ANZ Sells Shanghai Bank Stake in Unwinding of Asia Expansion

Updated on
  • China Cosco, Shanghai Sino-Poland to each take 10% stakes
  • Sale is latest by CEO Elliott to reduce ANZ’s presence in Asia

ANZ to Sell Shanghai Rural Stake for $1.3B

Australia & New Zealand Banking Corp. agreed to sell its 20 percent stake in Shanghai Rural Commercial Bank Co. for A$1.84 billion ($1.33 billion), Chief Executive Officer Shayne Elliott’s latest move to unwind an Asian expansion that sapped profits.  

China Cosco Shipping Corp. and Shanghai Sino-Poland Enterprise Management Development Corp. will buy 10 percent each, the Melbourne-based company said in a statement Tuesday. The holding was valued at A$2 billion in ANZ’s 2015 annual report.

“The sale reflects our strategy to simplify our business and improve capital efficiency,” ANZ Deputy CEO Graham Hodges said, adding the deal would allow the bank to focus resources on its Asian institutional business. The sale will increase ANZ’s Tier 1 capital ratio by about 40 basis points, the bank said.

ANZ shares closed up 1.7 percent in Sydney, outperforming a 1.2 percent gain in the S&P/ASX 200 financial index. The lender’s shares gained 8.9 percent last year.

“It is a strategic deal and a good outcome for ANZ,” T.S. Lim, a Sydney-based banking analyst at Bell Potter Securities, said by phone, noting that some investors had seen the risk of a firesale at a bigger discount.

Shipping, Finance

For Cosco Shipping, the acquisition is another step in expanding its financial businesses. In December, it agreed to buy HK$6.15 billion ($792 million) of shares in a Chinese asset manager. In February last year, Chairman Xu Lirong said that Cosco Shipping planned to apply for more financial licenses and to increase its investment in insurance and brokerage businesses, the 21st Century Business Herald reported.

Since taking over as head of ANZ in January 2016, Elliott has sought to wind back the bank’s lower-returning businesses in Asia. In October, he announced the sale of retail and wealth-management businesses in five Asian markets to Singapore’s DBS Group Holdings Ltd.

Also on the block are stakes in China’s Bank of Tianjin Co., PT Bank Pan Indonesia and Malaysia’s AMMB Holdings Bhd. Domestically, ANZ is also exploring options around the sale of its Australian wealth and New Zealand insurance businesses. The Shanghai Rural deal is expected to close in mid-2017 subject to regulatory approvals, ANZ said.

Under previous CEO Mike Smith, ANZ had more than doubled its number of corporate clients and almost tripled its number of employees in Asia to 21,000. The bank had set a target to earn as much as 30 percent of profits from outside Australia and New Zealand by 2017.

However, the strategy struggled to deliver as near-zero interest rates pushed on margins and new banking regulations required capital deductions for minority shareholdings in other financial firms.

ANZ first invested in Shanghai Rural in 2006, during John McFarlane’s tenure as CEO. 

No comment was immediately available from China Cosco Shipping or Sino-Poland.