ANZ Group Holdings (ASX:ANZ) Q4 2026 Earnings Call

0:01 Good morning, everyone. I'm Kylie Bundrock, ANZ's Group General Manager, Investor Relations and M&A. Thank you for joining us for the presentation of our four-year 2026 financial results being presented from ANZ's offices in Melbourne, which stand on the lands of the Wurundjeri people. On behalf of the ANZ team, I pay my respects to Elders past and present and extend my respects to any Aboriginal and Torres Strait Islander people joining us for today's presentation. Our results materials were lodged this morning with the ASX and are also available on the ANZ website in the Shareholder Centre. A replay of today's presentation including Q&A will be available on our website shortly after the session concludes.

0:49 The results materials and today's presentation contain forward looking statements and in that regard I draw your attention to the disclaimer at the front of the results slide pack. Our CEO, Nuno Matos, and CFO, Fahan Faruqi, will present for around 45 minutes, after which I'll explain the procedure for Q&A before we move to questions. A reminder that if you would like to ask a question, you can only do so via the phone. Over to you, Nuno.

1:21 Thanks, Kylie. Good morning, everyone. Thank you for joining us. We have completed the first full year of our ANZ 2030 strategy. In October 25, we laid out a clear plan focused on five immediate priorities and four strategic pillars delivered in two phases. We committed to a set of financial targets and transparently reporting on our progress with consistent disclosures. The results we are announcing today demonstrate the significant progress we have made through the execution of ANZ 2030. We are on track to deliver all 5 million priorities on time. In parallel, we are also investing in strategic growth initiatives and our business execution is improving quarter on quarter.

2:10 In short, our transformation is happening and we have momentum. Since announcing AN10 2030, the external environment has become even more volatile. Geopolitic tensions, energy price shocks and rapid technological change are affecting the markets in which we operate. These factors have impacted capital flows, trade and infrastructure development across the region in the past year. At the same time, the rapid evolution over artificial intelligence is transforming how societies, companies and individuals operate. Competition for capital to fund AI, defense, energy transition projects and government deficits has intensified.

2:58 This expenditure super cycle, combined with inflationary supply side shocks, continues to drive interest rates higher globally. In Australia, the cash rate is at its highest level since 2008, while US bond yields are the highest since 2002. Against this backdrop, the economies across our geographic footprint remain relatively resilient, Asia continues to be the fastest growing region in the world, while New Zealand and Australia show modest growth. At ANZ, we have the right strategy for this complex environment. The work we have done to strengthen execution, simplify ANZ and build resilience has created a stronger bank.

3:46 Our mix of business is reflected in our high quality portfolio, which is mostly comprised of investment-grade or highly secured exposures. Our capital levels remain strong and we are a highly rated bank benefiting from diverse sources of funding from both depositors and debt investors. This strength allows us to focus on helping customers leverage opportunities and navigate risk, drawing in our deep product capabilities, the strength and scale of our two home markets and our international network across 29 markets. For large corporate customers, this includes participation in the technology-led export boom in Asia and the energy transition.

4:32 We also help small and medium-sized businesses as they weather a more challenging environment, improve efficiency, and build their businesses. In Australia and New Zealand, our retail customers are largely resilient, with the majority ahead of their scheduled repayments. However, we acknowledge that some customers are experiencing financial pressures, which has been more evident in the second half. We work closely with those customers who require assistance to identify appropriate and sustainable support. Now turning to our financial performance, and I note I will compare numbers excluding the impact of last year's significant items. Our discipline management of margins, capital, costs, and business volumes underpinned a 10% increase in our cash profit over the prior year and delivered higher shareholder returns. Our return on tangible equity was 11.56%, an improvement of 109 basis points over the prior year.

5:40 Our balance sheet and capital position remained strong, with common equity 1 broadly stable at 11.99%, Our liquidity and funding ratios are all well above regulatory minimums. We declared a final dividend of 83 cents per share at a franking rate of 80%, increased from 75% in the first half. This translates to an additional 1.8 cents of franking credits per share for eligible Australian shareholders. The full year dividend is 166 cents Now, turning to the first phase of our ANZ 2030 strategy, focused on five immediate priorities which are all on track.

6:29 Our first is embedding the new leadership team and resetting our culture. Both are critical to establishing a winning culture and executing ANZ 2030. Most recently, Ben Kelleher joined the Executive Committee as Group Executive, and CEO New Zealand following the retirement of Antonia Watson. I would like to take this opportunity to thank Antonia for her significant contribution during her 17 years with the bank. We have also transformed the broader leadership team, including bringing new talents with the experience needed to execute our strategy. This year, we embedded our new values and updated our code of conduct to give our people clarity on the behaviors, decisions and pace expected of them. Together, these are crucial guardrails that support execution of the strategy to ensure our people put customers' interests first, deliver quality work at pace, are more accountable, action-oriented and decisive, and balance results with risks.

7:41 Our second main priority is accelerating the integration of Suncorp Bank. By the end of September 26, in line with our commitment, we delivered 60% of this program. We now target 85% by March 27 and we are on track for full customer migration by June 27. Our third priority is delivering a modern digital single customer front-end to 7.7 million retail customers and more than 600,000 small business customers by the end of September 27. At the end of September 26, we delivered 45% of the program, again on track, and our plan is to get to 80% by March 27.

8:29 Completing this priority and the integration of Suncorp will allow us to show up to customers through one ANZ experience and their one ANZ brand while allowing investment with confidence and efficiency. This will unlock significant potential for the future and will mark the beginning of our second phase of ANZ 2030. Through the year, we have made significant and sustained progress in materially simplifying the organization. We realized a prerogative benefit of $902 million exceeding the 875 million of gross cost savings we foreshadow at the first half results. This productivity benefit combined with a significant step change in cost management and Sanfei Realty DFX translation has allowed us to deliver a 7% reduction in our cost base.

9:27 Our cost to income ratio of 49.3% improved by more than 4 percentage points in FY26 demonstrating progress towards our mid-40s targets by FY28. We also continue to make progress on our known financial risk management uplift and remain on track to deliver our root cause remediation plan through our PACT program. PACT is anchored in the bank strategy and is part of our broader transformation, focused on delivering better outcomes for customers. Today, We have released the second and third report from Promontory, our independent reviewer. The latest report acknowledged our progress while recognizing the challenge of executing a complex program such as this.

10:17 Now, I will shift from our immediate priorities to our strategic foundations with a focus on the customer-first pillar. Our strategy is focused on improved customer service, superior propositions, Australia Retail and Business and Private Bank have progressed their transformation and started to gain momentum. For Australia Retail, there was a material improvement in financial performance.

11:08 We delivered a 5% increase in revenue, while resetting our cost base down 16%, highlighting the deep structural transformation and simplification taking place. We restored growth in home lending and customer deposits to be in line with system in the second half, while maintaining disciplined margin management and as a result, Roti of this division is now accretive to Group Returns. NPS is starting to head in the right direction, while MFI clearly has more to be done. In FY26, we start laying the foundations for our differentiated propositions, focusing on the affluent and migrant segments, launching simple and secure digital international money transfers. We also launched our digital app in New Zealand, India and Singapore, make it easier for people to bank with us even prior to arriving to Australia.

