Executive Interview - Joseph Healy - Managing Director, ANZ Institutional Banking
(5 May 2005 – Australia) At last week’s interim profit announcement, ANZ reported its Institutional Banking profit had grown a steady seven percent on the previous year to A$455 million. The importance of this market segment to the bank has been evidenced by a number of key appointees in the senior management ranks over the past six months , including Joseph Healy who was named managing director of Institutional Banking in February this year.
Healy was previously head of ANZ Regional Investment Banking and Private Equity and the main instigator of the bank’s "Wall Street to Main Street" strategy of providing mid-sized business with investment banking and advisory services. He has been charged with the task of replicating the success he achieved in that segment in the Institutional market segment.
East & Partners senior consultant Paul Bartholomew spoke to Healy about the principles behind the Wall Street to Main Street approach to working with customers and his plans to implement the strategy in ANZ’s Institutional Banking business.
You were responsible for driving the Bank’s successful Wall Street to Main Street strategy in the middle markets. Are you essentially trying to do the same in the Institutional Banking space?
The main agenda item for my team is to develop a strong growth business within Institutional Banking, which we define roughly as our relationships with companies turning over A$150 million and north of that. The relevance with my previous role is that quite a lot of the philosophy that we employed in the middle markets works equally well in the Institutional market. We take the view that we’re going to provide our clients with strategically relevant ideas and solve their capital requirements, not just narrowly focussing on the senior debt requirements. We must naturally ask how can we help our clients grow, what kinds of capital structures are necessary to achieve this, and what are the links between their strategic intent and financial profile? To do this we need to develop a deep knowledge of what their strategy is, the industry and markets they operate in, the aspirations and concerns of shareholders and stakeholders and then, how we can pull all of this together to develop the right solution. That’s where our existing strong industry specialisation work really comes into its own because it provides knowledge and insight.
I see it as an ability to take a lot of what we’ve done in the mid-market centred around a solution rather than a narrow product focus, in other words an integrated capital solutions mentality and employ it in the Institutional space. For example, we’ve got a private equity capability that we used very successfully in the mid market, which we could bring into the Institutional market as well.
Can you discuss the principles behind the Wall Street to Main Street strategy?
There are three components to it: firstly, you’ve got to have the right kind of people; you’ve got to have top class relationship managers who understand corporate finance and who are confident about engaging with their clients at the senior level, digging deep into the strategy and digging deep into the finance and bringing them together. That is essence of our Wall Street to Main Street strategy and that is why the same principles and philosophy apply in the Institutional market.
The second thing we’ve got to do is be careful about segmenting our clients and we already do that through our specialist industry groups and we’ll continue to do that by looking at the buying behaviour. I think too often people segment clients on size and not necessarily on their buying behaviour. Quite a lot of the most attractive companies that we do business with are not necessarily the bigger ones, but clients that have significant growth aspirations and that’s the key, to really understand what those aspirations are and to make sure we’re in there working alongside them; so that we are relevant to them in a strategic sense.
So the behaviour component is quite important. Linked to that is a term used quite often by North American banks, "wallet size" or "share of wallet". I’m a big believer in understanding the client wallet, and not just the size of the wallet but the nature of it, how much is spent on senior debt, how much is spent on risk management products, how much is on transaction products, how much on advisory work, how much on structured and trade finance, and how does that wallet change and compare to peers in the same industry, and who’s responsible for making decisions about the various parts of that wallet.
It’s all linked to client account planning analysis, or what we now call ‘The client CEO Agenda Plan’. This crucial investment shouldn’t be viewed as a once a year exercise, where you get a bunch of people around a table asking where the client might be going, and then you fill the form in and off you go. When it’s done well, it’s got to be strategic - long on analysis and insights and short on description; it must also be a ‘living’ document as we build our intelligence on clients, industries and markets. It has also got to be the road map that we use so that we have a very clear sense of what a client is doing and what they could and should be doing. We’ll be doing a lot of work on that as an integral, fundamental, part of how we think about our clients. So, the quality of the relationship bankers is fundamental; the quality of the ‘CEO Agenda Plan’ is fundamental and we will commit to ongoing investment in our people to build this as a core competency for ANZ in the Institutional space.
