ANZ Banking Group chief executive Mike Smith had a 16 per cent pay cut in fiscal 2009 to $10.9 million, but the bank says he actually received half that amount.

The bank’s annual report released on Monday shows Mr Smith’s total remuneration for the 12 months to September 30 was valued at $10.935 million, down from $12.963 million in the previous year.

The sum included a rise in short term incentives (STIs) to $4.5 million, up from a $2.4 million STI payment in the previous year.

“The CEO’s STI payment for the 2009 year has been determined having regard to both the company’s underlying profit for the current year as well as the significant progress achieved in relation to ANZ’s long-term strategic goals,” the report said.

ANZ’s net profit dropped by 11 per cent to $2.94 billion in the year, while underlying profit rose by 10 per cent to $3.77 billion.

Mr Smith’s STI payment consisted of $2.4 million in cash, with the balance awarded in shares that are to be deferred for up to two years.

With another $1.589 million worth of grants to be deferred, plus other long-term equity allocations, Mr Smith actually received $5.405 million worth of remuneration in the financial year, ANZ said.

Meanwhile, Mr Smith said in his report to shareholders released on Monday that there would be continuing volatility in financial markets and the global economy in the current financial year.

“While the inevitable aftermath of the recent failures in the financial system and in business is going to be greater regulation, in my view, the real challenge is for governments to avoid acting on populist rhetoric,” he said.

“Regulators and business need to work together to identify how we create the right balance between free markets which are the best tool we know for fostering innovation and generating wealth, and ensuring there is a watchful eye from regulators that can help markets avoid overshooting and spinning out of control.”

ANZ shares closed down 30 cents, or 1.33 per cent, to $22.18.

AAP