Earnings Transcript for ANZ.AX - Q2 Fiscal Year 2024

Jill Campbell: Good morning, everybody. I'm Jill Campbell, ANZ's Head of Investor Relations. Thanks for joining us for the presentation of our First Half Financial Year 2024 Results. We're presenting them from ANZ's offices in Melbourne on the lands of the Wurundjeri people. On behalf of the ANZ team speaking today, I pay my respects to Elders past and present, and I extend those respects also to any Aboriginal and Torres Strait Islander peoples joining us for today's presentation. Our results materials were lodged this morning with the ASX. They're also available on the ANZ website in the Shareholder Center. A replay of the results presentation, including the Q&A will be available on our website from around mid-afternoon. The results materials and the presentation being broadcast today may contain forward-looking statements or opinions. And in that regard, I draw your attention to the disclaimer on Page 2 of the slide deck. Our CEO, Shayne Elliott; and CFO, Farhan Faruqui will present for around 35 minutes. And after that, I'll go over the procedure for Q&A before moving to questions. Ahead of that though, a quick reminder that if you do want to ask questions, you can only do that on the phone. And with that, Shayne, I'll hand to you.

Shayne Elliott : Thank you, Jill, and good morning, and welcome, everybody. There are 5 key messages from the half. First, this is a result about consolidation and delivery. We delivered what we promised and coming off of record 2023, these are strong results. Second, diversification served us well with momentum across all divisions from targeted investment, efficient capital allocation and strong risk management. We have options, others don't, and we use them well. Third, we made progress where we said we would, preparing for Suncorp, growing ANZ Plus, leveraging institutional processing platforms and delivering productivity. Fourth, we use productivity benefits to fund investment and growth, including ANZ Plus, institutional's digital backbone, upgrading New Zealand's core banking platform and growing our commercial business. We're not milking the franchise but investing, intending to build and sustain the most contemporary digital capability in each business. Finally, we continue supporting customers through challenging times with a fortress balance sheet, a diversified portfolio of businesses and an experienced team. And that support is needed. As well most remain resilient, higher interest rates, taxes, rent and household expenses are hurting many. The number of customers in hardship rose this half and while still lower than it has been in the past, it's extremely distressing for each of them. And we expect that number to rise further as cost of living bites harder and unemployment likely increases. But I do want to assure those customers that we are here to support you. And for example, we developed a world-first AI transaction scoring capability for retail and small business customers, which means we can identify customers at risk of distress around 40 days earlier than usual, so we get customers back on their feet more quickly. We also support customers by keeping them safe. Now providing a safe place for their money has been core to our business for 196 years and always will be. And that's why investing in security is our #1 priority. Now being a simpler, stronger bank helps, meaning we're really enabled to help those in need with the right tools at the right time to keep them safe; safe from criminals, safe from hackers, safe from scammers. And sadly, people are more susceptible to scams in times of stress. So, we will continue to invest here as well. And you may have seen our latest advertisements with the return of our hugely popular Falcon, but also an anti-fraud system flagging suspicious transactions. Now the ads are fun, but they carry a serious message about extra layers of security through ANZ Plus and the protection Falcon technology provides. In fact, we're adding more scam-safe controls to ANZ Plus, including disabling screen sharing, limiting transfers to crypto exchanges and better identifying unusual activity from unexpected locations. And these efforts are making an impact. And while still too high, it's good to see the amount that customers are losing to scams is falling. Now, turning to the financials. This was a strong half. Of the back of a record result in 2023, cash profit was down just 1% on the previous half. We strengthened our balance sheet, increasing Common Equity Tier 1 ratio to 13.5%, and we maintained our collective provision balance above $4 billion, still 20% higher than pre-COVID. Return on equity was 10.1% or 10.7%, excluding the capital held to purchase Suncorp Bank. Revenue was flat half-on-half, but with the mix shifting towards institutional, offsetting a more subdued domestic retail market, showing the benefits of diversification. Expenses were very well managed, growing only 1% despite absorbing annual wage uplifts and price increases from technology vendors in particular. Credit costs remain remarkably low. Now while that's true across the industry, we are confident that our transformed and derisked customer base is delivering sustainably lower credit costs. Institutional grew revenue again and posted record return on equity domestically and internationally. Customer revenues in markets performed particularly well, growing 30% half-on-half with most of the growth coming from our international network, again demonstrating the benefit of diversification. The institutional pivot from a lending business to one built around digital payment and currency platforms has transformed underlying performance and positions us beautifully for better long-term growth with sustainably higher returns. New Zealand delivered consistently yet again. Australia Retail produced strong growth in home loans without leading on price and commercial continued to deliver our highest return on equity while growing loans 7% and deposits 3% versus the prior year. And finally, we further simplified the group selling 16.5% of AmBank. Now this added to our already strong capital base, providing the opportunity to return $2 billion to shareholders via the buyback announced today. And reflecting the overall strength of our result and confidence in the future, the Board announced a higher dividend of $0.83. Now as mentioned, we executed key priorities well, Suncorp, Plus, platforms and the productivity required to fund it all. So let me talk to each in turn. The Australian Competition Tribunal authorized our proposed acquisition of Suncorp and legislation has been introduced in Queensland to allow it to proceed. Now these are important milestones, and we commend the Queensland government for recognizing the significant benefits the transaction brings. That said, we still have conditions to meet, including passing that legislation and approval from the Federal Treasurer. Now we're almost 2 years into the process and while taking longer than anticipated, we're using the time productively and are more confident of the substantial benefits that will flow. It's a bit like training for a marathon. Ray State got postponed, but we kept training, and now we are fitter and faster. For example, we are piloting a generative AI tool to radically reduce the time to compare, contrast and harmonize thousands of terms, conditions, procedures, policies and contracts of Suncorp Bank and ANZ, which will accelerate and derisk integration. Now going well, we expect to finalize the acquisition in August and we'll then provide an update on the timing and scale of benefits. The digital transformation of Australian Retail is gathering pace. 2 years ago, I shared our ambition for ANZ Plus to become more attractive, engaging and secure for customers and more efficient and resilient for shareholders. And it's clear we've made good progress. On average, we attract around 35,000 customers every month, around half of which are new to ANZ. And despite that rapid growth, average deposits have held consistently at about $20,000. As of yesterday, we had almost 700,000 customers on Plus approaching $14 billion in deposits, which is 8% of our retail deposit base. Net Promoter Scores are consistently higher than peers and customers are highly engaged with 47% using at least one of our financial well-being features. ANZ Plus home loans are in market in limited release and we recently completed final regulatory steps to allow us to increase volumes. As we build scale more generally, our cost to acquire and cost to serve on Plus continue to fall and are now 45% and 30% below ANZ Classic with that gap increasing. And the economics are compelling, but the strategic value of Plus is our ability to pivot and innovate at pace. And one of those pivots is preparing for Suncorp, where we will build out propositions on Plus to match and exceed Suncorp services so we can safely move their customers to ANZ leveraging scale and maximizing synergies. Looking ahead, we are already exploring and piloting generative AI across ANZ Plus to provide better tools to manage money, resolve inquiries, provide property valuations and detect fraud. Now another key focus is leveraging our institutional platforms. As you know, ANZ operates one of the largest payment platforms in the region, processing around 60% of Australia and New Zealand correspondent clearing payments, providing services to 90% of the world's globally systemic banks. We process $164 trillion in payments in, out and around the markets in which we operate every year, which is more than 60x the GDP of Australia. Now built for institutional, these platforms are now used by other divisions and customers to drive scale and grow revenue. While Australia and New Zealand remain core, our international network is critical for growth and already 3 of our largest payments customers are Asia-based, with international payments growing an impressive 8.5% over the year. More broadly, we continue to grow payments market share with digital payments up 7% versus a year ago and NPP agency payments up 20%. Now payments innovation is essential to sustain success and we recently extended leadership, becoming the first major bank to go live with a natively built API-enabled Pay To service for billers in Australia. This allows businesses to send a payment request to their customers via secure digital platforms, which customers can then review and accept. It's safer, faster and cheaper, but to be successful requires the scale of a leading payments platform like ANZ. Now the other driver of sustainable success is the volume of payments processed via customer systems directly integrated into ours. And once integrated, these channels are difficult to replicate. And these volumes grew strongly at 11% compared to a year ago and 39% over 2 years. Now none of this investment in growth is possible without productivity. For example, in Australian home loans, we've leveraged automation to reengineer processing and in this half, improving productivity by 13%, further improving turnaround times and partners and customers notice with our broker NPS increasing to a record level and market share rising. Another good example are the 3,000 engineers using generative AI, copilot tools to rewrite bank software, delivering material gains in engineering productivity. Finally, optimizing our workforce across 29 markets is also key to efficiency. We have the largest offshore operations and technology capability of any Australian company with 10,000 colleagues across Bengaluru and Manila who augment our skills in cyber security, transaction processing, sanctions checking, engineering, judgmental credit, generative AI and predictive analytics, and they will have an increasingly important role to play as we grow. Overall, ANZ has a good track record on productivity. It's a core capability as opposed to spotty interventions in response to a crisis. We're the only major Australian bank to have held reported costs at or below those of 2016. Now looking ahead, as a well-managed derisked and diversified group, we are well positioned to manage through what remains a complicated environment. The global economy has been resilient in the face of major shocks with wars in the Ukraine and Middle East. This year, 40% of the world votes and elections across countries that generate around 50% of global GDP. Despite tension, surprises to date have been few and credible transitions of power evident. But ongoing conflicts, geopolitical tension and more active industry and trade policy interventions continue to impact us all. China's economy is adjusting to structurally lower growth, but the region is adapting as capital is redirected elsewhere, and other Asian economies raise their presence in global supply chains. ANZ is a beneficiary of this shift. Now closer to home, the Australian economy is resilient. Consumption has slowed, but investment in government spending are robust, unemployment low and consumer confidence has improved. Now while growth is unlikely to pick up this year, strong household and corporate balance sheet suggests a hard landing is unlikely. In Australia, liquid household assets exceed total household liabilities by the largest amount in at least 25 years. Now clearly, these are aggregate numbers and the challenge for the community is around the disbursement of wealth and debt. Our customers, however, are generally better off than most, and that's why we don't see the levels of stress one might expect given headline economic indicators. Housing remains challenging. And even with public support, it is the weakest stream of investment activity, reducing labor mobility and raising social pressures. Competition for labor and materials and construction and infrastructure remains vigorous. We estimate the major project pipeline in Australia will exceed $100 billion by 2026 from around $40 billion pre-pandemic. Now around half of that growth is in electricity, highlighting the commercial opportunities presented by climate transition. That's a huge opportunity for us as Australia's leading institutional bank with our strength intermediating regional capital flow and #1 market positions in project finance, trade, debt capital markets, corporate foreign exchange and sustainable finance. Our diversified portfolio, unique global network, engaged workforce and fortress balance sheet, combined with careful customer selection means we are well positioned to deliver despite uncertain times. So looking ahead, our priorities are clear. We will continue to run the group prudently using our strength to support customers and leverage opportunities from our network. Pending authorization, we will acquire Suncorp Bank. We will grow ANZ Plus, while deepening customer engagement. We will grow our commercial business, leveraging our points of difference and extend our institutional banking lead in sustainability, currency and payments. We will invest in productivity, building capacity for the future. And finally, we will continue to foster a diverse and supportive culture focused on living our purpose to shape a world where people and communities thrive. I'm confident we're in an excellent position to deliver value for shareholders, customers and our people whatever may come. And with that, I'll hand over to Farhan.

