Kylie Bundrock: Good morning, everyone. I'm Kylie Bundrock, ANZ's Group General Manager, Investor Relations and M&A. Thank you for joining us for the presentation of our full year 2026 financial results, being presented from ANZ's offices in Melbourne, which stand on the lands of the Wurundjeri people. On behalf of the ANZ team, I pay my respects to elders past and present, and extend my respects to any Aboriginal and Torres Strait Islander people joining us for today's presentation. Our results materials were lodged this morning with the ASX and are also available on the ANZ website in the Shareholder Center. A replay of today's presentation, including Q&A, will be available on our website shortly after the session concludes. The results materials and today's presentation contain forward-looking statements, and in that regard, I draw your attention to the disclaimer at the front of the results slide pack.
Kylie Bundrock: Our CEO, Nuno Matos, and CFO, Farhan Faruqui, will present for around 45 minutes, after which I'll explain the procedure for Q&A before we move to questions. A reminder that if you would like to ask a question, you can only do so via the phone. Over to you, Nuno.
Nuno Matos: Thanks, Kylie. Good morning, everyone. Thank you for joining us. We have completed the first full year of our ANZ 2030 strategy. In October 2025, we laid out a clear plan focused on five immediate priorities and four strategic pillars, delivered in two phases. We committed to a set of financial targets and transparently reporting on our progress with consistent disclosures. The results we are announcing today demonstrate the significant progress we have made through the execution of ANZ 2030. We are on track to deliver all five immediate priorities on time. In parallel, we are also investing in strategic growth initiatives, and our business execution is improving quarter on quarter. In short, our transformation is happening, and we have momentum. Since announcing ANZ 2030, the external environment has become even more volatile. Geopolitical tensions, energy price shocks, and rapid technological change are affecting the markets in which we operate.
Nuno Matos: These factors have impacted capital flows, trade, and infrastructure development across the region in the past year. At the same time, the rapid evolution of artificial intelligence is transforming how societies, companies, and individuals operate. Competition for capital to fund AI, defense, energy transition projects, and government deficits has intensified. This expenditure super cycle, combined with inflationary supply side shocks, continues to drive interest rates higher globally. In Australia, the cash rate is at its highest level since 2008, while US bond yields are the highest since 2002. Against this backdrop, the economies across our geographic footprint remain relatively resilient. Asia continues to be the fastest growing region in the world, while New Zealand and Australia show modest growth. At ANZ, we have the right strategy for this complex environment. The work we have done to strengthen execution, simplify ANZ, and build resilience has created a stronger bank.
Nuno Matos: Our mix of business is reflected in our high-quality portfolio, which is mostly comprised of investment grade or highly secured exposures. Our capital levels remain strong, and we are a highly rated bank, benefiting from diverse sources of funding from both depositors and debt investors. This strength allows us to focus on helping customers leverage opportunities and navigate risk, drawing in our deep product capabilities, the strength and scale of our two home markets, and our international network across 29 markets. For large corporate customers, this includes participation in the technology-led export boom in Asia and the energy transition. We also help small and medium-sized businesses as they weather a more challenging environment, improve efficiency, and build their businesses. In Australia and New Zealand, our retail customers are largely resilient, with the majority ahead of their scheduled repayments.
Nuno Matos: However, we acknowledge that some customers are experiencing financial pressures, which has been more evident in the H2. We work closely with those customers who require assistance to identify appropriate and sustainable support. Now, turning to our financial performance, and I note I will compare numbers excluding the impact of last year's significant items. Our disciplined management of margins, capital, costs, and business volumes underpinned a 10% increase in our cash profit over the prior year and delivered higher shareholder returns. Our return on tangible equity was 11.56%, an improvement of 109 basis points over the prior year. Our balance sheet and capital position remains strong, with Common Equity Tier 1 broadly stable at 11.99%. Our liquidity and funding ratios are all well above regulatory minimums. We declared a final dividend of AUD 0.83 per share at a franking rate of 80%, increased from 75% in the H1.
Nuno Matos: This translates to an additional AUD 0.018 of franking credits per share for eligible Australian shareholders. The full year dividend is AUD 1.66 per share. Now, turning to the first phase of our ANZ 2030 strategy, focused on five immediate priorities, which are all on track. Our first is embedding the new leadership team and resetting our culture. Both are critical to establishing a winning culture and executing ANZ 2030. Most recently, Ben Kelleher joined the executive committee as Group Executive and CEO of New Zealand following the retirement of Antonia Watson. I would like to take this opportunity to thank Antonia for her significant contribution during her 17 years with the bank. We have also transformed the broader leadership team, including bringing in new talents with the experience needed to execute our strategy.
Nuno Matos: This year, we embedded our new values and updated our code of conduct to give our people clarity on the behaviors, decisions, and pace expected of them. Together, these are crucial guardrails that support execution of the strategy to ensure our people put customers' interests first, deliver quality work at pace, are more accountable, action-oriented, and decisive, and balance results with risks. Our second immediate priority is accelerating the integration of Suncorp Bank. By the end of September 2026, in line with our commitment, we delivered 60% of this program. We now target 85% by March 2027, and we are on track for full customer migration by June 2027. Our third priority is delivering a modern, digital single customer front end to 7.7 million retail customers and more than 600,000 small business customers by the end of September 2027.
Nuno Matos: At the end of September 2026, we delivered 45% of the program, again on track, and our plan is to get to 80% by March 2027. Completing this priority and the integration of Suncorp will allow us to show up to customers through one ANZ experience under one ANZ brand, while allowing investment with confidence and efficiency. This will unlock significant potential for the future and will mark the beginning of our second phase of ANZ 2030. Through the year, we have made significant and sustained progress in materially simplifying the organization. We realized a productivity benefit of AUD 902 million, exceeding the AUD 875 million of gross cost savings we foreshadowed at the H1 results. This productivity benefit, combined with a significant step change in cost management and some favorability in FX translation, has allowed us to deliver a 7% reduction in our cost base.
Nuno Matos: Our cost-to-income ratio of 49.3% improved by more than 4 percentage points in FY26, demonstrating progress towards our mid-40s target by FY28. We also continue to make progress on our non-financial risk management uplift and remain on track to deliver our root cause remediation plan through our PACT program. PACT is anchored in the bank strategy and is part of our broader transformation, focused on delivering better outcomes for customers. Today, we have released the second and third reports from Promontory, our independent reviewer. The latest report acknowledged our progress while recognizing the challenge of executing a complex program such as this. Now, I will shift from our immediate priorities to our strategic foundations with a focus on the customer-first pillar. Our strategy is focused on improved customer service, superior propositions, strengthened proprietary origination, and becoming the transactional bank of choice for our customers.
Nuno Matos: When we launched ANZ 2030 a year ago, I was clear we had two divisions which performed consistently well, Institutional and New Zealand, while Australia Retail and Business and Private Bank had underperformed. Since then, both Australia Retail and Business and Private Bank have progressed their transformation and started to gain momentum. For Australia Retail, there was a material improvement in financial performance. We delivered a 5% increase in revenue while resetting our cost base down 16%, highlighting the deep structural transformation and simplification taking place. We restored growth in home lending and customer deposits to be in line with system in the H2, while maintaining disciplined margin management, and as a result, ROTE of this division is now accretive to group returns. NPS is starting to head in the right direction, while MFI clearly has more to be done.
