Australia and New Zealand Banking Group (ANZ) is kicking off a bold cost-cutting initiative led by its new CEO, Nuno Matos. The bank is gearing up for increasing margin pressures as it heads into the 2026 financial year.
ANZ has reported a significant drop in its annual cash profit for the year ending September 2025, with a 14% decrease bringing it down to around A$5.79 billion compared to the previous year. This decline is attributed to a combination of one-off charges, such as redundancy costs, regulatory fines, and ongoing restructuring expenses. Even though this has impacted earnings in the short term, the leadership views these actions as crucial steps toward creating a more streamlined and competitive bank.
Taking the reins in early 2025, Matos has made it abundantly clear that his priorities lie in operational discipline and efficiency. “We are building a simpler, stronger, and more resilient ANZ,” he stated during the results briefing. The new CEO highlighted that the bank’s transformation will focus on streamlining operations, boosting digital capabilities, and cutting down on the overlapping structures that have accumulated over years of expansion.
Margin Squeeze and Competitive Headwinds
The bank’s financial performance has been feeling the pressure lately, mainly due to shrinking net interest margins (NIM), which have dropped to about 1.55%. This decline is largely a result of intense competition in the mortgage and business lending markets. Australian lenders are in a fierce battle for market share, with customers refinancing their loans at unprecedented levels as interest rate expectations continue to fluctuate.
Analysts are pointing out that the tough environment isn’t going to get any easier anytime soon. With possible rate cuts from central banks on the horizon and fierce competition for deposits, profit margins are likely to stay under pressure. The management at ANZ has recognized that to safeguard profitability, they will need to rethink their pricing strategies and find a better balance between loans and funding sources.
Restructuring and Job Cuts
As part of its efforts to cut costs, ANZ has kicked off some major restructuring moves, which include laying off thousands of employees. This is all about streamlining operations and reaping the benefits from its recent acquisition of Suncorp Bank. They’re now speeding up the integration of Suncorp to achieve those cost savings even quicker than they originally planned.
In a strategic move, ANZ has decided to pause its share buyback program to save capital for its transformation efforts. This choice aims to bolster the bank’s balance sheet while also freeing up resources for investing in technology and automating processes, which are key components of Matos’s long-term vision.
A Leaner Future and Strategic Refocus
Matos has committed to cutting overall costs by about 3% in fiscal 2026 while striving for greater efficiency across all departments. The bank is also tightening its non-financial risk frameworks after facing a series of compliance issues that have impacted its reputation. Enhancing risk governance and ensuring operational transparency are now key priorities for the CEO.
Despite a dip in annual profits, investors seemed to hold a cautiously optimistic view. Following the announcement of the results, ANZ’s shares saw a slight uptick, thanks to the confidence in the leadership’s decisive moves and the clear turnaround strategy they laid out. The bank’s solid capital position also provided some comfort, giving it the flexibility to tackle the challenging operating landscape ahead.
Outlook and Challenges Ahead
Looking ahead, Matos has laid out an ambitious plan to boost the bank’s return on tangible equity to 12% by 2028 and 13% by 2030. Achieving these goals will rely heavily on effectively implementing cost-saving measures, maintaining a disciplined approach to the balance sheet, and successfully rolling out digital growth initiatives.
Despite the progress made, there are still hurdles to overcome. The mix of tighter lending margins, sluggish credit growth, and increased regulatory oversight means that ANZ will need to navigate its turnaround with both precision and determination. As the fourth-largest bank in Australia, how ANZ performs will be a key indicator of how the entire sector adjusts to the upcoming economic challenges.
For Matos, 2026 is shaping up to be a pivotal year one that will really put his commitment to cutting costs and revamping operations to the test. It is a chance to see if he can breathe new life into ANZ’s competitiveness and get its growth back on track.