Farhan Faruqui: Thank you, Shayne, and good morning, everyone. As Shayne said, this half was characterized by continued strong execution and delivering what we promised. From my standpoint, there are 3 key highlights. First, financially, off the back of a record year, we have delivered stable results this half. Revenues are flat half-on-half, cost growth constrained to a 1% uplift and low credit impairment charges reflect the quality of our portfolio. All 4 businesses have performed well and have exited the half with strong origination momentum. Our balance sheet is also stronger than ever. Second, strategically, we have made strong progress. Shayne touched on ANZ Plus and our continuing momentum in building and running a digital retail bank. We are also readying ourselves for the completion of the Suncorp Bank transaction, which remains subject to approvals. We remain confident that we will deliver on our promise of strong financial and customer benefits of the acquisition. We continued the simplification of the bank, completing the sale of a large part of our stake in AmBank, freeing up $668 million of capital. And finally, we delivered strong shareholder outcomes with total shareholder returns of 19% in the half. Our return on equity remains strong at 10.1% or 10.7% when excluding capital for Suncorp. We've announced today a $2 billion on-market share buyback. This is one of the largest capital management exercises that we have ever announced. In addition, the Board declared a dividend of $0.83 per share, partially franked at 65%. All of this reaffirms our commitment to deliver what we promise. Now let me turn to the details of our financial outcome for the half and my references will be to half-on-half changes unless I specify otherwise. Starting with operating income performance. Following a record FY '23 performance, we delivered operating income flat to a strong second half with ANZ's business mix, allowing us to deal effectively into the competitive environment. However, operating income was slightly up, excluding the one-off impacts of M&A such as the AmBank divestment and business closures. Our markets' business performance was outstanding with revenues 27% higher and 5% higher than the very strong first half of last year. Net interest income ex-markets reduced by $91 million, with strong business volume growth, partially offsetting margin reductions. Other operating income was up 7% this half and 20% on a prior comparable period. Now as you know, other operating income is impacted by several factors, including markets, business performance and seasonality. Therefore, the comparison that best reflects underlying business momentum is on an ex-market space is PCP. And on that metric, other operating income ex-markets was 11% higher. This growth was underpinned by the uplift in international transaction banking and corporate finance fees and from our cards businesses in Australia and New Zealand. Now I'll spend some time talking about net interest income and markets in particular. Starting with volume, we grew lending and deposit volume across Australia Retail, commercial and in New Zealand. Group average customer deposits grew 3% and average lending grew 2%. Once again, I'll make 3 key points here. First, Australia home loan volume grew at 1.5x system in the half. This is the third consecutive half of above system growth. This growth was delivered through improved process and propositions rather than leading on price. Retail deposit mix shift slowed and total average deposit volumes increased by $9 billion. While margin pressures from last year flowed through to impact half-on-half outcomes, actions taken by the business resulted in a retail exit NIM up 1 basis point, March '24 versus September '23. Secondly, commercial business momentum has been particularly strong with loan growth of 7% year-on-year. The last 12 months represent the strongest period of absolute loan volume growth ever in the commercial business. This has been driven by continued momentum in our larger segments, particularly health and agri. We also saw a return to growth in the small business segment and we are scaling digital offerings, harmonizing policies and intensifying our focus on sales and service, making it easier for our customers to do business with us. If we exclude the impact of management actions relating to the sale or rundown of some of our asset finance and investment lending portfolios, underlying loan growth was 8% year-on-year. Our pipeline remains very strong and we expect to continue growing above system. Thirdly, in institutional, there was a shift from bank debt to bond markets. Despite this shift, which impacted loan volumes, institutional grew lending revenue while capturing the bond market shift in our markets business. Total institutional deposits contracted over the half. However, at call operational deposits grew and lower margin deposits were actively managed down. These outcomes across lending and deposits resulted in institutional NIM ex-markets expanding 3 basis points. A combination of diversification, active margin management and volume momentum has stabilized both underlying NIM and net interest income over the last 3 quarters as evident on this slide. Our focus remains to allocate capital to the most return accretive opportunities across our businesses, driving volume growth to optimize net interest income. Group underlying NIM as a result of our management actions was limited to a 2 basis points decline. As I just mentioned, pressure on asset pricing reduced with assets contributing 4 basis points to the NIM decline versus 7 basis points in second half '23. Active management of our liability pricing and the asset and funding mix allowed us to hold NIM flat in both categories. There was a continuing NIM benefit from the capital and replicating portfolio, which in this half, again provided a 3 basis points uplift. While the impact of capital and replicating portfolio may vary in each half, we expect it to be a tailwind at least over the next 2 to 3 years with the net benefit dependent on volume changes. We are very encouraged as we exit the first half with benefits of diversification, strong balance sheet and stabilizing NIM, all supportive to net interest income. The markets business delivered its strongest first half performance since 2017, with total markets income up 27% and customer franchise income up 30%. The customer franchise performed well in each product segment and was able to harness higher client demand in certain rates and commodities offerings. Also important to note that our differentiated international footprint accounted for 2/3 of the growth in franchise income on a year-on-year basis. It's also important to note that while the markets business has been historically characterized by revenue volatility, the growing strength of our customer franchise has delivered 40% growth over the last 3 years and has been consistent in its performance. This consistency of markets franchise income is underpinned by the reasons our clients choose us; the suite of capabilities that we have built over several years of investment in combination with our unique footprint across the region. It's also because of the high quality of our customer base, which represents some of the largest companies in the world. I'll turn now to how markets activities flow through to group revenue and how this impacts the group net interest margin. While markets income increased 27% this half, this comprised a 36% increase in other operating income, partially offset by a reduction in net interest income. That was due to higher funding costs. Consequently, the impact of markets activities on the group NIM, delta was an adverse 7 basis points. This comprises 5 basis points from higher growth in markets assets relative to the group and 2 basis points due to the higher funding costs. Now I won't spend time on the accounting for markets income as we detailed this in the roundtable session we ran in March and those materials are available on our website. But it is important to reiterate that the markets business is run to optimize return on equity and total revenue. And in fact, the very things that drove total markets revenue and ROE uplifts in the half also adversely impacted headline group NIM. Now moving to costs. Our disciplined approach to cost management constrained expense growth to 1%. This is despite our largest cost component, our people costs being impacted by inflation from October 1. While we continued to progress execution of our strategic priorities, we delivered our highest level productivity benefits ever in this half. As a result of these actions, our FTE reduced by 350 across our higher cost locations in the half, which reflects ongoing optimization of our footprint, technology simplification and continued investment into automation and digital channels. As I mentioned many times, productivity is an ongoing discipline for us with more than $1.5 billion of benefits delivered since 2019. Our productivity efforts this half have focused on continuing to simplify our technology with almost half of our targeted applications now hosted on cloud, consolidating and rationalizing areas within our head office functions and continuing to build out our group capability centers. Productivity is improving customers' experience, allowing them to engage with us via their channel of choice. For example, in Australia Retail, close to 1 million conversations were undertaken through our Message us capability in the half, up 58% with 40% of those conversations not requiring banking support. Meanwhile, in commercial, almost half of our small business lending applications were processed through streamlined processes that translated to a 10% reduction in time to money year-on-year. Digital origination of transaction accounts increased 35% year-on-year. It is this continued focus on productivity that allows us to invest in our strategic initiatives and drives business growth and momentum. Moving to individual provisions. The work we've undertaken over a number of years to reshape our lending book continues to drive strong credit quality outcomes. In line with the last 2 years, this half, we saw another low IP loss rate outcome of 1 basis point with a charge of $38 million. We believe the outcomes of our portfolio improvement are long term in nature and have delivered a structural change in expected loss rates, resulting in our peer-leading low provision charge and IP loss rates in recent years. Like the rest of the sector, we are starting to see pockets of stress emerge primarily in parts of our Australian mortgage and New Zealand mortgage portfolios as our customers deal with the impact of high interest rates and significant cost of living pressures. We continue to work with our customers to provide any support required. It is important to note, however, that these delinquency increases are off a historically low base and delinquency levels continue to remain below 2019 levels. I'll comment briefly on the collective provision balance, which stands at $4.05 billion. Since the first half of 2020, we witnessed a number of pronounced economic trends, a pandemic, a massive influx of liquidity, the subsequent rapid rise in cash rates, a dramatic rise in and stubborn levels of inflation and a steep rise in home loan interest rates. Over the past year, these conditions have moderated. As a result, several economic indicators are beginning to move back into a more normal range. At the same time though, as I said earlier, there are signs emerging of stress in parts of our New Zealand and Australian housing portfolios. Now post the introduction of AASB 9, banks were required to take more of a forward-looking view of expected future credit losses, including management's forward-looking views on the range of potential impacts. As we see less of these extreme events and we return to what we could characterize as more normal economic conditions that could provide us with the comfort to reduce the weightings of both the downside and severe economic model scenarios and consequently increase the weighting to the base case economic scenario. The outcome of such changes would naturally result in a future release to our current collective provision levels. However, given the level of volatility and uncertainty that still exists from a cost of living, inflation, direction of interest rates and a geopolitical perspective, we believe our provision levels are prudent and appropriate for now. We have further strengthened our balance sheet with high levels of capital and liquidity. Our CET1 ratio at the end of the half was 13.5%, including the impact of the partial sale of our AmBank investment. Our CET1 ratio pro forma for both Suncorp and the $2 billion on-market buyback remains very strong at 11.8%. On an internationally harmonized basis, we continue to be one of the highest capitalized banks in the world. This capital strength provides capacity to support our customers and to take advantage of growth opportunities when they are on strategy and return accretive. We also announced today $0.83 per share dividend, partially franked at 65%. The franking reflects the geographically diverse nature of our business, including the strong performance of our non-Australian businesses. We will continue to maximize the distribution of franking credits to our shareholders as they are more valuable to you than to us. I should note that post completion of Suncorp Bank, our franking generation will improve. Similarly, our liquidity position continues to strengthen with an LCR ratio of 134% and a well-diversified funding base by geography and by customer segment. We have also replaced our TFF maturities and have completed two third of our full year term funding needs in the first half. Looking forward, my areas of focus support the group key objectives, as outlined by Shayne. First, our financial performance remained strong with all 4 businesses performing well and with management actions producing stable NIM outcomes over the last 3 quarters. Looking forward, we see margin headwinds moderating as deposit mix begins to stabilize and asset margins become less of a headwind. We are optimistic that the current trends, our business momentum and diversification will be supportive to net interest income. The competitive environment, however, remains unpredictable and we will continue to refine our settings to optimize our financial outcomes. Second, diversification remains a positive differentiator for us, particularly because of 4 largely uncorrelated businesses. Having a set of healthy businesses is crucial to leveraging diversification benefits. In our case, all 4 divisions and each region are meaningful contributors to the group performance, are each profitable with above cost of capital outcomes, and we continue to target growth across our portfolio. Third, we are consistently executing our strategic initiatives and will accelerate where we feel appropriate. For example, in the second half, we will uplift investment in preparing Suncorp Bank for integration as well as accelerating the work required to seamlessly transition our existing customers and Suncorp's customers to the superior ANZ Plus propositions. Fourth, we have a long-standing focus on cost management. While fully offsetting very high levels of inflation remains challenging, you have seen us demonstrate a disciplined and growth-oriented investment approach and a consistent focus on productivity for many years. You should assume this continues. And finally, we remain committed to maintaining a strong balance sheet. This is vital for us because it allows our businesses to deliver our commitment to our customers, provides us with the capacity to access accretive opportunities. So with that, thank you very much, and I'll hand you back to you, Jill.