Nuno Matos: In FY26, we started laying the foundations for our differentiated propositions, focusing on the affluent and migrant segments, launching simple and secure digital international money transfers. We also launched our digital app in New Zealand, India, and Singapore, making it easier for people to bank with us even prior to arriving to Australia. We also started investing in proprietary channels, but we acknowledge we are at the beginning of this journey. In FY27, alongside delivering the single customer front end, we will advance our affluent and migrant propositions, reshape our credit card propositions, and transform our contact center experience. In Business and Private Bank, we are also delivering a strong financial outcome, increasing revenues by 6% while reducing costs by 3% and driving an increase in ROTE of more than 100 basis points. Profit increased 14% year-on-year as we grew both sides of the balance sheet.
Nuno Matos: Deposits grew in line with the market for full year 2026, and lending reached system-level growth in the H2. While MFI has increased, strategic NPS has not followed. Reversing this trend is a clear priority. We are making progress delivering ANZ 2030 with a focus on more bankers who are better trained with better tools, as well as improved platforms for our customers and a strong Private Bank. Our commitment to increase bankers' numbers by around 50% by 2030 is on track, with 50 frontline bankers added in the Q4. Our Banking Academy, run in partnership with Melbourne Business School, is now live, helping lift the capability of our existing bankers while creating a pipeline of talent. The first graduates are already in the market serving customers. We continue to evolve our AI-enabled CRM tool for our frontline bankers, supporting more informed and personalized customer conversations.
Nuno Matos: For our mid-market business customers, we delivered the first iteration of our improved and simplified experience using Transactive Global, our market-leading institutional payments platform. This platform, together with the single customer front end for small business, means over time, we will go from 10 different customer-facing platforms for our business customers to just two primary platforms. Private Bank remains strong, with deposits up 10%, investment funds under management up 11%, and lending up 17%. The business continues to demonstrate momentum, with ongoing investment in frontline capacity while work progresses on modernizing our wealth proposition. For Suncorp Bank, we are in the final stages pre-migration and fully focused on ensuring this is a safe and secure event for our customers. As we prepare, we are taking all the actions we would expect ahead of a migration of this scale.
Nuno Matos: This includes, for example, discontinuing certain products and no longer accepting new lending applications. We are redirecting those customers with new lending needs to ANZ. In the meantime, Suncorp continues to provide great service to customers, and we are supporting them through the migration. Institutional continues to deepen customer relationships while ensuring efficient capital allocation, and I will refer to the numbers on an FX-adjusted basis. Revenue was down by 1%, reflecting lower average lending balances throughout the year and highlighting our focus on returns. Increased efficiencies reduced costs by 2%. Our market-leading payments and cash management business drove operational at-call deposits growth of AUD 12 billion, or 10% over the year, while total institutional customer deposits grew 24%. We exit the year with positive momentum in Corporate Finance, with lending growth of 7%, weighted towards the H2, where lending spreads and terms became slightly more favorable.
Nuno Matos: Trade lending balances grew strongly as we helped customers transact across the region. Markets revenue increased 1% through the year, despite challenging conditions in the H2. Our capital markets business delivered its stronger ever half as we supported our clients in issuing a record level of funding. We also made tangible progress on the growth initiatives under our ANZ 20 strategy. We onboarded more than 30 significant new-to-bank FIG and multinational customers who are sector leaders and represent a material opportunity across the region. We continue to invest in our payments and cash management platforms, including enhancements to the Transactive Global Experience, delivering self-service TDs, and expanding confirmation of payee functionality. We also expanded our use of capital efficiency tools, delivering approximately AUD 2 billion of RWAs efficiency to recycle into additional customer growth.
Nuno Matos: Looking to FY27, we will continue to upgrade platform capabilities and sales capacity and enhance our customer payment solutions. In New Zealand, we are shifting gears, and we are determined to match our ambition with our market-leading position. In FY26, revenues were up 2%, while costs were up 3%, excluding the impact of the New Zealand class action. Net lending and deposits had solid growth at 5% and 4% respectively, with SME business lending a highlight. In a highly competitive market, we grew our New Zealand customer base to more than 2.7 million. Our personal MFI share increased by 1.5 percentage points to 33.6%, while personal NPS rose to its strongest level since 2022.
Nuno Matos: Carrying this year's momentum forward, we are continuing to replatform the business for the future, having launched a faster digital TD journey, as well as ANZ Apply, which now provides customers with an indicative home loan decision in around five minutes. We are refreshing our propositions for priority customer segments, including strengthening our wealth propositions through partnerships with major global institutions, while working to better serve the evolving needs of affluent customers. In business banking, we are putting more bankers into the market, supported by better data, insights, and lending capabilities, particularly in the segments and locations where we see opportunities to growth. Today, I also want to update you on our approach to AI, given the growing importance of the technology. At ANZ, the AI journey is not new and is not a standalone strategy.
Nuno Matos: To be clear, we view it as a critical enabler of our ANZ 2030 strategy. Our approach is deliberately targeted. We have organized our AI framework to serve our strategic pillars in three key ways. First, by delivering more relevant, personalized experience to our customers and better tools for our bankers. Second, by simplifying work and increasing organizational productivity and capacity. Third, by strengthening how we manage risk. Rather than pursuing AI everywhere, we are prioritizing opportunities which unquestionably deliver value and accelerate our strategic initiatives with right-sized investment spend. Our AI use cases require a clear business outcome where the technology can be embedded into the way work gets done and where it can be scaled across the bank. That work is supported by robust governance, which is already in place, and controls that we are continuing to strengthen.
Nuno Matos: We are introducing a clear architecture and platform strategy, common technology, and data. With a lens on customer first, in FY26, we deliberately concentrated our investment on high-value use cases supporting the strategy. This included the evolved AI-enabled CRM tool for business bankers and better customer service through the transformation of our contact center experience. These are not standalone AI tools. They are embedded into end-to-end workflows. We are also embedding AI into how we deliver technology. For example, AI-assisted software engineer has doubled our capacity to deliver coding for the single customer front end. This technology carries risks, which demands a very tight control framework. Therefore, trust is central to our approach. We have existing controls in place, including multiple AI gateways and a governance council.
Nuno Matos: We are building on this by implementing an enterprise AI control plane, which will provide visibility, governance, and technical control across users, models, agents, tools, costs, and platforms, as well as traceability of decisions. As we increasingly use AI agents, humans must remain in control. Our enterprise control panel will set defined limits on what agents can and do, and stop activity where it operates outside those limits. To scale this work safely, we are also simplifying our architecture around common platforms, strengthening our data foundations and governance, and building AI skills and literacy across the organization. This includes establishing an AI academy to improve foundational AI literacy and role-based proficiency as we scale adoption across ANZ. Our aim is to build a sustainable pipeline of AI skills and talent through immersive learning and practical labs. We are confident this approach will support the delivery of ANZ 2030.
Nuno Matos: Finally, we acknowledge the need to ensure the right balance between people and technology, and to consider the impact of AI on society more broadly as we embrace its adoption at ANZ. To conclude, 2027 will be pivotal for ANZ. We will deliver two major transformation projects, the integration of Suncorp Bank and the single customer front end, as well as a significant uplift in customer outcomes through our NFR program and continued investment in growth initiatives. With this, once we have successfully completed the first phase, we will be in a much stronger competitive position to deliver the second phase of our strategy, focused on growth and outperformance. Today, I would like to leave you with three final key messages. Our transformation is moving at pace, and shareholders are being rewarded. We continue to invest for growth in line with ANZ 2030, and the business is gaining momentum.