The third thing in all of this is to make sure we have all the products that will allow us to solve client needs, but I emphasise product and solutions because too often in organisations, products are driven for the sake of product – remember that many of today’s products were designed to solve for yesterdays needs. We want our relationship bankers to think bespoke solutions in the way that a top class management consultant would, to think innovation rather try to define our client needs just around our existing product offering. All of our people need to do that well and it has to be a core value; a solution mentality rather than a product driven mentality. Innovation is very important.
One of the issues for ANZ is that the Bank does have a product silo culture, so how much of a challenge will it be to get the strategy working across all of those different product groups?
It’s a good question but remember it’s not unique to ANZ. I think when you have a silo structure you get a lot of strength but sometimes that strength can be specific to different parts and you don’t necessarily get the full synergy across the whole business and, worst case, the overall client experience may be mixed. The Institutional banking business that I look after sits within our Institutional Financial Services business, which is headed by Steve Targett. Steve has been strengthening his management team over the past six months. Cathryn Carver joined from Westpac as managing director of Corporate & Structured Financing and Scott Reid joined as chairman, NSW, and he has committed to working with my team to build our profile with senior decision makers in the NSW market, and I hope beyond as Scott is a world-class relationship banker who has been a great acquisition for us.
Also, David Hornery moved to Singapore from Capital Markets to lead our efforts in the key Asian region where we look to support our Australian and New Zealand clients. There have been other changes like integrating our Foreign Exchange and Capital Markets businesses into a single client facing business and we also hired some great leadership there such as Mark Whelan as Head of sales for Markets. We are all committed to ensuring a seamless proposition to our client base.
Can this Wall Street to Main Street strategy or philosophy work as effectively in the Institutional space as it did in the middle markets?
As mentioned earlier, I am convinced that the same principles, the same philosophy applies in the Institutional space, in fact, arguably even more so because competition is quite intense and the ability to differentiate is crucial. We need the approach with regards to our clients where we tell them that the second thing we want to talk about is finance, the first thing we want to talk about is our view of where their business is going, and why we think what they’re doing is right but also why they might want to give some thought to something else. We want to be able to demonstrate ways in which our clients can grow bigger and stronger.
We have fantastic specialist knowledge of the industries and markets our clients operating in, we’re looking at how fast those industries are changing in terms of growth and we’re asking how our clients are sitting in those industries and what the critical success factors in those industries are. For example, should they be going international, or expanding within Australia and New Zealand? We spend a lot of time having those kinds of discussions, doing research and analysis, and then we develop relevant ideas.
For example, we may have a client who’s been growing at a rate less than the industry, but the business is being run by an entrepreneur who’s built it up over 20 or 30 years, and who is wealthy within his own right but the appetite for doing more than what they’re currently doing is limited, yet the business has potential to grow at a higher rate. So, for example, we’ll go to that client and say "there’s a fundamental issue here, unless your business is growing at least in line with the industry you’ll be going backwards, meaning the very wealth you thought you were growing could be eroding over time and it may be time for you to sell into an IPO, to a trade player or, perhaps, a management buy-out".
The emphasis is on the business and strategy first and foremost with finance second. In the final analysis, we are trying to help our clients maximise the value of the business. That is the test we will apply in assessing the legitimacy and relevance of our ideas.
Is the fact that both you and other very senior people have been brought into ANZ’s institutional business an acknowledgement that the Bank has been underperforming in this segment?
Not at all. Actually, I think we’ve been pretty successful and when you look at external research and the overall performance of the business, it’s been a very positive story. The challenge is that in a market where competition remains quite intense, where in a lot of core product areas, margins are under pressure, how do you take that very strong market position that you’ve got and develop a stronger growth model off the back of that?