12:08 We also started investing in proprietary channels, but we acknowledge we are at the beginning of this journey. In FY27, alongside delivering the single customer front-end, we will advance our affluent and migrant propositions, reshape our credit card propositions, and transform our contact center experience. In business and private bank, we are also delivering a strong financial outcome, increasing revenues by 6% while reducing costs by 3% and driving an increase in ROTI of more than 100 basis points. Profit increased 14% year on year as we grew both sides of the balance sheet. Deposits grew in line with the market for full year 26 and lending reached system level growth in the second half.

12:58 While MFI has increased, Strategic NPS has not followed. Reversing this trend is a clear priority. We are making progress delivering ANZ 2030 with a focus on more bankers who are better trained with better tools, as well as improved patterns for our customers and a strong private bank. Our commitment to increase bankers' numbers by around 50% by 2030 is on track, with 50 frontline bankers added in the fourth quarter. Our Banking Academy, run in partnership with Melbourne Business School, is now live, helping lift the capability of our existing bankers while creating a pipeline of talent. The first graduates are already in the market, serving customers.

13:46 We continue to evolve our AI-enabled CRM tool for our frontline bankers, supporting more informed and personalized customer conversations. For our mid-market business, customers We deliver the first iteration of our improved and simplified experience using Transactive Global, our market-leading institutional payments platform. This platform, together with the single customer front-end for small business, means over time we'll go from 10 different customer-facing platforms for our business customers to just two primary platforms. Private Bank remains strong. We deposit up 10% Investment Funds Under Management up 11% and Lending up 17%.

14:32 The business continues to demonstrate momentum with ongoing investment in frontline capacity while work progress on modernizing our wealth proposition. For Suncorp Bank, we are in the final stages pre-migration and fully focused on ensuring this is a safe and secure event for our customers. As we prepare, we are taking all the actions we would expect a hell of a migration of this scale. This includes, for example, discontinuing certain products and no longer accepting new lending applications. We are redirecting those customers with new lending needs to ANZ. In the meantime, Suncorp continues to provide great service to customers and we are supporting them through the migration. Institutional continues to deepen customer relationships while ensuring efficient capital location and I'll refer to the numbers on an FX-adjusted basis.

15:27 Revenue was down by 1%, reflecting lower average lending balances throughout the year and highlighting our focus on returns. Increased efficiencies reduced costs by 2%. Our market-leading payments and cash management business drove operational at-call deposit growth of $12 billion, or 10% over the year, while total institutional customer deposits grew 24%. We exit the year with positive momentum in corporate finance, with lending growth of 7%. We waited towards the second half where lending spreads and terms became slightly more favorable. Trade lending balances grew strongly as we helped customers transact across the region.

16:18 Markets revenue increased 1% through the year, despite challenging conditions in the second half. Our capital markets business delivered its stronger ever half as we supported our clients in ensuring a record level of funding. We also made tangible progress on the growth initiatives under our ANZ20 strategy. We onboarded more than 30 significant new-to-bank FIG and multinational customers who are and represent a material opportunity across the region. We continue to invest in our payment and cash payment platforms, including enhancements to the transactive global experience, delivering self-service term deposits, and expanding confirmation of pay functionality.

17:03 We also expanded our use of capital efficiency tools, delivering approximately $2 billion of RWA deficiency to recycle into additional customer growth. Looking to FY27, we'll continue to upgrade platform capabilities and sales capacity and enhance our customers' payment solutions. Now, in New Zealand, we are shifting gears and we are determined to match our ambition with our market leading position. In FY26, revenues were up 2% while costs were up 3%, excluding the impact of the New Zealand class action. Net lending and deposits had solid growth at 5% and 4% respectively, with SME business lending a highlight.

17:52 In a highly competitive market, we grew our New Zealand customer base to more than 2.7 million. Our personal MFI share increased by 1.5 percentage points to 33.6%, while personal NPS rose to its strongest level since 2022. Carrying this year's momentum forward, We are continuing to re-platform the business for the future having launched a faster digital term deposit journey as well as ANZ Apply which now provides customers with an indicative home loan decision in around 5 minutes. We are refreshing our propositions for priority customer segments including strengthening our wealth propositions through partnerships with major global institutions while working to better serve the involving needs of affluent customers.

18:48 And in business banking, we are putting more bankers into the market, supported by better data, insights and learning capabilities, particularly in the segments and locations where we see opportunities to growth. Today, I also want to update you on our approach to AI, given the growing importance of the technology. At ANZ, the AI journey is not new, and is not a standalone strategy. To be clear, we view it as a critical enable of our ANZ23 strategy. Our approach is deliberately targeted. We have organized our AI framework to serve our strategic pillars in three key ways. First, by delivering more relevant, personalized experience to our customers and better tools for our bankers.

19:38 Second, by simplifying work and increasing organizational productivity and capacity. And third, by strengthening how we manage risk. Rather than pursuing AI everywhere, we are prioritizing opportunities which unquestionably deliver value and accelerate our strategic initiatives with right-sized investment spend. Our AI use cases require clear business outcomes where the technology can be embedded into the way work gets done and where it can be scaled across the bank. That work is supported by robust governance, which is already in place and controls that we are continuing to strengthen.

20:23 We are introducing a clear architecture and platform strategy, common technology and data. With a lens on customers first, in FY26 we deliberately concentrated our investment on high-value use cases supporting the strategy. This included the evolved AI-enabled CRM tool for business bankers and better customer service to the transformation of our contact center experience. These are not standalone AI tools. They are embedded into end-to-end workflows. We are also embedding AI into how we deliver technology. For example, AI-assisted software engineer has doubled our capacity to deliver coding for the single customer front end. As we have seen recently, this technology carries risks, which demands a very tight control framework.

21:16 Therefore, trust is central to our approach. We have existing controls in place, including multiple AI gateways and a governance council. We are building on this by implementing an enterprise AI control plane, which will provide visibility, governance and technical control across users, models, agents, tools, costs and platforms, as well as traceability of decisions. As we increasingly use AI agents, humans must remain in control. Our Enterprise Control Panel will set defined limits on what agents can and do, and stop activity where it operates outside those limits.

22:01 To scale this work safely, we are also simplifying our architecture around common platforms, strengthening our data foundations and governance, and building AI skills and literacy across the organization. This includes establishing an AI academy to improve foundational AI literacy and role-based proficiency as we scale adoption across ANZ. Our aim is to build a sustainable pipeline of AI skills and talent through immersive Learning and Practical Labs. We are confident this approach will support the delivery of ANZ 2030. Finally, we acknowledge the need to ensure the right balance between people and technology and to consider the impact of AI on society more broadly as we embrace its adoption at ANZ.

