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ANZ takes a $281 million hit in Asia

Photo / File
Photo / File

In a major backwards step for its overseas operations, ANZ has struck a deal to sell off its retail and wealth operations across Asia.

Singapore's DBS bank will pay book value plus A$110 (NZD$116) million for assets in Singapore, Hong Kong, China, Taiwan and Indonesia, which hold A$11 billion in loans and represent the bulk of ANZ's Asian retail and wealth management business. The sell-off will hit the bank's bottom line to the tune of A$265m.

Chief executive Shayne Elliott, who is scaling back the expansion into Asia undertaken by predecessor Mike Smith, said Australia's fourth-largest lender is likely to also exit the four remaining countries in which it has a presence. Mr Elliott said ANZ's businesses in Vietnam, Laos, Cambodia and the Philippines were under review but would not be drawn on a timeline for a possible broader exit.

"This is the heart of the business and we're continuing to look at the other franchises," Mr Elliott told analysts.

"We don't see a future for us in retail and wealth businesses across Asia and we will exit at the right time."

Chief financial officer Michelle Jablko said ANZ's return on equity and earnings per share will be subject to a "small impact".

ANZ did not give a price tag for the transaction but said the impact on its bottom line - including writedowns and transaction costs - will be a net loss of about A$265 million.

It will be initially higher in the first half of the bank's 2017 financial year but will be offset back as the sales progress over future periods.

A trading halt placed on ANZ's shares ahead of the announcement on Monday was lifted an hour after the market opened.

At 2.20pm, the shares were up 28 cents, or 1.01 per cent, at A$27.90 - broadly in line with gains by rivals Commonwealth Bank and Westpac.

DBS will acquire 1.26 million customers across the five countries, and deposits of about A$17m. About 80 per cent of staff will move across.

The businesses being sold are expected to contribute A$825m of revenue and A$50m in cash profit to ANZ's 2016 full-year results, due on Thursday.

In May, the bank cut its interim dividend for the first time in seven years after first-half cash profit dropped 24.3 per cent, with a A$260m impairment on its investment in Malaysia's AmBank among the one-off hits.

ANZ said its focus in Asia will now be institutional banking across 15 countries.

"In retail and wealth, although we have grown a profitable business in Asia, without greater scale ANZ's competitive position is not as compelling," Mr Elliott said in a statement.

"To make a real difference for our retail and wealth customers, we would need to make further investments in our Asian branch network and digital capability ... (which) do not make sense for us given our competitive position and the returns available to ANZ."

The sales are subject to regulatory approval and are expected to take 18 months.

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