ANZ Builds Multi-Billion Dollar War Chest

Post by Sharat on September 2, 2009 · Under Business News, Capital Markets, Company News, Mergers & Acquistions, banking · Comment 

Australian banking major ANZ has built a war chest of between $5.9 billion to $7.3 billion in excess capital, more than enough for ANZ chief Mike Smith to finance his stated ambition of turning the lender into a super-regional bank through acquisition.

The lender plans on increasing staff levels at its Chinese operation by more than tenfold, and intends to have over 500 people working in its retail banking operation in China by 2012.

ANZ’s capital ratio currently stands at 10.2 per cent, well above those of its Big Four rivals and above its 7.5 per cent to 8 per cent target.

In a research note to clients on Tuesday Goldman Sachs JBWere said that in order for the lender to increase its return on equity, ANZ would need to either improve the performance of existing businesses or deploy the excess capital.

At the start of the month, ANZ announced the acquisition of some of Royal Bank of Scotland’s commercial and retail banking assets in Asia for $687 million and revealed that it may acquire a further two or three businesses of similar scale in the region.

“It’s better to use the balance sheet profitably than not at all. We have to manage that capital position. I’m relatively comfortable where we’re at, and we’re looking at a number of opportunities.” Mr. Smith said on Monday.

ANZ had been believed to be in the running for the acquisition of ING Group’s private banking assets in Asia and Switzerland, hiring HSBC as an adviser for a proposed bid. However the lender decided to pass up the opportunity.

Rival Commonwealth Bank of Australia is believed to have moved into the second round of bidding.

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