Asset-Sale Pressure on Europe, U.S. Banks Is Good for ANZ, CEO Smith Says

Australia & New Zealand Banking Group Ltd. (ANZ) will have acquisition opportunities in Asia as new regulatory rules put pressure on European and U.S. banks to sell assets, Chief Executive Officer Mike Smith said.

“Inevitably they’re going to have to sell some of the family silver,” Smith in an interview with Bloomberg Television in Melbourne yesterday. “It could be whole businesses in Asia, it could be portfolios, but they’re definitely going to have to offload stuff.”

ANZ Bank, which yesterday announced record full-year profit and aims to double the proportion of earnings it generates in Asia by 2017, joins Singapore-based DBS Group Holdings Ltd. (DBS) in eying businesses that may be put up for sale. Piyush Gupta, CEO of Southeast Asia’s largest bank, said Nov. 2 any European bank selling assets because of that region’s debt crisis is “something we might look at.”

Smith said new capital rules being introduced in Europe will constrain the ability of European banks to lend in Asia.

“They won’t be in the market offering loans the way they have been the last few years and so it’s like going onto the field and having a lot of the opposition players not showing up, which is good for us,” Smith said in the interview.

ANZ Bank is one of Australia’s four pillar lenders, so named for a law that prevents them buying each other. Four years ago it began a strategy of expanding in Asia to offset slower growth in its home market.

Asia generated about 15 percent of the bank’s profit in the 12 months to Sept. 30, Chief Financial Officer Peter Marriott told reporters in Melbourne yesterday. Smith has set a target of boosting that to 30 percent in the next six years.

Profit Miss

ANZ’s net income in the six months ended Sept. 30 rose 4.3 percent from a year earlier to A$2.69 billion ($2.78 billion), missing the median estimate of four analysts surveyed by Bloomberg News for profit of A$2.78 billion as demand for lending in Australia grew at the slowest pace in three decades.

Signs of a weakening domestic economy, as well as concern that fallout from Europe’s debt crisis will affect the country, were among reasons Australia’s central bank reduced borrowing costs this week for the first time in 2 1/2 years. The Reserve Bank of Australia damped household appetite by boosting borrowing costs seven times between October 2009 and a year ago to the highest rate in the developed world.

In that context ANZ Bank’s Asia strategy “makes all the sense in the world,” Smith said yesterday. “Australia is going to be lower growth for some time and if you are looking for growth it’s going to be in Asia.”

Smith also said Europe’s debt crisis will continue for “a couple of years.”

‘Kicking the Can’

“It’s a bit like kicking the can down the road,” he said. “The problem is that the can keeps getting bigger and there will come a time when they’ll kick the can and they’ll have a broken foot and the can won’t have gone anywhere.”

Unless Greece agrees to the European Union’s austerity and aid package, “it’s going to be very hard to see how they stay in the euro,” the ANZ Bank CEO said.

Smith, who has said many assets in Asia have been too expensive, looked at and walked away from bidding for Korea Exchange Bank (004940) a year ago in a deal that Citigroup Inc. estimated at the time could have cost as much as A$6.5 billion.

ANZ Bank’s strategy has included expanding its business in China, Vietnam, Malaysia, the Philippines, Taiwan, Singapore and Hong Kong. Smith, 55, joined ANZ Bank in 2007 after running HSBC Holdings Plc’s Asian division.

To contact the reporter on this story: Jacob Greber in Sydney at jgreber@bloomberg.net

To contact the editor responsible for this story: Chitra Somayaji at csomayaji@bloomberg.net

2:48

Nov. 4 (Bloomberg) -- Australia & New Zealand Banking Group Ltd. Chief Executive Officer Mike Smith talks about the possibility U.S. and European banks may need to sell Asian assets to raise capital under new regulatory requirements. Smith also discusses Europe's debt crisis and the banking industry's credit rating outlook. He spoke with Bloomberg's Jacob Greber in Sydney yesterday. (Source: Bloomberg)