Speaking on the phone from the bank’s near-deserted head office in Melbourne, Mr Elliott said the crisis could lead to a spike in unemployment and also make people more averse to taking on big debts, both of which could lead to declines for housing prices. “I’m not going to give you a price prediction, but you’d have to think it was material,” he said. “It’s not going to be 2 or 3 per cent, it’s got to be a material [effect].”
In a wide-ranging discussion, Mr Elliott said “more margin pressure” from falling interest rates, and the likelihood of higher bad debts could further hit shareholder returns. “Will returns in the banks be lower as a result of this? Clearly,” Mr Elliott said.
Regulators in New Zealand, the United Kingdom and Europe even this week moved to suspend banks from paying dividends. Mr Elliott said he could understand why some overseas regulators had declared a “time-out” for dividends, though he did not know if this would happen in Australia.
Yet despite the pain for shareholders, Mr Elliot said it was the duty of banks in crisis to wear loan losses and take risks to support their customers. Asked if ANZ was prepared to act as a “shock absorber” for the economy, Mr Elliott replied: “Yes we are prepared, that’s our role actually, and that’s what capital is for, that’s what all the provisions and all the various things that we have on our balance sheet are for.”
As part of the government’s “Team Australia” plan for responding to the pandemic, the big four banks have a key role in cushioning the economy from a crisis Mr Elliott said would be “terrible” and “devastating for so many.”
There was a whole generation of people who came out of the Depression who were frugal
ANZ chief executive Shayne Elliott
Mr Elliott stressed the path of the crisis remained uncertain, and ANZ only this week ruled off its first half. Profits and the dividend will be announced at the end of this month after deliberations by the board.
Even so, with unemployment expected to rise sharply, he predicted the crisis could have lasting impacts on consumers’ attitudes to debt, the housing market, and how people do their banking.
“Australia in the future won’t look the same,” he said. “It won’t look the same because it will impact a whole generation of our customers, the way they think about technology, the way they think about borrowing, the way they think about employment, the way they think about frankly the capitalist system and democracy.”
Social distancing might mean consumers become more willing to do their banking on their phones, which banks would welcome, but he also said people could potentially become “more fearful about taking on loans for example.”
Mr Elliott, who is from New Zealand, cited the example of his grandparents, who lost their home in the 1930s Great Depression. He said his father remembered the stories growing up, and it “scarred him for life in terms of his approach to borrowing.”
“That’s a story of one, but you hear that a lot. You know there was a whole generation of people who came out of the Depression who were frugal, and you know, all of those sorts of things as a result. I don’t want to over-dramatise it, but I think if this thing goes on for months, it will have an impact,” Mr Elliott said.
He said the pandemic was crucially different to the 2008 global financial crisis and the Asian financial crisis of the late 1990s because it was affecting the way of life in Australia.“For Australia in particular and New Zealand, all of those other crises were something we almost watched on television, and we experienced in some ways. With this one it’s fundamentally changing our way of life. That is I think psychologically massive compared to all the other ones,” he said.
The Reserve Bank is giving banks $90 billion in cheap funding, and the federal government is providing $20 billion in loan guarantees to keep small and medium firms alive during the shock. Lenders have promised repayment holidays to small businesses, consumers and landlords with up to $10 million in debt.
Mr Elliott said small business clients have been especially hard hit, with 17 to 18 per cent of ANZ’s 130,000 small and medium enterprise customers having requested a repayment deferral. Close to 50,000, or 5 per cent of its 1 million-odd mortgage customers have sought a repayment holiday. Hardship applications — for people who can no longer afford their loan, even with a deferral — have doubled.
My concern is we’re only at the beginning of this thing, we’re in like week two really, I mean this is going to go on for a long time,
ANZ CEO Shayne Elliott
The crisis has also forced big employers such as banks to rapidly activate work-from-home plans for tens of thousands of staff, including in ANZ’s case, thousands in Manila and Bangalore.
Mr Elliott is one of the few ANZ staff still turning up to the office for work, with 90 per cent of non-branch its Australian staff working remotely. He said he was effectively working in a “bunker” of sorts, and work was “a bit lonely,” with face-to-face meetings replaced with a stream of conference calls.
“I’ve got literally half a floor all on my own,” he said.
“You spend your whole life on a phone, so you have your multiple conference calls. It’s very quiet, it is a bit strange. It’s a strange feeling to be perfectly honest, and you feel a bit disconnected.”
The bank is trying to keep staff healthy by providing webcasts from psychologists on how to stay resilient, and he said staff were using the online video-conferencing program Zoom to arrange social events like pizza nights and morning teas.
But Mr Elliott said he was concerned about the toll it will take on people as the crisis drags on.
“Not everybody is living in a nice cosy family situation at home, some are sharing houses, some are on their own, and that can be quite isolating and difficult for people. My concern is we’re only at the beginning of this thing, we’re in like week two really, I mean this is going to go on for a long time,” he said.
Clancy Yeates is a business reporter.
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