10,640 Speaker 4: Maybe it was obviously everybody else. You know. I spent 579 00:28:10,680 --> 00:28:12,480 Speaker 4: a bit of time up in California recently, and the 580 00:28:12,480 --> 00:28:15,080 Speaker 4: future is generative AI. And I know probably people are 581 00:28:15,080 --> 00:28:16,960 Speaker 4: sick of hearing about it, and there's no doubt there's 582 00:28:16,960 --> 00:28:20,240 Speaker 4: an element of overhype. That's true in any new technology. 583 00:28:20,440 --> 00:28:22,520 Speaker 4: But I've seen that future. And the future is going 584 00:28:22,520 --> 00:28:26,040 Speaker 4: to come in two ways. All of us, all of 585 00:28:26,040 --> 00:28:28,760 Speaker 4: the banks, we'll all everybody will start using these co 586 00:28:28,880 --> 00:28:31,679 Speaker 4: pilots that are embedded in every single tech tool we have. 587 00:28:32,440 --> 00:28:34,760 Speaker 4: Microsoft Outlook. It'll be in Salesforce, it will be in 588 00:28:34,920 --> 00:28:37,720 Speaker 4: every tech tool we have your phone, and they'll be 589 00:28:37,760 --> 00:28:39,719 Speaker 4: great and they'll make it all more efficient, just like 590 00:28:39,800 --> 00:28:43,000 Speaker 4: email made us all more efficient. But the benefits of 591 00:28:43,080 --> 00:28:45,760 Speaker 4: that won't differentiate you. They'll all get competed away for 592 00:28:45,840 --> 00:28:47,720 Speaker 4: the benefit of customers, but you still have to do 593 00:28:47,760 --> 00:28:50,680 Speaker 4: it great. The real opportunity is how do you then 594 00:28:50,760 --> 00:28:56,800 Speaker 4: take those AI tools and intelligent automation that comes with 595 00:28:56,840 --> 00:29:01,400 Speaker 4: it advanced analytics and embed those in propositions. Yeah, so 596 00:29:01,720 --> 00:29:06,120 Speaker 4: imagine if on your amzid plus you had a virtual 597 00:29:06,400 --> 00:29:09,160 Speaker 4: personal banker who you can ask questions of. Am I 598 00:29:09,160 --> 00:29:10,440 Speaker 4: going to be able to form to go on holiday 599 00:29:10,440 --> 00:29:13,000 Speaker 4: this year? Tell me where my money went last month? 600 00:29:13,240 --> 00:29:15,320 Speaker 4: Talk to me about am I saving enough to form 601 00:29:15,320 --> 00:29:17,840 Speaker 4: my retirement? All the beaks will do the productivity stuff, 602 00:29:18,520 --> 00:29:22,160 Speaker 4: contact centers all that. Son who have the right tech platforms, 603 00:29:22,160 --> 00:29:25,160 Speaker 4: we're able to build better propositions and that's obviously where 604 00:29:25,200 --> 00:29:27,600 Speaker 4: we aspire to be in Australia and in New Zealand. 605 00:29:29,280 --> 00:29:33,080 Speaker 3: So, you know, thinking about the year ahead, what excites 606 00:29:33,120 --> 00:29:33,640 Speaker 3: you the most? 607 00:29:34,240 --> 00:29:36,600 Speaker 4: Got a lot of work to do at a z 608 00:29:37,000 --> 00:29:40,040 Speaker 4: embedding and integrating the sun cork one point two million customers. 609 00:29:40,680 --> 00:29:42,320 Speaker 4: We've got a ZI plus on market. We have about 610 00:29:42,360 --> 00:29:45,000 Speaker 4: eight hundred and fifty thousand customers already who've chosen to 611 00:29:45,000 --> 00:29:48,680 Speaker 4: move to am zip plus already, which is a great achievement. 