Euromoney, October 2016
ANZ’s sale of its retail and wealth management businesses in Asia to DBS is a rare example of a win-win deal.
Firstly, the ANZ side. As we reported in our October cover story, CEO Shayne Elliott wants to pare Asia back to what he thinks the bank is good at: institutional business — specifically trade, debt capital markets, corporate foreign exchange and cash management. The problem is, ANZ has a lot more than that, ranging from unwanted stakes in a range of Asian institutions to an emerging corporate business that doesn’t fit the bank’s approach to asset deployment or risk management.
Within that range of surplus businesses, retail and wealth management is one of the better ones. It brings revenues of S$825 million, S$17 billion of deposits and an S$11 billion loan book. It is a large chunk of the acquisition ANZ made from RBS in 2010 (though there were institutional businesses within that sale too), and it is largely a mass-affluent business across Singapore, Hong Kong, Taiwan and Indonesia, plus a little in China. It is profitable and decent but clearly not core to what ANZ wants to do with its capital.
Selling that business – albeit for a modest S$110 million over book value – is going to make Elliott very popular at home. Many analysts and shareholders want him to shed pretty much everything the bank has in Asia and, while he won’t go that far, this sale gives a very clear illustration that he is delivering on his strategy to slim things down in Asia and focus on the stuff that really pays. Sales of the local bank stakes would be more popular still, but that looks to be a harder slog.
Next, the DBS side. The acquisition is not transformative but it is more than helpful. Only last week DBS proudly announced it had become one of the top five wealth managers in Asia, with S$159 billion under management. This acquisition adds another S$23 billion to the pile, cementing its position at the top table of Asia Pacific private wealth management and helping with CEO Piyush Gupta’s ever-growing target for the contribution of this business to the overall bank (first ‘double digits’, quickly achieved, then 15%, just about achieved now, and now the new target of 20% of group earnings).