Nuno Matos: With that, I will hand over to Farhan.
Farhan Faruqui: Thank you, Nuno, and good morning, everyone. I am going to build on Nuno’s comments. Our full year 2026 results demonstrated that we are delivering value for our shareholders while transforming the bank to be fit for growth. We have structurally reset our cost base while delivering on our immediate priorities and building momentum, including in our Australian businesses. The result is a stronger financial performance, greater capacity to invest in strategic growth initiatives, and increased reward for shareholders. Our progress is evident across key financial measures. Statutory profit was up 23%, and on a cash profit basis, excluding the significant items in FY25, profit was up 10%. Return on tangible equity increased 109 basis points to 11.56%. Our cost-to-income ratio improved 416 basis points to 49.26%. Revenue to risk-weighted assets increased 8 basis points to 4.83%.
Farhan Faruqui: We are generating better returns from both our cost base and the capital that we deploy. Momentum strengthened across our balance sheet in H2. Higher rates supported margins and replicating portfolio returns. However, they also increased customer preference for higher-yielding deposits and contributed to tougher trading conditions, which softened markets income, particularly in Q4. Pronounced currency movements were largely offset by lower translated expenses and earnings hedges, limiting the net impact. Our capital position was supported by stronger organic capital generation, which created capacity for approximately AUD 30 billion in lending growth and to maintain a stable dividend. Credit quality remained resilient, reflected in low individual provision loss rates. Our total shareholder return was 20.7% for the year, and our earnings of AUD 253 cents per share is up 30% year-on-year. We have declared a final dividend of AUD 83 cents per share.
Farhan Faruqui: The DRP will be neutralized. Franking on the final dividend increased to 80% from 70% a year ago. We enter FY27 with stronger business momentum, a structurally lower cost base, and the balance sheet capacity to support our next phase of growth. For the full year, the group delivered a cash profit of AUD 7.6 billion, up 10%, excluding the significant items in FY25. As I highlighted at H1, FX movements were pronounced this year. We hedged a large portion of our non-Australian dollar earnings to reduce volatility. We were able to offset AUD 594 million of translation headwind in revenue with a AUD 302 million translation benefit in expenses. We further reduced the net FX impact through AUD 234 million of realized FX earnings-related hedge gains. As a result, the net impact on profit before provisions was approximately AUD 50 million.
Farhan Faruqui: For the remainder of the presentation, unless I state otherwise, I will speak to performance on a constant currency basis and exclude FY25 significant items to better reflect our business performance. FY26 revenue increased 3%. Revenue excluding markets also growing 3%, supported by year-on-year growth of 3% in net interest income and 6% in non-interest income. Markets delivered AUD 2.1 billion of revenue for the year, growing 1% year-on-year. Net interest income growth was supported by balance sheet momentum, which accelerated through the year, and margins benefited from a higher interest rate environment. Non-interest income growth reflected the ANZ Worldline joint venture acquisition, higher fees within some of our businesses, and the non-repeat of prior period items. Growing capital-light revenue is a key priority under ANZ 2030.
Farhan Faruqui: Consistent with this, we are now reporting net fee and commission income more prominently across our results announcements, statutory reporting, and divisional disclosures. This provides greater transparency and a clearer basis for assessing progress against this priority. In H2, our revenue increased 2%, supported by ex-markets income growth of 3%. Net interest income, excluding markets, increased 4% compared to H1. As I mentioned, our Australian Retail and Business and Private Bank divisions have improved momentum, together delivering 7% revenue growth half on half. Overall, H2 demonstrates improving momentum in our core businesses and gives us a stronger revenue position heading into FY27. Turning to margin. NIM excluding markets increased 2 basis points to 2.3% in H2, while group NIM was stable. I will now talk to the key drivers of group NIM movement over the half.
Farhan Faruqui: The replicating portfolio contributed 5 basis points as lower rate hedges continued to roll on to higher rates. Disciplined deposit pricing contributed a further 2 basis points. Wholesale funding also contributed 1 basis point in the half as we took advantage of favorable funding markets. These benefits were partly offset by deposit mix as customers continued to favor higher-yielding products, together with ongoing competitive pressure on asset margins, particularly in Australian and New Zealand home lending. In Q4, NIM excluding markets reduced 4 basis points quarter on quarter to 2.28%. Around half of that reduction reflected higher Group Centre liquids, with the balance largely driven by asset and funding mix. Looking ahead, the replicating portfolio remains supportive, and we expect 4 basis points NIM benefit over the next 12 months, which is 2 basis points higher than we had previously indicated.
Farhan Faruqui: Also, we do not expect the Group Centre liquids impact experienced in Q4 to persist through H1 2027. However, competition and funding mix pressures are expected to continue. On balance, noting that margin outcomes may vary from quarter to quarter, we expect H1 2027 NIM ex-markets to remain broadly stable half on half. Moving to the balance sheet, customer deposit growth excluding markets was strong and broad-based, increasing 8% or AUD 51 billion year-on-year. Payments and cash management was a particular highlight, with operational at-call deposits up 10% in the year, with around a quarter of that growth from new customers. This reflects the strength of our relationship model, international network, and Transactive Global platform. Australia retail deposit momentum improved, with household deposits growing around system as we exited the year.
Farhan Faruqui: Business and Private Bank grew deposits in the seasonally softer H2 for the first time in three years, while New Zealand grew at around system and maintained its market-leading deposit share at approximately 30%. Consistent with the broader industry, customer preference for term deposits became more pronounced in H2, and we saw this trend across all divisions. Turning to lending, we saw strong momentum in lending across our businesses. Loans grew 6% over the year, accelerating in H2, up 4% half on half. Institutional lending grew by AUD 19 billion or 12% this year across regions and products. The depth and scale of our international trade capabilities contributed to strong year-on-year growth as our clients added resilience to their supply chains.
Farhan Faruqui: Corporate finance lending growth gained momentum towards the end of the year, providing an exit rate benefit while maintaining stable front book margins and portfolio credit quality. In Australia retail, home lending returned to system growth in the H2, supported by improved service levels and participation in the government's First Home Buyers Guarantee Scheme. We also delivered disciplined lending growth in business and private bank, with at-system growth in the H2 weighted towards larger customers in our middle market segment. In New Zealand, we maintained share in business and agri lending and balanced volume and margin in a highly competitive home lending market. Markets, as I mentioned earlier, delivered AUD 2.1 billion of income this year, up 1%. Our markets income was lower in the H2, particularly impacted by the final quarter as customers shortened hedging tenors against the backdrop of an uncertain global economic environment.
Farhan Faruqui: This contributed to lower FX and rates income, while commodities was impacted by weaker precious metals demand, as we highlighted at the Q3. On the other hand, capital markets delivered a record half as we supported our customers through an elevated funding cycle. Turning to expenses. On a constant currency basis, expenses reduced by 4%. On a reported basis, excluding significant items recognized in 2025, expenses reduced by 7%, ahead of our initial market guidance of 3%. While FX movements provided a benefit, the cost outperformance was also underpinned by stronger productivity. We delivered AUD 902 million of in-year gross cost savings, AUD 100 million more than our initial guidance. A significant part of this came from simplifying our operating model, including the program announced last September to reduce approximately 3,500 roles and a further 1,000 managed service contractors. That program is now complete.
