News Reports That ANZ Not Interested In RBS Asian Assets Far Fetched

Post by Sharat on April 17, 2009 · Under International Business News, Mergers & Acquistions, banking · Comment

The Australian Newspaper is reporting the unlikely story that the Australia and New Zealand banking Corporation (ANZ) which recently made the short list as a bidder for troubled UK banking giant RBS’s Asian operation is no longer keen on being included in the asset sales.

At the start of the week it was announced that Standard Chartered, HSBC and ANZ had been named as part of the short list of potential bidders for RBS retail and commercial banking operations in The Philippines, Taiwan, Hong Kong, China, India, Pakistan, United Arab Emirates and Kazakhstan.

Money-AU reported yesterday that RBS was prepared to split the sale amongst various potential buyers, rather than sell the entire portfolio to a single buyer, largely for practical purposes.

The Pakistani operations are most likely to attract the highest bids from domestic financial institutions rather than international bidders.

Whilst the Indian franchise, a legacy of RBS’s ABN Amro acquisition, perhaps the jewel in the crown of its whole Asian portfolio, and the asset of most interest to ANZ, could not be sold to either Standard Chartered or HSBC in its current form.

The Reserve Bank of India, India’s banking regulator would simply not tolerate the sale of an existing banking franchise in India, with a branch banking network, to be acquired by another international bank with its own branch banking network in the country. Such a sale would run counter to its protectionist strategy of not allowing international banks to develop enough scale to provide meaningful competition to domestic incumbents in India.

This would mean that a sale of the Indian franchise would have to be broken into wholesale banking asset and retail banking asset sale which would be hugely unattractive to any buyer.

RBS for its part has said it is talking to regulators from each market it operates and is planning asset sales separately.

“RBS Group has announced its intention to consider options, including the potential sale of its retail and commercial businesses in Asia-Pacific,” an RBS spokesman said. “We are currently in active discussions with potential buyers as well as regulators in each affected country.”

It is most likely that the Australian is reporting spin from its sources within ANZ. The article suggests that RBS is keen on selling the entire portfolio to a single bidder, and that “ANZ is not prepared to buy a parcel of assets and wants to avoid duplication of brands in the markets where it is already present”

ANZ has a presence in Indonesia and Vietnam as part of joint ventures or stakes in financial institutions operating in those countries. Though it would make some sense not to purchase a wholly owned subsidiary in those countries, which would compete with its JV’s and would run counter to its current strategy, the argument is not completely compelling.

Strategies should be fluid, sales of existing stakes to JV partners could be conducted, and the ANZ brand could be built on its own using the RBS pan Asian banking asset portfolio.

In China ANZ has both its own subsidiary and a joint venture, it could easily replicate the same strategy in other countries where joint ventures exists.

Most likely ANZ or the analysts whom the Australian spoke to for its story are playing down the Australian banking majors’ chances of buying certain assets, simply because it does not have the deep pockets that its rivals have for any potential bid.

HSBC recently completed a US$18.5 billion rights issue, whilst Standard Chartered recently reported record profits despite the global banking crisis.

Certain assets though within the RBS Asian portfolio almost certainly have ANZ’s name on them.

“ANZ understands it is one of a number of parties involved in the RBS Asia sale process,” ANZ spokesman Paul Edwards said.

ANZ Chief Mike Smith since taking the helm has consistently enunciated a strategy of becoming a super regional bank with 20 per cent of its earnings derived from overseas. The notion that ANZ has suddenly lost interest in a pan Asian banking portfolio is farfetched to say the least.

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