ANZ boss says Hong Kong banks are attractive but expensive

PUBLISHED : Wednesday, 09 October, 2013, 12:00am
UPDATED : Wednesday, 09 October, 2013, 8:35am

Australia and New Zealand Banking chief executive Michael Smith says takeover targets in Hong Kong are attractive but too costly.

"I have always been interested in assets in this part of the world and Hong Kong obviously is an attractive market, but I feel they are overpriced," Smith said in Hong Kong yesterday. "I look at Hong Kong as very much a stepping stone into China. Therefore, anything you look for has to have the strategic next step in terms of your expansion into the Chinese mainland."

Smith, who heads Australia's most Asia-focused lender, is trying to double the contribution from his bank's businesses outside Australia and New Zealand to as much as 30 per cent of profit by 2017. His largest transaction since becoming chief executive in 2007 was the US$550 million purchase of Royal Bank of Scotland's businesses in Singapore, Taiwan, Indonesia, Hong Kong, the Philippines and Vietnam in 2009.

His bank was among firms interested in acquiring Hong Kong's Wing Hang Bank, Reuters and The Wall Street Journal said last month. The Australian lender was among five bidders for Chong Hing Bank, Oriental Daily reported last month.

Smith declined to confirm bids for the two banks. Wing Hang trades for 1.7 times its corporate net worth, while Chong Hing is valued at 1.9 times book value.

Wing Hang, the more profitable lender of the two, may fetch as much as three times book, according to Mizuho Financial and BNP Paribas estimates.

"I am always looking at various opportunities but right now I think it is all too expensive," Smith said. "Two times book is ridiculous at these times. Expectations of owners are not very realistic."

Smith said in May 2008 that paying more than three times book for Hong Kong's Wing Lung Bank would be "crazy".

The following day, China Merchants Bank beat ANZ in bidding for Wing Lung in a transaction that valued the lender at the same level.

ANZ expected to obtain a banking licence next year in Thailand, the only major Asian market where it did not have a presence, Smith said.