ANZ Scraps 2016 Staff Share Bonus Amid Cost-Cutting Drive

Updated on
  • Australian bank cites ‘challenging year’ in post to employees
  • ANZ recently reported lowest full-year earnings since 2011

Australia & New Zealand Banking Group Ltd. has axed its traditional A$1,000 ($746) share bonus for staff this year, citing the need to cut expenses. 

In an intranet post seen by Bloomberg News, management told employees that 2016 had been a “challenging year” and that in an “environment of lower growth and lower returns, ANZ needs to reduce costs.” The bonus cost the bank A$17.3 million in its most recent financial year, according to Bloomberg calculations based on details in ANZ’s annual report.

Higher funding costs, narrower margins and rising bad-debt charges are putting pressure on profit at Australia’s largest lenders, with ANZ earlier this month reporting its lowest full-year earnings since 2011. Since taking over in January, Chief Executive Officer Shayne Elliott has been winding back the bank’s lower-returning operations in Asia and focusing on the domestic market.

“It’s been a difficult operating environment for ANZ and our shareholders have already felt the impact of this through a reduction in the dividend,” Stephen Ries, a spokesman for the Melbourne-based lender, said in an e-mail confirming the decision. He stressed that the share offers were never guaranteed and came on top of other annual bonuses and pay rises for most staff.

Most of ANZ’s permanent employees who have worked continuously for three years at the bank were eligible for up to A$1,000 of stock each financial year through its so-called employee share offer program, according to ANZ’s annual report.

The bank issued 626,121 shares through the program at A$27.60 apiece in the year ended Sept. 30, the report showed. That A$17.3 million expense was lower than the previous year’s A$20.5 million.

CEO Concerns

Scrapping this year’s share issue comes after Elliott was this month granted 27,764 deferred shares, a company filing on Nov. 28 showed. That formed part of his annual compensation and the bonus was previously disclosed in the company’s annual report, a fact reiterated by Ries when queried about the matter.

The bonus stock allocation “was intended to share the benefit of good years,” Elliott said in a speech in Sydney on Wednesday. “It was not a good year.”

During his address, Elliott voiced concern over “emerging signs of stress” in the Australian economy and overheating property prices in some parts of the country. He also reiterated the bank’s intention to sell its non-core businesses, which would release capital.

Investor Support

ANZ, Australia’s third-biggest bank, is exploring the sale of a number of assets, including its domestic wealth business and minority stakes in Shanghai Rural Commercial Bank Co., Bank of Tianjin Co., PT Bank Pan Indonesia and Malaysia’s AMMB Holdings Bhd.

Investors appear supportive of the new strategy, with ANZ shares having risen 11 percent in the past six months. Half of the 16 analyst recommendations in a Bloomberg survey were to buy the stock, with only one sell.

ANZ shares closed 1.1 percent higher at A$28.41 in Sydney on Wednesday, compared with the benchmark S&P/ASX 200 Index’s 0.3 percent drop.