Jill Campbell: Thanks, Farhan. A reminder, if you want to ask a question, you need to do that by the phone. I'll hand to the operator, Ashley, who will just very quickly walk you through the procedure, which you've heard a million times, but we're going to tell you again, and then we'll hand to Matt Wilson for the first question. Thanks, Ashley.

Operator: Thank you. [Operator Instructions]. I'll now hand back to Ms. Jill Campbell.

Jill Campbell: Thanks, and over to you, Matt.

Matt Wilson: Matt Wilson, Jefferies. Just a couple of things on capital. Firstly, you've still got your APRA overlay of $500 million. Is there any sort of clarity or color you can provide as to when it can be released? And then when we look at the risk intensity of the home loan book, it's sort of moved from 27% to 30%, which is well above peers. Is that an opportunity for optimization going forward?

Shayne Elliott: Farhan, do you want to...

Farhan Faruqui: Yes. Maybe I'll take the capital question first, Matt. Thank you for that. Look, I think at this point, our the -- sorry, I didn't remember the question...

Matt Wilson: The $500 million overlay.

Farhan Faruqui: Yes, the $500 million overlay. So, the operation risk overlay is something we are continuing to work on and we are investing, obviously, in ensuring that we are meeting the requirements from an APRA standpoint as well as improving our own operational risk outcomes. That work is well progressed. We continue to engage with APRA on that and we will potentially provide more feedback to you once we have more development on that. But look, there's no timing at this point that is clear. But I can assure you that our work is progressing very strongly. On the second question on the home loan risk weights, look, they're affected by some model impacts. We are discussing those with APRA as well as looking at product mix and other impacts of things like the Breakfree product expiring. So, we will continue to work with those model changes and continuing to engage with APRA to see if we can get some reduction in our home loan risk weights, but it's in progress at this point, Matt.

Matt Wilson: Okay. And just finally on ANZ Slide 10, you gave us a breakdown of age group. Are you surprised that the products resonated more with particularly people over 50? But if you combine 35-plus, it's a larger percentage of the customer base. [Technical Difficulty] products resonate.

Shayne Elliott: It's a great observation. I think the reality is we are surprised. I mean I don't think we ever thought it was only for a younger sort of millennial cohort. It wasn't designed around that. It was designed around people with a saver mindset who wanted to improve their financial well-being. But I think the reason we put the data in there is precisely that. I think it's a far more diversified proposition than people may have otherwise thought. And what's been interesting to see is despite the growth in the chart there, we continue to grow, those numbers have remained remarkably stable. So, it wasn't like there was any -- yes, it's continuing to attract a diverse demographic over time. And look, I don't know, Matt, and we should probably do some work on it with Maile that for example, I think while it's digital, I think the high levels of security in that may well be attracting older people or I'm putting myself in that category, older people like me, may be more attractive to some of that. But yes, I think it's a really strong outcome actually, but we should do some more work on what the drivers are. Thanks, Matt.

Jill Campbell: And next one is Ed Henning from CLSA. Thanks, Ed.

Ed Henning: Ed Henning from CLSA. A couple of questions for me. Firstly, one, just on the cost outlook. Farhan, you talked about an uplift in the second half around the Suncorp investment. Can you just give us a little bit more of a feel on the outlook of cost as the first one? Any headwinds or targets coming into the second half from the first half is the first question, please.

Farhan Faruqui: Yes. Thanks, Ed, for that question. As I said, there are going to be uplifts and particularly around Suncorp integration work that obviously will get more momentum once we get the full approvals through. Look, at this point, as you know, there is also investment seasonality, typically, pretty much across all banks, first half is lower and then it picks up in the second half. So, I'm just pointing that seasonality element out to you through that point. We certainly see from a headwind perspective, vendor inflation still continuing. Obviously, from a salary and wages perspective, most of that impact has already come through in the first half because it goes up in October 1, so you won't see that being a dramatic shift in the second half. But as I said, we continue to work through productivity. We said we've delivered $200 million of productivity in the first half. Those benefits will continue into the second half and we continue to have a large pipeline of actions from a productivity standpoint that will also show up to offset some of these uplifts in the second half. So our -- overall, our guidance, Ed, is to -- is pretty much the same as what we had said at the end of last year, which is that we continue to be confident that we will offset a large -- some parts of the inflationary challenges that we have in front of us.

Ed Henning: And typically, obviously, with employees or wage costs being the biggest part of your component of your cost with that, the salary increase gone through. Is that a bigger headwind traditionally than the second half uplift in investment spend or will they both kind of neutralize each other out?

Farhan Faruqui: Well, I mean, so you won't see a further uplift in the salary and wages because that's already gone through. So that is a net zero uplift. But I think the real offset in terms of the impact from higher investment or other vendor inflation type headwinds is really more on the productivity rather than on the salary and wages being held equal. So yes, we -- it's effectively a productivity outcome that we are seeking in terms of offsetting inflation. I think it's important also that salary, the salary component that we've shown in our slides does have a few elements to it. So, it's obviously salary and salary related. So, when we talk about inflation, that number, which is on the slide on operating expenses, which is Slide #25, the $250 million, which is -- it includes salary and wages, it includes vendor costs and vendor inflation, and it also includes other salary-related items, such as long lead provisions, et cetera. So, we don't expect any of the salary items to repeat again in the second half in terms of additional uplift.

Shayne Elliott: I'd just add a couple of things, Ed on it. I'd say -- so first of all, relative to our peers, I mean we all suffer from the same environment. You could argue that given our international footprint and remember, more than half of our people don't live in Australia, they live somewhere else. And many of those places we operate in and actually suffer from higher wage inflation. We all suffered from the same sort of drivers. But ANZ, when you look at the half-on-half, clearly outperformed in terms of managing costs well. So I think that, again, shows our ongoing commitments around productivity. And then the second thing I would just comment on is the fact that, that is also not coming. Our management of productivity is not coming at the cost of under-investing. I mean, I think you're all aware that we capitalize very little of our investment, sort of I think Farhan can correct me if I'm wrong, at the latest, but it's around 15% of our investment state is capitalized. The rest is -- so we're not getting the benefit of putting stuff on the balance sheet and deferring it to later. And yet we continue to invest at or above the level of our peer group because as we want to build a stronger bank for the future.

Farhan Faruqui: Yes, that's correct.

Ed Henning: And just a second question on margin. Overall, running into the second quarter, the margin, the underlying margin fell by 1 basis point. In the bluenotes piece, you talked about the retail margin being up 1 basis point on the exit. You did well on the institutional margin that was up 3 basis points in the half. Can you just give us a little bit more of a feel of what you're seeing going forward on the margin? A couple of your peers have talked about the mortgage margin getting -- the outlook getting better for that and the headwinds easing, but any more commentary on the margin outlook would be helpful.

Farhan Faruqui: Yes. Ed, I think you've sort of -- you sort of described it really well. So on retail, we're starting to see some favorable trends in terms of the deposit mix stabilizing, the asset margin headwinds slowing, which is why we were able to exit March 1 basis points up from September. Again, in retail -- I'm sorry, in institutional, we've had strong discipline around margins for assets and deposit margins, we've been managing very actively to ensure that we have an overall margin expansion in the institutional business half-on-half. So again, positive trends going into the second half. We've seen some more pressure in terms of -- particularly in terms of liabilities in commercial. But again, those pressures have been easing as the mix shift has been slowing. And the New Zealand housing portfolio has actually expanded margins half-on-half. So, it's -- there are lots of favorable factors supporting margins going into the second half. As I said, the [indiscernible] rate will continue to be beneficial. We will have a smaller wholesale funding task for the second half relative to the first half, where we've done almost 2/3 of our wholesale funding for the year, particularly as the TFF matures. So, I think what I would say overall is that margins are looking stable going into the second half. Now, of course, competitive pressures as well as rate outlook because there's still different views in terms of the direction of rate movements will determine where we land up. But I think overall, I would say that margins are looking positive going into second half.