If you look at ANZ’s market share in Australia and New Zealand in the Institutional space, it’s very strong and when you’ve got such a strong platform, what you don’t want is to become complacent. So, I say we have a fantastic asset, now how do we use that asset to achieve strong, sustainable market share growth? That comes back to ideas, the things that we’ve talked about: quality of our people, quality of ‘CEO Agenda Plan’. And the third thing is having the product capabilities and solution mentality that makes it all happen.
To achieve this level of engagement with a client, do you need to reduce the ratio of clients to RMs? Will you be taking on more RMs?
We need to have even more high calibre relationship managers. We’ve got to invest in people. And that’s where training and development comes in. I see it as such a crucial part of what we’re trying to do. So we’ll be investing in our people to make sure we’re developing those who clearly have the potential.
We have many top quality people in our relationship management teams; there’s been a lot of very good hiring in recent years, and a part of our commitment to the seamless approach to clients, is investing heavily in training and development programs that reinforce that. As I mentioned earlier, by way of example, one of the programs that we’re looking at is called ‘The CEO Agenda’. One of the principals of our Wall Street to Main Street approach was an extensive series of training modules built up around specific case studies linking corporate finance and strategy. We see this commitment as an integral part of how we manage the business, not just as a series of training events.
In all of this, we want to make sure our best clients see our best people, so we’ll be very disciplined about our client analysis and making sure we have the right people working with the right clients. We can build "share of the wallet" via the quality of relationships we have with key clients. It’s through the quality and consistency of our ideas that we will grow this business in the direction that we want to take it – by making ourselves even more relevant to our clients than we are today.
Having top quality relationship managers is such a major issue now with so many players currently looking for them. Is it hard to bring in the quality you need?
I found that when I was in my previous role building the Wall Street to Main Street strategy in the middle markets that, internally, we had the exact same discussion four years ago. We said we had thousands of relationships and hundreds of relationship bankers but that if we were really going to grow this business and make it truly different to what our competitors are doing, then we would need to bring in and develop a certain kind of banker who was much more of this broad corporate financier. We’ve hired people with a corporate finance bent who are relationship bankers in terms of professional values – which is vitally important to us - but who are also very capable in talking about corporate finance, and to my mind that’s where the future lies.
The successful Institutional and Corporate bank will be the bank that has a much stronger corporate finance flavour in its approach to its clients as well as being excellent in providing more traditional products and services. There is absolutely no prospect of growing the business in the way we want to grow it without having more of that calibre of individual. We are investing heavily to achieve this.
In the middle markets, over the course of three and a half years we hired several dozen top class individuals, people who, perhaps in the past, wouldn’t have thought of a commercial bank as being a natural home for their talents and who had much more of the consultant, investment banking mind set. But when we told them what we were trying to do, that we were investing in these capabilities and that we’d had some success and were committed to greater success, then the right kind of individuals are attracted to join because they see an opportunity that is quite unique in the Australian and New Zealand market, and they see an organisation that is committed to making it a reality. And of course once you’ve hired a few top quality people, you can point to them and say they’re here because this is a place where they know they can make a real difference.
I look back on that experience and think we were able to make that work in the middle market, so I’m very confident we can make it a reality in the Institutional space. We’re not going to be looking for the run of the mill, traditional relationship banker; we’re going to be looking for people who really believe that large domestic banks should be playing a greater role in the capital and strategic needs of their clients.
What else would you say is important in building growth in the Institutional Banking space for ANZ?
I want to build on our existing strengths and differentiation. I have been genuinely impressed with the quality of our existing client relationships and the quality of our people both within my own relationship side of the business and across the three different product groups – Markets, Trade & Transaction Services and Corporate & Structured Financing. I see great opportunities to take our client focus to a new level, one that will truly set us apart from our competitors.