Farhan Faruqui: We also reduced our reliance on consultants and contractors, lowered third-party spend through vendor rationalization, and strengthened cost management across the group. Collectively, all our actions delivered more than AUD 1 billion in benefits on an annualized basis. Suncorp Bank synergies contributed a further AUD 82 million of productivity, primarily through the removal of duplicative project spend. Investment spend was approximately AUD 1.5 billion for the year. We are focused on prioritization and driving more value for every dollar spent. Our capitalized software balance remains below peers, reflecting our continued approach of expensing a higher proportion of investment upfront. Overall, the performance demonstrates the structural cost reset we have achieved and strengthened cost accountability across the group. Taking into account our expected full-year cost of the ANZ Worldline ownership, our pro forma 2026 cost base would be AUD 11.26 billion.
Farhan Faruqui: Looking ahead, we will continue to deliver productivity to both offset inflationary pressures and support the growth phase of our strategy. Therefore, we expect FY27 total expenses to remain flat to the pro forma FY26 cost base of AUD 11.26 billion. Moving to portfolio quality. With an overall FY26 loss rate of 4 basis points, the credit quality of our book remains robust. This charge remains below our long-run loss rate of 11 basis points and reflects the quality and the diversification of the book across our business lines. For the H2, the individual provision charge was AUD 212 million, which included AUD 79 million of wholesale provisions and AUD 133 million of retail provisions. This resulted in a H2 annualized loss rate of 5 basis points. While slightly up on prior periods, the book remains resilient to macroeconomic conditions.
Farhan Faruqui: Non-performing exposures were flat year-on-year at 0.57% of total committed exposure. I note that there was a 2 basis point increase in the H2, primarily driven by our Australian mortgage portfolio, reflecting higher cost of living and interest rate pressures on our customers. Our 90-day plus delinquencies increased by 12 basis points to 95 basis points over the last six months, with a small increase in hardship assistance. Despite the increase in delinquencies, Australian mortgage individual provision losses remained low at AUD 8 million for the half, supported by strong collateral coverage with a portfolio dynamic LVR of 40%. Overall portfolio quality remains strong, with 87% of customers ahead on repayments and 75% maintaining savings buffers of at least three months.
Farhan Faruqui: We continue to stress test our mortgage portfolio against a range of economic factors, including unemployment, interest rates, and house prices, and we remain confident in its resilience as a result. Our Institutional portfolio remains a high-quality book, with 92% of total exposures investment grade. The portfolio continues to be heavily weighted towards low-risk segments, with 60% of exposure to sovereigns and financial institutions, while higher risk watch and control list exposures reduced over the half. In Business and Private Bank, our portfolio continued to perform well, with our small business portfolio 90-plus-day delinquencies remaining steady for the half at 2.2%, and our wholesale portfolio credit quality remaining broadly stable. We note some emerging stress in the agriculture and transport and logistics portfolios, reflecting the higher cost operating environment.
Farhan Faruqui: Overall, the Business and Private Bank portfolio remains well collateralized, with 83% of exposure fully secured, with a loss rate of 8 basis points for the half and 7 basis points for the year, which is down 2 basis points on FY25. Our New Zealand portfolio also remains resilient. The agriculture sector has strengthened. Early delinquency and hardship indicators have improved, while 90-plus-day delinquencies for mortgages were modestly up 3 basis points in the half. Now, moving to collective provisions. You will recall that we increased our provision balance in the H1, having considered risks to our portfolio from the geopolitical environment, particularly in the Middle East. We have maintained this prudent approach in the H2, continuing to recognize the evolving economic and geopolitical environment, including the impact of elevated inflation and interest rates, which are reflected in our base economic forecast.
Farhan Faruqui: For the H2, we have further increased our collective provision balance with a charge of AUD 96 million, driven largely by portfolio growth, credit quality movements, and a minor change to our scenario weight settings and overlay adjustments. Our collective provision balance has increased to AUD 4.53 billion, with coverage increasing two basis points over the prior corresponding period to 1.2% of credit risk-weighted assets. This is now approximately AUD 2.1 billion above our base case scenario, providing coverage across a wide range of economic outcomes. This approach has taken into account the following: One, around 53% of our scenario weight settings are weighted towards downside outcomes, reflecting the geopolitical environment. Two, our Australian mortgage collective provision settings have increased balances by AUD 65 million for the half and AUD 327 million over the past 18 months.
Farhan Faruqui: Three, our onshore and offshore portfolio continue to be both resilient and of high quality, as supported by consistently low individual provision loss rates. Four, that group collective provision balances cover 13 times the individual provision losses taken in FY26, remaining steady and well above peers. Overall, our settings continue to provide appropriate coverage, and as always, we continue to actively review this position as conditions evolve. Now, turning to capital. The CET1 ratio ended the year at 11.99%, including the 8 basis point impact of the ANZ Worldline Australia acquisition. This outcome is underpinned by stronger financial performance, which delivered 80 basis points of organic capital generation in the H2, up from 71 basis points in the prior corresponding period. The interim dividend and risk-weighted asset growth from customer lending was fully funded from this capital generation.
Farhan Faruqui: The CET1 outcome absorbed 9 basis points from previously disclosed data methodology changes that are expected to at least partially unwind in the 2027 financial year, and 22 basis points net of the capital floor from higher IRRBB risk-weighted assets in the H2. On IRRBB, given the interest rate environment, we took the opportunity to pre-hedge a portion of our replicating portfolio prior to existing hedges rolling off to support net interest income. The associated 8 basis point capital impact of that will roll off in the H1 of financial year 2027. Higher interest rates, particularly through September, also impacted the market value of replicating portfolio hedges, consistent with the broader sector. Rates have subsequently moved off those recent peaks. We also remain focused on capital efficiency and higher returning growth.
Farhan Faruqui: Two external RMBS transactions delivered 5 basis points of capital benefit this year, with further initiatives underway to support capital optimization. The declared final dividend is AUD 0.83 per share, and with significantly improved earnings, the dividend payout ratio is 66%, aligned closely with our target range of 60% to 65%. Shareholder returns are supported by increasing the franking level to 80%, up from 70% a year ago, and reflective of improving performance in the Australian geography. On funding, our average surplus liquidity coverage ratio and net stable funding ratio are stable year on year and well above regulatory minimums. We executed our 2026 funding program as planned, and additionally brought forward AUD 3.5 billion of 2027 funding, given attractive market levels. Looking ahead in the 2027 financial year, we expect to issue around AUD 25 billion to AUD 30 billion.
Farhan Faruqui: In closing, we enter FY27 from a stronger position with a clear focus on sustaining revenue momentum, maintaining cost discipline, and allocating funding and capital to opportunities that generate returns in line with our ANZ 2030 strategy. Thank you, and I will now hand back to Kylie for Q&A.
Kylie Bundrock: Thank you, Nuno, and thank you, Farhan. As a reminder, if you would like to ask a question, you can only do this via the phone. If you could please limit your questions to one per person. I will now hand to the operator for questions. Thank you, Ash.
Operator: Thank you. If you wish to ask a question, please press star one on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star two. If you are on a speakerphone, please pick up the handset to ask your question. Your first question today comes from Andrew Triggs with JP Morgan. Please go ahead.
