ANZ’s Chances Of Acquiring KEB Stake Improve
Australian banking major ANZ, which has grand ambitions of Asian expansion has seen the chances of it acquiring a controlling stake in Korea Exchange Bank rise sharply, after KEB said the Australian banks was a strong partner for buyout candidate.
US private equity firm Lone Star funds is selling a stake worth as much as US$4.1 billion and it is understood that ANZ is the front runner in acquiring the stake.
Larry Klane, chief executive of KEB said an ANZ acquisition of the lender would fit well with its stated ambition of becoming a super-regional lender.
“ANZ is a fine institution based in Australia but with a growing pan-Asian footprint and aspiration, and I think it’s in that context that they might find our franchise would fit in very nicely,” Mr Klane told CNBC.
“I’m not in a position to be commenting too particularly on individual participants and how they’re playing or not playing in this particular process.”
ANZ may face stiff competition for the stake, most notably from Japanese securities firm Nomura which has also expressed interest.
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NAB Denies Rumours Of Exiting The UK
Australian banking major National Australia Bank has denied speculations that intends to exit the UK and sell off its British units, after the lender last week dropped out of the bidding to acquire a 318 branch network from Royal Bank of Scotland.
Mark Joiner NAB’s chief financial officer says the lender remains optimistic over its prospects for acquiring AXA Asia Pacific Holdings, despite the fact that the competition regulator has failed to give its approval.
NAB own two banks in the UK, the Clydesdale and Yorkshire banks, both of whom combined posses between 2 to 3 per cent market share in the recession struck UK. NAB’s UK operations have no immediate prospect of expanding into a size which has significant scale advantage, and has long been considered a dead weight hanging on the groups performance.
NAB’s CFO making the first public comments by a senior manager since the lender withdrew from the RBS auction said that the bank would continue to be present in the UK, and would ride the wave of any recovery.
“With RBS, we decided that given what was on offer, our own situation and our view of the market, we weren’t ready to buy,” he said.
“We actually feel quite good about our franchise there — there has been a lot of investment in the last few years and it has made enormous reputational gains because it’s the only bank in Scotland that didn’t go broke.”
Mr. Joiner added that Clydesdale had managed to grow its deposit base at twice the rate of the banking system in general, and that its profit margin on new business far more attractive since before the financial crisis.
NAB would therefore put Clydesdale on a growth footing, and benefit from a recovery in the currency and industry margins.
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Australian Economic Growth Expected To Slow
A leading index of economic growth expects suggest that economic growth will slow down during the second half of 2010 after falling for the first time in ten months.
The Westpac-Melbourne Institute leading index of economic activity, which indicates the likely pace of activity three to nine months in the future, was unchanged in April at 264.4 points.
Annualised growth declined to 7.6 per cent from 8.8 per cent in the March quarter, though the rate still remains well above its long term trend rate of 3 per cent.
The report suggests the first economic slowdown in 10 months.
“This is the first slowing after 10 consecutive months of sharp acceleration. The year to March saw the sharpest upturn in the Leading Index since the rebound coming out of the early 80s recession,” Westpac Senior Economist Matthew Hassan said.
Mr. Hassan added that the index continues to suggest economic growth is robust but the April moderation is notable because it predates the volatility experience by financial markets during May and June.
Mr Hassan said while all the data on other components was not available, the sharp turnaround in commodity prices and fall in equities alone could see more slowing in the growth rate of the Leading Index in May-June.
“The overall level of the Index was unchanged in the April month.”
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Australian Households Saving More
Australians are saving more with the level of household savings increasing during the June quarter. However credit card have usurped the mortgage as the main type of debt being carried by Australians for the first time in nearly four years according to the results of a survey.
The Melbourne Institute household financial conditions index rose 17.2 per cent to 33.7 in June, up from 28.8 in March.
“Credit card debt overtook mortgage debt as the main form of household debt in June, 36.6 per cent compared to 33.9 per cent. This is the first time since November 2006 that households nominate credit card, and not mortgage debt, as their main form of debt.” Melbourne Institute research fellow Dr Edda Claus said in a statement on Thursday.
51.5 per cent of respondents cited saving for a rainy day as the main reason for their savings, a figure which remains unchanged from the March quarter.
55.8 per cent of respondents cited saving for a holiday or travel as the main reason for their savings, up from 55.0 per cent during the March quarter.
Credit card debt became the main form of debt carried by Australian households, replacing mortgages, and the level of debt rose by 3 per cent to 36.6 per cent.