Jill Campbell: Thanks, Ed. Next question is from John Storey from UBS.

John Storey: I just have two questions for you. Shayne, I think you called out how the business has transformed over the last few years and how risk-adjusted margins have improved quite substantially. I just wanted to reconcile that with one of the tables that you've got in your 1 half results deck. Just looking at long run loss rates and just noticed that they've increased, particularly in the institutional business, they've gone from 19 basis points to 21 basis points. Maybe you could just comment on the thinking behind that.

Shayne Elliott: Sure. I'll actually, Farhan to...

Farhan Faruqui: Yes, John, let me just give you a quick answer on that. So the fundamental shift, as you said, has been in institutional, which are up 2 basis points half-on-half. Part of that is a mathematical outcome because we had lower facility utilization in the half. So if you like, the denominator is smaller, which increases the loss rate without any fundamental shift in terms of risk appetite and risk -- the kinds of risks we are taking. And the other part of it is largely driven by the fact that there's been some small business mix changes, which increases the weighted average -- the credit ratings of the overall portfolio. So, it's really nothing substantial. There's been no change in the view we take risk in institutional. There's been no downgrading of risk appetite. It's just partly mathematical because of lower utilization and partly because of the mix changes within the portfolio.

John Storey: And second question is just, Shayne, just for you, just around Suncorp Bank. Obviously, we've had a chance now to see, I guess, the impact of the mortgage competition on bank's results in this set of -- in this reporting period. Just wanted to get your sense on how you think about the competitive landscape and how you think about, strategically how you think about Suncorp Bank just given the change in the competitive landscape and the economics just more broadly, I guess, around retail banking. Has that fundamentally changed your views there?

Shayne Elliott: Thanks for the question. No, it hasn't fundamentally changed our views here. I mean I think we need to go back to basics here and remind ourselves why we're attracted to Suncorp Bank. What we're acquiring here isn't the home loan book per se. I mean, we kind of -- we get that for free, if you will. What we're really acquiring is 1.2 million customers, what we're after and what we really traded to is the deposit base. And that deposit base has significant value. And again, when we do the math and if you were to revalue the bank today versus when we acquired it, there's no doubt there's been a change in where that value is derived from and one might argue that the home loan book is a lower value today than it was then, but the deposit book is of higher value. And so the fundamentals are still strong. What we wanted, Suncorp, is we want the customers, we want the deposit base, and we want to be able to bring them over on to ANZ platforms, which we will be able to service them at a far lower cost. I mean, I point you again to those ANZ Plus stats today about the cost to acquire and cost to serve being 45% lower and 30% lower than ANZ Classic. Now we don't have total insight into the cost to serve and cost to acquire at Suncorp, but one is going to imagine that, again, the gap will be very, very significant. And so by moving those customers across, we can significantly generate scale at a much lower cost. But again, I'll just remind you, the value comes from the deposit base, in particular.

Jill Campbell: Thanks, John. Next question is from Andrew Lyons from Goldman Sachs.

Andrew Lyons: Just a question on your NIM, Farhan. Your disclosures today suggests that your ex-markets activity NIM was down 2 bps half-over-half. And yet when we look at your divisional disclosures, your retail NIM was down 12 bps, your commercial NIM was down 7% and New Zealand down 4%. Now I realize they're not entirely like-for-like, but can you just perhaps help us to reconcile, I guess, the top-down view of the group underlying performance on margin with the bottom-up divisional view? Is it just the ex-markets in-store was up 3 basis points? Or is there something else going on there?

Farhan Faruqui: No. Look, I mean I think largely that was the main driver of keeping some stability on in-store ex-markets. Obviously, replicating portfolio overall was a benefit as well in terms of a tailwind for the half. We've also had some small benefit in the center from, if you like, lower volumes. So look, -- and there's been some benefit, of course, of some deduction in the ESA account and shift to semi-govs, et cetera. So, a lot of those things have been helpful in terms of driving the overall margin reduction underlying to about 2 basis points. And yes, you're right, I mean, look, there is retail half-on-half, as I said, was really a flow-through of the impact of second half. And commercial, from a deposit standpoint has actually been -- is now -- as we exit the half is actually holding reasonably stable. So we -- the margin trends became increasingly stable as we went through the quarter. In fact, I would say that the exit rate for March is fairly stable relative to where the second quarter was.

Andrew Lyons: And then just a second question for you, just on your provisioning balances. You have $1.4 billion of CP above your base case and mentioned there might be an opportunity to reduce weightings to the downside over time. Can you perhaps just provide some context as to how close to your base case CP might you be willing to move? Or maybe another way to ask the question is, what weighting could you see the 46% of the base case move to over the cycle?

Farhan Faruqui: Yes. Look, I'm happy to start, but I think maybe Kevin or Shayne, you might want to add. Look, I think it's impossible to know today what's going to happen over the next 6 months. My comment and remarks were basically around the fact that if the environment continues to become more normalized as we start to see some of those environmental factors moderating, then there is absolutely potential to reduce the severe and downside weightings that move towards base case, which, of course, ends up releasing collective provisions. Now we are in that normalization process. We have to see how the next 6 months play out. As I've said, there's a lot of things that remain open, as you would agree, John, because we've had -- we don't know the direction of interest rates. There are different views in terms of what interest rate directions will take. Inflation continues to be, it's too early to call it if you like. So, it's hard to say when and how much. All we are saying is that today's trend would suggest that there is potential for a collective provision release assuming no other environment.

Shayne Elliott: And before we hand, I think, and you know this, but just to state the obvious, mathematically, over the long run, you would expect the base case to be more than 50%. You would expect it to be a bell curve and you expect to be equally distributed between the upside and downside. And so we've ended up -- and along with the rest of the industry, in this quite unusual situation where base case is at less than half and all of the weighting is to the downside. So that's an unusual extreme. I think it's -- obviously, we think it's entirely appropriate given where we are as an economy, but you'd expect that to normalize in the base case to certainly be above 50%, if not sort of around that sort of 2/3 number with a tail on either side. But Kevin, I know you've done some modeling.

Kevin Corbally: Yes. The only thing I'd add to what you both said is that the accounting standards actually require us today to take a forward look into what we believe future economic environment might be like and the impact on our customer base. So if today, we believe that it was going to be different, we would have actually reflected that in the numbers. What we are seeing, though, is there's been a lot of stress over the last 4 years, a lot of volatility to the extent that were to return to what I'd classify something akin to normal conditions, then we would probably look, as you said, Shayne, to allocate more towards the base. And at the moment, just to clarify, we've got $1.9 billion above the base case. What you would expect if we have more normal conditions is that we would allocate more towards base. But at the moment, we think our levels are prudent and appropriate for what we see in the environment today.

Jill Campbell: Thanks, Andrew. And we'll keep with the Andrews now, Andrew Triggs from JPMorgan. Thanks, Andrew.

Andrew Triggs: Can I ask a question, please, on Slide 30. The ROE, divisional ROE slide, which is helpful, it shows the retail bank at 11% moving up towards the commercial bank at 25%. If you show that to someone for the first time, that would assume the group NIM would -- sorry, the group ROE would be much higher than it was, which was 10.7% when you strip out the Suncorp Group capital. Can I just be clear, when you, I guess, judge your divisions, including in the retail bank where mortgage growth has actually been quite strong, that you're holding those divisions to account for sort of a fully allocated ROE, which shareholders actually see when you weigh all the divisions?

Shayne Elliott: Yes. It's a really pertinent question. So, the answer is yes and no. So, to the extent we do a little bit of both. So yes, so these ROEs are essentially on the controllable. So, if I look at -- just pick anybody or Maile, Mark or Clare or Antonia, these are their controllable deliverables, yes. And in terms of that's the balance sheet that they control, to a large extent, some of the costs are allocated, et cetera. So yes, this is primarily this. But then we, as a team, are clearly accountable for the whole. And so we as a team, very much accountable and in terms of our scorecards that we're accountable to our Board and as individuals and its divisions, we have both. So hopefully, that makes sense. So, there's certainly -- you're quite right. I mean the gap between the mathematical average of that and the group is material. And that is not left outside anybody's accountability. I mean, clearly, Farhan and I spent a lot of time on that, but my Group Executives are jointly accountable for that as well.

Farhan Faruqui: I think the only point I would add to that, Shayne, because it's an excellent summary. I think it's really a little bit of making sure that we hold the divisions accountable for the capital that they control and that they're required to hold from an APRA standpoint because that's the best way to judge their underlying performance. That doesn't mean, as Shayne said, that at a group level, all of us are accountable for the full capital, but it's about making sure that we are actually providing an appropriate apple-to-apple, if you like, view of how each division is performing from a return on equity perspective. If we were to, say, allocate all of Suncorp's capital to each of the divisions or all of the capital associated with our Asian partnerships, that -- we would have done our job in terms of ticking the box on allocation, but I'm not quite sure that either Mark, Maile, Clare or Antonia can control those outcomes. So, to some extent, it's about making sure we're judging the business on the underlying performance and then holding ourselves all accountable for the total group outcome.

Shayne Elliott: And one last, sorry, one last clarification, Andrew, every bit that's not in there, so whether it's the Asia partnerships or anything else that sits a group, somebody in my team, could be me, has primary accountability for that capital line, yes. So every single dollar of capital, the whole $70-odd billion, somebody has primary accountability for. And then as I say, we then jointly manage the whole. Hopefully, that makes sense.

Andrew Triggs: Yes. I guess the -- yes, I mean drilling into the Australian Retail component, so that was 11%. At the full year '23, it was 14%. I don't have the second half number, but obviously came down a lot. And that was -- you were growing home loan balances quite quickly in the period, and that was being done with cash back both, 2,000 in refi and 3,000 in first time buyer market. So, can you sort of explain -- I mean, if you throw Suncorp capital, I probably would ignore that, but if you were to put a normal loan loss charge on the retail division, the 11% ROE would be lower again.

