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Current as of 26/05/17 03:00PM NZST
Jamie Gray is a business reporter for the NZ Herald

NZ's biggest finance firm sold to China

Fortune 500 company HNA pays ANZ Bank $660m for UDC.
ANZ's New Zealand chief executive David Hisco says the sale of UDC will allow the bank to focus on its core business.
ANZ's New Zealand chief executive David Hisco says the sale of UDC will allow the bank to focus on its core business.

ANZ Bank has sold New Zealand's biggest finance company, UDC Finance, to Chinese logistics and financial services company, HNA, for $660 million, as it continues to streamline its business and improve its capital position.

The sale, to be completed late this year, will result in a net gain of A$100m and will boost the group's common equity tier one capital ratio by about 10 basis points, it said.

HNA, a Fortune 500 company, evolved from a regional airline based on Hainan Island into a global company with $124 billion of assets, $39b in annual revenues and nearly 200,000 employees across North America, Europe and Asia.

UDC, which has been going for 75 years, is big in vehicle, plant, equipment and machinery financing.

Today's sale, one of a string of recent divestments, follows a general push by the Australian Prudential Regulation Authority for the big four banks to improve their already high capital adequacy ratios, in line with the findings of the Murray inquiry into the Australian financial system in 2014.

In addition, the latest set of international banking accords, dubbed Basel Four, is expected to propose a higher standard on capital reserves for banks to mitigate against the risk of financial crisis.

Graeme Hodges, deputy chief executive of ANZ Group, said the sale of UDC, together with the other asset sales, would represent about a 70 basis point improvement for the bank's capital ratio.

"It is not just about capital - it's about streamlining and simplifying our business," Hodges told the Herald.

"We would rather focus [on] our core banking business rather than the asset financing business, and we were offered very good price for this," he said.

Massey University banking expert David Tripe said the UDC sale would help "tidy up their accounting position a little".

"With UDC they have got a reasonable price over book value," he said. "That winds up as a gain on the balance sheet, so that improves their numbers in that regard," Tripe said.

The UDC deal follows the sale last week of ANZ's 20 per cent stake in Shanghai Rural Commercial Bank to COSCO and Sino-Poland Enterprise for A$1.84b.

The bank announced the sale of its retail banking and wealth management businesses in five Asian countries to Singapore's DBS bank in October, as part of its strategy to wind back previous chief executive Mike Smith's program to expand into Asia.

In November, ANZ reported a drop in cash profit to a six-year low as it copped the costs from a major restructure under new chief executive Shayne Elliott.

ANZ is also reviewing the future of its Australian wealth division as it looks to focus only on areas in which it has enjoyed a long-term competitive advantage.

ANZ sold its Esanda car leasing and finance business to Macquarie Group in 2015, and had been reviewing its stake in UDC Finance for more than a year.

The bank's New Zealand chief executive David Hisco said the sale followed a strategic review and was in line with ANZ's strategy to simplify its business and focus on its core banking activities.

The purchase price represented a price-to-book ratio of 1.6 times net assets of $424m as at 30 September 2016.

The UDC sale is subject to regulatory approvals.

- NZ Herald

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