ANZ streamlines business in China

ANZ streamlines business in ChinaANZ further streamlined its business in China as it announced on January 3 the sale of its 20% stake in Shanghai Rural Commercial Bank (SRCB) to China COSCO Shipping Corporation and Shanghai Sino-Poland Enterprise Management Development Corporation.

The agreement will see COSCO and Sino-Poland Enterprise each acquiring 10% of SRCB for a total consideration to ANZ of 9.19 billion renminbi (US$1.32 billion). The price represents a price-to-book of about 1.1x SRCB net assets as at December 2015, and the sale will increase ANZ’s capital ratio by about 40bp.

ANZ deputy CEO Graham Hodges says the sale reflects the bank’s strategy to simplify its business and improve capital efficiency. “The sale will also allow us to focus our resources on our institutional banking business in Asia,” he adds in a statement.

The disposal represents another move by ANZ to reduce its retail presence in Asia since Shayne Elliott took over as CEO in January 2016. On October 31 2016, it announced the sale of its retail and wealth management business in five markets – China, Hong Kong, Indonesia, Singapore and Taiwan – to DBS for about S$110 million above book value.

The portfolio of businesses sold include total deposits of S$17 billion, loans of S$11 billion, investment asset under management of S$6.5 billion and total revenue of S$825 million for financial year 2016. They serve about 1.3 million customers, of which over 100,000 are affluent/ private wealth customers and 1.2 million are retail customers.

ANZ first invested into SRCB in September 2007 and has put in a total of A$568 million, including an initial investment of A$318 million when it acquired a 19.9% stake. It made an additional investment of A$250 million in October 2010 through a pro-rata rights issue to bring its holding to 20%.

Since then, ANZ has recognized A$1.3 billion of equity accounted earnings and received A$178 million in dividends. In the financial year 2016, the SRBC investment contributed A$259 million to ANZ’s post-tax profit.

After transaction costs and taxes, ANZ says the sale price is broadly in line with the carrying value of the investment in the bank’s account as at September 30 2016. This includes accumulated equity accounted profits and foreign currency translation reserves over the period of investment.

ANZ has been in China since 1986 and has seven branches, four sub-branches and an operations hub in Chengdu. In 2010, ANZ China was established, making ANZ the first Australian bank to be locally incorporated in China.

Date

3 Jan 2017

Channel

Capital Markets

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