ANZ's Turnaround Strategy Under Nuno Matos: Can Cost-Cutting and Expansion Deliver 13% ROE by 2030?

Australia's banking sector is undergoing a strategic recalibration, with ANZ Group's CEO, Nuno Matos, at the forefront of a high-stakes turnaround plan. The bank's 2025 strategy-centered on aggressive cost-cutting, selective expansion, and operational efficiency-aims to elevate its return on equity (ROE) to 13% by 2030, a target that appears ambitious given the competitive pressures and structural challenges in the sector. This analysis evaluates the feasibility of ANZ's roadmap, drawing on recent financial data, industry trends, and comparative insights from its rivals.

Strategic Overhaul: Cost-Cutting and Resource Reallocation

ANZ's 2025 strategy begins with a sharp focus on reducing operational costs. The bank has suspended its A$800 million share buyback program and redirected funds toward cost-saving initiatives, including workforce reductions and the divestment of non-core assets like its Cashrewards business, as the Retail Banker International reported. These measures are projected to yield A$800 million in savings this financial year, with an additional A$500 million anticipated from the Suncorp Bank acquisition, as the Retail Banker International reported.

However, cost-cutting alone is not sufficient. ANZ is simultaneously expanding its workforce in high-growth areas such as mortgage and business banking by up to 50%, while investing in digital tools to enhance customer service and operational agility, as the Retail Banker International reported. This dual approach-trimming non-essential expenses while doubling down on core competencies-reflects a nuanced strategy to balance efficiency with growth.

Competitive Landscape: Efficiency Gaps and ROE Benchmarks

The Australian banking sector, dominated by the Big Four (Commonwealth Bank of Australia, ANZ, National Australia Bank, and Westpac), remains fiercely competitive. According to KPMG's 1H25 results, ANZ's cost-to-income ratio of 52.1% lags behind CBA's 45.2% and NAB's 46.86%, highlighting efficiency gaps that could hinder its ROE ambitions, as the KPMG report found. Meanwhile, ANZ's current ROE of 10.2% trails CBA's 13.7% and NAB's 11.7%, underscoring the need for accelerated performance improvements, as the KPMG report found.

The sector's profitability is also constrained by rising personnel and technology costs, which have pushed the average cost-to-income ratio for the Big Four to 49.2% in 1H25, up 89 basis points year-on-year, as the KPMG report found. For ANZ, bridging this efficiency gap will require not only cost discipline but also innovative operational models to reduce overheads without compromising service quality.

External Tailwinds and Risks

The interest rate environment and macroeconomic conditions will play a pivotal role in ANZ's success. The sector's net interest margin (NIM) has stabilized at 181 basis points in 1H25, but further rate hikes are unlikely, limiting the upside for NIM expansion, as the Seeking Alpha article noted. However, the First Home Guarantee scheme-which allows buyers to secure mortgages with a 5% deposit-could boost demand for home loans, a key revenue driver for ANZ's mortgage division, as the Seeking Alpha article noted.

Geopolitical factors, such as the normalization of Australia-China relations, may also provide a tailwind by supporting trade and investment flows. Conversely, a slowdown in economic growth or regulatory shifts could dampen lending activity and profitability.

Can 13% ROE Be Achieved?

ANZ's 13% ROE target by 2030 hinges on three critical factors:
1. Sustained Cost Savings: The A$1.3 billion in annual savings from 2025 initiatives must be maintained while avoiding operational bottlenecks.
2. Growth in Core Businesses: Expansion in mortgage and business banking must outpace rivals, leveraging digital tools to capture market share.
3. Efficiency Gains: Reducing the cost-to-income ratio to align with industry leaders like CBA will be essential to close the ROE gap.

While the strategy is well-structured, execution risks remain. For instance, workforce reductions could impact customer service, and over-reliance on the mortgage sector may expose ANZ to housing market volatility. Additionally, the competitive pressures from CBA's superior efficiency and NAB's recent strategic adjustments could erode ANZ's market position if not countered effectively.

Conclusion

Nuno Matos's turnaround strategy for ANZ is a bold but necessary response to a challenging banking landscape. The combination of cost-cutting, targeted expansion, and digital investment positions the bank to improve its ROE trajectory. However, achieving 13% ROE by 2030 will require not only disciplined execution but also favorable external conditions. Investors should monitor ANZ's progress against its cost-saving targets, its ability to differentiate in core markets, and its response to sector-wide efficiency trends.