22:50 Now, to conclude, 27 will be pivotal for ANZ. We will deliver two major transformation projects. The integration of Suncorp Bank and the SINIS customer front-end, as well as a significant uplift in customer outcomes through our NFR program and continued investment in growth initiatives. With this, once we have successfully completed the first phase, we'll be in a much stronger competitive position to deliver the second phase of our strategy focused on growth and outperformance. Today, I would like to leave you with three final key messages. Our transformation is moving at pace. and shareholders are being rewarded. We continue to invest for growth in line with ANZ 2030 and the business is gaining momentum. With that, I will hand over to Farhan.

23:45 Thank you Nuno and good morning everyone. I'm going to build on Nuno's comments. Our full year 26 results demonstrated that we are delivering value for our shareholders We have structurally reset our cost base while delivering on our immediate priorities and building momentum, including in our Australian businesses. The result is a stronger financial performance, greater capacity to invest in strategic growth initiatives, and increased reward for shareholders. Our progress is evident across key financial measures. Statutory profit was up 23% and on a cash profit basis, excluding the significant items in FY25, profit was up 10%.

24:33 Return on tangible equity increased 109 basis points to 11.56%. Our cost-to-income ratio improved 416 basis points to 49.26%. And revenue to risk-weighted assets increased 8 basis points to 4.83%. We're generating better returns from both our cost base and the capital that we deploy. Momentum strengthened across our balance sheet in the second half. Higher rates supported margins and replicating portfolio returns. However, they also increased customer preference for higher yielding deposits and contributed to tougher trading conditions which softened markets' income, particularly in the fourth quarter.

25:19 Pronounced currency movements were largely offset by lower translated expenses and earnings hedges, limiting the net impact. Our capital position was supported by stronger organic capital generation, which created capacity for approximately $30 billion in lending growth and to maintain a stable dividend. Credit quality remained resilient, reflected in low individual provision loss rates. Our total shareholder return was 20.7% for the year and our earnings of 253 cents per share is up 30% year-on-year. We have declared a final dividend of 83 cents per share. The DRP will be neutralized.

26:04 Banking on the final dividend increased to 80% from 70% a year ago. We entered FY27 with stronger business momentum, a structurally lower cost base, and the balance sheet capacity to support our next phase of growth. For the full year, the Group delivered a cash profit of $7.6 billion, up 10%, excluding the significant items in FY25. As I highlighted at the first half, FX movements were pronounced this year. We had a large portion of our non-Australian dollar earnings to reduce volatility. We were able to offset $594 million of translation headwind in revenue with a $302 million translation benefit in expenses. We further reduced the net FX impact through $234 million of realized FX earnings-related hedge gains. As a result, the net impact on profit before provisions was approximately $50 million.

27:07 For the remainder of the presentation, unless I state otherwise, I will speak to performance on a constant currency basis and exclude FY25 significant items to better reflect our business performance. FI26 revenue increased 3%. Revenue excluding markets also growing 3%, supported by year-on-year growth of 3% in net interest income and 6% in non-interest income. Markets delivered $2.1 billion of revenue for the year, growing 1% year-on-year. Net interest income growth was supported by balance sheet momentum, which accelerated through the year, and margins benefited from a higher interest rate environment. Non-interest income growth reflected the ANZ Worldline joint venture acquisition, higher fees within some of our businesses, and the non-repeat of prior period items.

28:00 Growing capitalized revenue is a key priority under ANZ 2030. And consistent with this, we are now reporting net fee and commission income more prominently across our results announcements, statutory reporting, and divisional disclosures. This provides greater transparency and a clearer basis for assessing progress against this priority. In the second half, our revenue increased 2% supported by ex-markets income growth of 3%. Net interest income excluding markets increased 4% compared to the first half. As I mentioned, our Australian retail and business and private bank divisions have improved momentum together delivering 7% revenue growth half on half.

28:45 Overall, the second half demonstrates improving momentum in our core businesses and gives us a stronger revenue position heading into FY27. Turning to margin, NIM excluding markets increased two basis points to 2.3% in the second half while Group NIM was stable. I will now talk to the key drivers of Group NIM movement over the half. The replicating portfolio contributed five basis points as lower rate hedges continue to roll on to higher rates. disciplined deposit pricing contributed a further two basis points. Wholesale funding also contributed one basis point and a half as we took advantage of favorable funding markets. These benefits were partly offset by deposit mix as customers continued to favor higher yielding products together with ongoing competitive pressure on asset margins, particularly in Australian and New Zealand home lending.

29:42 In the fourth quarter, NIM excluding markets reduced four basis points quarter-on-quarter to 2.28%. Around half of that reduction reflected higher Group Centre liquids, with the balance largely driven by asset and funding mix. Looking ahead, the replicating portfolio remains supportive, and we expect four basis points NIM benefit over the next 12 months, which is two basis points higher than we had previously indicated. Also, we do not expect the Group Centre liquids impact experienced in the fourth quarter to persist through the first half of 2027. However, competition and funding mix pressures are expected to continue. On balance, noting that margin outcomes may vary from quarter to quarter, we expect first-half 27 NIMX markets to remain broadly stable half-on-half.

30:38 Moving to the balance sheet, Customer deposit growth excluding markets was strong and broad-based, increasing 8% or $51 billion year-on-year. Payments and cash management was a particular highlight, with operational at-call deposits up 10% in the year, with around a quarter of that growth from new customers. This reflects the strength of our relationship model, international network, and transactive global platform. Australia retail deposit momentum improved. with household deposits growing around system as we exited the year. Business and private bank grew deposits in the seasonally softer second half for the first time in three years, while New Zealand grew at around system and maintained its market-leading deposit share at approximately 30%.

31:27 Consistent with the broader industry, customer preference for term deposits became more pronounced in the second half, and we saw this trend across all divisions. Turning to lending, we saw strong momentum in lending across our businesses. Loans grew 6% over the year, accelerating in the second half up 4% half on half. Institutional lending grew by $19 billion, or 12% this year, across regions and products. The depth and scale of our international trade capabilities contributed to strong year-on-year growth as our clients added resilience to their supply chains. Corporate finance lending growth gained momentum towards the end of the year, providing an exit rate benefit while maintaining stable front book margins and portfolio credit quality.

32:16 In Australia retail, home lending returned to system growth in the second half, supported by improved service levels and participation in the government's first home buyers guarantee scheme. We also delivered disciplined lending growth in business and private bank with ad system growth in the second half rated towards larger customers in our middle market segment. In New Zealand, we maintain share in business and agri-lending and balance volume and margin in a highly competitive home lending market. Marcus, as I mentioned earlier, delivered $2.1 billion of income this year, up 1%. Our Marcus income was lower in the second half, particularly impacted by the final quarter as customers shortened hedging tanners against the backdrop of an uncertain global economic environment. This contributed to lower effects in rates income, while commodities was impacted by weaker precious metals demand as we highlighted at the third quarter.

