ANZ makes welcome progress in slimming down abroad

Bank of Tianjin Co

03/01/2017 07:30

(The author is a Reuters Breakingviews columnist.  The opinions 
expressed are his own.) 
    By Jun Yang 
    HONG KONG, Jan 3(Reuters Breakingviews) - One down, three to 
go. Australia and New Zealand Banking Group  ANZ.AX  has sold 
out of a Chinese bank for a decent A$1.8 billion ($1.3 billion). 
Newish Chief Executive Shayne Elliott is moving decisively to 
streamline the bank. Some other holdings could be trickier to 
shed, but any progress will help ANZ narrow a valuation gap to 
its peers. 
    On Tuesday, ANZ said it would sell its 20 percent stake in 
Shanghai Rural Commercial Bank to two local outfits. That seems 
like a good result, both financially and strategically.  
    Financially, the price represents about 1.1 times the 
unlisted company's book value as of December 2015, a decent 
valuation considering Chinese banks typically trade at discounts 
to net assets. Viewed another way, ANZ's proceeds, including 
A$178 million of dividends, and subtracting A$145 million of 
taxes and deal fees, come to 3.3 times the A$568 million it 
invested in two goes in 2007 and 2010, a Breakingviews 
calculation shows.  
    There is strategic logic too. Banks must set aside more 
capital against riskier assets like these non-controlling equity 
stakes, while a regional economic slowdown is dimming growth 
prospects for lenders in Asian emerging markets.  ANZ still 
holds minority stakes in AMMB  AMMB.KL  in Malaysia, PT Bank Pan 
Indonesia  PNBN.JK  and Bank of Tianjin  1578.HK ,  another 
Chinese lender.   
    Since taking over a year ago, Elliott has partly reversed 
the "super-regional" strategy of predecessor Mike Smith, 
refocusing overseas on institutional banking. In October, the 
lender agreed to sell its retail and wealth-management 
operations in five Asian markets. ANZ will probably sell its 12 
percent stake in the $5.3 billion Bank of Tianjin after a 
year-long lock-up period, following the bank's Hong Kong 
flotation, expires in March. Back at home, it is reviewing an 
exit from life insurance, another capital-hungry business. 
    The Asia focus has suppressed ANZ's stock, which trades at 
the smallest premium to book value among the four big Australian 
lenders. If Elliott can keep delivering change, investors are 
likely to reconsider that. 
 
    On Twitter https://twitter.com/JYang_in_HK 
 
     
    CONTEXT NEWS 
     - Australia and New Zealand Banking Group said on Jan. 3 
that it would sell its 20 percent stake in unlisted Shanghai 
Rural Commercial Bank for A$1.8 billion ($1.3 billion). 
    - The price represents about 1.1 times Shanghai Rural's book 
value as of December 2015, the Australian bank said. China COSCO 
Shipping and Shanghai Sino-Poland Enterprise Management 
Development are the buyers. 
    - As of 3:25 p.m. in Sydney (0425 GMT), ANZ shares were up 
about 1.8 percent, at A$30.96. 
    - The deal is part of efforts to "simplify our business and 
improve capital efficiency," ANZ Deputy Chief Executive Graham 
Hodges said in a statement.  
    - For previous columns by the author, Reuters customers can 
click on  YANG/    
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 (Editing by Quentin Webb and Kathy Gao) 
 ((junseok.yang@thomsonreuters.com; Reuters Messaging: 
junseok.yang.thomsonreuters.com@reuters.net)) 
 
Keywords: ANZ SALE/CHINA BREAKINGVIEWS