By Gareth Vaughan
When the ANZ Banking Group gets around to "considering" the future of its New Zealand wealth unit, one thing it won't be doing is selling its KiwiSaver business, CEO Shayne Elliott says.
ANZ has issued an information memorandum on its life insurance heavy Australian wealth unit with Elliott saying the bank's not simply hoisting a 'for sale' sign. Rather it's seeking a partner. Elliott says the idea is that ANZ continues to offer wealth products and services, but does so with a partner that's "world class at manufacturing and supplying product."
ANZ says the future of ANZ's NZ wealth unit will be considered after decisions are made in Australia. This business unit includes ANZ's KiwiSaver operations which, as of December 31, had $9.5 billion under management giving it 26% marketshare.
Speaking to interest.co.nz in a Double Shot interview, Elliott said there are no plans for change at ANZ's KiwiSaver business.
"New Zealand [wealth] is in many ways a better balanced business, our [wealth] business here [NZ] isn't predominantly life insurance. We've got this fabulous KiwiSaver business. We're a market leader, we like that business very much. And so we have a slightly different approach here," Elliott says.
"We've said we're going to keep KiwiSaver, it's core to what we do, we do it well. The [NZ] life insurance business we don't know. We'll have a look at that after we've concluded Australia. And if we find a really good model of partnership, perhaps we'll extend that into the life insurance business here in NZ," Elliott says.
Asked if ANZ was looking to partner with anyone else in KiwiSaver Elliott said no. The intention is for the business to remain as it is.
"It's a good business, [requiring] low capital. We happen to be very good at it so that's what we have decided to do," Elliott says.
Asked whether considering the future of ANZ's NZ wealth business would solely focus on ANZ's life insurance operations, Elliott said there are other "tiny bits and pieces" in that business.
"But primarily if and when we get to that point, we'll look at the life insurance business and make a decision then," he says.
ANZ NZ's wealth operations include funds, comprising ANZ Investments which features investment management, managed funds including KiwiSaver, and insurance with insurance sold directly to bank customers and through independent advisers. These businesses are fully integrated with the bank's retail and business banking units, and have significant customer overlap. ANZ NZ is NZ's number one fund manager and KiwiSaver provider, and the third biggest insurance business.
Elliott a New Zealander who was previously ANZ's chief financial officer, succeeded Mike Smith as CEO at the start of 2016.
'ANZ not the best owner of UDC'
Other changes afoot at ANZ NZ include the proposed NZ$660 million sale of UDC Finance to China's HNA Group. Elliott, who is aiming to develop a "simpler, better capitalised and more balanced bank," says whilst UDC is a good business, ANZ is not the best owner of it.
"We have $55 billion of shareholder's capital and we have to deploy that capital in a responsible way where we have strategic long-term advantage, but also that generates a decent return," says Elliott.
"We've got to make sure our resources and capital is being allocated where we can do extraordinarily well."
"And we decided that's not an area, a finance company in New Zealand, [although a] good business, [with] decent returns, [that] provides a service to the community, we are not the best owner for that. And we would rather put our financial and intellectual capital into our core businesses around being the best bank for people who want to buy and own a home, or people who want to start and run a small business," says Elliott.
The point about creating a simpler, better bank is about being "a little bit smaller but better," focusing ANZ's intellectual capital and financial capital on "a few things that we can do extraordinarily well."
'We are going to be disrupted'
Disruption, Elliott acknowledges, is a factor in ANZ's slimming down plans.
"Absolutely. And when I talk about having our intellectual capital focused on fewer things, partly it's to say 'look we are going to be disrupted.' Technology, new entrants, regulatory change is having a massive impact on all parts of our business. And it seems to me and my team that better we just focus on a few things and do them really well so that we can deal with that disruption."
"If we're trying to handle disruption on all sorts of fronts and all sorts of markets, it's more likely we'll fail. So yes that's a very important part about creating a simpler, more focused bank," Elliott says.
'We're going to be more of an open platform'
He also argues that complete ownership of the value chain, or the universal banking model of the past two or three decades, is not the future. Rather, partnerships will be key.
"The model over the last 30 years or more in banking has been this universal banking model where we own and operate all parts of the value chain whether it's life insurance or funds management, private banking, online broking, all of these things we do. I think the way going forward... the only way to win, is to be really excellent at these things, it's very hard to be really excellent at all of those," Elliott says.
"So we've taken a view, and not all of our peers agree with us, that we're going to be more open, more of an open platform. That our strength is really the way we service customers, and we can partner with people who are in the manufacture [of products]. For example, in Australia recently we've done a deal where we've essentially partnered with an online broking provider who will run the nuts and bolts of our sharebroking operation. It'll still have an ANZ brand on it, our customers will still have access to it, but it's going to be in partnership with somebody who is really terrific at running that really, really well, who will be better placed to handle disruption than we are. So I think that is the way forward."
'The vertically integrated model is not the model we will be pursuing'
But where does it end? Elliott says he's not sure.
"I don't know where that will stop. We're talking about it in the wealth business, we've done it in online broking, we're just much more open minded to partnering."
The "crown jewels" and things ANZ needs to be "excellent" at include customer service, with the bank needing to "own that customer relationship," nurture it, and be very good at that. This means ANZ must own its key channels to market such as mobile banking. And, Elliott says, core banking is the other key bit.
"What do we do for people? We move money around for people. We change the timing of people's consumption. You want to buy a house today and you can't afford it or you want to go on a holiday and you can't, you borrow money. Or you want to save and defer consumption till you retire. So that maturity transformation."
"So those sorts of businesses, - banking, savings, borrowing, moving money around, foreign exchange, those are core to what we do. They will never move away from ANZ. But all the ancillary services that go with that are where we would look to partner," says Elliott.
In terms of the vertical integration model Elliott doesn't see it as broken, but says it does have risks.
"I don't think it's broken... [But] it's much more difficult today. I have been in the industry for 30 years. With all the regulation that is happening in the world, different community expectations, it has become more difficult to manage. Doesn't mean it's impossible, but it's far more difficult than it ever has been. And so companies have to make a choice. And I'm sure that some will continue with the vertically integrated model and others will probably do quite well out of it. [But] that's not the model that we will be pursuing," Elliott says.
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