Shayne Elliott: So good, great question. Yes, I can clarify that.

Andrew Triggs: If you can reconcile the growth in that division.

Shayne Elliott: Yes. No, that's a very good question. So, you're right that these numbers reflect actual credit losses. But we -- and again, I don't want to sound like it's overly complicated, but -- so we do what I just said, and we also look at that on an expected loss basis, okay? So to your point, the businesses also have an understanding of what their expected loss is. And that's when we do our pricing, so the pricing tools use expected loss. Yes, not actual. Now historically, just out of -- I mean, the one that's been the most different, the division that's had the most difference, I mean actual and expected has actually been institutional, and you know the history there. And obviously, that's better coming into better alignment. But we do measure on both expected loss, ROA on expected loss basis and ROE on an actual loss, but pricing is made on an expected loss basis. So just to give you a number. So in Australian Retail today, the expected loss rate we use is 5 basis points, but the actual is less than 1 basis points.

Andrew Triggs: Second question is just on ANZ Plus. So, you provided a bit of an update on the home loan origination piece. Interested just with the -- I think, if my memory serves, that the Suncorp customers will be migrated before ANZ Classic customers. Also interested, I think home loans was a testing bed for the lending product and credit cards would be put on later. Could you give an update please on the sequencing? And ultimately, I guess, what I'm after really is how long will we have the dual run costs of the platforms before you get genuine migration of the ANZ Classic customers across?

Shayne Elliott: So clearly, yes, again, that's a good question. We, actually -- just out of bunch, we took our Board through the latest update on this just yesterday, actually, we spent quite a bit of time on this. So, what we're doing is we're building a really contemporary digital resilient platform in ANZ Plus. At the moment, it essentially has a save and transact capability and an emerging home loan capability. Clearly, the home loan capability we have there today is extremely basic. And we have to build out its functionality to have joint borrowers, offset accounts, investment properties, all that sort of, first home buyer whatever, yes. So -- and then we have a road map for building that out. In modern tech world, that's not a waterfall thing we have, a hard-coded waterfall approach to when we do that. It will depend on the environment that we've got. The plan that you laid out is correct. The plan is that for retail customers in Suncorp, whatever the brand we decide is, whether it's blue, yellow, whatever Suncorp, ANZ, it doesn't really matter, we will move those customers on to the Plus platform to get the benefits of scale. We continue -- we still don't own Suncorp. We still don't have perfect insight into their technology stack and some of the technical details that we need to know in order to make decisions about the right timing. At the moment, the working assumption, given scale and given what we know, but it will -- it is almost certainly going to change is that we will migrate the save and transact customers at Suncorp first at some point. And then later, we would follow on with their home loan customers and it's likely that we would migrate the bulk of their home loan customers before we migrate the ANZ Classic home loan customers. What we're looking at is opportunities where it's not a binary choice if that makes sense where we can achieve a lot of the benefits of the better platform earlier than just sort of doing [bony-like] and what I mean by that, it's not going to be -- we, just all go all boots on Suncorp and then later do all ANZ Classic, it won't be. There'll be a blending point. The time at which we get to the benefits will accrue, we don't have to wait right to the end to start getting the productivity benefits. I mean we get those early on. And really where the benefits come as of our front book, if you will, becomes -- the sooner we make our front book offering on ANZ Plus, the sooner we get those benefits. And we're already seeing that and I mentioned the cost to serve, cost to acquire. We need to get to the same point. And that's not going to be in the next year or 2, where the vast bulk of our home loan acquisition front book will be on Plus. That's still going to be 3, 4 years away.

Andrew Triggs: But, Shayne is it fair to say a very large savings will be when the Classic gets turned off?

Shayne Elliott: When Classic origination gets turned off, because actually maintaining a home loan sitting on here also it doesn't really cost very much, not really. It's the acquisition where the cost is. And so the sooner we can acquire -- and it's the same with save and transact. The more we can get customers choosing on to the ANZ Plus platform. For acquisition, we get exactly those benefits we've just talked about, the 45% or 30% benefits, and it will be -- I don't know what the number will be in home loans. I mean the early testing on home loans are that the cost to onboard a customer in home loans is substantially lower than it is in Classic. But we're at very, very early days. But you're right. Once you move the front book -- that's where the benefit is not so much the back book. The back book, the cost of servicing the back book is it's important. We want to do it because it will actually help, but it's not really where the main game of savings will be.

Farhan Faruqui: But I think it's also fair that as we scale ANZ Plus, then some of the run costs of Classic will actually start to reduce as well. So you -- so there are benefits that are going to start flowing through. But ultimately, when we actually switch off the systems and origination in Classic, then of course, that's where the rest of the cost falls out. But it's not that we have to wait for that to get any benefits.

Jill Campbell: Thanks, Andrew. We'll go to Victor German from Macquarie.

Victor German: Thank you, Jill. I was hoping to ask a few questions on your Slide 22, and I apologize in advance for the shorter-term nature of my questions, but I think it's just important to understand the key margin drivers. So firstly, I know that your average interest earning assets in the institutional bank and the corporate center declined, which I'm guessing must have been driven by a reduction in liquids or reduction in ESA balances as GLAs increased. In the past, you have provided margin impact from liquidity, which was generally negative to margins but broadly neutral to revenue, it would be good to understand if that was a driver in this result and where it was captured in first half '24? And I'll ask my second question after.

Farhan Faruqui: So just that I understand your question, Victor, you're basically asking what is the impact in the underlying movements on assets and funding mix driven by liquids. Is that what you're saying?

Victor German: Yes. I mean maybe you can give me a better explanation, but I'm just sort of looking at your average interest hitting assets and they are kind of flat and the reason they're flat is because the corporate center is down and institutional business is down. So, I'm assuming, I'll let you tell me whether it was driven by liquids or reduction in ESA balances. And in the past, there was a drag to margins, which you generally highlighted or be neutral to revenue. I just want to understand how that plays out in this result.

Farhan Faruqui: Yes. So look, I think the -- from an asset and funding mix standpoint, there is a benefit that comes from the reduction in ESA and move into the -- into semi-govs, et cetera. That benefit is roughly about 1 basis point. That's the shift from liquids in the group center. So, that is a positive in the assets and funding mix. And the negative is the obvious things like the mix shift between saving -- sorry, from save and transact to TDs. That is a negative. So overall, it balances out from an asset and funding mix standpoint. I think the other thing to note though, Victor, is that overall, from a group standpoint, it's actually better to move the liquids into semi-govs out of ESA because you get a margin uplift. So, it's an overall revenue positive, the shift from ESA to semi-govs. But overall, as I said, the shift in deposits, offset by a better outcome from a liquid standpoint.

Victor German: So about 1 basis point. And actually, interestingly, my second question was actually kind of you partly answered it, but I think it'd just be good to get a little bit more color on what's behind the deposit pricing piece and the asset and funding mix buckets in the waterfall, which is showing kind of net balance of 0 despite the fact that we know that TD pricing is higher and the impact of mix is still negative as we can see on your balance sheet. And I know that when you adjust for differences in the way that you disclose your replicating portfolio to your peers, it appears that your headline trends from kind of both of those are materially better than the peers. We've disclosed about 5 basis point decline in margins as a result of those issues. So, it'd just be good to understand why your trends are better and whether there is any potential timing differences? Or why is it such a small impact to margins from deposit pricing and deposit mix?

Farhan Faruqui: I think it's -- so the deposit mix is overall about 2 basis points adverse half-on-off. Asset mix benefits effectively counter that from a divisional weights point of view. So more commercial growth, lower trade in the mix, et cetera. So that's sort of the broader mix factor. From a deposit pricing standpoint, as I said, we've got benefits in terms of institutional because we had better outcomes from an institutional deposits ex-markets perspective. We had more pressure, if you like, in New Zealand and commercial. So, they offset each other as well. So, it's basically a lot of ins and outs, Victor, that effectively negate the pressures that we had from ATD perspective. So at call, for example, institutional is up, while TDs are down. So that helps negate some of those deposit pricing pressures.

Shayne Elliott: I mean, the simplistic answer is it's the benefit of the diversified book that we had. We have to use that diversification actively and use it well. So, it's not an accident, but that is where -- that you say you're right, we have more moving parts here. And it means if we use that smartly, which obviously we think we do, we're able to offset whether we see adversely or how to offset that by managing on the other side.

Farhan Faruqui: And it's a bit of a grain to be honest, Victor, to what Shayne is saying. I mean it's not one of those things where you just make a broad settings decisions at the beginning of the half and then run through the whole half. We're actually doing this on a weekly basis. We're looking at where we need to reduce, where we need to increase, how we want to change price, et cetera. So, it is very much a targeted outcome. It's not sort of one that just falls into our laps.

Victor German: And it sounds from your earlier answer that those 2 buckets, the deposit pricing and the mix bucket, you think should be broadly similar in the second half as you've seen this half?

Farhan Faruqui: Yes. I mean there's nothing to suggest at this point just based on where the trends are when we exited March, that would suggest otherwise. So, we think that is likely to be stable, but Victor, you know as well as I know that it's impossible to sit here and predict 6 months out. We just have the confidence to the point that Shayne was making that we have a balanced portfolio where we can continue to allocate and make sure we get the most optimal outcome. But current trends certainly are encouraging.

Jill Campbell: Thanks, Victor. We'll go to Richard Wiles from Morgan Stanley.

Richard Wiles: I'd like to ask some questions on ANZ Plus also. Shayne, you've been going for about 18 months with the deposits. You've grown $14 billion, which is quite a big number, but it is only 8% of the deposit base. So, my first question is, how long do you think it will take to migrate all the ANZ deposit customers to ANZ Plus? Is this a 3 or 4-year program? Is it a 7- or 8-year program? And then my second question relates to pricing. I think the rate is 4.9% for the savings account at the moment. That's a pretty high ongoing rate for a savings account. Westpac eSaver is 1.1%. CBA NetBank Saver is 2.35%. So, how are you going to ensure in the medium term that ANZ doesn't become a high-cost deposit franchise once the customers migrate?

