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Giving evidence to the financial services royal commission in its seventh and final round of hearings, ANZ CEO Shayne Elliott defended the bank’s decision to reduce its branch presence.
Counsel assisting the royal commission Rowena Orr QC questioned ANZ’s decision to close approximately 110 branches over the past decade and, according to Mr Elliott, 35 branches over the past 12 months, which MS Orr alleged has reduced accessibility to banking services, particularly for customers in remote and regional communities.
However, Mr Elliott told the commission that he had questioned whether the services offered through a branch network could be offered more efficiently through the provision of technology or through other “avenues”, making specific reference to home loan origination via the broker and mobile banking channel.
Ms Orr asked: “Do people tend to like to go into branches when they’re discussing something as significant as a home loan?”
Mr Elliott replied: “Yes, perhaps, although I would say for ANZ - and we may be different from our peer group – [less] than a third of home loans are originated through a branch.
“[Fifty-five] per cent come through brokers and another roughly 15 per cent come through our mobile banking network.”
The ANZ CEO added: “So, the branch network is not a terribly efficient or well used avenue for home loans.”
Mr Elliott’s comments reflect findings from Morgan Stanley Research’s Roadmap to Branchtopia report, released in October, which found that mortgage sales through ANZ’s branch network were the least efficient of the big four banks, with $35 million in home loans settled per branch in the 2017 financial year (FY17).
According to Morgan Stanley, ANZ “relied more on mortgage brokers” relative to other major banks, with broker-originated loans making up 51 per cent of its home loan flows in 2H17.
Further, when asked by Ms Orr whether ANZ’s branch closures were motivated by financial considerations, Mr Elliott said that there was “very little correlation” between the bank’s branch activity and it’s underlying financial position.
“What most people do in a branch drives very little value,” he said. “We don't charge fees for most of what they do. It is a service that is not necessarily correlated to where we generate our profits or earnings. That’s quite unusual for most industries.”
Mr Elliott claimed that with most of ANZ’s home loan customers using mortgage brokers, some borrowers were “essentially subsidising” the provision of a branch network.
“[That] causes us a real dilemma,” the CEO continued.
Mr Elliott stated that ANZ does not consider the profit and loss position of its branches, stating that it instead assessed the number and nature of interactions between branch staff and customers.
“We look at the kinds of transactions that are available in that area - home loans, deposits and others, and then we consider what the alternatives are for those [customers] - if we were to close a branch, what [are] the alternatives? Are there technology solutions like leaving ATMs, which today can do a vast array of things for people? Are there other banks close by? Is there another ANZ branch close by?”
He concluded: “We apply a lot of those factors into making the decision. It’s not an algorithm. It’s not a formula. It inevitably requires some level of judgment on behalf of my colleagues in the Australia division.”
The final round of the royal commission’s public hearings continues and will conclude on Friday, 30 November.
[Related: NAB slams ‘dysfunctional’ ASIC negotiations]