Our specialist Industry segmentation is a great strength and we have plans to segment even further. I also believe our Asian franchise and northern hemisphere presence is a strong point of difference and will become even more important with so many of our clients increasingly active internationally. In Institutional Financial Services we have on the ground presence across ANZ’s network in Asia and can follow our clients around Asia. If you take an area like trade finance, we’ve already grown our business through Asia but there are also big opportunities for us in Europe and the USA. We are in a good position internationally, and we will be building on this investment.
East & Partners senior consultant Paul Bartholomew spoke to Healy about the principles behind the Wall Street to Main Street approach to working with customers and his plans to implement the strategy in ANZ’s Institutional Banking business.
You were responsible for driving the Bank’s successful Wall Street to Main Street strategy in the middle markets. Are you essentially trying to do the same in the Institutional Banking space?
The main agenda item for my team is to develop a strong growth business within Institutional Banking, which we define roughly as our relationships with companies turning over A$150 million and north of that. The relevance with my previous role is that quite a lot of the philosophy that we employed in the middle markets works equally well in the Institutional market. We take the view that we’re going to provide our clients with strategically relevant ideas and solve their capital requirements, not just narrowly focussing on the senior debt requirements. We must naturally ask how can we help our clients grow, what kinds of capital structures are necessary to achieve this, and what are the links between their strategic intent and financial profile? To do this we need to develop a deep knowledge of what their strategy is, the industry and markets they operate in, the aspirations and concerns of shareholders and stakeholders and then, how we can pull all of this together to develop the right solution. That’s where our existing strong industry specialisation work really comes into its own because it provides knowledge and insight.
I see it as an ability to take a lot of what we’ve done in the mid-market centred around a solution rather than a narrow product focus, in other words an integrated capital solutions mentality and employ it in the Institutional space. For example, we’ve got a private equity capability that we used very successfully in the mid market, which we could bring into the Institutional market as well.
Can you discuss the principles behind the Wall Street to Main Street strategy?
There are three components to it: firstly, you’ve got to have the right kind of people; you’ve got to have top class relationship managers who understand corporate finance and who are confident about engaging with their clients at the senior level, digging deep into the strategy and digging deep into the finance and bringing them together. That is essence of our Wall Street to Main Street strategy and that is why the same principles and philosophy apply in the Institutional market.
The second thing we’ve got to do is be careful about segmenting our clients and we already do that through our specialist industry groups and we’ll continue to do that by looking at the buying behaviour. I think too often people segment clients on size and not necessarily on their buying behaviour. Quite a lot of the most attractive companies that we do business with are not necessarily the bigger ones, but clients that have significant growth aspirations and that’s the key, to really understand what those aspirations are and to make sure we’re in there working alongside them; so that we are relevant to them in a strategic sense.
So the behaviour component is quite important. Linked to that is a term used quite often by North American banks, "wallet size" or "share of wallet". I’m a big believer in understanding the client wallet, and not just the size of the wallet but the nature of it, how much is spent on senior debt, how much is spent on risk management products, how much is on transaction products, how much on advisory work, how much on structured and trade finance, and how does that wallet change and compare to peers in the same industry, and who’s responsible for making decisions about the various parts of that wallet.
It’s all linked to client account planning analysis, or what we now call ‘The client CEO Agenda Plan’. This crucial investment shouldn’t be viewed as a once a year exercise, where you get a bunch of people around a table asking where the client might be going, and then you fill the form in and off you go. When it’s done well, it’s got to be strategic - long on analysis and insights and short on description; it must also be a ‘living’ document as we build our intelligence on clients, industries and markets. It has also got to be the road map that we use so that we have a very clear sense of what a client is doing and what they could and should be doing. We’ll be doing a lot of work on that as an integral, fundamental, part of how we think about our clients. So, the quality of the relationship bankers is fundamental; the quality of the ‘CEO Agenda Plan’ is fundamental and we will commit to ongoing investment in our people to build this as a core competency for ANZ in the Institutional space.