33:14 On the other hand, capital markets delivered a record half as we supported our customers through an elevated funding cycle. Now, turning to expenses. On a constant currency basis, expenses reduced by 4%. on a reported basis, excluding significant items recognized in 2025, expenses reduced by 7% ahead of our initial market guidance of 3%. While FX movements provided a benefit, the cost outperformance was also underpinned by stronger productivity. We delivered $902 million of in-year gross cost savings, $100 million more than our initial guidance. A significant part of this came from simplifying our operating model including the program announced last September to reduce approximately 3,500 roles and a further 1,000 managed service contractors.

34:08 That program is now complete. We also reduced our reliance on consultants and contractors, lowered third-party spend through vendor rationalization, and strengthened cost management across the group. Collectively, all our actions delivered more than $1 billion in benefits on an annualized basis. Suncorp Bank Synergies contributed a further $82 million of productivity, primarily through the removal of duplicative project spend. Investment spend was approximately $1.5 billion for the year. We are focused on prioritization and driving more value for every dollar spent. Our capitalized software balance remains below peers, reflecting our continued approach of expensing a higher proportion of investment upfront.

34:59 Overall, the performance demonstrates the structural cost reset we have achieved and strengthened cost accountability across the Group. Taking into account our expected full-year cost of the ANZ Worldline ownership, our pro forma 26 cost base would be 11.26 billion. Looking ahead, we will continue to deliver productivity to both offset inflationary pressures and support the growth phase of our strategy. Therefore, we expect FY27 total expenses to remain flat to the pro forma FY26 cost base of $11.26 billion. Moving to portfolio quality, with an overall FY26 loss rate of 4 basis points, the credit quality of our book remains robust.

35:45 This charge remains below our long-run loss rate of 11 basis points and reflects the quality and the diversification of the book across our business lines. For the second half, the individual provision charge was $212 million, which included $79 million of wholesale provisions and $133 million of retail provisions. This resulted in a second-half annualized loss rate of 5 basis points. While slightly up on prior periods, the book remains resilient to macroeconomic conditions. Non-performing exposures were flat year-on-year at 0.57% of total committed exposure. I note that there was a two basis point increase in the second half, primarily driven by our Australian mortgage portfolio, reflecting higher cost of living and interest rate pressures on our customers.

36:36 Our 90-day-plus delinquencies increased by 12 basis points to 95 basis points over the last six months, with a small increase in hardship assistance. Despite the increase in delinquencies, Australian mortgage individual provision losses remained low at $8 million for the half. Supported by strong collateral coverage with a portfolio dynamic LVR of 40%, overall portfolio quality remained strong with 87% of customers ahead on repayments and 75% maintaining savings buffers of at least 3 months. We continue to stress test our mortgage portfolio against a range of economic factors including unemployment, interest rates and house prices and we remain confident in its resilience as a result.

37:23 Our institutional portfolio remains a high quality book with 92% of total exposures investment grade. The portfolio continues to be heavily weighted towards low risk segments with 60% of exposure to sovereigns and financial institutions while higher risk Watch and control list exposures reduced over the half. In business and private bank, our portfolio continued to perform well with our small business portfolio 90 plus day delinquencies remaining steady for the half at 2.2% and our wholesale portfolio credit quality remaining broadly stable. We note some emerging stress in the agriculture and transport and logistics portfolios reflecting the higher cost operating environment. Overall, The business and private bank portfolio remains well collateralized with 83% of exposure fully secured with a loss rate of 8 basis points for the half and 7 basis points for the year which is down 2 basis points on FY25.

38:24 Our New Zealand portfolio also remains resilient. The agriculture sector has strengthened. Early delinquency and hardship indicators have improved. while 90-plus-day delinquencies for mortgages were modestly up three basis points in the half. Now, moving to collective provisions, you would recall that we increased our provision balance in the first half, having considered risks to our portfolio from the geopolitical environment, particularly in the Middle East. We have maintained this prudent approach in the second half, continuing to recognize the evolving economic and geopolitical environment, including the impact of elevated inflation and interest rates, which are reflected in our base economic forecast. For the second half, we have further increased our collective provision balance with a charge of $96 million driven largely by portfolio growth, credit quality movements, and a minor change to our scenario weight settings and overlay adjustments.

39:21 Our collective provision balance has increased to $4.53 billion, with coverage increasing two basis points over the prior corresponding period, to 1.2% of credit risk-weighted assets. This is now approximately $2.1 billion above our base case scenario, providing coverage across a wide range of economic outcomes. This approach has taken into account the following. One, around 53% of our scenario-weight settings are weighted towards downside outcomes reflecting the geopolitical environment. Two, our Australian mortgage collective provision settings have increased balances by $65 million for the half and $327 million over the past 18 months. Three, our onshore and offshore portfolio continue to be both resilient and of high quality as supported by consistently low individual provision loss rates.

40:16 And four, that group collective provision balances cover 13 times the individual provision losses taken in FY26. remaining steady and well above peers. Overall, our settings continue to provide appropriate coverage, and as always, we continue to actively review this position as conditions evolve. Now, turning to capital, the CET1 ratio ended the year at 11.99%, including the 8 basis point impact of the ANZ Worldline Australia acquisition. This outcome is underpinned by stronger financial performance, which delivered 80 basis points of organic capital generation in the second half, up from 71 basis points in the prior corresponding period. The interim dividend and risk-weighted asset growth from customer lending was fully funded from this capital generation.

41:08 The CET1 outcome absorbed nine basis points from previously disclosed data methodology changes that are expected to at least partially unwind in the 27th financial year, and 22 basis points net of the capital floor from higher IRRWB risk-weighted assets in the second half. On IRRWB, given the interest rate environment, we took the opportunity to pre-hedge a portion of our replicating portfolio prior to existing hedges rolling off to support net interest income. The associated eight basis point capital impact of that will roll off in the first half of financial year 27. Higher interest rates, particularly through September, also impacted the market value of replicating portfolio hedges consistent with the broader sector.

41:55 Rates have subsequently moved off those recent peaks. We also remain focused on capital efficiency and higher returning growth. Two external RMBS transactions delivered five basis points of capital benefit this year, with further initiatives underway to support capital optimizations. The declared final dividend is 83 cents per share and with significantly improved earnings, the dividend payout ratio is 66% aligned closely with our target range of 60 to 65%. Shareholder returns are supported by increasing the franking level to 80% up from 70% a year ago and reflective of improving performance in the Australian geography. On funding, our average surplus liquidity coverage ratio and net stable funding ratio are stable year-on-year and well above regulatory minimums.

42:46 We executed our 26 funding program as planned and additionally brought forward $3.5 billion of 27 funding given attractive market levels. Looking ahead in the 27 financial year, we expect to issue around $25 to $30 billion. In closing, we enter FI27 from a stronger position with a clear focus on for sustaining revenue momentum, maintaining cost discipline and allocating funding and capital to opportunities that generate returns in line with our ANZ 2030 strategy. Thank you, and I will now hand back to Kylie for Q&A.

