ANZ Banking Group sells stake in Shanghai Rural Commercial Bank for $1.8b

Australian Financial Review Jan 3 2017 1:03 PM

James Thomson, James Frost

ANZ Banking Group has sold it's 20 per cent stake in Shanghai Rural Commercial Bank for $1.838 billion as it continues to downsize its presence in Asia.

The sale, to China COSCO Shipping Corporation and Shanghai Sino Poland Enterprise Management Development Corporation, will boost ANZ's tier one capital ratio by 40 basis points from 9.6 to 10.

ANZ deputy chief executive, Graham Hodges, said the sale reflected the banks plans to simplify the business and improve capital efficiency by focusing on institutional banking business in Asia.

"This includes a significant commitment to China over the past 30 years with 100 per cent ANZ-owned branches in Beijing, Shanghai, Guangzhou, Chongqing, Chengdu, Hangzhou and Qingdao serving our institutional clients," Mr Hodges said.

The fillip will see the bank leapfrog rival NAB's tier one capital ratio of 9.8 per cent to become the best provisioned of the big four banks with Commonwealth Bank at 9.4 and Westpac at 9.5.

In October ANZ sold its Asian retail and wealth management arms to DBS in a deal that is expected to add another 15 to 20 basis points to its ratio taking it to as much as 10.2 once the sale is completed.

Bell Potter banking analyst TS Lim said the sector laggards may begin to feel pressure to shore up thier ratios following the sale.

"Don't forget that ANZ still have another three material investments in the region they are looking to sell. Once they get that rolling they could increase it even more so its a good start to the New Year" Mr Lim said.

The sale of ANZ's stake in Shanghai Rural Commercial Bank is the first of four minority stakes that were earmarked for sale by ANZ's institutional head of banking Mark Whelan in November 2016.

The other investments flagged include the bank's 11.9 per cent stake in the Bank of Tianjin, a 39.5 per cent stake in the PT Bank Pan Indonesia and a 23.8 per cent stake in Malaysia's AMBank. The assets were believed to be valued $4 billion.

Insiders say the next most likely sale to take place is the Bank of Tianjin stake. Floated on the Kong Kong Stock Exchange in March 2016, the bank is expected to sell the remaining stake at the conclusion of the 12 month lock up period. The shares have a market value of $873 million.

The disposal of these non-core minority stakes is part of ANZ CEO Shayne Elliott's refinement of the bank's super regional strategy that began under the previous chief executive Mike Smith and will see the bank focus on its institutional presence at the expense of its international retail offering.

ANZ said the sale will not have a material impact on its profit and loss statement; the stake had a carrying impact of $1.990 billion but transaction costs of $145 million and the release of reserves mean the sale is broadly in line with the value of the stake on ANZ's books at September 30.

ANZ paid $318 million for its stake in 2007 and invested another $250 million into the business three years later after taking up a pro-rata rights issue that lifted its holding to 20 per cent.

At midday, ANZ Bank shares were up 45c or 1.5 per cent to $30.87 while the benchmark S&P/ASX 200 was up 54 points or 0.95 per cent to 5,719.