ANZ is cashing up to deliver on its super-regional banking strategy, announcing plans yesterday to raise up to $2.85 billion as it duels with global giants HSBC and Standard Chartered for the Asian assets of distressed British lender Royal Bank of Scotland.
With the asian region leading in the recovery for the current economic crisis there seems to be quite a few factors pointing that ANZ is heading in the right direction in expanding its base. The asian banks are much more conservative with their lending practices and hold healthy lending to value ratios and it would help to get into this lucrative market and it might [pay off pretty well compared to the crisis the current us banks and European banks are facing at the moment.
Morgan Stanley analyst Richard Wiles said the $14.40 a share placement price by ANZ was above his 12-month target price of $13.60 and was unattractive. "The trading update does not make us more positive on the earnings outlook, and the ability to make an unspecified Asian acquisition increases the risk profile," Mr Wiles said.
The main part of the raising, an underwritten $2.5 billion institutional placement, was three times oversubscribed at $14.40 a share — a discount of only 7.5 per cent to the stock’s last trade at $15.57 and a further pointer towards stability in the financial system.
The funds raised, including plans for a $350 million share purchase plan, will take the lender’s tier one capital ratio above its Big Four peers to more than 9 per cent.
However, ANZ confirmed industry-wide rumours that it was "one of a number of parties" participating in a competitive sale process for RBS’s Asian assets.
"As part of that process, ANZ has recently submitted a non-binding proposal to RBS group for selected businesses," the bank said.
"The scope, terms (including regulatory approvals), timetable and risk profile of any transaction — and whether a transaction will occur — remain unknown."
In 2007, soon after taking the reins at ANZ, Mr Smith said he wanted to expand the Asian region’s contribution to group profit to 20 per cent by 2012.
"You’d think that China, India, the footprint in the Middle East, and Hong Kong would be of most interest to ANZ," said Macquarie Group analyst Ben Zucker. "Indonesia is also a possibility, but ANZ already has a good exposure there." The RBS sale process has some way to go. It is understood the next stage, allowing for due diligence and contract negotiation involving preferred bidders, could be a month away and the final result may not be known until July.
Even if ANZ misses out, it is likely to explore other assets that are freed up as a result of the financial crisis.