The third thing in all of this is to make sure we have all the products that will allow us to solve client needs, but I emphasise product and solutions because too often in organisations, products are driven for the sake of product – remember that many of today’s products were designed to solve for yesterdays needs. We want our relationship bankers to think bespoke solutions in the way that a top class management consultant would, to think innovation rather try to define our client needs just around our existing product offering. All of our people need to do that well and it has to be a core value; a solution mentality rather than a product driven mentality. Innovation is very important.
One of the issues for ANZ is that the Bank does have a product silo culture, so how much of a challenge will it be to get the strategy working across all of those different product groups?
It’s a good question but remember it’s not unique to ANZ. I think when you have a silo structure you get a lot of strength but sometimes that strength can be specific to different parts and you don’t necessarily get the full synergy across the whole business and, worst case, the overall client experience may be mixed. The Institutional banking business that I look after sits within our Institutional Financial Services business, which is headed by Steve Targett. Steve has been strengthening his management team over the past six months. Cathryn Carver joined from Westpac as managing director of Corporate & Structured Financing and Scott Reid joined as chairman, NSW, and he has committed to working with my team to build our profile with senior decision makers in the NSW market, and I hope beyond as Scott is a world-class relationship banker who has been a great acquisition for us.
Also, David Hornery moved to Singapore from Capital Markets to lead our efforts in the key Asian region where we look to support our Australian and New Zealand clients. There have been other changes like integrating our Foreign Exchange and Capital Markets businesses into a single client facing business and we also hired some great leadership there such as Mark Whelan as Head of sales for Markets. We are all committed to ensuring a seamless proposition to our client base.
Can this Wall Street to Main Street strategy or philosophy work as effectively in the Institutional space as it did in the middle markets?
As mentioned earlier, I am convinced that the same principles, the same philosophy applies in the Institutional space, in fact, arguably even more so because competition is quite intense and the ability to differentiate is crucial. We need the approach with regards to our clients where we tell them that the second thing we want to talk about is finance, the first thing we want to talk about is our view of where their business is going, and why we think what they’re doing is right but also why they might want to give some thought to something else. We want to be able to demonstrate ways in which our clients can grow bigger and stronger.
We have fantastic specialist knowledge of the industries and markets our clients operating in, we’re looking at how fast those industries are changing in terms of growth and we’re asking how our clients are sitting in those industries and what the critical success factors in those industries are. For example, should they be going international, or expanding within Australia and New Zealand? We spend a lot of time having those kinds of discussions, doing research and analysis, and then we develop relevant ideas.
For example, we may have a client who’s been growing at a rate less than the industry, but the business is being run by an entrepreneur who’s built it up over 20 or 30 years, and who is wealthy within his own right but the appetite for doing more than what they’re currently doing is limited, yet the business has potential to grow at a higher rate. So, for example, we’ll go to that client and say "there’s a fundamental issue here, unless your business is growing at least in line with the industry you’ll be going backwards, meaning the very wealth you thought you were growing could be eroding over time and it may be time for you to sell into an IPO, to a trade player or, perhaps, a management buy-out".
The emphasis is on the business and strategy first and foremost with finance second. In the final analysis, we are trying to help our clients maximise the value of the business. That is the test we will apply in assessing the legitimacy and relevance of our ideas.
Is the fact that both you and other very senior people have been brought into ANZ’s institutional business an acknowledgement that the Bank has been underperforming in this segment?
Not at all. Actually, I think we’ve been pretty successful and when you look at external research and the overall performance of the business, it’s been a very positive story. The challenge is that in a market where competition remains quite intense, where in a lot of core product areas, margins are under pressure, how do you take that very strong market position that you’ve got and develop a stronger growth model off the back of that?
If you look at ANZ’s market share in Australia and New Zealand in the Institutional space, it’s very strong and when you’ve got such a strong platform, what you don’t want is to become complacent. So, I say we have a fantastic asset, now how do we use that asset to achieve strong, sustainable market share growth? That comes back to ideas, the things that we’ve talked about: quality of our people, quality of ‘CEO Agenda Plan’. And the third thing is having the product capabilities and solution mentality that makes it all happen.
