ANZ on October 18 announced an agreement for the sale of its 40% stake in the Philippine-based card issuer Metrobank Card Corporation (MCC) to its joint venture partner Metropolitan Bank and Trust Company (Metrobank).

ANZ agreed to sell half of its 40% stake in MCC to Metrobank for US$144 million. It also entered into a put option to dispose the remaining 20% to Metrobank, exercisable in the fourth quarter of financial year (FY) 2018 on the same terms for similar consideration. If exercised, this would deliver a total sale price of US$288 million.

MCC is the leading provider of credit cards in the Philippines with more than 1.5 million cards in force. ANZ describes its joint venture with Metrobank, which owns the remaining 60% of MCC, as a successful financial and commercial transaction since it was formed in 2003.

This comes as ANZ’s original investment in MCC was A$14 million (US$11.02 million). Since 2003, ANZ has recognized A$177 million of equity accounted earnings and received A$101 million in dividends. For FY2016, MCC contributed A$34.5 million of equity accounted earnings to ANZ.

ANZ deputy CEO Graham Hodges says the sale makes sense for ANZ given its continued efforts to simplify its business. “It is also a good outcome for MCC and its card customers given the strength of the business. ANZ remains committed to its institutional business in the Philippines,” he adds.

The sale of the 40% stake by ANZ – assuming the put option is exercised – represents an implied price-to-book multiple of 4.4x (based on MCC’s audited financial statements as at December 31 2016).

It also represents an expected post-tax gain on sale of about A$245 million and an increase in ANZ’s common equity tier 1 (CET1) capital ratio of 9bp as per Australian Prudential Regulation Authority (APRA) in FY2018.

ANZ says the sale likewise represents a broadly neutral impact to the bank on return on equity and earning per share, excluding the gain on sale.

The transaction is subject to customary regulatory approvals, and payment for the initial 20% stake would occur post receipt of these approvals.

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