THE DISTILLERY: ANZ ups the ante

Jotters assess ANZ Bank's new technologies plan, while another sympathises with the Reserve Bank.

The $1.5 billion that ANZ Bank has found to pump into new technologies has coincided with a decline in its branch network. This morning two business commentators take us through the proposal and how that speaks to the modern banking footprint. Also in Friday’s shot from The Distillery, the reasons for the ASX’s aggressive defence of its market position have become clearer with the release of two documents – and there’s one more note to be discussed on the RBA’s latest rate cut.

Right off the bat The Australian’s Glenda Korporaal makes the rather astute point that ANZ’s investment serves as a reminder that, despite chief executive Mike Smith’s Asian vision, the Melbourne-based bank still generates almost 70 per cent of its earnings domestically.

"Titled 'Banking on Australia', the package of measures does not represent an allocation of new investment dollars by the bank – the $1.5 billion comes out of its existing investment program allocations. Aimed at ‘making it easier for Australians to bank with ANZ’, the package highlights the shifting trends in banks' interface with customers – the relative decline in the role of the bank branch and the rise of online and now mobile phone banking.”

Business Spectator’s Cliona O’Dowd quotes the same Credit Suisse report as Korporaal, which explains that ANZ was the only bank amongst the big four to reduce its branch network in 2012, reducing it by 4 per cent.

"The same note shows CBA and Westpac increasing their branch networks by 1 per cent, while NAB’s network remained unchanged from the previous year. That doesn’t mean that ANZ has given up on its branch network, just that it is adapting it to be more in line with the future of retail banking. Included in today’s announcement was a five-year refurbishment program for its branches across the nation. By the end of the year, ANZ expects to equip 46 branches with a new design and layout that will focus more on meeting complex customer needs than everyday banking. Part of the plan is also to shrink its branches where possible to save on property expenses.”

Meanwhile, The Australian Financial Review’s Chanticleer columnist Tony Boyd says two documents released yesterday explain why ASX chief executive Elmer Funke Kupper is defending the exchange’s turf so actively.

"The first document is the ASX group monthly activity report which shows cash equity market volumes and values at the lowest September monthly level since 2005. One caveat is that September 2012 only had 20 trading days. But the message is clear that ASX’s core business is under severe pressure from a combination of factors… The second document was the Reserve Bank of Australia’s annual assessment of clearing and settlement facilities in Australia. This gives a firm endorsement of how the ASX is running clearing and settlement but also hints at the prospect of competition. The RBA says a new derivatives exchange, FEX has applied for a market licence in Australia and it has approached LCH, a London based company, to provide its clearing services. If LCH is granted a licence it will be the thin edge of the wedge and threaten the ASX monopoly in cash equities and derivatives.”

And as part of the wash-up from Tuesday’s rate cut, The Australian’s Adam Creighton delivers a warning to the Reserve Bank not to move without proper grounds.

"The Reserve Bank's most recent economic update even projected inflation would rise to the top half of the 2-3 per cent target band by the middle of next year. The Australian dollar seems to have settled at a higher level, meaning falling import prices cannot for much longer be relied upon to keep overall inflation at bay. The Reserve Bank's decision to cut interest rates this week appeared to be based more on what might happen rather than what is happening.”

This column thinks that last sentence is a bit unfair, with yesterday’s edition of The Distillery giving a pretty compelling context for Australia’s rates settings, thanks to The Australian Financial Review’s David Bassanese.

But Creighton’s point about inflation is just as crucial about our lingering concerns for growth, particularly through the prism of retail sales. The market is predicting another 100 basis points of rate cuts over the next 12 months. How is the RBA going to accommodate for those wishes when inflation would presumably be threatening.

ANZ Australia chief Phil Chronican recognises the Reserve Bank is in a "bind,” trapped between concerns for inflation and growth.

In other economic matters, Fairfax’s Michael Pascoe basically orders his audience not to bother reading stories about seasonally adjusted data, as it’s completely substandard to the long-term trend figures. With a graph on retail sales showing a seasonally adjusted line jumping up and down, but broadly in line with the trend line, he makes a convincing case.

In company news, Fairfax’s Michael West investigates the possibility of linking executive pay to safety, using Origin Energy’s two fatalities six weeks ago as a case example.

Fairfax’s Malcolm Maiden gives his summation of the Nine Entertainment debt negotiations, saying the best guess is that lenders need to have an agreement by the end of the month.

The Australian’s Bryan Frith writes that the continuous disclosure rules for ASX-listed companies will be put under the spotlight promptly after Fortescue founder Andrew Forrest’s High Court victory, with the bids for Discovery Metals and Elders.

And on the Discovery bid, The Australian Financial Review’s Matthew Stevens takes us to a dinner table somewhere in New York, where the idea was hatched.

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