DBS to acquire ANZ’s Asian wealth assets
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DBS Group said it plans to buy Australia and New Zealand Banking Group’s (ANZ) wealth and retail businesses in five Asian markets – part of a big private banking push for the Singapore lender and the first significant retreat from Asia for ANZ.
The businesses in Singapore, Hong Kong, China, Taiwan and Indonesia, will be sold for around S$110 million, in a deal that underscores how smaller players are being squeezed out of private banking due to lack of scale.
“Further investments do not make sense for us given our competitive position and the returns available to ANZ,” Chief Executive Shayne Elliott said in a statement.
Mr Elliott also told an analysts call the bank would look to exit its retail and wealth assets in the Philippines, Vietnam, Cambodia and Laos separately.
He added that for the bank to have remained competitive it would have had to invest further in developing its branch network and digital capacity.
The deal will help DBS build up its leading position in the region, said Ms Tan Su Shan, DBS’ head of consumer banking and wealth management, noting that the Singapore lender had recently entered the top five bank rankings for the Asia-Pacific region.
DBS and local rival Oversea-Chinese Banking Corp have been aggressively bidding for the Western private banking assets for sale in Asia.
DBS, Singapore’s biggest lender, is also weighing a bid for ABN AMRO’s Asian private bank, sources have told Reuters.
ANZ TO FOCUS ON INSTITUTIONAL BANKING IN ASIA
The ANZ transaction is expected to be completed progressively from the second quarter of 2017, with full completion in all markets expected by early 2018.
“Further investments do not make sense for us given our competitive position and the returns available to ANZ,”
Most of its staff currently employed in the affected units will join DBS, ANZ said, adding that it will focus on its institutional banking business in Asia instead.
ANZ, Australia’s third-largest bank by market value, also said it would take a loss of A$265 million on the sale, including write-downs, and added the sale was expected to increase its Tier 1 capital ratio by 15 to 20 basis points. The losses are set to be booked in the first half of the current financial year.
They will come of top of A$360 million in one-off charges that will be booked in the year just ended. Those earnings are due to be released in full on Thursday.
In 2009, ANZ acquired the Royal Bank of Scotland’s retail, wealth and commercial businesses in Taiwan, Singapore, Indonesia and Hong Kong as well as institutional businesses in Taiwan, the Philippines and Vietnam for US$550 million.
The move was part of a “super-regional strategy” led by former ANZ Chief Executive Mike Smith, who left the bank last year.
DBS Q3 PROFIT STABLE, BAD DEBT CHARGES UP
The news comes as DBS posted a slight increase in third-quarter net profit, in line with expectations, although bad debt provisions rose sharply due to its exposure to the troubled oil and gas sector.
Singapore banks are grappling with growing risks to earnings as credit woes deepen for the offshore services sector, which has been hit hard by an almost two-year rout in oil prices that lasted until early this year.
DBS said net profit came in at S$1.071 billion in the third quarter that ended in September, versus a profit of S$1.066 billion a year earlier. That compares with an average forecast of S$1 billion from five analysts polled by Reuters.
Bad debt charges rose to S$436 million in the third quarter from S$178 million a year ago.
Questions & Answers
Q.Why is ANZ selling its retail and wealth management businesses in these Asian markets?
Why is ANZ selling its retail and wealth management businesses in these Asian markets?
ANZ's CEO stated that further investments in these units would not be sensible given their competitive position and the returns available to ANZ. The bank would have needed to invest more in its branch network and digital capacity to remain competitive.
Q.What is the expected financial impact of this sale on ANZ?
What is the expected financial impact of this sale on ANZ?
ANZ expects to take a loss of A$265 million on the sale, including write-downs, which will be booked in the first half of the current financial year. The sale is also expected to increase its Tier 1 capital ratio by 15 to 20 basis points.
Q.What will happen to the staff currently employed in the ANZ units being sold?
What will happen to the staff currently employed in the ANZ units being sold?
ANZ has stated that most of its staff currently working in the affected units in the five Asian markets will join DBS. The transaction is expected to be completed progressively by early 2018.
Q.Are there other parts of ANZ's Asian retail and wealth business also being sold?
Are there other parts of ANZ's Asian retail and wealth business also being sold?
Yes, ANZ's CEO indicated that the bank would also seek to exit its retail and wealth assets in the Philippines, Vietnam, Cambodia, and Laos separately. This is part of a broader retreat from the region.
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