“About 48.8 per cent of Australian households saved part of their income in June 2010, up from 46.2 per cent in March,” the report said.
The survey results from the June quarter suggest that nearly 75 per cent of Australians own their home outright or hold a mortgage, a figure which declined from previous surveys.
More than 40 per cent of households said they were debt free, while a third said they held mortgage debt, down almost four per cent since last quarter.
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Wayne Swan Says Global Economic Recovery To Be Patchy
The volatility in financial markets, coupled with Europe’s economic woes suggest that the global economic recovery will be patchy, federal treasurer Wayne Swan says.
Speaking to business leaders Mr. Swan said that the events unfolding in Europe served as a reminder to the risks that remain to the global economy.
“What we’re seeing is a fairly patchy recovery, with the world economy growing at very different speeds across different regions and the situation in Europe, and recent volatility in global financial markets, continues to remind us that downside risks remain to the global recovery.” Mr. Swan said.
The Euro zone’s sovereign default crisis has rattled financial markets, forcing some European governments to dramatically cut spending.
Australia managed to avoid the worst of the global financial crisis, escaping recession, thanks in large part to a $52 billion fiscal stimulus package, that drove the government budget into deficit.
Mr. Swan added that Australia had undertaken new fiscal discipline, which would result in a balanced budget during 2012-2013, almost three years earlier than previously forecast.
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Australian House Prices Reasonable Relative To Incomes Says RBA
The Australian central bank is downplaying suggestions that there is a housing bubble in the country, but added that the outlook for countries which are heavily in debt was bleak.
On Tuesday, Ric Battellino deputy governor of the Reserve Bank of Australia (RBA) said that house prices relative to incomes were fairly reasonable.
“People feel that house prices in Australia are quite high and that’s quite often because the ratio of house prices to income that are published for Australia tend to focus mainly on prices in the cities, and they are quite elevated. But, if you look across the whole country, the ratio of house prices to income is not that different from most other countries.” Mr Battellino said.
The RBA official went on to add that he was concerned over the events unfolding in Europe, because governments who fall into financial difficulty have no one to bail them out.
“So the developments in government debt are, I think, a worry because it’s not clear to me that they can be solved certainly any time soon. If they are going to be solved through fiscal tightening, that actually means some quite difficult periods ahead for some of these economies.”
He went on to make the point that Australia did not face the same problems as encountered by Eurozone countries, because its debt levels were low, though Europe’s problems were reverberating in Asia.
“Certainly Australia’s own government debt position is very good, we’ve one of the best (debt position) in the world. But all through the region where we are and our trading partners, government debt is not a problem.”
Mr. Battellino went on to say that though the Australasian region was the least affected by the European sovereign default crisis, he was unable to make any predictions about the seriousness of the effects.
“I really can’t say, it depends on what measures are taken to deal with these issues and where it heads to from here.”
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Interest Rates Likely To Rise Over The Year
A leading Australian economist says he believes that interest rates will continue to rise over the coming year, and that the trend of tightening interest rates is proof of a robust economy.
Chris Richardson, director of consultancy Access Economics, says that last week’s unemployment data were a testament to the strength of the Australian economy, but also meant that interest rates were likely to rise.
Mr. Richardson added that he does not expect rates to rise in the immediate future, and that they would remain steady over the next two months.
Unemployment fell to 5.2 per cent in May, while the number of people with jobs rose by 26,900 (0.24 per cent), the Australian Bureau of Statistics (ABS) said on Thursday.
“The job figures are a reminder that Australia’s economy has momentum and strength in a way that the rest of the rich world does not have,” Mr Richardson told AAP on Tuesday.
“I wouldn’t be surprised if the Reserve Bank leaves rates on hold for another month or two, particularly while the air around Europe and its woes is cleared more.
“My essential expectation is that rates continue to rise and that they will rise through the rest of 2010 and a chunk of 2011.”
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ANZ Indonesian Expansion Hits Road Block
Australian banking major ANZ, which has bold ambitions to transform itself into a super-regional lender, may be forced to put on hold an audacious plant to acquire a $1.4 billion stake in Indonesia’s Bank Panin, after it said its majority investor made the disclose that his stake in Panin was not for sale.
ANZ was the preferred bidder in the race to acquire the stake, since it already owned a 38.8 per cent share in the Indonesian bank, ahead of rival bidders Standard Chartered and Spain’s BBVA.
ANZ currently operates a joint venture with Panin, which is being used to transfer the assets in Indonesia acquired from Royal Bank of Scotland, an arrangement that was finalized on Monday.
