ANZ Beats Westpac to Dominate Australia Bond Underwriters With Asian Push

Australia & New Zealand Banking Group Ltd. is leading domestic bond underwriter rankings for the first time in at least 12 years as the lender’s expansion in Asia helps it tap growing investor demand for Australian assets.

Managing deals for Bank of America Corp., the World Bank and APA Group helped boost ANZ’s market share of bond offerings in Australia to 15.1 percent from 11.2 percent last year, according to data compiled by Bloomberg. The Melbourne-based bank is beating Westpac Banking Corp., now the No. 2 underwriter with 15 percent.

Under Chief Executive Officer Mike Smith, ANZ bought Royal Bank of Scotland Group Plc’s businesses in Hong Kong, Singapore and four other nations in 2009 for $550 million, increasing the firm’s presence across the Asia-Pacific region that now has as many millionaires as Europe. The Australian dollar has risen 9.9 percent against its U.S. counterpart this year, the second-best performance among the 16 major currencies tracked by Bloomberg.

“For Australian issuers, access to Asian savings is becoming increasingly important,” said Phil Bayley, principal of Melbourne-based consultancy firm ADCM Services. “With the acquisition of RBS assets in the region, ANZ has gained critical mass and certainly increased its distribution capacity.”

Photographer: Mark Graham/Bloomberg

Australia & New Zealand Banking Group Chief Executive Officer Mike Smith speaking before the public hearing of a Senate inquiry into competition within the Australian banking industry, at Parliament House in Canberra. Close

Australia & New Zealand Banking Group Chief Executive Officer Mike Smith speaking... Read More

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Photographer: Mark Graham/Bloomberg

Australia & New Zealand Banking Group Chief Executive Officer Mike Smith speaking before the public hearing of a Senate inquiry into competition within the Australian banking industry, at Parliament House in Canberra.

Asian Share

Asian investors are buying on average 20 percent of the Australian bond offerings managed by ANZ, compared with between 5 percent and 10 percent a year ago, said Paul White, the global head of syndicate.

They bought 22 percent of the International Bank for Reconstruction and Development’s A$1.5 billion ($1.5 billion) offering of 5.75 percent notes in February, according to the World Bank. The deal was managed by ANZ, TD Securities Inc. and RBC Capital Markets.

Australia’s strengthening economy and relatively high interest rates are luring Asian bond buyers, according to Cath Carver, ANZ’s global head of capital markets, who moved to Hong Kong from Sydney this year to help the bank’s customers access funding from Asia. The government’s AAA rated two-year bonds yield more than seven times as much as the U.S. equivalent.

They’ve “increased their interest and investment in Aussie dollars,” Carver said in a phone interview, “whether it be government bonds at one end or credit at the other.”

The nation’s benchmark cash rate is 4.75 percent, compared with as low as zero in the U.S. and Japan. Employment jumped by the most in 10 months in November, more than double the median forecast, and the jobless rate fell to 5.2 percent, compared with a seven-month high of 9.8 percent in the U.S.

Millionaires

Australia’s gross domestic product will increase by 3.7 percent in 2011, compared to 2.55 percent in the U.S., and 1.34 percent in Japan according to the median forecasts of economists surveyed by Bloomberg.

The number of millionaires in the Asia-Pacific region rose 26 percent to 3 million in 2009, matching Europe and almost equaling North America’s 3.1 million, Capgemini SA and Merrill Lynch & Co. wrote in the 14th annual World Wealth Report published in June. The region’s millionaires boosted their combined assets 31 percent to $9.7 trillion, the report states.

The International Monetary Fund predicts Asia’s developing economies will expand 9.4 percent in 2010, compared with growth of 2.7 percent in advanced countries.

Bond sales in Australia have reached A$110.3 billion this year, at least 64 percent higher than any other period in the past decade apart from the record A$117.7 billion in 2009, Bloomberg data show.

Bank of America

Bank of America sold A$1.2 billion of three-year debt in August, the Charlotte, North Carolina-based lender’s biggest bond sale in the Australian currency in more than three years.

APA Group, whose pipelines carry more than half Australia’s natural gas, raised A$300 million in July in the first sale of BBB rated 10-year notes in Australia by a non-financial company, according to data compiled by Bloomberg.

ANZ’s market share of bond sales in Australia in 2010 has almost doubled from 7.7 percent in 2008, Bloomberg data show. The lender is also seeking to increase its share of Asian local currency debt markets, including the Singapore and Hong Kong dollars and the Vietnamese dong, White said.

It is ranked fifth, sixth and fourth in those markets this year, Bloomberg data show.

Westpac’s market share of Australian bond sales is down from 18.2 percent in 2009, the data show. Mark Goddard, executive director, syndicate at Westpac, declined to comment.

RBS Deal

ANZ’s Smith is targeting about 20 percent of the bank’s earnings from Asia by 2012. Last year’s deal with RBS, which also included businesses in Taiwan, Indonesia, the Philippines and Vietnam, represented 54 branches with $3.2 billion in loans and $7.1 billion in deposits serving about 2 million clients, ANZ said in an Aug. 4, 2009, statement to the Australian stock exchange.

The lender is continuing to assess strategic opportunities in Asia under a plan to become a “super regional bank,” ANZ said in a Nov. 25 statement, the day it shelved plans to buy control of Korea Exchange Bank.

ANZ’s profit from its institutional business rose 23 percent to A$1.75 billion in the year to Sept. 30, according to its annual report.

The bank’s shares have risen 3.9 percent this year, while those of its main competitors Westpac, Commonwealth Bank of Australia and National Australia Bank Ltd. have dropped at least 7.1 percent and the benchmark S&P/ASX-200 index has declined 1.8 percent.

To contact the reporter on this story: Sarah McDonald in Sydney at smcdonald23@bloomberg.net.

To contact the editor responsible for this story: Will McSheehy at wmcsheehy@bloomberg.net.

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