Andrew Triggs: Thank you. Good morning. My question is just around the Institutional bank, which saw the strongest loan growth that I can recall in quite some time. Could you provide a bit more color on that and the sustainability of that you referenced to pick up in corporate finance momentum late in the H2, please? It has been done with a little bit of margin decline, but still decent, it looks like, underlying top-line growth and pre-provision profit growth.
Nuno Matos: Thanks, Andrew. In Institutional, clearly, we operated in the H1 2026, we operated in what I would call a challenging environment, certainly onshore, but also offshore. When I mean challenging, I mean, we thought that the pricing levels were not completely rational. In this segment, as we know, we actually do not target lending as a goal. We target returns, and we target relationship or transactional banking. In the H1, we consciously preferred to be more selective in applying capital, in lending capital to the markets. In the H2, the conditions normalized a little bit, and we sought that they were more in line with what we expect. So H2, we grew, I would say, at pace on the asset side. We believe those conditions will continue to be there in 2027. Again, do not expect us to be a lender.
Nuno Matos: Expect us to be a transactional bank. What we want to keep a very clear priority on returns while we support customers in a 360 manner. That is what happened in 2026 and what I think it will happen in 2027.
Andrew Triggs: Thanks, Nuno. To what extent has this momentum sort of not yet been reflected in net interest income? Could you give us a sense of how the loan growth proceeded through Q3 and Q4?
Nuno Matos: Yeah, it is a very good question. I would say that a significant part of the loan growth happened in Q4.
Andrew Triggs: Okay, thank you. If you combine the capital impacts of the data and methodology and pre-hedging on replicating portfolio, Farhan, what would be the combined impact on capital level unwind over FY27?
Farhan Faruqui: Sorry, could you repeat the question again, Andrew? Sorry.
Andrew Triggs: So just that you talked about the impacts of data methodology.
Farhan Faruqui: Yes
Andrew Triggs: Also the pre-hedging on replicating portfolio.
Farhan Faruqui: Yeah.
Andrew Triggs: It sounds like replicating portfolio impact will come back in H1, and some of those data methodology impacts will come through over the full year. Could you just combine those two?
Farhan Faruqui: Sure. On the pre-hedging, Andrew, we have about 8 basis points impact, which would unwind in the course of the H1. On data methodology, it is hard to give you a number, but as you note, we talk about a 9 basis point impact on capital in the Q3. We expect some of that to unwind in the H1. Hard to give you an exact number for that. Having said that, also, as you would have noted, peak rates have also come off from the peak of September to now, substantially, particularly in Australian dollar term rates as well as US dollar term rates. That is going to be helpful as we head towards December and March. We expect a fair amount of this to unwind as we get through the H1.
Andrew Triggs: Okay, thank you.
Operator: Your next question comes from Matt Dunger with Bank of America. Please go ahead.
Matt Dunger: Thank you for taking my question. I wondered if I could ask about investment spend on slide 58. You have shown us that it has fallen with growth spend dropping away. How sustainable is this growth spend dropping away? With Suncorp Bank migration on track, how much investment spend does this free up, and will this be reinvested in growth or lower costs?
Farhan Faruqui: Thanks, Matt. I think the investment spend, we had guided, as you recall, last year that we expect our investment spend to be roughly around AUD 1.5 billion as we get through the ANZ 2030 strategy. That may shift as we get to the latter years, but at this point, we are holding to our guidance of AUD 1.5 billion investment spend every year. The expense rate, as you may have noticed, has slightly reduced, but that's largely because of the fact that we have moved more technology capex-heavy items into the slate and moved some of the more BAU, opex-heavy items into BAU. Overall, our software capitalization has not shifted. It's just a shift of where we are highlighting change versus run, and I think that's sort of become a cleaner representation now.
Farhan Faruqui: But we certainly expect at this point for our investment spend to remain at about AUD 1.5 billion, and that also accommodates for the work that is happening on Suncorp Bank integration as well as on the single customer front end. So we're not changing our guidance for 2027.
Nuno Matos: Yeah. I must say the following also, Matt. I know that dollars are the only measure that we can use publicly to compare or to announce, but the dollar efficiency on our investment spend has increased materially, meaning the outcomes we can squeeze out of each dollar invested in technology have improved significantly, and it will continue to improve significantly. This is beyond the simple AI impact. It's beyond that. It's how we organize technology to deliver and business to deliver together. That has changed dramatically, and it will continue to change dramatically. The investment in Suncorp, which is material, which will end by June 2027, all that spend will be then redirected into growth, into additional avenues of growth. So we believe AUD 1.5 billion is the right level.
Nuno Matos: Obviously, it will fluctuate with the inflation going forward, obviously, but it's a great level, and we are getting better on extracting value for each dollar every year. Thanks, Matt.
Matt Dunger: Thank you.
Operator: Your next question comes from Jonathan Mott with Barrenjoey. Please go ahead.
Jonathan Mott: Thank you. Question for Nuno. When we go back to the ANZ 2030 strategy day just over a year ago, you announced you were looking for 12% ROTE by 2028 and 13% by 2030. The revenue and economic environment, both in Australia and around the world, have deteriorated substantially. Australia has had five rate hikes since that time, and the governor is saying it is going to potentially feel like a recession for a lot of people. If the revenue environment maintains a soft environment, competition remains intense. Is there more flexibility that you have got on costs over the next few years to hit these targets, or are the targets going to be much more difficult to hit?
Nuno Matos: Yeah. It is certainly an important reflection. Undoubtedly, the economic environment we are facing in 2026 and 2027, it is less positive than the one we had a year ago. Having said that, it is also fair to say that we are closer at this point in time from our 2028 goals than eventually the market would expect at this point in time. So, if you see our ROTEs, 11.56% in 2026, our cost-to-income is on the 49s, which is approaching the mid-40s. So, my first message is, we are not changing in any way or form our guidance. Absolutely not. Second, management of margins, management of capital, management of business momentum is what distinguish companies at the end of the day.
Nuno Matos: We feel that from a management perspective, we will continue to excel, and we will continue to excel in the short term while we are building the long term of the company to make sure the company is in a much stronger competitive position soon enough. Even though I would certainly prefer to have a more benign environment, I do not have any doubts in renewing our commitments to the guidance. In terms of the costs, listen, we certainly will continue to maximize our productivity. At the same time, we also are conscious that if revenues are not there, additional costs will have to be evaluated. It is again management. We do not spend just because we spend because there is a revenue to be captured. If the revenue is not there, we will not spend.
Nuno Matos: I guess what I am telling you is, Jonathan, is that we will apply management to these numbers and to our outlook, but we remain fully committed with our guidance, and we see a clear path to get there.
Jonathan Mott: Thank you.
Operator: Your next question comes from Victor German with Macquarie. Please go ahead.
Victor German: Thank you. I was hoping to follow up on expenses. I appreciate all the hard work that you have done on expenses so far, but I am really trying to get a sense for how ambitious is the near-term cost, flat cost target. In H2 2026, there was, I think, AUD 100 million that you disclosed in the Q3 relating to a fine. 2027 should benefit from some integration synergy benefits. Adjusting for both, what is the underlying cost growth that your guidance currently implies? Do you feel that that incorporates the sufficient cost discipline that you are trying to achieve? If I can also push my luck, sorry, Kylie, on a related topic, but also just following up from Nuno’s comments on investments. I appreciate that you feel that you invest more efficiently than peers, and peer comparisons are not perfect.
