A Change of Guard

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Monday, 30 June 2008

$8 billion tag on ANZ's Asia plan

  • Danny John
  • June 30, 2008

AS MUCH as $8 billion of precious capital may have to be devoted by ANZ Bank to its expanding Asian operations for them to meet the group's optimistic target of making $1.5 billion of net profits from the region by 2012.

Detailed break-downs by industry analysts of the bank's requirements to back up its ambitious development plans indicate that any net surplus cash on its balance sheet generated by its Australian and New Zealand businesses will have to be channelled to the Asia-Pacific division.

With all of the major banks continuing to downplay the prospects of cash-raising rights issues to fuel future growth amid the global credit crisis, ANZ will be particularly dependent on its local offshoots in Indonesia, Malaysia, Vietnam and Cambodia to help fuel their expansion blueprints.

The bank undertook a five-day investors and analysts tour of the region last week, which prompted sector watchers at Credit Suisse and JP Morgan to conclude that around one-fifth of an expanded pool of shareholder funds totalling $40 billion by 2012 would be needed to underpin the Asian growth target.

The analysts have indicated that ANZ could have less than half of that amount in its regional businesses at present.

In the case of JP Morgan, it has suggested the figure might be as low as $2.1 billion once all of the equity stakes in ANZ partnership banks and financial services companies are added together.

The capital demands on ANZ are only set to rise as it seeks to accelerate its involvement in the Chinese banking market, where it has 20% stakes in two regional banks and looks to get a foothold in India as the country slowly opens up its financial services sector to foreign competitors.

"It must be remembered that Asia equals risk, not just growth," said the banking team at JP Morgan.

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