Shayne Elliott: Great questions. All right. So, let's talk about -- so in terms of migration. So, we're really pleased with the fund growth. Remember that $14 billion, around half of it is new to bank. So, these are people that are not migrating. These are people who are choosing to come to ANZ. In terms of how long it will take. Remember, at this point, people are opting in. We're not -- we haven't migrated anybody. We've put an offer out there and people are free to choose. And pleasingly, 35,000 people a month are choosing ANZ Plus and that numbers remain remarkably consistent. So, in terms of when you start, we hope to do a test migration later in this calendar year, where we will actually take some digital native ANZ Classic save and transact customers. People who don't have a credit card and home loan on all that, relatively simple end and move people across. We'll do that as a test, just like we've tested everything else and plus to make sure it's a great experience and that it works and customers like it and that we can do it. And then we hope to scale up migrations and we do that in waves. It won't be migrated. It's one of those things you do over a weekend or et cetera, we will do it in waves, depending on customer behavior, the usage, the attractiveness of that customer we'll move people over. It's not a 5-year migration. When you talk about savings and transact accounts, it's a couple of years. It's not 5. And the reason we don't have -- I don't have a perfect number for that. I mean we have a plan, Richard, I'm not going to share, but we've got to find out, we've got to go and test and see how this works and what the customer reactions are to it. You will see today already -- and hopefully, you are an ANZ customer. If you are an ANZ customer, you'll be already receiving some information from ANZ Classic that is preparing customers for that migration. So, we're simplifying our portfolio, modifying some of the terms and conditions, et cetera, getting ready for the time, whenever that might be, over the next couple of years, where we will move people across. So that's sort of the timetable for that. Obviously, customers who are more complex like somebody like myself who has a savings account and a credit card and a home loan, they will be later, but we've actually got some really great ideas that we're piloting and working on that we can certainly from an opt-in point of view, encourage those people to move some of that relationship like I do today, where I bank my savings and everyday banking across some Plus, but have my home loans sitting in Classic and a way to make that delightfully easier the term we use but to make that relatively simple. So that's the plan there. So, next year will be really to start the heavy lifting on migration of Classic customers for save and transact and that's when you'll start to see those volumes hopefully start to rise in terms of value. In terms of the point about rate, it's a fair question. Obviously, with the new product we wanted to be out there. Remember, it's new. And by any measure you look at, it's the most successful launch of a new banking platform in Australia compared to Neos or other bank sub-brands in terms of the rate of growth, and we monitor that pretty closely. What we did more recently is we have not -- we are not -- I mean, you've chosen a couple of competing products. We are not the highest rate in the market. We are high, but we are not the highest. And in fact, at the last RBA rate increase, we did not pass on all of that to our customers. And I would just point out that, that rate, while appropriate for most customers only on the first 250,000, which again is a big number. The plan is we got to get scale. And really, the important indicator, and I mentioned in my talk was that a number of customers are engaging with financial well-being feature, which says and the number who qualifies a main financial institution customer is really high. So that -- and the people are getting salary putting their salaries into the account, enrolling in PayID and we put some numbers in there. Those are the indicators that people who are engaged and using Plus, who are not just leaving money there because they're attracted to 4.9%. Yes. So over time, as we build out those services, we build confidence in that, we will obviously have to change our approach to pricing. The other point at the moment is -- and again, I don't want to bang on too much about this. At the moment, it's a really simple offering. There's a transaction account, a savings account. Clearly, we need to enrich in that with term deposits and things -- the sort of equivalent of the bonus saver kind of things as well, which are appropriate for different parts of the market, where customers are attracted to different pieces. So, we've broadened out that over the coming 12 to 18 months as well. But that's the strategy, if you will, to make it the most engaging platform, the most useful, the one with the best tools so that people, we want to pay a decent rate, but that's not going to beat that -- that's not the hero feature of Plus. But I will say, being lower cost to run helps.

Jill Campbell: Thanks, Richard. Going to Jonathan Mott from Barrenjoey. Thanks, Motty.

Jonathan Mott: I've got a question about the commercial business, which has really not been discussed much at all, and now almost 85% as much profit is in retail bank. So having a look at this business, the last half, the revenue was quite wide, costs were up a bit, which goes against some of the trends which your peers are seeing. Can you give us a bit more detail on the pressures that you're seeing coming through a bit more margin pressure than the season revenue pressure. And a bit more of an update on the commercial business.

Shayne Elliott: I'm glad to talk about that. I'll give a broader sort of strategic update, and Farhan can talk a little bit about those drivers you mentioned. So Jonathan, I think it's important to note that our business looks different than our peers. So, our commercial bank support 650,000 small, medium-sized businesses across Australia. Of that, about 600,000 are what you would call small, sole trader, 3, 4, 5 employees, relatively simple businesses and about 50,000 midsize, et cetera. Unsurprisingly, the small, typically aren't borrowing or if they are, it's very small or if they are borrowing, they do so as a home loan, yes. Just remember, the way we report our numbers, that home loan revenue sits in the retail bank. Now that's unlike our peers. I'm not saying one is right or wrong, it's just different. So, we are not -- in the home loan revenue. If you're a small business owner and you've got a home with ANZ. And don't forget, that's about 25% to 30% of our flow in home loans comes from small business owners. We count that in retail, not a small business, unlike our peers. As a result, that means that our business mix is heavily skewed towards deposits. And we actually like that. We think that's a great business because, again, it plays to our strengths in payments and deposits, and we want to be a digital leader in terms of the way we service the smaller end of our SME customers. And that's why we're building up -- that's why we've done the JV with Worldline. That's why we're looking to leverage the payments platforms we have in institutional, and it's also why we've invested in our GoBiz platform for those who do want to borrow on an unsecured basis, we have a solution there. We've also added corporate cards into GoBiz. And so we're going to enrich in the GoBiz offering. So it's much more a digital-led strategy for our commercial bank than many of our peers. That isn't to say that -- on the other hand, the 50,000, the other, the bigger end, they do have borrowing needs and that's in agri, in health and other industries. And we saw really strong growth there, 7% borrowing growth in the year and we see bigger opportunities to do that well. We brought a new management team, appointed Clare just over a year ago. We've rebased the strategy there. We now have a road map around what is the right technical build we need to have and what's the right approach around the way we cover or relationship management -- relationship manage those customers. That strategy is already being implemented. We update the Board pretty regularly. Clearly, it's the last cab off the rank for us. We've restructured and strengthened institutional first. We've done a lot of work in New Zealand and that's ongoing work. We've done a lot of work, obviously, in retail with Plus and commercial has been very much the heavy focus for us in terms of building out what that strategy and how we win in the marketplace, and we're only really at the beginning of execution. And that's why I pointed out the fact that going forward, you'd expect us to see us pivot more of our investment spend into commercial. Now that investment spend is, again, probably going to be more like you've seen in retail with technology rather than just feet on the street kind of investment, not to say there isn't a place for that. So that's where we are. It's still early days. It's a great business, but again, it looks very different to our peer group. But -- and we like that, by the way, because it means we're not taking head on competition from the others. Do you want to talk about the financial drivers?

Farhan Faruqui: Yes. So I think I'd just add, I think you've covered a lot of it, actually, Shayne, but Jon, but I would -- there are 2 or 3 things I would say. Firstly, we've been investing to the point that Shayne was making. It is the last cab off the rank, but we have been investing in commercial. And Clare has been reshaping the workforce and the operating model as well to make sure that we get the best positioning to serve customers in their choice of channel. As a result of that, some of the expenses in the commercial business are actually inflated because of the restructuring costs as well as costs of the investment that we've been making. It's not a feet on the street strategy. It's very much focusing on the right channel from -- in terms of serving customers. So, there is cost inflation because of those 2 factors. And that will, of course, normalize as we go forward. The other is that because of that investment we've been making, as I pointed out earlier, the lending growth has actually been very, very strong and that momentum is strong and that pipeline is very strong, looking out into the next half. The third point I would make is that the NIM impact is largely driven more by deposits rather than assets. And the reason why it's driven more by deposits is that -- just to remind you as well, Jon, that it is a balance sheet that is much more weighted to liability than to asset. So when liability mix impacts, which impacted most divisions, impact margins, they impact commercial a little bit more on the deposit side because of the higher liability balance and proportion in the balance sheet. So again, those pressures, as I mentioned earlier, have slowed towards the end of the half. So, we start to see more stability in terms of commercial NIM, but we start to see volume growth continuing because of the strong pipeline and the momentum we've had in the last 12 months. So actually, I think a large part of that investment, restructuring, deposit shift factors have already played out in the last 12 months. So we're actually well positioned now in terms of the next 6 to 12.

Jonathan Mott: And I'd ask a second question, this goes back to the discussion around the collective provision. If you sit back and have a think about it, the CPE is about $4 billion, but it's protecting a balance sheet, which has $1.15 trillion of exposure default. And I know we can all build Excel models, and we're all pretty good at that, which is kind of estimate what it is. And we know what it is a lot of that kind of modeling. But the forest from the trees, it doesn't seem like it's a massive amount of provisioning to protect a major bank. And then you're saying that the base case is half of that. So, where is the upside in having some kind of review to release collective provision? Wouldn't it just be a bit more prudent to leave it where it is rather than have an academic discussion about which model is the best way and what the base case and downside is when it's not a huge amount of money in the scheme of things?