Victor German: If we look at CBA, NAB, and Westpac, they appear to have rebased their investment spend to around AUD 1.8 billion to AUD 2 billion in the P&L, versus ANZ’s P&L investment spend of about AUD 1.3 billion. I will just be keen to hear your thoughts on the relativities with peers, and if you feel like your investment spend is actually sufficient based on everything that you are seeing that your peers are doing. Thank you.
Nuno Matos: Sure. Listen, if we are on the cost side, we ended the year at roughly AUD 11.1 billion, AUD 11.07 billion of costs. With all the considerations that Farhan already mentioned, which effectively tells you that we accelerated, accelerating our productivity journey. If you now include a full year of ANZ Worldline, as you know, we acquired ANZ Worldline roughly two months before the end of the year. If you include 100% of the cost base of ANZ Worldline, the underlying cost for 2027 would be around AUD 11.25 billion, AUD 11.26 billion. What we are guiding is no more than that. So, it is basically we are guiding flat costs. What it means, flat costs? It means the following. It means that we will absorb 100% of inflation, which, as you know, lately has been running a little bit high.
Nuno Matos: We also will absorb the whole investment in our growth initiatives, and that is about increasing the number of bankers. We are increasing a significant number of bankers in business banking in 2027. We are also increasing the number of proprietary lenders on the home loan business. Again, we are also improving our platforms and remediating, continue to remediate our NFR shortcomings of the past. So, we are absorbing all of this in 2027 and still arrive with a cost-flat approach. As you saw in 2026, ANZ will always try to do its best. The cost management, this is an important message, 2026 was not about just cutting some headcount. 2026 was about establishing a culture of not spending a cent more than what is needed to drive this business.
Nuno Matos: That means people, that means contractors, that means consultants, that means vendors, that means traveling. It means that we only spend what is connected with the revenue, or obviously, with complying with the regulation. That culture and that methodology, which has a governance, has a way of doing things in the company, is embedded. You should count on us to continue to try to beat whatever we commit. Second, on your specific question versus peers, I have the sense that whatever goes to P&L from investments, since each bank has a different definition of investments, to be clear, it is not comparable. What I can tell you is that our AUD 1.5 billion of investment in growth is the number we feel the company needs and the company can digest in a year of effective transformation. Thanks, Victor.
Victor German: Thank you. Just if I can confirm, because you talked about the investment in additional bankers, and that makes a lot of sense. I am assuming that sits outside of the investment spend, because the investment spend number is not changing year-on-year, but it sounds like you are investing more. Any chance you can give us a bit more color in terms of how that sort of additional investment in the business outside of investment spend, how much is that increasing next year?
Nuno Matos: I can give you a sense of the concepts we are doing and some level of dimension. Yes, the investment spend is basically technological investments, but there is a massive investment in people. That means, on one hand, continuing to change and refresh our leadership team in the company, which has been a significant part of our culture transformation in the last 18 months. For example, in business banking, we announced that we would increase 50% the number of our bankers up to 2030. You can basically make it lineal and have a sense of how much people we have to increase net in 2027. I can give you even a more easy-to-do math. In Q4, we did 50, just in Q4. That gives you a sense of how much people, how much frontline and capacity to interact with customers we are putting in.
Nuno Matos: The same will happen for home loans, in terms of proprietary lending. So, there is a significant increase on strengthening our proprietary origination, which is in doubt, as we said several times in our previous presentations. We said that our origination machine, digital and people, platforms and people, or people and platforms, had to be strengthened. Those two elements are a significant part of what we are doing.
Victor German: Thank you.
Nuno Matos: Thanks, Victor.
Operator: Your next question comes from Andrew Lyons with Jefferies. Please go ahead.
Andrew Lyons: Thanks, and good morning. Just a question on your capital. At the FY25 result, you delivered a 12.03% CET1 and chose to issue equity through the DRP, and you flagged the potential to do the same in the interim, even though you ended up not doing that. 12 months on, CET1 is lower at 11.99%, and you have said you will neutralize the DRP. I concede you do have some reversals to come through on the capital base, but what has changed in your assessment of the capital position between a 12.03% with an underwritten DRP and 11.99% with a neutralized one?
Nuno Matos: Pravat?
Farhan Faruqui: Yeah. Sorry. Thanks for that, Andrew. I think it is fair to say, Andrew, that we sit here in a very different place relative to where we were a year ago. I think the first and most important thing is that we are now one year into our ANZ 2030 strategy. We have greater confidence in terms of our ability to generate organic capital. As you have seen, we have done so already by increasing our organic capital generation to 80 basis points versus 71 basis points, if you look at prior corresponding period from the year-end. So the impact of our strategy is starting to show through from an organic capital perspective, which gives us more confidence in terms of being able to continue to generate earnings to support our growth and our dividend.
Farhan Faruqui: The second, as you mentioned, is that there is going to be a fair amount of unwinds that are going to come through, and those unwinds are substantial, some of which I just mentioned to the question that was asked earlier. The third is that we have been a lot more focused, and we are building a very clear DNA, almost, I would argue, a machine, to try and create better quality capital optimization and far more discipline around capital allocation. A lot of the activities that we are going to be undertaking and have undertaken already, which included, as I mentioned, some of the RMBS transactions that we have done in this H1. We have talked about some of the, and I mentioned this, I think, earlier in the Q3. We have done some CRT transactions, which we will continue to do.
Farhan Faruqui: So there is a fair amount that we are doing, as well as some of the data methodology changes that will come through in the H1 and into the year in FY27, all of which are going to add capacity in our capital position, so that worries us a little bit less. The fourth thing is that last year, we had much less confidence and visibility to what was going to happen with the New Zealand business capital requirements, and now that has become much clearer. So we know where we stand insofar as New Zealand is concerned. We now have less capital to generate and to, sorry, less capital ratios to work towards in New Zealand versus what we had originally expected. So we have some capacity there potentially as well.
Farhan Faruqui: I think when we take all of this together, and we look at where we are in terms of our capital, the activities that we are undertaking to create more capacity, and the unwind that is going to come, I think we are in a much better place compared to a similar number 12 months ago.
Andrew Lyons: Thanks so much, Farhan. Can I just hazard just what the benefit from the changes to the New Zealand capital requirements were for the ANZ Group?
Farhan Faruqui: Basically, the CET1 ratio, as you remember, was much lower than what was originally being planned, which was above, is now about 12% rather than the 13.5% that was being originally planned for. So we have more capacity now there, as well as the floor benefit that we have gotten now as well will be helpful to us.
Andrew Lyons: Okay, thank you.
Operator: Your next question comes from Brian Johnson with MST. Please go ahead.
Brian Johnson: First off, congratulations on the cost-out execution. It is very rare to see a bank in Australia deliver on it. I was just wondering, Farhan, could we get some explanation and some sensitivity, if possible, on the declining New Zealand dollar hedge? Just having a look at it in AUD terms, if I was to go back to 2024, we had AUD 3.4 billion. It is now down to AUD 2.25 billion. So what I would like to understand is, and it is given a fairly substantial. The unwind of it, or the realization of it, has really helped out in 2026, probably helps out in 2027, but I would just like to confirm whether it, other things being equal, it all but disappears in 2028?
