ANZ Mulls Australian Asset Sales After Scaling Back in Asia

(Bloomberg) -- After scaling back Australia & New Zealand Banking Group Ltd.'s Asian businesses, Chief Executive Officer Shayne Elliott is now turning his attention closer to home.

The country's third-biggest bank is exploring “a range” of possible options for its Australian wealth business, it said Thursday as it announced its its lowest full-year earnings since 2011. That may include the sale of its life insurance, pension and investments businesses in the country, the Melbourne-based lender said in an exchange filing.

“We will not shy away from taking tough decisions,” Elliott said on a call with investors. “We have to act with more urgency than others because of our historical business mix.”

Since taking over in January, Elliott has sought to wind back ANZ's lower-returning businesses in Asia, a legacy of his predecessor Mike Smith's expansion into the region. The restructure is taking place at a time when higher funding costs, narrower margins and rising bad-debt charges in Australia are putting pressure on earnings at the bank and its rivals.

Earlier this week, Elliott announced the sale of the bank's retail and wealth-management businesses in five Asian markets to Singapore's DBS Group Holdings Ltd. and signaled that more divestments were to come. The bank said Thursday it will consider options for its wealth business in New Zealand in 2017.

“ANZ has exhibited good momentum in turning around the business,” said Omkar Joshi, an investment analyst at Watermark Funds Management, which oversees about A$1 billion ($768 million). Any deal to sell parts of its Australian wealth business would “help release capital and therefore lift returns,” he said.

Complicated Deals

The lender's stakes in Shanghai Rural Commercial Bank, Bank of Tianjin Co., PT Bank Pan Indonesia and Malaysia's AMMB Holdings Bhd. are also under review as the bank refocuses its efforts toward domestic markets and its Asian institutional operations. Elliott reiterated Thursday ANZ's intention to sell its bank shareholdings, though it will take time.

“We can't just simply go out and run an auction and see who turns up,” Elliott said on a call with reporters. “We have to negotiate with government, regulators and our partners. That is why it is complicated, it is not to do with our price ambitions.”

He added: “I'm very confident that portfolio will return to our shareholders in excess of its book value of A$4 billion.”

On the media and investor calls, Elliott stressed that ANZ remains committed to its Asian institutional-banking business, where it has been jettisoning less profitable clients and focusing on big corporate customers. Its institutional-banking division accounted for 18 percent of cash profit in its latest financial year, down from the previous year's 27 percent, according to Bloomberg calculations based on ANZ's financial statements.

Softer Side

Unaudited cash profit, which excludes one-time items, for the year ended Sept. 30 slumped 18 percent from a year earlier to A$5.9 billion, less than the A$6.1 billion mean estimate of analysts in a Bloomberg survey. Profit was dragged lower by A$1.1 billion in charges mainly related to its restructuring program, ANZ said.

The bank's shares rose 0.6 percent to A$27.34 at 1:55 p.m. Sydney time, after falling as much as 1.3 percent in early trading.

For a detailed breakdown of ANZ Bank's earnings, click here

The bank's net interest margin -- a key measure of lending profitability -- fell to 2 percent from 2.04 percent a year earlier.

Bad-debt charges rose 62 percent to A$1.96 billion. The bank said this was mainly due to a rise in resource-related exposures as well as the settlement of the Oswal legal dispute.

ANZ, which cut its dividend in May for the first time since 2009, will pay a final dividend of 80 Australian cents a share. That results in a full year-payout of A$1.60, down from A$1.81 in 2015.

To contact the reporter on this story: Emily Cadman in Sydney at ecadman2@bloomberg.net.

To contact the editors responsible for this story: Marcus Wright at mwright115@bloomberg.net, Darren Boey, Paul Panckhurst