43:27 Thank you, Nuno, and thank you, Farhan. As a reminder, if you would like to ask a question, you can only do this via the phone. And if you could please limit your questions to one per person. I will now hand to the operator for questions. Thank you, Ash. Thank you. If you wish to ask a question, please press star 1 on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star 2. If you're on a speakerphone, please pick up the handset to ask your question. Your first question today comes from Andrew Triggs with JP Morgan. Please go ahead.

44:05 Thank you. Good morning. My question is just around the institutional bank, which saw the strongest line growth that I can recall in quite some time. Could you provide a bit more colour on that and the sustainability that you referenced to pick up in corporate finance momentum late in the second half, please? And it's been done with a little bit of margin decline, but still decent, it looks like, underlying top line growth and pre-provisioned profit growth.

44:30 Thanks, Andrew. In institutional, clearly, we operated in the first half of 26. We operated in what I would call a challenging environment, certainly onshore, but also offshore. And when I mean challenging, I mean we thought that the pricing levels were not completely rational. And in this segment, as we know, we actually don't target lending as a goal. We target returns and we target relationship or transactional banking. So in the first half, we consciously prefer to be more selective in applying capital, in lending capital to the markets.

45:22 In the second half, the conditions normalized a little bit and we thought that they were more in line with what we expect. So second half, We grew, I would say, at pace on the asset side. We believe those conditions will continue to be there in 2027. But again, don't expect us to be a lender, expect us to be a transactional bank. What we want to keep a very clear priority on returns while we support customers in a 360 manner. So that's what happened in 2026 and what I think it will happen in 2027.

46:12 Thanks, Bruno. And to what extent has this momentum sort of not yet been reflected in managed income? Could you give us a sense of how the loan growth proceeded through the third and fourth quarters?

46:22 Yeah, it's a very good question. I would say that a significant part of the loan growth happened in Q4.

46:34 Okay, thank you. And if you combine the capital impacts of the data methodology and pre-hedging on replicating portfolio, what would be the combined impacts on capital that will unwind over FY27?

46:44 So if you repeat the question again, Andrew.

46:49 So just that you talked about the impacts of data methodology and also the pre-hedging on replicating portfolio. It sounds like replicating portfolio, in fact, will come back in the first half. and some of those data methodology impacts will come through over the full year. Could you combine those two, please?

47:04 Sure. So on the pre-hedging, Andrew, we've got eight basis points impact, which would unwind in the course of the first half. And on data methodology, it's hard to give you a number, but as you note, we took about a nine basis point impact on capital in the third quarter. We expect some of that to unwind in the first half. Hard to give you an exact number for that. Having said that, also, as you would have noted, peak rates have also come off from the peak of September to now, substantially, particularly in Australian dollar term rates as well as US dollar term rates. So that's going to be helpful as we head towards December and March. So we expect a fair amount of this to unwind as we get through the first half.

47:49 Thank you. Your next question comes from Matt Dunger with Bank of America. Please go ahead.

47:57 Yeah, thank you for taking my question. I wondered if I could ask about investment spend on slide 58. You've shown us that it's fallen with growth spend dropping away. How sustainable is this growth spend dropping away? And with Suncorp Bank migration on track, how much investment spend does this free up? And will this be reinvested in growth or lower costs?

48:19 So thanks, Matt. Look, I think the investment spend... We had guided, as you will recall... last year that we expect our investment spend to be roughly around $1.5 billion as we get through the ANZ 2030 strategy. Now, that may shift as we get to the latter years, but at this point, we're holding to our guidance of $1.5 billion investment spend every year. Now, the expense rate, as you may have noticed, has slightly reduced, but that's largely because of the fact that we have moved more technology, CapEx-heavy items into the slate and moved Some of the more BAU, OPEX heavy items into BAU. Overall, our software capitalization has not shifted. It's just a shift of where we're highlighting change versus run. And I think that's sort of become a cleaner representation now. But we certainly expect at this point for our investment spend to remain at about $1.5 billion, and that that also accommodates for the work that is happening on Suncor Bank integration as well as on the single customer front end.

49:31 So this is not, we're not changing our guidance for 27. And I must say the following also, Matt.

49:39 I know that dollars are the only measure that we can use publicly to compare or to announce, but the dollar is Efficiency on our investment span has increased materially, meaning the outcomes we can squeeze out of each dollar invested in technology have improved significantly, and it will continue to improve significantly. And this is beyond the simple AI impact. It's beyond that. It's how we organize technology to deliver and business to deliver together. That has changed dramatically, and it will continue to change dramatically. The investment in Suncorp, which is material, which will end by June 27, all that spends will be then redirected into growth, into additional avenues of growth.

50:33 So we believe 1.5 is the right level. Obviously, it will fluctuate with the inflation going forward, obviously, but it's a great level and we are getting better on extracting value for each dollar Your next question comes from Jonathan Lott with Baron Joey. Please go ahead.

51:01 A key question for Nuno. When we go back to the 2030 Strategy Day just over a year ago and you announced you were looking for 12% revenue by 2028 and 13% by 2030, the revenue and economic environment both in Australia and around the world have deteriorated substantially. Australia's had five rate hikes since that time. The Governor is saying it's going to potentially feel like a recession for a lot of people. If the revenue environment maintains a soft environment, competition remains intense, is there more flexibility that you've got on costs over the next few years to hit these targets or are the targets going to be much more difficult to hit?

51:46 It's certainly an important reflection and undoubtedly the economic environment we are facing in 26 and 27 It's less positive than the one we had a year ago. Having said that, it's also fair to say that we are closer at this point in time from our 28 goals than eventually the market would expect at this point in time. So if you see our road is 11.56 in 26, our cost of income is on the 49s, which is approaching the mid-40s. So my first message is we're not changing in any way or form our guidance. Absolutely not.

52:36 Second, management of margins, management of capital, management of business momentum is what distinguished companies at the end of the day. And we feel that from a management perspective, we will continue to excel. and will continue to excel in the short term while we are building the long term of the company to make sure the company is in a much stronger competitive position soon enough. So even though I would certainly prefer to have a more benign environment, I don't have any doubts in renewing our commitments to the guidance. In terms of the costs, We certainly will continue to maximize our productivity.

53:24 And at the same time, we also are conscious that if revenues are not there, additional costs will have to be evaluated. It's again management. We don't spend just because we spend because there is a revenue to be captured. If the revenue is not there, we will not spend. So I guess what I'm telling you is that we will apply management to these numbers and to our outlook, but we remain fully committed with our guidance and we see a clear path to get there. Thank you. Your next question comes from Victor German with Macquarie.

54:11 Please go ahead.

54:13 Thank you. and I was hoping to follow up on expenses. I appreciate all the hard work that you've done on expenses so far, but I'm really trying to kind of get a sense for how ambition is the near-term cost, flat cost target. In 2.26 there was, I think, $100 million that you disclosed in the third quarter relating to a fine. and 2027 should benefit from some integration synergy benefits. So adjusting from both, what is the underlying cost growth that your guidance currently imply? And do you feel that that incorporates the sufficient cost discipline that you are trying to achieve?

