ANZ continues spirited sale of Asian assets
16 January 2017
http://www.australianbankingfinance.com/asian-markets/anz-continues-spirited-sale-of-asian-assets/
ANZ Banking Group is offloading its kiwi-based asset finance arm, UDC Finance, to China’s HNA Group as the bank continues the Asian-exit strategy that CEO Shayne Elliott expects will simplify its business and enhance its core capabilities.
HNA, which now owns Hainan Airlines, a 25 per cent ($6.5 billion) stake in Hilton Worldwide Holdings and a 13 per cent stake in airline Virgin Australia has reportedly agreed to terms at $628 million for UDC, the asset finance business of ANZ Bank New Zealand.
ANZ New Zealand chief executive officer, David Hisco, said the sale of UDC is “consistent with our strategy to simplify the bank”, calling it a positive outcome for customers and staff.
According to ANZ the sale price represents a net gain on the sale of $100 million. And more importantly garners a price-to-book ratio of 1.6 times UDC’s net assets.
An impregnable buffer
In little over a year ANZ has built an impregnable buffer of capital by embarking on a spirited sale of Asia-themed assets, further lifting the Melbourne-based lender’s Common Equity Tier 1 (CET1) capital ratio by 10 basis points to a market-leading 10.1 per cent.
By pressing ahead with CEO Shayne Elliott’s controversial exit strategy, ANZ now boasts the strongest capital position among all of its major rivals.
Elliott’s mission is to finalise some $3 billion worth of largely Asian-themed disposals, unwinding the decade of acquisitions under predecessor Mike Smith, whose legacy of offshore expansion included retail brand building from Chongqing to the reaches of West China.
This latest sale comes a week after the bank offloaded its 20 per cent stake in Shanghai Rural Commercial Bank (SRCB) for A$1.83 billion to twin Chinese state-owned enterprises.
In October Elliott offloaded ANZ’s retail and wealth management units across Asia having acquired them from Royal Bank of Scotland in 2009.
Narrowed focus
According to Morningstar, the decision to offload its 20 per cent stake in Shanghai Rural Commercial Bank (SRCB) to SOE’s China COSCO Shipping Corporation Limited and Shanghai Sino-Poland Enterprise Management Development Corporation Limited makes sense given the investment no longer fits with the bank's revised Asian strategy.
ANZ’s capital ratio is now well above the bank's target of around 9.0 per cent and above the regulatory minimum of 8 per cent, Morningstar head of Australian banking research David Ellis said.
"The divestment is consistent with the bank's strategy of simplifying its business and narrowing the focus of its Asian operations on institutional business," he said in a note. Ellis added he would not be surprised if ANZ’s additional Asian financial services investments were also divested.
“Following the sale of the SRCB stake, ANZ will have minority stakes in three Asian financial services groups in Malaysia, Indonesia, and China, with a combined book value around $3 billion as at 30 September,” he said. “We expect ANZ's four remaining retail and wealth businesses in the Philippines, Vietnam, Cambodia, and Laos, which are under review, to eventually be sold.”
In a statement, ANZ deputy CEO Graham Hodges said the sales will allow ANZ to focus resources 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.”