ANZ To Acquire AWB Loan Portfolio

Post by NeilMc on December 8, 2009 · Under Australian Economy, Business News, Company News, Mergers & Acquistions, banking · Comment

Australian banking major ANZ is continuing to use the global financial crisis as a predatory opportunity for acquisitions, and has inked a deal to purchase a $2.4 billion loan book from AWB which will also expand its customer relationships through an exclusive referral agreement with the company.

AWB will incur a $62 million pre-tax loss from the transaction, but will benefit from a $155 million capital release from the deal, which it will use to provide support for its loan portfolio. The company will see its profits cut by between $5-10 million going forward.

Prior to the crisis AWB was in fairly good shape, earning decent returns from its loan portfolio, however due to its BBB-minus credit rating, its cost of funding negated any positive returns from its loan portfolio.

A higher rated lender such as ANZ provides a much more natural fit for the business.

Australia’s Big Four have used the financial crisis to opportunistically expand their business, with ANZ acquiring the Asian consumer and business banking portfolio of RBS for $687 million, whilst CBA acquired Bankwest from HBOS at a distressed price during the height of the crisis.

The Big Four have also been large beneficiaries of the Federal Government deposit and wholesale funding guarantee, which has meant that second tier and regional lenders such as AWB face higher funding costs.

ANZ is rumoured to be interested in the Australian assets of AXA Asia Pacific Holdings (APH), and is watching the progress of the joint bid between AMP and APH parent AXA SA carefully, with the view to tabling its own bid for APH’s Australian assets should the acquisition attempt ultimately fail.

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