Farhan Faruqui: Yeah. I am happy to start, and I am sure Nuno will want to add a little bit on this. I mean, you are absolutely right. The numbers are correct. We are at about AUD 2.3 billion book now on the New Zealand hedge versus, I think it was about AUD 2.8 billion last year, so it has reduced. Now, some of that has been actively done because of the fact that rates, of course, have been at extremely high levels, and we have been managing more dynamically in terms of our hedge strategy insofar as New Zealand is concerned. And we have managed our floor in terms of how much capacity we want to hedge or how much earnings we want to hedge for year 1 and year 2 as we have gone through the period.
Farhan Faruqui: But that is an evolving situation, Brian, and we will continue to, of course, monitor that and put on more hedges as we think appropriate. But at this point, our hedge benefits are mostly in FY27 and a very modest amount that will come through in FY28, but that could fundamentally shift depending on what positions and hedges we continue to put on as we see the evolving environment in terms of the Aussie dollar, Kiwi dollar rate.
Brian Johnson: Farhan, if you put on more New Zealand hedges, does that chew up capital?
Farhan Faruqui: Yeah. I mean, it does. It will impact somewhat on capital, but again, the benefit of that will either come through hedge earnings or will come through cash profit from New Zealand. So, it is not particularly expensive from a hedging standpoint. It is much more about making sure that we are designing to reduce volatility rather than to manage earnings.
Brian Johnson: Thank you.
Operator: Your next question comes from Brendan Sproules with Goldman Sachs. Please go ahead.
Brendan Sproules: Good morning, team. Just got a question on your ambitions in New Zealand. I mean, slide 19 shows that you had pretty strong balance sheet growth, both lending and save and transaction deposits, and you had very positive share gains in MFI across personal and business. But the H2 revenue sort of slowed to zero, and I was just wondering how you balance, just given the size of your franchise in New Zealand relative to the other banks there, how you balance this ambition of customer and volume growth versus revenue?
Nuno Matos: Well, I would say, Brendan, a couple of things. First is, as a leader in New Zealand, we will continue to behave as a leader. Actually, what I would say is that we are renewing our energy and making sure that we translate that leadership, that important position, into even more growth and more returns. Okay? So that's how we see New Zealand. New Zealand is a significant part of our group and is a very, very profitable part of our book, is extremely accretive to the group returns, extremely. So we want more of that market. We want to continue to grow in that market. What we don't do, as we don't do in Australia, is to embark in rates or price discounts expeditions. That we don't do. We don't destroy value at that level.
Nuno Matos: We compensate that with a very effective and intense commercial activity and retail activity, meaning we double down on how we interact with our customers, and we double down on how we innovate in our platforms. So you should expect us to continue to grow in New Zealand, both in returns and in volumes, but certainly in returns.
Farhan Faruqui: If I could just add just to that point, to your question as well. I should point out that even though we had that impact in the H1, our exit in Q4, from a margin standpoint, is higher. So that gives us a good tailwind going into 2027 as well.
Brendan Sproules: Thank you. That's very helpful. Maybe just a second question on the performance in H2 of the Suncorp Bank franchise. Now, you said that your lending opportunities are being passed over to the ANZ retail division, but you saw a significant fall in save and transaction deposits on slide 17, MFI. How should we think about the revenue growth within this division in 2027 while we go through this significant integration?
Nuno Matos: Sure. Brendan, as you know, we are in the last stages of the integration of the two banks. At this point in time, customers were formally notified that they are coming into the family of ANZ. The moment of truth, if you want, started. It is normal, in any integration of this kind, it is normal that when customers are informed, some might take decisions on that regard. Having said that, the vast, vast majority of all the business is with us. That is one angle, which is just the pragmatic angle of the D-day is approaching. We are months away from it, so there is some dynamics around that. Having said that, the save and transact dynamics are also highly influenced by the obvious, which is customers are taking higher yield products, in this case, TDs. Okay? That is absolutely normal.
Nuno Matos: At the same time, we close lending, so we are not doing more lending because we cannot have lending files as we address the integration. We have to stop that in one book, and we have to start that in the other book. Obviously, that is already impacting the Suncorp origination. We are absolutely, if you want, at this point in time, focused on bringing that book of business, its fantastic customers, the fantastic franchise, its employees into the ANZ family. I think at this point in time, it is the most important element of all.
Brendan Sproules: Thank you.
Nuno Matos: Thanks, Brendan.
Operator: Your next question comes from Richard Wiles with Morgan Stanley. Please go ahead.
Richard Wiles: Good morning. I wonder if you could talk a little bit more about the 4 basis points of impact on margins from mortgages on slide 30. Is it evenly split between Australia and New Zealand? Has it got worse? Given your aim to grow in line with system, should we expect the overall mortgage margin headwinds to continue, or even grow a little bit next year? Thank you.
Farhan Faruqui: Thanks, Richard. Not a significant shift in terms of where margins were as we exited from a lending perspective. But the 4 basis point, I would say broadly, is 2 basis point. Some of this is rounding, Richard, so forgive me. But it is roughly 2 basis points in Australia, home loans, about a basis point in New Zealand, and about a basis point in the wholesale business, across business and private bank as well as Institutional. So the impact from the wholesale business is minimal, and the split of 2, 1 is roughly right, notwithstanding some of the rounding. There has not been a substantial change in Q4. However, as we have said before, Richard, and you have heard this many times, we said we would deliver system growth in H2. We have done that.
Farhan Faruqui: But we remain, obviously, very watchful to see where margins are and returns are heading as we get into H1. We will continue to manage volume and margins as we go forward. We are not representing an outcome here in terms of system and volume. We are just sort of suggesting that our continued focus on margin and volume growth and balancing that will remain.
Nuno Matos: Yeah. Adding to what Farhan said, in the H2 2026, we regained pace with market on our mortgage business in Australia, and slightly the same in New Zealand across the whole year. In the case of Australia, we were at 1.1 system in the H2. That was because, as we said, we would address our service issues, which are absolutely addressed. We also entered the First Home Buyers Guarantee Scheme, where we were an outlier, and we are there now. All of that contributed to our going back into market flow. We also improved the broker onboarding processes, which allowed us to be much more friendly in that channel. However, I want to remind all of us that mortgage is a very, very important need of our customers, and we will continue to compete in this segment, obviously, with a lot of intensity.
Nuno Matos: But as a transactional bank, it is not at the center of our strategy, and I will not repeat that. It is not. As you know, the returns of this product, of this business, for the industry, are borderline paying cost of capital. So, we see this as a business that needs to be delivered due to be a very important customer need. It is not a crucial business to deliver high returns from a shareholder perspective, okay? So we will continue to compete, but you should see us less present when margins are below cost of capital or irrational. You will see us more active when margins obviously invite to a more active role. Thanks, Richard.
Richard Wiles: Thank you.
Operator: Your next question comes from Ed Henning with CLSA. Please go ahead.
Ed Henning: Thanks for taking my question. Just further on your comments, just ended before on not growing volumes at the cost of margins. Can you just dig into that a little bit more on where you think system credit growth will be across the different segments of your business, and then incorporating kind of where you think you will be? You talked about today about adding bankers on the business side and also adding proprietary lenders. Also, can you include not taking any more flows into Suncorp Bank and how that will fit with you versus potential consensus, please?
