Trust may cash in $500m ASB stake

By GEOFF SENESCALL

The community trust owning 25 per cent of ASB Bank is considering selling its shareholding, estimated to be worth around $500 million.

It has appointed the merchant banking firm Deutsche Bank to advise on its options.

Prompting the review was the prospect of the ASB Community Trust having to fork out cash, normally distributed to local charities, to help fund the bank's expansion.

In 1998 ASB bought the insurer Sovereign for $235 million, of which the trust had to pay nearly $60 million.

Earlier this year ASB's 75 per cent shareholder, Commonwealth Bank of Australia, bought the insurer Colonial for nearly $A9 billion.

Because Colonial has a New Zealand operation, it is likely CBA will want to fold that into the local business.

Analysts estimate the value of Colonial's New Zealand business to be worth $500 million.

As a result, the community trust will almost certainly be asked to pay for its share of the asset - about $125 million.

The deputy chairman of the trust, Waari Ward-Holmes, confirmed yesterday that Deutsche Bank had been appointed to advise the trust.

"We've got to look at the options. That covers every possibility ..."

Sale was one option, Mr Ward-Holmes said.

The trust would not need to consult the public if it decided to sell the ASB stake, he said. No time frame had been set for a decision.

Mr Ward-Holmes said that, until now, the trust had received adequate dividends from the bank to cater for the applications from the public.

In the year ended June 1999, the ASB paid out a dividend of $22.7 million to shareholders.

If the trust decides to sell, it will end a 153-year association with the bank.

In 1989 the trust sold CBA its 75 per cent shareholding for around $250 million.

At the time, ASB had 98 branches and assets worth $2.4 billion. Today the bank has 121 branches, assets of $14.8 billion and an estimated worth of around $2 billion.

The $250 million gained from the sale to CBA is held by a charitable trust. Fund managers are looking after the investments.

Both the charitable and community trusts distribute funds to charities in the old ASB region, effectively north of the Waikato River.

CBA has pre-emptive rights over the trust's shareholding. Last week the Australian bank said it intended to lift its presence in the New Zealand wholesale banking market after it was granted an expanded banking licence by the Reserve Bank.

To date CBA has run its wholesale operations separate to ASB, whose focus is on the retail and commercial market.

CBA intends to provide services to the New Zealand financial markets such as underwriting, securities, derivatives and foreign exchange.