Shayne Elliott: That's a philosophical question. It's not -- it's -- we don't -- remember, there are accounting standards here that we have to apply. We don't just sit around and make the stuff up. I think the important point is, I take your point. And partly, that's a little bit frustrating and from our position, a little bit frustrating when we get arguments whether it should be 4% or 3.8% or 4.5%. I'd sort of take the same view like in the scheme of things, it's there or thereabouts. I mean the important thing about our $1.15 trillion in exposure, remember, 20% of that is sovereign. And we have the highest weighting to very extraordinarily low risk names unlike our peers, which are heavily skewed towards housing. So, I take your point, but there is a process here. And to be prudent, we follow prudent standards that are audited by our auditor, et cetera, that take us through that. I think when I stand back and think about it, though, I take the $4 billion is what it is. I stand back and think about what's our ability to absorb pain and if things go wrong. And you're right, we've got a big balance sheet. So, you work through the stresses and understand your first point of call is your profitability. Let's not forget, at this run rate, we're generating about a profit of $7-odd billion a year, which is your first call on being able to absorb problems because in an extremist, you go to that first. Then through there, you have the ability to look into your provision balances, of which this is one, then ultimately capital, which we sit across, which we've got extraordinary high levels of capital as well relative to our past and to our peers. So, I kind of look through as a stack of our ability to absorb stress and that's why we talk about having a fortress balance sheet. And again -- and I've talked about the fact that customer selection is so important. And that includes the fact that we have a bigger weighting of our balance sheet to sovereigns, central banks, high-quality borrowers. Even within our institutional bank, a much higher skew towards investment-grade names. So, I take your point. But again, we follow a process. It is what it is. You have to think about it and I know you do. We think about it in the whole of the entire stack we have in our balance sheet.

Jill Campbell: Thanks, Motty. We'll go to Brian Johnson from MST. Thanks BJ.

Shayne Elliott: Brian, are you there?

Brian Johnson: Can you hear me now?

Shayne Elliott: Yes, we can. Go ahead.

Brian Johnson: Shayne, just before I ask two questions, if I may, can I just make an observation. Just looking at your share price today falling away and then you say that the margin is up 1 basis point in March. Now, I can't see anywhere where that is disclosed in the slide. You speak about the investment, but nowhere in the pack, can I see that you don't disclose the investment anymore. If I actually have a look on Page 27, it says 9 basis point loan loss charge in the Australian Retail business. Today, you've said 5 basis point. I just want to add to just some residual concerns about basically the disclosure. I think these are some issues that should be addressed. Now, just on two questions, if I may. And this kind of goes back to Motty's question as well. If I have a look at Page 151 in the result, I can see that ANZ is the only major bank where the regulator actually takes a regulatory capital deduction because the balance sheet provisioning loss is lower than what the regulator stresses it to, which implies to me that if you do actually release any of the collective provision, it will probably come straight off your core equity Tier 1 ratio anyway. If we then have a look at Slide 88, we can actually see quite a substantial increase in the earnings by virtue of writing back the collective provision that was established during COVID. If we have a look at the long-run loan loss on Page 27, we can -- and I get that it's just math. So, I can see that, that is actually increasing. If I have to look at Page 28, I can see that the impaired assets are definitely going up. But then if I look at Page 33, I can see a collapse in the economic profit to the point where the economic profit in this half year is actually below the value of the franking credits. Could we just understand the merits of basically this idea that you're clearly flagging about writing the collective provision back.

Shayne Elliott: We're not flagging any such thing...

Brian Johnson: As you release capital.

Shayne Elliott: We've not flagged any such thing. Thanks for the walk through the pages. We're not flagging any such thing. There was -- what we said was if the outlook for the economy, given the fact that the weighting is so heavily skewed towards the downside, the natural question is, how would you see that changing over time. And what we're pointing out is that if the basic economic indicators improve, that you would see a higher weighting to the base case, perhaps even a small weight into an upside mathematically that through just the accounting process, would all else being equal, lead to a release of collective provisions. That is true of any bank anywhere in the world, that is a statement of fact. That is all we were making the point of Brian.

Brian Johnson: And would it queue up capital from Acacia? Does it increase that regulatory expected loss deduction if it was to happen?

Shayne Elliott: Kevin wants to answer this one.

Kevin Corbally: Brian, it's Kevin. Just to clarify a couple of things, and there's a lot, obviously, in what you said. But essentially, the way that regulatory loss is calculated is that APRA split out defaulted and non-defaulted loans. And on defaulted loans, that is essentially the IP that we've got together with the Stage 3 expected credit loss balance. However, for slotted exposures, APRA say, you have to have 50% loss given default. It doesn't matter what our security is. That's essentially the position we need to take. So that's the key reason why we have a capital deduction. It's got nothing to do with the quality of the book. It's just a difference in interpretation between the regulator and ourselves. And as Farhan alluded to earlier in terms of the expected loss, the long-run expected loss, that's principally driven by a small -- a very small uptick in institutional. Bear in mind, all of these are at record low numbers in terms of expected loss, but it's very small, which is predominantly driven by a denominator together with a couple of other factors. So, I think there are reasons behind all of them.

Brian Johnson: So, does that imply the opposite is that if the slotted exposures don't change, that even if you write back the collective provision, there's no impact on the Core Equity Tier 1?

Kevin Corbally: Well, pretty much.

Brian Johnson: The second one is just on ANZ Plus. And I think ANZ is to be congratulated on the customers that you've acquired. My understanding is that ANZ Plus at the moment is very much a mobile product, so I can get it on an iPhone. I can get on my mobile phone. I can get it on a SIM-enabled iPad, but I can't actually do any online banking with it. Can I confirm that is correct? And if so, how does that reconcile with basically migrating customers on to it, who may not be comfortable with it? And then the subset of that, how much would it cost to -- how much does it actually cost to actually kind of get it match ready to the point where it is ready for pure online banking, non-mobile?

Shayne Elliott: So, we're already doing that. So that's already in the numbers and there is going to be an online option. So, web-based as opposed to mobile-based, Absolutely, you can actually go on to the website at the moment. And obviously, we need to build it out and promote that and they are quite right. There will be customers that prefer that although the data would suggest that those numbers are extraordinarily low. They are vast, vast bulk of our -- and again, we've done the analysis on our customer cohort and what they already do today in terms of their usage and web usage is falling. Unsurprisingly as the richness of mobile improves and increases, particularly from a security point of view. But we will have -- absolutely have a web platform that's being built as we speak. It's within the numbers. I can't remember precisely what that costs. It doesn't cost a whole lot because the core the core offering, the way the things will work is exactly the same. It is -- that is the whole point of the ANZ platform, but it's identical. It's not another stack of technology. Yes, it's got a different interface, which we'll build out, but that's not a material cost factor for us, and it will be built.

Brian Johnson: So can I just reiterate that point on disclosing the investment. You guys have got a good story to say on this. But as I say, I can't see that the investment spend is actually disclosed.

Jill Campbell: Thanks. We'll go to Matt Dunger from Bank of America Merrill Lynch.

Matt Dunger : Jill, if I could just ask a follow-up question on the migration of Suncorp customers on to ANZ Plus. Shayne, you've talked about the value in the deposit base. Are you able to talk to us how you manage the pricing disparity between Suncorp Growth Saver Account at 5.05% versus ANZ Plus at 4.9% when you're undertaking the migration?

Shayne Elliott: Yes, sure. So -- and that's a really legitimate question, Matt. So clearly, this is complicated, and we're not moving -- let's just for sake of argument, let's assume hypothetically we assume ownership on the 1st of September. We're not migrating anybody for quite a period of time, actually. And what we said to our customers, and we made a commitment, hey, same brand, same product, same branches, same people at Suncorp in Queensland, for quite a period of time in a number of years. What we will do is we will build out on the Plus platform to it. So, migration doesn't mean we're going to move Suncorp customers on to the current ANZ Plus portfolio of products. It will go on to the platform ANZ Plus, but what we need to do is build out appropriate products, services, pricing, terms and conditions on the Plus platform so that we can move those Suncorp customers across. Now, at the moment, our product suites are very, very similar. We pretty much have a whole bunch of things that are more or less the same and we have some things that are different, like the one that you just mentioned. We will make changes to ensure that we can bring customers across under products and services they like. But ultimately, they may or may not be differently branded. We have to figure that out and they may or may not be priced differently again. What we don't want to do, though, is just increased complexity. So those are the sorts of things that the team are working through in quite a lot of detail, but that's still some period of time away before we're going to migrate. And when we say migrate, that means like almost force or push a customer from the product you mentioned across under ANZ. So, we've still got time, we'll work all those things out over time. But I'm really confident about that because we've got a platform that allows us to differentiate, whether it's the brand differentiation, pricing terms and conditions, whatever that might be. And we've got to have a really appropriate suite of products that not only keeps and retains and engages with the Suncorp customers, but also the ANZ Classic and probably even more importantly, new to bank customers more broadly across the market. So hopefully, that answered the question. The point is that we will build out a richness in terms of product suite for people where we see opportunity.

Matt Dunger : And if I could just ask a follow-up question on New Zealand and demand remaining weak there. Can you talk to how you're positioning the book and noting the lower credit risk-weighted assets in the half and also the collective provision balance falling in business in agri?

Shayne Elliott: All I would do is say that I'm on the Board over there and New Zealand is a well-run business. We are the largest bank in New Zealand. We have a relationship with 1 in 2 kiwis, we have 30-odd percent market share in the home loans. We've got great economic insight into what's happening there. The New Zealand economy is under more stress than Australia. That's probably not unsurprising. It's more exposed, if you will. But then our business is stronger in many ways in terms of years of investment in terms of the technology, et cetera, that we have there. The reality is when you stand back, the same fundamental drivers of stress, higher interest rates starting to creep up in terms of unemployment are they still very low. The issues about cost of living are exactly the same. The difference there is that the books positioned differently to your question. In New Zealand, we have a very, very small institutional lending business. Our housing book proportionately is larger. But as you know, the housing book in New Zealand is structured very differently. And don't forget, we've been operating for years in New Zealand under essentially macro prudential guidelines that have limited our ability -- all of the bank's ability to lend in terms of investor loans or high LVR lending. And at one point, there was even some regional geographic limitations. All of those things have actually meant that the banking system is still remarkably resilient and very, very safe. And if you look at things like dynamic loan-to-value ratios, the interest cover, et cetera, things are still very strong. However, just like here, stress is starting to increase. Broadly, the numbers are more or less the same as they are here, but the shape of the business more commercial than -- sorry, more housing on average than the group, means that the impacts on the numbers are slightly different. But I don't think there's any too much to read into it. We've taken the same approach about really strong risk management, really strong customer selection, et cetera. And I think, again, that's serving us well.

Jill Campbell: Thanks, Matt. We'll go to Carlos Cacho from Jarden, please.

Carlos Cacho: I just first wanted to ask about the sensitivity of your margin to changes in [indiscernible] basis. We've gotten details from some of the peers around that. And there's obviously it's been very low recently. So, I wonder if you could give us any insight into that sensitivity.