Nuno Matos: Okay. Sure, Ed. Obviously, on the lending side, which I think it is part of your question, on the lending side, the mortgage business will grow at a slower pace. We all know that. I think, in my opinion, that is not relevant for the industry from a return perspective. That, as I have been saying for quite some time, that business does not materially impact the returns of banks. If anything else, it anchors them around cost of capital. So, I am not concerned with that from a return perspective. Obviously, I would prefer the economy to be growing faster, and the mortgage market to be growing faster, but it is just not as relevant as it seemed to be. I am much more interested in making sure that we continue to grow out the size of our customer base. That is the bank we are.
Nuno Matos: It is not so much about growing volumes on our balance sheet. It is not so much inflating our balance sheet and competing for margin. It is gaining customers that really want to do business with us and have a comprehensive 360 relationship. That is how I see banking. That is how we see banking at ANZ. Double down on transactional banking, meaning we are the bank that wants to be with customers on a permanent basis, on a recurrent basis. For retail, it means to be their main account provider, their main payments provider, their main cards provider, and also, obviously, lending into their home lending needs. On business banking, it is to be their transactional bank, meaning, again, do their accounts, their payments, their FX needs, and also lending into this segment.
Nuno Matos: Certainly, on Institutional, it is again to be the bank that serves them, the bank of their CFO, of their treasurer, meaning, again, cash management, trade, FX. This is what is going to make us more profitable down the road. In terms of volumes, I would expect in 2027 to be close to the market. Remember, we started in 2025 being an outlier. Our flows were not in line with the market in many parts of our business. In 2026, clearly, we catch up materially H2, basically in line with market. In 2027, we should continue to consolidate that trend, but it does not mean that when we see irrational pricing, it does not mean we will compete for that. It means we will always prefer to deliver to customers, but at the same time, to shareholders. So, I hope I will give you a sense on how we compete in these markets, Ed.
Ed Henning: Thank you.
Operator: Your next question comes from Matthew Wilson with Jarden. Please go ahead.
Matthew Wilson: Yeah, good morning. Matt Wilson, Jarden. The shape of the credit book has materially improved over the last decade. There has been much less lending into the riskier segments like commercial property, transport and storage, agri, retail, wholesale, trade, et cetera. Your exposure to sovereign/financial institutions is now double that of your peers at circa 38%. This should translate into the lowest bad debt outcome for the sector, which is very different to what you have achieved historically and probably still the market's perception. Would you agree? Based on what we have seen in the Institutional book in the last H1, it would be very much a shame to turn on the credit tap just as the plug is being pulled from the economy. You have seen more cycles than your peers. How does it feel to you at this stage?
Nuno Matos: Well, Matthew, first, I think your reading is absolutely correct, and I think it highlights and acknowledges the work that the team did in the last decade. I want to give you some numbers to quantify what you just said, because again-
Matthew Wilson: Yep
Nuno Matos: numbers talk by itself. Again, our portfolio continues to be very resilient. That is the first message I would like to give. We are in a much challenging environment. These are the moments where we are tested, that our models are tested, and I hope our model will be tested in a positive way throughout this cycle. Our IP was 4 basis points in 2026. 4 basis points on the H1, 5 in the H2, a small uptick. Above all, the profile of our portfolio is structurally more conservative than our peers. I have the sense, us to blame, that we have not yet been able to translate this enough to you folks.
Matthew Wilson: Not all of us.
Nuno Matos: Meaning, and I will give you the numbers. If you just look into investment-grade percentage, we are by far the highest investment-grade exposure in our balance sheet versus our peers, by far. If you go to Institutional, 92% of our portfolio is investment grade. 61% of our portfolio Institutional is FIG and sovereign, which is lower risk. 81% of our corporates are investment grade, and the rest are fully collateralized. In the H2, to your question, and now addressing a little bit your question, in the H2, of the lending we did to Institutional, 97% was investment grade, right? In Business Banking, 83% is collateralized with property. Our IP in Business Banking went down from 2025, from 9 basis points to 7. This is not because the market is better. This is because our risk selection is better, okay?
Nuno Matos: Our watch and control lists in net terms went down from 25. Fair to say our control sub-component went up. We are still, my point is, we are still benefiting from decisions on risk and capital allocation that we were taking in the last years. We have no private credit direct exposures at all. We have co-lending with, obviously, with private credit, but we do not lend to private credit directly by no means. I think it is a number that the market should look into it. Our CP coverage of IP, it is 13 years. Our peers are between 5 and 9. When someone says, "Yeah, but you are 120 on CP coverage, 1.2%." Well, but our portfolio is so different that when you divide CP by IP, it is 13 years versus others, 9 to 5. Do not expect us to change that.
Nuno Matos: We are not changing our investment, our risk appetite. We are not relaxing. We are a firm believer on a bank that wants to be here for the cycles and that bets on flow business, transactional banking, fees, and so on. We are going to get there as we continue to improve our capabilities. Thanks, Matthew.
Matthew Wilson: Thank you. Very clear. Cheers.
Operator: Once again, if you wish to ask a question, please press star one on your telephone. Your next question comes from Tom Strong with Citi. Please go ahead.
Tom Strong: Oh, good morning, and thanks for taking my question. Perhaps just to follow on from the last question, a question for Farhan perhaps, just around the provisioning and when we've talked about, I guess, the level of conservatism. We've heard 13 years, AUD 2 billion above the base case, and 53% weighted to downside scenarios, which would be quite unusual in the global perspective. I mean, given all that, should we continue to expect a slight moderation in the coverage ratio, or how do you sort of think about that over the next 12 to 18 months?
Farhan Faruqui: Look, I think, Tom, I do not think we will give you a forecast for where we think the coverage ratio is going to be because that is going to be a function of what happens in the environment and how we see our portfolios behaving and what the transmission impact is to the Australian economy, et cetera. So, it is hard to give you a ratio. But I think what we can certainly say is that we feel at this point, certainly based on the stress testing we have done, and I mentioned some of that in my prepared remarks around the work that we are doing, for example, on the Australian mortgage portfolio, testing it across price, across home prices, rates, unemployment, et cetera, that we feel that we have substantial coverage.
Farhan Faruqui: We have taken over AUD 300 million of incremental mortgage collective provisions over the course of the last 18 months to protect ourselves for that. However, as Nuno Matos went through the detail on Institutional and Business and Private Bank, we certainly do not expect to see further substantial deterioration unless there is an incredible event globally that causes that. So as far as we are concerned right now, we do not see any reason. Having said that, we have said that our long-run loss rates are closer to 11 basis points. We are currently operating at 4 basis points from an IP loss perspective. To say that that will not grow at all over the next 2 to 3 years, especially if the environment remains where it is, would be unreasonable in my view. So I think there will be some level of increase around where the IP loss rates are.
Farhan Faruqui: We will have to watch that, and we will have to make sure we are managing our portfolio for that. But I do think that we are not suggesting that our plans currently expect or anticipate the fact that we are going to remain at these low levels of loss rates for the next 5 years.
Nuno Matos: Yeah. I would just say to add to Farhan Faruqui's, it is obvious that the Australian sector, banking sector, it is extremely prudent in capital and in provisioning. That explains in part why you guys, you folks, you attribute a very low cost to capital to the sector. It is very obvious and high multiples. I do not think that will change. Those are the settings of the industry. But with time, I would assume that it will normalize. But do not expect us to change the settings within time, by no means. Thank you.
Tom Strong: Thanks very much.
Operator: There are no further questions at this time. That does conclude our conference for today. Thank you for participating. You may now disconnect.
