The ANZ is getting out of retail banking and wealth management in Asia.
Singapore’s DBS Bank has bought the ANZ’s retail and wealth business in Singapore, Hong Kong, China, Taiwan and Indonesia.
The bank didn’t release a a sale price but said it represents an estimated premium to net tangible assets of $110 million.
The ANZ will take a net loss of $265 million including write-downs of software, goodwill and fixed assets.
The bank’s share price fell by 0.9% when the deal was announced. But a short time ago they had recovered to $27.61, down just 0.04% and almost flat with Friday’s close.
The sale, whose process will extend into 2017 and early 2018 as regulatory requirements are met in different countries, will have no impact on 2016 full year results due to be released on Thursday.
The ANZ says it will strengthen its focus on institutional banking in Asia where it has a presence in 15 Asian countries and $43 billion in gross lending assets.
“It is all about focus,” says CEO Shaayne Elliott said.
“It is a profitable business. Actually it’s a good little business .. but the world’s changed and the rules of operating have changed. It’s become much more complex.”
The bank says it would have needed to make further investments in the Asia branch network and digital capability.
Elliott says Asia remains core to ANZ’s strategy.
“This transaction simplifies our business while allowing us to continue to benefit from higher levels of growth in the region through a focus on our largest, most successful business in Asia — banking large corporate and institutional clients driven by trade and capital flows particularly with Australia and New Zealand,” he says.
He says it’s essential in the current banking climate of lower growth, more regulation and regulatory capital and intense competition to maximise resources for the best return on investment.
Elliott, who in January replaced Mike Smith, a big believer in the growth prospects of Asia, has been clear that he wanted a more targeted business in the region.
The retail and wealth business being sold includes $11 billion in gross lending assets, $7 billion in credit risk weighted assets and $17 billion in deposits.
Last financial year the business accounted for $825 million in revenue and net profit of $50 million.
The ANZ has 1.3 million retail and wealth customers in Asia, with 100,000 of them wealth customers and the rest retail.
Singapore’s DBS Bank says the transaction will create significant value. The ANZ business will be bolted to the existing DBS platform and will benefit from efficiencies especially in technology and branch distribution.
Tan Su Shan, group head of consumer banking and wealth management at DBS, says: “Over the years, DBS has made significant strides in the wealth business, and recently became the first Singapore and Asian bank to break into the top five private banks in Asia-Pacific. This acquisition will further cement our leadership position.”
Elliott says: “I am also pleased that DBS plans to take on the majority of our staff meaning continuity for customers and greater opportunities for our people as part of a leading Asian bank with significant growth ambitions.”
The other centres where the ANZ has retail and wealth management businesses — Cambodia, Laos, Vietnam and the Philippines — are still under review.