55:04 And if I can also push my luck, sorry, Carly, on the related topic, but also just following up from Nuna's comments on investment spend, I appreciate that you feel that you invest more efficiently than P&L. And P&L comparisons are not perfect, but if we look at CDA and Ebon Westpac, they appear to have rebased their investment spend to around $1.8 to $2 billion in the P&L. versus P&Ls and that investment spend of about 1.3 billion. So I'd just be keen to hear your thoughts on the relativities with peers and if you feel like your investment spend is actually sufficient based on everything that you're seeing that your peers are doing. Thank you.

55:45 Sure. Listen, on the cost side, we ended the year at roughly $11.1, $11.07 million of costs, okay? with all the considerations that Farhan already mentioned, which effectively tells you that we accelerated, accelerating our productivity journey. If you now include a full year of Worldline, as you know, we acquired Worldline roughly two months before the end of the year. If you include 100% of the cost base of Worldline, The underlying cost for 27 would be around 11.25, 11.26.

56:33 What we are guiding is no more than that. So it's basically we are guiding flat costs. And what it means flat costs? It means the following. It means that we will absorb 100% of inflation, which as you know, lately is being running a little bit high. And we also will absorb The whole investment in our growth initiatives. And that's about increasing the number of bankers. We are increasing a significant number of bankers in business banking in 27. We are also increasing the number of proprietary lenders on the home loan business. And again, we are also improving our platforms and remediating, continue to remediate our NFR shortcomings of the past. So we are absorbing all of this in 2027 and still arrive with a cost flat approach.

57:34 As you saw in 2026, our house ANZ will always try to do its best. And the cost management is an important message. 2026 was not about just getting some headcounts. 26 was about establishing a culture of not spending a cent more than what is needed to drive this business. And that means people. That means contractors. That means consultants. That means vendors. That means traveling. It means that we only spend what is connected with the revenue or obviously with complying with the regulation.

58:19 That culture and that methodology which has a governance has a way of doing things in the company is embedded so you should count on us to continue to try to beat whatever we commit second on your specific question versus peers I have the sense that whatever goes to P&L from investments since each bank has a different definition of investments to be clear it's not comparable But what I can tell you is that our $1.5 billion of investment in growth is the number we feel the company needs and the company can digest in a year of effective transformation.

59:10 Thanks, Hector.

59:12 Thank you. And just if I can confirm, because you talked about investment in additional bankers and that makes a lot of sense. I'm assuming that sits outside of the investment spend, because the investment spend number is not changing year on year, but it sounds like you're investing more. Any chance you can give us a bit more power in terms of how that sort of additional investment in the business outside of investment spend, how much is that increasing next year?

59:35 I can give you a sense of the concepts we are doing and some level of

59:39 dimension.

59:40 Yes, the investment spend is basically technological investments. But there is a massive investment in people. And that means, on one hand, continuing to change and refresh our leadership team in the company, which has been a significant part of our cultural transformation in the last 18 months. But, for example, in business banking, we announced that we would increase 50% the number of our bankers up to 2030 you can basically make it linear and have a sense of how much people we have to increase net in 2027 and I can give you even a more easy to do net in Q4 we did 50 just in Q4 so that gives you a sense of how much people how much Frontline and capacity to interact with customers we are putting in.

1:00:41 And the same will happen for home loans in terms of proprietary lending. So there is a significant increase on strengthening our property origination, which is in doubt as we said several times in our previous presentations. We said that our origination machine, digital and people, Platforms and People, or People and Platforms, have to be strengthened. And those two elements are a significant part of what we are doing. Okay? Thank you. Thanks, Hector. Your next question comes from Andrew Lyons with Jefferies. Please go ahead.

1:01:25 Thanks and good morning. Just a question on your capital. At the FY25 result, you delivered a 1203 CET1 and chose to issue equity through the DRP, and you flag the potential to do the same in the interim, even though you ended up not doing that. 12 months on CET, one is lower at $1,199, and you've said you'll neutralise the DRP. Now, I can see you do have some reversals to come through on the capital base, but what's changed in your assessment of the capital position between a $1,203 with an underwritten DRP and $1,199 with a neutralised one?

1:02:00 Yeah. Thanks for that, Andrew. Look, I think it's fair to say, Andrew, that we sit here in a very different place relative to where we were a year ago. I think the first and most important thing is that we are now one year into our ANZ 2030 strategy. We have greater confidence in terms of our ability to generate organic capital. And as you've seen, We have done so already by increasing our organic capital generation to 80 basis points versus 71 basis points if you look at prior corresponding period from the year end. So the impact of our strategy is starting to show through from an organic capital perspective which gives us more confidence in terms of being able to continue to generate earnings to support our growth and our dividend.

1:02:50 The second, as you mentioned, is that there is going to be a fair amount of unwinds that are going to come through and those unwinds are substantial, some of which I just mentioned to the question that was asked earlier. The third is that we have been a lot more focused and we are building a very clear DNA, almost I would argue a machine, to try and create better quality capital optimization and far more discipline around capital allocation. So a lot of the activities that we're going to be undertaking and have undertaken already which included, as I mentioned, some of the RMBS transactions that we've done in this half. We've talked about some of the, and I mentioned this I think earlier in the third quarter, we've done some CRI transactions which we'll continue to do. So there's a fair amount that we are doing as well as some of the data methodology changes that will come through in the first half and into the year in FY27, all of which are going to add capacity in our capital position.

1:03:56 So that worries us a little bit less. The fourth thing is that last year we had much less confidence and visibility to what was going to happen with the New Zealand business capital requirements and now that has become much clearer. So we know where we stand insofar as New Zealand is concerned. We now have less capital to generate and to get less capital ratios to work towards in New Zealand versus what we had originally expected. So we have some capacity there potentially as well. So I think when we take all of this together and we look at where we are in terms of our capital, the activities that we are undertaking to create more capacity and the unwind that is going to come, I think we are in a much better place compared to a similar number 12 months ago.

1:04:44 Can I just hazard just what the benefit from the changes to the New Zealand capital requirements were for the ANZ Group?

1:04:53 So basically we, you know, roughly the CET1 ratio, as you remember, was much lower than what was originally being planned, which was above, is now about 12% rather than the 13% that was, 13.5% that was being originally planned for, so we have more capacity now there, as well as the floor benefit that we have gotten now as well will be helpful to us. Your next question comes from Brian Johnson with MST. Please go ahead. First off, congratulations on the cost-out execution. It's very rare to see a bank in Australia deliver on it. That said, I was just wondering, Fahan, could we get some... Explanation and some sensitivity if possible on the declining New Zealand dollar hedge just having a look at it in a dollar terms if I was to go back to 24 we had 3.4 billion it's now down to 2.25 billion so what I'd like to understand is and it's given a fairly substantial the unwind of it or the realization of it has really helped out in 2026 probably helps out in 27, but I'd just like to confirm whether other things being equal at all but disappears in 28?