612 00:29:48,840 --> 00:29:51,959 Speaker 4: And next year we're actually going to start moving our 613 00:29:52,000 --> 00:29:55,240 Speaker 4: existing customers. We've got six million customers and our a 614 00:29:55,360 --> 00:29:57,160 Speaker 4: Z Classic offering and we need to move this is 615 00:29:57,160 --> 00:29:59,200 Speaker 4: in Australia, we need to move them across. That's going 616 00:29:59,280 --> 00:30:00,920 Speaker 4: to take a couple of is what we're start next year. 617 00:30:00,960 --> 00:30:02,960 Speaker 4: That's really exciting. And then of course what I just 618 00:30:03,000 --> 00:30:06,400 Speaker 4: talked about, we've got our first AI virtual CFO tool 619 00:30:06,440 --> 00:30:08,320 Speaker 4: being built in Palo Alto with a partner at the 620 00:30:08,360 --> 00:30:10,120 Speaker 4: moment hook to be able to roll it out for 621 00:30:10,160 --> 00:30:12,800 Speaker 4: small businesses in the middle of next year. Because our 622 00:30:12,840 --> 00:30:15,840 Speaker 4: strategy is, look, we need to give our customers better tools. 623 00:30:15,840 --> 00:30:18,560 Speaker 4: People want tools to manage their money, make their money 624 00:30:18,560 --> 00:30:21,640 Speaker 4: go further, own the home faster, not slower. We want 625 00:30:21,640 --> 00:30:24,160 Speaker 4: people to own the home faster, and we want people 626 00:30:24,200 --> 00:30:26,360 Speaker 4: to be able to save for their retirement better. And 627 00:30:26,440 --> 00:30:29,280 Speaker 4: the way you do that is with better tools. You know, 628 00:30:29,840 --> 00:30:31,680 Speaker 4: the tools and the insights and the data. And we 629 00:30:31,720 --> 00:30:33,800 Speaker 4: think the way that will come together in this AI 630 00:30:33,960 --> 00:30:36,000 Speaker 4: world and that's you know, that's really really exciting. 631 00:30:36,440 --> 00:30:39,400 Speaker 1: We had a rugby game in the weekend given you 632 00:30:39,480 --> 00:30:41,520 Speaker 1: a key we bit. You've lived in Australia for a while. 633 00:30:41,800 --> 00:30:43,959 Speaker 1: Are you a Wallabies or an All Black supporter? 634 00:30:44,080 --> 00:30:47,440 Speaker 4: I find that question insulting. Actually, I can't even imagine. 635 00:30:48,160 --> 00:30:52,840 Speaker 4: I can't imagine reading for the Wallabeds. I'm a die 636 00:30:52,880 --> 00:30:57,600 Speaker 4: hard or Blacks fan. I mean, I'm a total New Zealander. 637 00:30:57,600 --> 00:30:59,440 Speaker 4: I don't have an Australian past, but I don't want one. 638 00:30:59,520 --> 00:31:01,400 Speaker 4: I love Usustralia and the lovely people all that. But 639 00:31:01,840 --> 00:31:05,040 Speaker 4: I'm a very passionate Kiwi. But I'm a big passionate 640 00:31:05,120 --> 00:31:05,760 Speaker 4: or Black supporter. 641 00:31:06,520 --> 00:31:09,000 Speaker 1: Well, I love to wrap up with a really offending question. 642 00:31:09,160 --> 00:31:11,800 Speaker 1: He thanks so much, Shane for you for coming on 643 00:31:11,840 --> 00:31:14,640 Speaker 1: she Lunch Day. I really appreciate it you and thanks 644 00:31:14,680 --> 00:31:17,720 Speaker 1: everyone for tuning in. Be sure to watch Shared Lunch 645 00:31:17,760 --> 00:31:20,400 Speaker 1: on YouTube or on your favorite podcast app. 646 00:31:20,760 --> 00:31:25,640 Speaker 3: Have a great week.