Australia & New Zealand Banking Group Ltd. (ANZ.AU) said
Tuesday it will pay US$550 million for some of Royal Bank of
Scotland Group PLC's (RBS) Asian banking operations in what the
group described as a stepping stone into the region.
The Australian lender will also keep watch for further deals in
the region to help it achieve its ambition of becoming a
significant player in the Asian market, but said a
"transformational deal" is still some way off.
ANZ Chief Executive Mike Smith, a former HSBC executive, wants
to transform Melbourne-based ANZ into a "super regional bank",
competing with the likes of HSBC and Citigroup. He hopes to
generate 20% of ANZ's revenues from Asia by 2012 amid intense
competition and slowing loan growth in its home markets.
ANZ said it will buy RBS' retail and commercial banking
operations in Taiwan, Singapore, Indonesia and Hong Kong, and its
institutional businesses in Taiwan, the Philippines and
Vietnam.
But it is not buying operations in India or China - considered
by some as the jewels of RBS' Asian business - due to a combination
of price and a lack of banking licenses, Smith said.
RBS said in a statement it "remains in advanced discussions with
bidders" for its operations in India and China. People familiar
with the situation have said Standard Chartered PLC (STAN.LN) is in
talks to buy the operations in those two countries.
"The acquisition of these RBS businesses is a further stepping
stone in our super regional strategy and creates a new platform for
our retail and wealth businesses in Asia," ANZ's Smith said in a
statement.
"This acquisition is consistent with our strategy and involves
the businesses that we wanted from the RBS sale process, in markets
that we know well, with regulatory approval processes which we
believe are achievable for ANZ," he said.
Analysts said that if Smith is serious about transforming ANZ -
Australia's fourth largest lender by market capitalization - into a
major force in Asian banking, he'll have to look at further
acquisitions.
ANZ already owns stakes in several banks around the region,
including a 19.9% stake in Shanghai Rural Commercial Bank, an 85%
stake in Indonesia's PT ANZ Panin bank and a 20% stake in AmBank in
Malaysia.
Smith said that the RBS deal boosts ANZ's critical mass in Asia,
but is not "transformational" for the group or its strategy in the
region.
Any future "transformational" deal, which could conceivably
double the group's size, is likely a long way off and may be based
on a share deal rather than cash, Smith said. His focus will be on
bedding down the RBS operations, but Smith said the group will keep
an eye open for further bolt-on deals.
After the RBS deal, ANZ will still be sitting on around A$4
billion in capital, some of which could be used for acquisitions,
after raising A$4.7 billion through recent share placements.
Smith told Dow Jones Newswires in an interview there will be
further acquisition opportunities in Asia as foreign banks sell
assets to shore up their retrench in their domestic markets after
the global financial crisis.
"There are one or two things on the horizon," he said. "There
are a few (opportunities) around."
ANZ is also on the lookout for deals to "bulk up" in Australia,
and Smith said he was still keen to pursue opportunities to expand
in both India and China.
Still, Smith said he is comfortable with the group's organic
growth strategy in China, with ANZ set to open a rural bank in
Chongqing in September, and told reporters that ANZ hopes to get a
banking license in India before the end of the year.
He told Dow Jones Newswires ANZ had felt that integrating RBS'
Indian operations would have been too complex, while the operations
in China were too expensive. But he said that ANZ would consider
future opportunities to expand through acquisition in both
countries, though its organic growth in China was "going well".
As ANZ grows scale in Asia, it may consider a secondary listing
in the region, the group's CEO said.
Not A Super Regional Bank Yet
Analysts expect the lender to look at further deals in Asia,
with Citi analysts noting the bank is "not a super regional
yet."
"While this (RBS) is a good deal, more will likely be required
to achieve the super-regional vision and the goal of 20% of
earnings from Asia by FY12," Citi analysts said.
There is speculation that ANZ could look at ING Groep NV's (ING)
private banking business in Asia.
"Views in the market suggest these assets would represent a
compelling strategic fit, especially considering the RBS asset
purchases," IG Markets analyst Ben Potter said.
ANZ is also hoping to get a banking license to operate in India,
and Smith said the group is making progress on achieving local
incorporation in China.
Under Tuesday's deal, ANZ will triple its customer base in Asia
to an estimated 3 million clients from the current 1 million.
It will also add 54 branches, US$3.2 billion in loans and,
perhaps most importantly, US$7.1 billion in deposits.
The assets being acquired recorded a profit of A$127 million in
the most recent 12 months before provisions. Provisions totaled
A$238 million, ANZ said.
In addition to the purchase price, ANZ will have to tip around
US$650 million more into the assets to be acquired to boost their
Tier 1 capital levels to 8%.
ANZ said the deal is expected to be cash earnings per share
accretive within two years after the deal is completed - expected
by the second quarter of 2010.
ANZ's head of Asia Alex Thursby said the RBS deal presents
significant opportunities to add to the group's growth in the
region.
"We are well advanced with integration plans for each country so
we can hit the ground running," Thursby said.
Retention agreements have been put in place with key RBS
employees, ANZ said.
The sale of the assets is a step in unwinding RBS' partial
acquisition of ABN AMRO. The US$101 billion, peak-of-the-market
deal was spearheaded by RBS and is widely seen as the strategic
misstep that led to RBS' downfall and the ouster of former chief
executive Fred Goodwin. RBS will retain its presence in about a
dozen markets in Asia.
RBS head of Global Banking & Markets for Asia Pacific, John
McCormick, said RBS will continue to be a global wholesale,
transaction and private bank, with a significant presence in Asia
in the 11 markets that account for 90% of its revenues in the
region.
Credit Suisse acted as financial adviser to ANZ on the
acquisition, which remains subject to regulatory approvals.
Investors reacted positively to the RBS deal. ANZ shares closed
up 3% at A$19.57, while the benchmark S&P/ASX 200 index rose
1.1% to 4309.3 points.
-By Lyndal McFarland, Dow Jones Newswires; 61-3-9292-2093;
lyndal.mcfarland@dowjones.com
(Andrew Peaple in Beijing contributed to this article)
Australia And New Zealan... (ASX:ANZ)
Historical Stock Chart
From May 2024 to Jun 2024
Australia And New Zealan... (ASX:ANZ)
Historical Stock Chart
From Jun 2023 to Jun 2024