1:06:06 Yeah, I'm happy to start and I'm sure Nuna will want to add a little bit on this. I mean, we are, we're absolutely, you're absolutely right, the numbers are correct. We're at about $2.3 billion book now on the New Zealand hedge versus I think it was about $2.8 billion last year, so it has reduced. Now, some of that has been actively done because of the fact that rates, of course, have been at extremely high levels. and we've been managing more dynamically in terms of our hedge strategy insofar as New Zealand is concerned. And we've managed our floor in terms of how much capacity we want to hedge or how much earnings we want to hedge for year one and year two as we've gone through the period. But that's an evolving situation, Brian, and we will continue to, of course, monitor that and put on more hedges as we think appropriate.

1:06:52 But at this point, our hedge benefits are mostly in FY27. and a very modest amount that will come through in FY28, but that could fundamentally shift depending on what positions and hedges we continue to put on as we see the evolving environment in terms of the Aussie dollar, Kiwi dollar rate. If you put on more New Zealand hedges, does that show capital?

1:07:17 Yeah, I mean, it does. It will impact somewhat on capital, but again, the benefit of that will either come through hedge earnings or will come through capital. cash profit from New Zealand. So it's not particularly expensive from a hedging standpoint. It's much more about making sure that we're designing to reduce volatility rather than to manage earnings. Thank you. Your next question comes from Brendan Sprouls with Goldman Sachs. Please go ahead.

1:07:54 Good morning, team. I've got a question on your ambitions in New Zealand. I mean, you had 519 shows that you had pretty strong balance sheet growth, both lending and saving transaction deposits, and you had very positive share gains in MFI across personal and business. But the second half revenue sort of slowed to zero, and I was just wondering how you balanced, just given the size of your franchise in New Zealand relative to the other banks there, How do you balance this ambition of customer and volume growth versus revenue?

1:08:27 Sure. Well, I would say, Brandon, a couple of things. First is, as a leader in New Zealand, we will continue to behave as a leader. Actually, what I would say is that we are renewing our energy and making sure that we translate that leadership, that important position, into even more growth and more returns. So that's That's how we see New Zealand. New Zealand is a significant part of our group and is a very, very profitable part of our book. It's extremely accretive to the group returns. Extremely. So we want more of that market. We want to continue to grow in that market. Now, what we don't do, as we don't do in Australia, is to embark in rates or price discount expeditions.

1:09:21 That we don't do. We don't destroy value at that level. We compensate that with an extreme, with a very effective and intense commercial activity and retail activity. Meaning we double down on how we interact with our customers and we double down on how we innovate in our platforms. So you should expect us to continue to grow in New Zealand both in returns and in volumes, but certainly in returns.

1:09:52 If I could just add just to that point to your question as well. I mean, there is a – I should point out that even though we had that impact in the half, our exit in the fourth quarter from a margin standpoint is higher. So that gives us a good tailwind going into 27 as well.

1:10:12 Thank you, that's very helpful and maybe just a second question on the performance in the second half of the Suncorp Bank franchise. Now you said that new lending opportunities are being passed over to the ANZ Retail Division but you saw a significant fall in saving transaction deposits on slide 17, MFI How should we think about the revenue growth within this division in 27 while we go through this significant integration?

1:10:43 Sure. Brandon, we are, as you know, we are in the last stages of the integration of the two banks. So at this point in time, customers were formally notified that they are coming into the family of ANZ. So the moment of through, if you want, started. And it's normal, in any integration of this kind, it's normal that when customers are informed, some might take decisions on that regard. Having said that, the vast, vast, vast, vast majority of all the business is with us. So that's one angle, which is just the pragmatic angle of the data is approaching, we are months away from it, so there is some dynamics around that. Having said that, the save and transact dynamics are also highly influenced by the obvious which is customers are taking higher yield products in this case TVs so that's absolutely normal at the same time we close lending so we're not doing more lending because we can't have lending files as we address the integration we have to stop that in one book and we have to start that in the other book.

1:12:04 So obviously that's already impacting the Suncorp origination. So we are absolutely, if you want, at this point in time, focused on bringing that book of business, its fantastic customers, the fantastic franchise, its employees into the ANZ family. And I think at this point in time is the most important element of all. Your next question comes from Richard Wiles with Morgan Stanley. Please go ahead. Good morning. I wonder if you could talk a little bit more about the four basis points of impact on margins from mortgages on slide 30.

1:12:50 Is it evenly split between Australia and New Zealand? Has it got worse? And given your aim to grow in line with the system, should we expect The overall mortgage margin headwinds to continue or even grow a little bit next year. Thank you.

1:13:09 Thanks. Thanks, Richard. So not a significant shift in terms of where margins were as we exited from a lending perspective. But the four basis point I would say broadly is two basis point and some of this is rounding, Richard, so forgive me. But it's roughly two basis points in Australia. home loans about a basis point in New Zealand and about a basis point in the wholesale business across business and private bank as well as institutional. So the impact from the wholesale business is minimal and the split of 2-1-1 is roughly right notwithstanding some of the rounding. There hasn't been a substantial change in the fourth quarter.

1:13:55 However, as we've said before Richard and you've heard this many times We are absolutely we said we would deliver system growth in the second half. We have done that but we remain obviously very watchful to see where margins are and returns are heading as we get into the first half and we will continue to manage volume and margins as we go forward. So we're not representing an outcome here in terms of system and volume. We're just sort of suggesting that our continued focus on margin and volume growth and balancing that will remain.

1:14:29 adding to what Farhan said in the second half of 26 we regained pace with market on our mortgage business in Australia and slightly the same in New Zealand across the whole year in the case of Australia we were at 1.1 system in the second half and that was because as we said we will address our service issues which are fully addressed we also enter the First Home Loan Buyer Scheme where we were an outlier and we are there now. So all of that contributed to our going back into market flow. We also improved the broker onboarding processes which allowed us to be much more friendly in that channel.

1:15:18 However, I want to remind all of us that mortgage is a very, very important need of the customers. of our customers and we will continue to compete in this segment obviously with a lot of intensity but as a transactional bank it's not at the center of our strategy and I won't repeat that it's not as you know the returns of this product of this business for the industry are borderline paying cost of capital so we see this as a business that needs to be delivered due to be a very important customer need is not a crucial business to deliver high returns from a shareholder perspective.

1:16:05 So we'll continue to compete, but you should see us less present when margins are below cost of capital or irrational. You will see us more active when margins obviously invite to a more active role. Thanks, Richard. Thank you. Your next question comes from Ed Henning with CLSA. Please go ahead.

1:16:39 Thanks for taking my question. Just further on your comments just then and before on not growing volumes at the cost of margins, can you just dig into that a little bit more on where you think system credit growth will be across the different segments of your business? and then incorporating kind of where you think you'll be. You talked about today about adding bankers on the business side and also adding proprietary lenders as well. And then also, can you include, you know, not taking any more flows into Suncorp and how that will fit with you versus potential consensus as well, please?

