UPDATE: ANZ Bank Confident On RBS Asia Bid, Sees Other Options
May 28 2009 - 2:17AM
Dow Jones News
Australia and New Zealand Banking Group Ltd. (ANZ) is confident
on its bid for some of Royal Bank of Scotland Group PLC's (RBS)
Asian assets, but if the bank isn't successful there are
significant alternatives for growth, Chief Executive Mike Smith
said Thursday.
"There are quite significant (acquisition opportunities) coming
up in Asia, but I also think there are opportunities in Australia,"
Smith told journalists after a business lunch in Melbourne.
ANZ Wednesday raised A$2.5 billion through an institutional
share placement to help it fund potential acquisitions, and to
boost its capital position to cushion against slowing economic
conditions and escalating bad debts. ANZ confirmed it had lodged a
bid for some of RBS's Asian assets.
RBS is considering a sale of its retail and commercial banking
operations in India, Pakistan, China, Taiwan, Hong Kong, Indonesia,
Malaysia and Singapore, as it focusses its attention on its home
market.
Smith said he had seen reports that HSBC Holdings PLC (HBC) and
Standard Chartered PLC (2888.HK) hadn't submitted bids for RBS'
Asian assets but he had no knowledge on the matter, which he said
was for RBS to comment on.
A person familiar with the situation told Dow Jones Newswires
Wednesday that RBS is still talking to HSBC and Standard Chartered,
and while not all parties hadn't yet submitted bids, that didn't
mean talks had broken off.
Smith declined to say which RBS assets ANZ is bidding for, but
he said if successful the bank expects a deal that would be
earnings per share accretive in around three years.
Smith, a former senior HSBC executive, aims to transform
Melbourne-based ANZ - currently Australia's fourth-largest bank by
market capitalization - into a "super regional" bank, and aims to
generate around 20% of the bank's earnings from Asia by 2012.
The bank has said it is recording solid organic growth in Asia,
but analysts believe the group will have to make acquisitions to
achieve its long-term targets.
Merrill Lynch analysts said in a note that ANZ could pay A$1
billion-A$2 billion for the assets it wants, but the size of any
deal would depend on how many bids RBS receives.
"ANZ's decision to raise equity before finalizing the purchase
of any Asian assets is in some ways surprising, however we do
believe it places ANZ at a funding advantage in the race to acquire
RBS's assets," Merrill Lynch said.
Asked why the bank had raised capital without having a certain
deal, Smith said he was "very confident there will be a few
opportunities and we need to be prepared."
He declined to rule out another tilt at the banking arm of
Australian financial services company Suncorp-Metway Ltd. (SUN.AU)
and said he was not relieved that a previous offer for Suncorp's
banking arm was rejected.
"I've said we're always interested in opportunities, but that
depends how they feel," he said.
While bad debts are rising, and remain hard to predict in the
commercial sector, ANZ has not seen any significant deterioration
in its consumer portfolio.
The bank said Wednesday that it expects charges for bad debts in
second half to be up around 20% from the A$1.44 billion recorded in
the six months to March 31.
Smith reiterated his view that Australia should abandon its
so-called "four pillars" policy, which prohibits mergers between
the nation's four largest banks.
He also said he expects ANZ will receive a banking license to
operate in India soon.
He told the lunch that the global economy is yet to bottom
despite early signs of stabilizing global financial markets. "I
think we're now beginning to see some early positive signs that the
global financial system is, at last, beginning to stabilize," he
said
"Nevertheless, global economic activity is expected to fall by
1.3% this year, its first fall in 60 years. And despite the recent
rally in global equity markets, the harsh reality is there's no
evidence that the world economy has bottomed out," he said.
Smith also said that the era of cheap money is over and that the
cost of borrowing remains high.
"Even here in Australia, the cost of borrowing, even for
AA-rated banks like ANZ, remains high and very different to the
overnight cash rates set by the RBA," he said.
-By Lyndal McFarland, Dow Jones Newswires; 61-3-9292-2093;
lyndal.mcfarland@dowjones.com
(Iain McDonald in Sydney contributed to this article)
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