ANZ may sell stakes in Asian banks
With interests in eight regional players, bank is being hit by Australia's strict capital rules
Australia and New Zealand Banking Group would consider selling some of its stakes in Asian banks to free up capital or if it sees better opportunities to meet its "super-regional" strategy, its chief executive said.
The move raises uncertainty about how Australia's smallest "big four" bank will be able to meet the profit targets it has set for offshore operations. ANZ owns stakes in eight banks in the region, including 39 per cent of PT Panin Indonesia Bank, 24 per cent of AMMB in Malaysia, 20 per cent in Shanghai Rural Commercial Bank and 17.6 per cent in Bank of Tianjin on the mainland.
Due to stringent capital rules set by Australia's banking regulator for minority stakes, ANZ's holdings in Asian banks are dragging down its return on equity. ANZ has urged the regulator to ease the requirements, which it says are tougher than in other countries.
ANZ chief executive Mike Smith said if the Australian Prudential Regulation Authority does not rule in ANZ's favour, then the bank would consider selling down its minority stakes. "It does mean you have to look at your options," Smith said ahead of the bank's third-quarter report due tomorrow.
The strategic partnerships are one element in Smith's strategy for ANZ to earn 25 to 30 per cent of its profit from outside Australia and New Zealand by 2017. That goal was set last year when the bank was well short of an earlier target for the Asia-Pacific to contribute 20 per cent of the group's profit by 2012.
Smith said shareholders may have to live with a lower return on equity (ROE) from ANZ's Asian holdings at least over the next five years as eventually that is where the bank's growth will come from, rather than from its mature Australian businesses. "It may well be that you have to maintain a lower ROE business for strategic reasons because it is going to pay you dividends in due course. That's the call," said Smith, who was sporting his favourite golden abacus cufflinks bought in Hong Kong eight years ago when he headed HSBC's Asian operations.