1:17:15 Okay. Sure. Obviously, on the lending side, which I think it's... Part of your question. On the lending side, the mortgage business will grow at a slower pace. We all know that. I think, in my opinion, that's not relevant for the industry from a return perspective. As I've been saying for quite some time, that business does not materially impact the returns of banks. If anything else, it anchors them around cost of capital. So, I'm not concerned with that from a return perspective. Obviously, I would prefer the economy to be growing faster and the mortgage market to be growing faster, but it's just not as relevant as it seems to be. I'm much more interested in making sure that we continue to grow the size of our customer base. That's the bank we are.

1:18:19 It's not so much about growing volumes on our balance sheet. It's not so much inflating our balance sheet and competing for margin. It's gaining customers that really want to do business with us and have a comprehensive 360 relationship. That's how I see banking. That's how we see banking at ANZ. So, double down on transactional banking, meaning we are the bank that wants to be with customers on a permanent basis, on a recurrent basis for Retail, it means to be their account, main account provider, their main payments provider, their main cards provider, and also, obviously, lending into their home lending needs. On business banking, it is to be their transactional bank, meaning, again, to their accounts, their payments, their effects needs, and also lending into this segment.

1:19:14 And certainly on institutional, it is, again, to be the bank that serves them the bank of their CFO of their treasurer meaning again cash management trade FX this is what is going to make us more profitable down the road in terms of volumes I would expect in 2027 to be close to the market remember we started in 25 being an outlier our flows were not in line with the market in many parts of our business 26 clearly we catch up materially second half basically in line with market in 27 we should continue to consolidate that trend but it doesn't mean that when we see irrational pricing it doesn't mean we will compete for that it means we will always prefer to deliver to customers but at the same time to shareholders so I hope I'll give you a sense on how we compete in this market set Thank you.

1:20:25 Your next question comes from Matthew Wilson with Jardin. Please go ahead.

1:20:30 Yeah, good morning, Matt Wilson, Jardin. The shape of the credit book has materially improved over the last decade. There's been much less lending into the riskier segments like commercial property, transport and storage, agri, retail, wholesale, trade, etc. And your exposure to sovereigns slash financial institutions is now double that of your peers at circa 38%. This should translate into the lowest bad debt outcome for the sector, which is very different to what you've achieved historically and probably still the market's perception, would you agree? But based on what we've seen in INSTO book in the last half, it would be very much a shame to turn on the credit tap just as the plug is being pulled from the economy. You've seen more cycles than your peers. How does it feel to you at this stage?

1:21:16 First, I think you're reading correctly. is absolutely correct and I think it highlights and acknowledges the work that the team did in the last decades and I want to give you some numbers to quantify what you just said because again numbers talk by itself we are undoubtedly again our portfolio continues to be very resilient that's the first message I would like to give and obviously we are in a much challenging environment but these are the moments where we are tested that our models are tested and I hope our model will be tested in a positive way throughout this cycle our IP was 4 basis points in 2026 4 basis points on the first half 5 in the second half a small uptick but above all the profile of our portfolio is structurally more conservative than our peers and I have the sense as to blame that we have not yet been able to translate this enough to you folks.

1:22:27 Not all of us.

1:22:29 Meaning, and I'll give you the numbers. If you just look into investment grade percentage, we are by far, by far, the highest investment grade exposure in our balance sheet versus our peers, by far. If you go to institutional, 92% of our portfolio is investment grade. 61% of our portfolio institutional is FIG and sovereign, which is lower risk. 81% of our corporates are investment grade and the rest are fully collateralized. In the second half, to your question, and now addressing a little bit to your question, in the second half, of the lending we did to institutional, 97% was investment grade, right? In business banking, 83% is collateralized with property.

1:23:22 Our IP in business banking went down from 2025. From 9 basis points to 7. And this is not because the market is better. This is because our risk selection is better. Our watch and control lists in net terms went down from 2025. Fair to say our control subcomponent went up. But we are still, my point is, we are still benefiting from decisions on risk and capital location that we're taking in the last years. We have no private credit direct exposures at all. We have co-lending, obviously, with private credit, but we don't lend to private credit directly by no means. And I think it's a number that the market should look into it. Our CP coverage of IP it's 13 years.

1:24:19 Our peers are between 5 and 9. So, when someone says, yeah, but you are 120 on CP coverage, 1.2%. Well, but our portfolio is so different that when you divide CP by IP, it's 13 years versus others 9 to 5. So, don't expect us to change that. We are not changing our investment risk appetite. We are not relaxing We are a firm believer on a bank that wants to be here for the cycles and that bets on flow business, transactional banking, fees, and so on. We are going to get there as we continue to improve our capabilities. Thanks, Matthew.

1:25:03 Thank you. Very clear. Cheers. Once again, if you wish to ask a question, please press star 1 on your telephone. Your next question comes from Tom Strong with Citi. Please go ahead.

1:25:16 Oh, good morning and thanks for taking my question. Perhaps just to follow on from the last question, a question for Han perhaps, around the provisioning. I mean, we've talked about, I guess, the level of conservatism. We've heard 13 years, 2 billion months of base case and 53% weight of the downside scenarios, which would be quite unusual in the global perspective. I mean, given all that, should we continue to expect a slight moderation in the coverage ratio or how do you sort of think about that over the next

1:25:47 Tom, I don't think we will give you a forecast for where we think the coverage ratio is going to be because that's going to be a function of what happens in the environment and how we how we see our portfolios behaving and what the transmission impact is to the Australian economy, etc. So it's hard to give you a ratio, but I think what we can certainly say is that we feel at this point, certainly based on the stress testing we've done, and I mentioned some of that in my prepared remarks around the work that we're doing, for example, on the Australian mortgage portfolio, testing it across home prices, rates, unemployment, etc., that we feel that we have substantial coverage. And we've taken over $300 million of incremental mortgage collective provisions over the course of the last 18 months to protect ourselves for that.

1:26:39 However, and as Nuno went through the detail on institutional and business and private bank, we certainly don't expect to see further substantial deterioration unless there's an incredible event globally that causes that. So as far as As far as we're concerned right now, we don't see any reason. Now, having said that, we've said that our long-run loss rates are closer to 11 basis points. We're currently operating at four basis points from an IP loss perspective. To say that that will not grow at all over the next two to three years, especially if the environment remains where it is, would be unreasonable in my view. So I think there will be some level of increase around where the IP loss rates are. We'll have to watch that, and we'll have to make sure we're managing our portfolio for that. but I do think that we are not suggesting that our plans currently expect or anticipate the fact that we are going to remain at these low levels of loss rates for the next five years I would just say to add to Farham's it's obvious that the Australian sector, banking sector it's extremely prudent in capital and in provisioning and that explains in part

1:27:54 why you guys, you folks, you attribute a very low cost to capital to the sector. It's very obvious and high multiples. I don't think that will change. Those are the settings of the industry. But with time, I would assume that it will normalize. But don't expect us to change that by no means. Thank you. Thank you very much. There are no further questions at this time and that does conclude our conference for today. Thank you for participating. You may now disconnect.