Despite its Asian aspirations, its Indonesian plans were dealt a body blow, when it was revealed that Mukmin Ali Gunawan, the largest share holder in Panin had no plans to sell his existing stake in the lender despite receiving several offers.
“He has a strong commitment to develop the bank and isn’t in a dire need to get cash,” a source at Panin Group told Dow Jones Newswires.
Analysts estimate the stake to be worth as much as $1.4 billion, and many were surprised by the revelation that the aging patriarch wished to retain control, since Panin had already mandated UBS to advise it on the transaction.
A spokesperson for ANZ said the lender intended to maintain its stake in Panin, and wishes to expand the existing joint venture between the two lenders.
“Our 39 per cent stake is a strategic investment, which is an important part of our super regional strategy and we are committed to working with other shareholders to grow and develop the bank over the long term,” he said.
Panin is the seventh-largest lender in Indonesia and has 364 branches across the nation. The Gunawan family holds 46 per cent of the bank and the stake is eventually expected to be sold.
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New Zealand Competition Regulator Delays Verdict On AXA Acqusition
After seeing its initial bid first rejected by the AXA Asia Pacific Holding (APH) independent directors, and then having its bid trumped by rival bidder NAB, Australian wealth manager AMP’s attempt to woo APH has hit yet another road block, after New Zealand’s competition regulator delayed delivering its verdict on the proposed acquisition by another two weeks.
The New Zealand Commerce Commission has postponed its giving its decision on the acquisition until June 25th.
AMP has proposed to acquire APH for a consideration of $12.85 billion, a bid that was later trumped by rival bidder NAB, who tabled a $$3.29 billion bid.
The Australian Competition & Consumer Commission failed to bestow its blessing for NAB’s higher bid over competition concerns in the retail funds sector.
“Allowing NAB and Axa to merge would significantly diminish incentives to compete for retail investment platforms used by investors that have complex financial needs,” ACCC chairman Graeme Samuel said in April.
In response to the negative verdict, NAB has begun negotiation with the Australian competition regulator over divestment of APH’s North investment platform, in order to allay some of the regulators concerns.
AMP has made the case that its acquisition of APH would fail to have a substantial impact on competition, as a result of a large number of independent rivals that would remain, and has therefore not submitted a higher bid for APH.
AMP argues that its acquisition would result in the creation of a fifth pillar in Australian financial services.
Earlier this month, Axa APH and its Paris-based parent Axa extended an exclusivity agreement with NAB until July 15 to give the bank more time to negotiate with the ACCC.
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ANZ Has Grand Asian Ambitions
Australian banking major ANZ intends to double the revenue it receives from its North Asian operations to $784 million, as it seeks to build its institutional business by targeting multinational and Chinese state owned enterprises.
ANZ’s top man for North Asia Gilles Plante says the lenders institutional business was exploding at a phenomenal rate, growing by nearly 50 per cent ever six months having first started from an extremely low base.
According to Mr. Plante, ANZ has banking relationships with over 30 state owned enterprise (SOE’s) it has whittled down from a list of 70, and the lender says it is in China for the long haul and has a 30 year horizon.
ANZ say greater China, Malaysia, Indonesia and India are its most important franchise markets, and the lender has set an ambitious strategy of Asian expansion, one which seeks to increase the contribution from the current 30 per cent of group profits to 20 per cent by 2012.
Mr. Plante currently overseas 45 per cent of the lenders regional revenue and profits, including the lenders businesses in Hong Kong and Singapore. Mr. Plante also oversees the strategic 20 per cent holdings in Shanghai Rural and Commercial Bank, China’s 17th-largest bank by assets, and Bank of Tianjin.
Alex Thursby ANZ’s head of Asia Pacific, Europe and America says the bank is hoping that China would loosen its regulatory environment, which would enable the lender to increase its stake in Shanghai Rural and Commercial Bank by more than the maximum 20 per cent stake it currently holds.
“China is getting more and more confident about opening things up, and Shanghai will push hard because it has greater aspirations, but it will take time and (the shareholding limit) won’t go straight to 51 per cent.” Mr Thursby said.
Currently ANZ posses four branches, and has two sub branches in the country, but has ambitions to expand its presence to 20 branches by 2013, and hopes to obtain a license to operate in local currency.
The lack of a domestic currency license has restricted ANZ’s ability to build a full fledged retail business in the country, however the lender remains hopeful of obtaining a license next year.