To achieve this level of engagement with a client, do you need to reduce the ratio of clients to RMs? Will you be taking on more RMs?
We need to have even more high calibre relationship managers. We’ve got to invest in people. And that’s where training and development comes in. I see it as such a crucial part of what we’re trying to do. So we’ll be investing in our people to make sure we’re developing those who clearly have the potential.
We have many top quality people in our relationship management teams; there’s been a lot of very good hiring in recent years, and a part of our commitment to the seamless approach to clients, is investing heavily in training and development programs that reinforce that. As I mentioned earlier, by way of example, one of the programs that we’re looking at is called ‘The CEO Agenda’. One of the principals of our Wall Street to Main Street approach was an extensive series of training modules built up around specific case studies linking corporate finance and strategy. We see this commitment as an integral part of how we manage the business, not just as a series of training events.
In all of this, we want to make sure our best clients see our best people, so we’ll be very disciplined about our client analysis and making sure we have the right people working with the right clients. We can build "share of the wallet" via the quality of relationships we have with key clients. It’s through the quality and consistency of our ideas that we will grow this business in the direction that we want to take it – by making ourselves even more relevant to our clients than we are today.
Having top quality relationship managers is such a major issue now with so many players currently looking for them. Is it hard to bring in the quality you need?
I found that when I was in my previous role building the Wall Street to Main Street strategy in the middle markets that, internally, we had the exact same discussion four years ago. We said we had thousands of relationships and hundreds of relationship bankers but that if we were really going to grow this business and make it truly different to what our competitors are doing, then we would need to bring in and develop a certain kind of banker who was much more of this broad corporate financier. We’ve hired people with a corporate finance bent who are relationship bankers in terms of professional values – which is vitally important to us - but who are also very capable in talking about corporate finance, and to my mind that’s where the future lies.
The successful Institutional and Corporate bank will be the bank that has a much stronger corporate finance flavour in its approach to its clients as well as being excellent in providing more traditional products and services. There is absolutely no prospect of growing the business in the way we want to grow it without having more of that calibre of individual. We are investing heavily to achieve this.
In the middle markets, over the course of three and a half years we hired several dozen top class individuals, people who, perhaps in the past, wouldn’t have thought of a commercial bank as being a natural home for their talents and who had much more of the consultant, investment banking mind set. But when we told them what we were trying to do, that we were investing in these capabilities and that we’d had some success and were committed to greater success, then the right kind of individuals are attracted to join because they see an opportunity that is quite unique in the Australian and New Zealand market, and they see an organisation that is committed to making it a reality. And of course once you’ve hired a few top quality people, you can point to them and say they’re here because this is a place where they know they can make a real difference.
I look back on that experience and think we were able to make that work in the middle market, so I’m very confident we can make it a reality in the Institutional space. We’re not going to be looking for the run of the mill, traditional relationship banker; we’re going to be looking for people who really believe that large domestic banks should be playing a greater role in the capital and strategic needs of their clients.
What else would you say is important in building growth in the Institutional Banking space for ANZ?
I want to build on our existing strengths and differentiation. I have been genuinely impressed with the quality of our existing client relationships and the quality of our people both within my own relationship side of the business and across the three different product groups – Markets, Trade & Transaction Services and Corporate & Structured Financing. I see great opportunities to take our client focus to a new level, one that will truly set us apart from our competitors.
Our specialist Industry segmentation is a great strength and we have plans to segment even further. I also believe our Asian franchise and northern hemisphere presence is a strong point of difference and will become even more important with so many of our clients increasingly active internationally. In Institutional Financial Services we have on the ground presence across ANZ’s network in Asia and can follow our clients around Asia. If you take an area like trade finance, we’ve already grown our business through Asia but there are also big opportunities for us in Europe and the USA. We are in a good position internationally, and we will be building on this investment.
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