ANZ sells Shanghai Bank stake in US$1.32bn deal

Australia and New Zealand Banking Group (ANZ) is to sell its 20% stake in Shanghai Rural Commercial Bank for yuan (CNY) 9.19bn (US$1.32bn), as part of a policy to reduce its presence in Asia.

ANZ originally bought its stake in the bank a decade ago as it sought to expand in China, but more recently it has reversed the plan under the leadership of chief executive officer (CEO) Shayne Elliott, who succeeded Mike Smith at the end of 2015.

The bank abandoned plans to derive up to 30% of its earnings from its Asia-Pacific, European and Americas division by 2017. Last October, ANZ announced the sale of its retail and wealth management businesses in China, Hong Kong, Indonesia, Singapore and Taiwan to Singapore’s DBS Group Holdings and a shift to focus instead on institutional banking in the region.

At the time of the sale, Elliott added that ANZ was exploring opportunities to exit other businesses. In addition to Shanghai Rural Commercial Bank, ANZ holds stakes in Malaysia’s AMMB Holdings, PT Bank Pan Indonesia  and China’s Bank of TianjinCo.

He also said that the “environment we face has changed” and the policy pursued by his predecessor of expanding outside its home markets of Australia and New Zealand meant that ANZ “would need to make further investments” that no longer made sense economically.

Shanghai Rural Commercial Bank was established in 2005 from a group of rural credit cooperatives and has more than 300 outlets and 5,000 staff members. ANZ’s 20% stake will be shared by China Cosco Shipping Corp. and Shanghai Sino-Poland Enterprise Management Development Corp.

ANZ said that the deal is likely to be completed in the first half of 2017 and the sale price represents a price-to-book ratio of roughly 1.1 times the institution’s net assets at the end of 2015. It will increase ANZ’s Tier 1 capital ratio by about 0.40 percentage point, it added. The stake was valued at A$1.96bn (US$1.41bn) in the bank’s latest annual report.

“The sale reflects our strategy to simplify our business and improve capital efficiency,” commented ANZ deputy CEO Graham Hodges. It “will also allow us to focus our resources on our institutional banking business in Asia.”

 

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