ANZ holds to salary squeeze
From the top down: The clamp on executive pay at ANZ has tightened. Photo: Bloomberg
ANZ will extend a cap on executive salaries, as the bank faces a slowdown in domestic borrowing and deeper scrutiny on pay.
The move comes on the heels of a similar pay freeze by bigger rival Commonwealth Bank and follows a string of the nation's biggest companies from BHP to Rio Tinto taking a knife to executive remuneration.
"As senior executives we have to demonstrate that constraining costs is everyone's business," CEO Mike Smith told an investor briefing. "For many executives at ANZ, including myself, salaries will remain fixed for 2013 just as they were this year."
Last October the bank froze the salaries of 900 top earners, citing weak conditions in the banking sector.
Mr Smith, who was last year paid more than $10million, also acknowledged the possibility of a global backlash against banks impacting local lenders, following the billion-dollar bailouts and regulatory missteps in much of the world's advanced economies.
"Banking globally is facing significant reputational challenges," he said. "Now there's bound to be some sort of spillover issues here in Australia."
He was talking as ANZ posted a third quarter profit of $1.53billion, up 9 per cent on a year earlier. That tally matched analysts' forecasts.
“We aren't going to see the pre-GFC credit growth return any time in the near future, but we are continuing to adapt the business to this environment,” Mr Smith said. He predicted that, despite the downturn in the domestic and global economies, ANZ would end up “pretty close” to achieving a target of generating 20 per cent of its profits from Asia.
The latest result puts ANZ on track to achieve a full-year profit of $6billion. ANZ said retail customers numbers were up 2.2 per cent over the quarter, while the bank had added 42,000 new commercial customers.
While ANZ didn't provide details on its interest margins, the bank said they were stable — despite increased costs of raising funds from deposits and on global money markets.
"We have managed ongoing funding and competitive pressures well, with group margins stable relative to the end of the first half," Mr Smith said in an analyst briefing.
Evans and Partners senior equities research analyst George Gabriel said ANZ's results showed the bank faring well in the current environment. ANZ shares yesterday were up 3 per cent at $24.61.
"ANZ's update has more positives than negatives and compares favourably to peers," he said.
CBA this week reported a record $7.1billion net profit for its financial year, while National Australia Bank posted a $1.4billion unaudited cash profit for the June quarter alone. Westpac has opted not to provide a quarterly update.
In contrast, CBA's net interest margins slipped 6 basis points to 2.06 per cent in the second half of 2012, while National Australia Bank offered no comparable numbers in its third quarter update, Mr Gabriel said. The full impact of ANZ's out-of-cycle variable rate rises in May and June are expected to flow to its margins by the end of fiscal 2013.
ANZ's effort to increase productivity and lower costs has caused a 3 per cent drop in staff numbers this year.
In February, ANZ said it would cut about 1000 jobs by September 30, in response to the slowdown.
BusinessDay understands that about 700 of those jobs have been axed so far.