Farhan Faruqui: Yes. So Carlos, it's -- our sensitivity is about $12 million per basis point move, so call it for every 10 points move in BizAway, we get 1, effectively 1 basis point of NIM impact. So, it's about $120 million per 10 basis point move broadly speaking. Does that solve your -- does that answer your...

Carlos Cacho: Yes. And then secondly, I noticed on Slide 105, where you disclosed the dynamic LVR of the portfolio for mortgages. Your negative equity does look to be a little bit higher than some of the peers that have recently disclosed similar numbers. I was just wondering if there might be -- it's still low, obviously, but wondering if there's a geographical mix behind that or if there might be a methodological difference or something?

Shayne Elliott: No. We don't, again, thanks for the pointing out, as to your point, it is extraordinarily low. But -- and I haven't had the opportunity to compare with peers that their disclosure over the last couple of days. But no, from our point of view, there's -- we don't think there's a methodology difference, that would be interesting to find out. But there's no geographic skew in there. Obviously, you know this. I mean, obviously, we have a geographic SKU at ANZ that will be different to other banks. But within our portfolio, we're not seeing any material differences. But there will be a weighting difference, obviously, given our heavier weighting to Victoria, for example, may have something to do with that, but not that we're aware of.

Jill Campbell: Thanks, Carlos. We'll go to Brendan Sproules from Citi.

Brendan Sproules: Brendan Sproules from Citi. I just wanted to ask about your markets income on Slide 23. We've had 3 very strong halves, probably above what you've described as the long-term average in this business. And particularly, you noticed the balance sheet contribution has increased within the customer franchise, the rates tile there also increased. I guess, given the way the world has evolved in the rate cycle, what are your expectations for these contributions sort of looking forward on a 6-, 12- and 18-month basis?

Shayne Elliott: Do you want to add? Look, so I might answer this more generically. So, it's a reasonable observation. And clearly, some of that -- not all of it, some of that is correlated to the interest rate cycle, which is probably not unsurprising. I mean, obviously, the way that we think about -- well, maybe not obviously, the way that we think about the business is actually focused on the other part of the business, which is the customer franchise piece. I think it's a fair observation to say that the business has performed strongly over the last 3 halves. And we've always said that we ran the business to be at about $2 billion. I think it's fair to say going forward, you might expect to see that slightly higher. And we're just going through our planning processes for the future, but the business has built some really strong foundational strength there. So this is not one-off driven, et cetera, there's some really strong foundations in there in terms of our digital capability, in terms of the breadth of our business. I mean I know it wasn't your question, but if you look at we're getting emerging strength in our commodities capability, which is relatively narrow in what we do in terms of gold and other bits and pieces, but a really nice point of diversification. And the rates business has been a steady performer, not just over the last couple of halves, but over time. And that's been a deliberate investment in the business. I mean ANZ historically, has always been strong at foreign exchange. That's kind of quarter and what we are. We were behind on rates and we've built out that capability by investing in technology and that's starting to come through. Look, I don't know of future holds, particularly over the next 6 to 12 months. But you say over time, we've got markets in good shape, solid business. We've reduced the volatility. It's more diversified geographically and by underlying. We're feeling pretty positive about the business given the strength of the customer franchise in there.

Farhan Faruqui: Yes, I just might add, Brendan, and you know this, obviously, with your own bank in terms of the international network that it is an important -- having the footprint that we have globally is a huge benefit because there is opportunities that are available to us in our international customer footprint. And when I talk about our international customers, they are pretty much sort of customers that you would see in your bank, Brendan, which are sort of the large global multinational customers who operate across the regions, across multiple geographies. And that gives rise to a lot of opportunities around credit and capital markets around rates and around foreign currency, which is why you see that consistency. And more and more customers now are coming and doing more business with us, which is why you've seen that 40% growth in customer franchise income that I mentioned over the last 3 years. I think the other thing is that -- other big advantage of having that footprint is that our local markets business is very strong. And that's something that many of our peers in Australia don't have and that allows us effectively an opportunity to also capture local opportunities. And that's been one of the drivers as well of our customer franchise income growth. In fact, if you look at just our international business revenue on a PCP basis, it's grown 36%. It's a huge driver of what we deliver. And as I said, it's been about 2/3 of the growth as well in this half. So, it is becoming a true differentiator for us and the consistency that it's bringing because of the quality of clients, because of the offerings that we have, because of the investments we've made, because of some of the local market licenses that we have in some countries, that is creating a lot of stickiness to our markets business. So, it's not the same volatile business it used to be.

Brendan Sproules: And I just got a second question on your productivity savings. And you talk on Slide 26 about the record half that you enjoyed this year. I just want to contrast between, I guess, the strategic initiatives that you show on 25, where you've spent $96 million increase in the half on cloud and ANZ run costs. But then in the productivity you're actually able to save $62 million. How do we think about those 2 categories going forward? Are they going to largely offset? Or do you think that going forward that you'll always be kind of spending more on technology than you'll finish up saving?

Farhan Faruqui: Well, to some extent, Brendan, the benefits that we're seeing in technology services that you point out on Page 26, which are things which relate to simplification. So effectively, as you migrate apps to cloud, which is what shows up in the strategic initiatives in the previous slide, you effectively get benefit from a productivity standpoint because you're able to shut down systems and applications on-prem. So, there are benefits, not necessarily 100% correlated, but that's the -- that's sort of the productivity benefits as we migrate more to the cloud.

Shayne Elliott: I think it's important though to point out and I don't know if -- I totally understand why you would link the 2. They're not necessarily correlated because migrating to cloud, for example, just using that example. Yes, we spend the money, we migrate to cloud, shutdown. There's clearly a benefit within technology, but actually, the biggest benefit goes into the businesses, which means that as a result of being in the cloud, they can deliver more quickly, more efficiently, et cetera. And so they're not totally correlated and maybe we should think about a better way of disclosing that, but that's reality of the matter. I mean our task and one of the things we talked about at management is making sure that when you've got those situations, you spend in one area for the benefit elsewhere that we've got much, much better at ensuring that those benefits are getting delivered.

Jill Campbell : Thanks, Brendan. Last question is from Azib Khan.

Azib Khan: Just coming back to markets income. That obviously annualized $2.4 billion in the first half. Shayne, do you still expect this to be a $2 billion per annum revenue business in a normal year?

Shayne Elliott: Great question. I think 2 things I would comment on that is don't forget that there is a seasonality in that business and I can't -- I think almost every year, the second half is a little bit weaker than the first half. And that's due largely to do with first half -- second half is European summer, which, again, our business skews to Northern Hemisphere surprisingly. But -- so there's a little bit of that. So there is a -- there will -- it's likely there will be a slowdown. It's a very good question. I would expect it to be slightly higher than the $2 billion. As I mentioned previously, we're just working through what that new number might be, and we'll be in a position to share that later in the year, we go through our planning process with the Board. And at the full year result, we'd certainly -- if there is a change, we'll update the market. But you'd expect it given -- I think the point here is we've really built some strong foundations and markets. It's a good business now. Well ranks, got really strong technology. It's got -- it knows what it's good at. It's well diversified. So, we've built confidence in our ability to grow that prudently and sensibly. And yes, and so we should expect to see it grow from here.

Azib Khan: And just a second question about the commercial business. You've mentioned, Shayne, in your opening comments that commercial is obviously an area you're going to look to grow in. As part of the response to the earlier question, you mentioned you've got 650,000 customers, of which 600,000 are small. As you growing that business, is it fair to assume it's that larger segment will grow, particularly because there's probably more loan growth on offer than deposit growth?

Shayne Elliott: Great question. Not necessarily -- so my colleagues who run that will probably not like the answer to this. But yes, of course, there's growth everywhere in commercial actually. There's absolutely growth in the bigger end, absolutely. And what we've been doing is building our strength for those segments that we think we can really build out strength, whether it's in agri or health or other areas. So that absolutely, there will be growth there. But the real juice in that business if we're being honest in terms of return does come from the deposit franchise and that comes from being the operating account of businesses. So actually, if you thinking from a returns point of view and top line growth, we think a lot of it will come from expanding that deposit base in the smaller end, yes. And so that's where -- because remember, we've got -- for every dollar we lend, we got $1.8 in deposits, and that's why you get that really high return outcome. So there's growth right across the board there. There'll be more customers. We've definitely got -- over time, not in the next 6 months, but over time, we absolutely need to grow our operating deposit capability. And it's no different than Plus by giving customers the tools they need to do better with their money. And we're in early stages of that. We obviously do pretty well today, but we're early stages of that. And yes, there will be some growth in the bigger end of that sector as well. And that's why we're sort of attracted to the business. And particularly given our business does look different to our peers, yes. And so we're not taking, it's not an head on competition with some of our larger bank peers.

Azib Khan: Do you have a target customer composition in mind, Shayne or do you think can sustain more than 90% of the customers being small?

Shayne Elliott: Look, it's a matter -- it's a good -- again, it's good question. It's a matter of debate. I personally am very attracted to the smaller end because I think those are the things at ANZ, we can really give those people tools, right? What's attractive to them. They're sole banked. They don't multibank, right? They just want simple things done well. They want us to help them run their business better. Give me the data and insight from my payments from what you're seeing across the industry and help me run do better with my money. It's very much aligned to our strategy around ANZ Plus with the same idea of financial well-being, give me the tools, give me the nudges, give me the insights and data. ANZ one of the -- we haven't talked about today and we don't have time. One of our great strengths is our data set. We have the most diversified data set around the economy. I talked about the $164 trillion in payments we process every year. Guess what? A big chunk of that is going into that SME land. And so being able to really extract value from that data and offer it in compelling easy ways, that's why we've done this JV with Worldline. That is really, really exciting. We still got a lot of work to do to be able to deliver that. So, I actually think -- I believe that even in the next 3 to 5 years, there's still going to be a very, very heavy skew to the small end, but it will all grow.

Jill Campbell: Thanks, Azib. And with that, we're out. And so if there's anybody that didn't get a chance to ask a question, please feel free to ring the Investor Relations team this afternoon, and all of this will be online later today, as I mentioned. Thanks very much.

Shayne Elliott: Thank you.