RBS Asian Operations A Good Fit For ANZ Bank - Macquarie Research
March 24 2009 - 2:46AM
Dow Jones News
Australia and New Zealand Banking Group Ltd. (ANZ) could get an
instant boost to its footprint in Asia by buying Royal Bank of
Scotland's Asian operations, which could represent an attractive
and low cost option for growth, Macquarie Research analysts said
Tuesday.
Melbourne-based ANZ has made no secret of its ambitions to
expand in Asia, where it aims to become a "super-regional" lender,
and while an ANZ spokeswoman declined to comment on speculation it
could bid for RBS Asian operations, she said it will assess
strategic opportunities as they arise.
RBS has hired Morgan Stanley to advise it on the potential sale
of its retail and commercial banking businesses in Asia, which
operate in eight countries around the region, including the key
markets of India, China and Hong Kong. The businesses could fetch
up to A$2.5 billion, Macquarie estimates.
ANZ has hired Credit Suisse to advise it on options according to
local media reports, and most analysts expect it will take a close
look at RBS' information memorandum, which was sent out to
potential buyers late last week, according to people familiar with
the situation.
ANZ - Australia's fourth largest bank - aims to become one of
the four biggest players in both India and China in coming years,
and Chief Executive Mike Smith wants to generate 20% of the bank's
earnings from the region by 2012.
Smith, a veteran banker in Asia who joined ANZ from HSBC in
2007, said last month that the gyrations in global banking sector
hadn't deterred the Australian lender's ambitions.
It's an ambitious - and some say high risk - strategy, but one
that differentiates ANZ from its Australian rivals, who have
refocussed their attention on the domestic market.
"We view ANZ's likely interest in the RBS Asian assets as
positive for shareholders as the deal would represent a low-cost
expansion of ANZ's existing Asian business, with positive balance
sheet implications," Macquarie said.
While ill-timed acquisitions have been behind the fall of some
of the world's biggest banks, including RBS, Macquarie believes the
assets up for grabs are well funded from a capital and liquidity
perspective, thanks in part to a strong deposit franchise. That
could help boost both ANZ's capital and funding positions - a big
selling point in this environment.
And while interest in the RBS Asian operations is likely to be
keen, with talk that multinationals HSBC and Standard and Chartered
are interested along with some of the Chinese banks, Macquarie sees
a better fit and stronger strategic imperative for ANZ than most
likely rival bidders.
"The geographic mix of business shows very little overlap with
ANZ's existing operations, and in fact is probably complementary to
ANZ's wholesale banking operations in Asia," Macquarie said.
"This stacks up well relative to other potential bidders -
namely Standard Chartered - where we believe there is far greater
overlap between the businesses," Macquarie said.
The assets for sale generated around GBP781 million of income
during the 2008 financial year, a 12.4% improvement on the prior
year, according to Macquarie's estimates.
ANZ would probably have to sell shares to investors to raise
cash to buy any assets. Macquarie expects a share placement would
have to be at a 10% discount to market price, which would mean
further dilution for shareholders. But it's worth noting a deal has
been expected for some time, and taking RBS assets would remove
that overhang from ANZ's share price, Macquarie's analysts
said.
RBS hasn't indicated a timeframe for any divestments, and
Macquarie isn't expecting any major developments in the near
term.
"Details of a potential deal are not likely to emerge for some
time given the sale process has only recently begun and
documentation is likely to be hot off the press," Macquarie
said.
It's also worth noting that Smith has stressed he's not in a
hurry to do any deals and he won't be overpaying for growth.
-By Lyndal McFarland, Dow Jones Newswires; 61-3-9292-2093; lyndal.mcfarland@dowjones.com
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