The ANZ Bank (ANZ) continues to clean up its balance sheet. Last Friday it revealed another $360 million in losses and write downs of assets and including $100 million in new restructuring costs.
Yesterday the bank revealed it is selling a group of Asian retail banking and wealth businesses to Singapore’s DBS Bank, to generate another $265 million in losses, meaning the total bill for the clean up started by CEO, Shayne Elliott is now $1.33 billion.
But there seems to be more to come with other assets in Asia on the block and the bank examining the future of its wealth management business, especially the life insurance operations – which is usually CEO code for a looming sales or changes that will produce losses.
The running total of losses for the year to September 30 from this clean up of bad debts, impaired loans and non-performing banking businesses, as well as the restructuring charges and cuts to the value of some financial assets, will now be more than $1.33 billion.
The ANZ said it would sell businesses in Singapore, Hong Kong, China, Taiwan and Indonesia that held $11 billion in loans and $17 billion in deposits to DBS, as it sought to focus instead on institutional lending in Asia.
ANZ will still be left with retail banking operations in Vietnam, the Philippines, Cambodia and Laos and the ANZ’s CEO, Shayne Elliott told an investor briefing these were likely to be sold eventually as well.
And apart from these Asian business, ANZ says it is also considering the future of its wealth arm, which is the subject of an internal strategic review.
Mr Elliott has said it is not generating high enough returns and there has been growing market speculation it may sell life insurance assets worth about $4 billion thereby jointing the NAB which sold 80% of its life operations to a big Japanese insurer. Mr Elliott signalled ANZ would have more to say about the future of its wealth business when it delivered its annual results on Thursday.
ANZ said the sale price to DBS represented an estimated premium of $110 million to net tangible assets, and it would take a $265 million net loss on the assets.
The sale of the assets would detract about $50 million a year from cash profit and $825 million in revenue.
The DBS deal and the other mooted sales plus some of the write-offs of problem loans earlier in the year, are part of Mr Elliott’s hard-nosed attempt to cut back on the ANZ’s move into Asian banking that was pursued by his predecessor, Mike Smith.
Mr Elliott told yesterday’s briefing that he plans to inject more capital into domestic retail and commercial banking.
He said Asia remained "core" to its strategy, but it would focus on large corporate and institutional customers in the region.
"Our strategic priority is to create a simpler, better capitalised, better balanced bank focused on attractive areas where we can carve out winning positions," Mr Elliott said.
"This transaction simplifies our business while allowing us to continue to benefit from higher levels of growth in the region through a focus on our largest, most successful business in Asia – banking large corporate and institutional clients driven by trade and capital flows, particularly with Australia and New Zealand."
ANZ shares rose 1% to $27.90 by the close yesterday.
Investors think the deals announced and mooted yesterday mean the chances have risen for a cut in the final dividend from 95 cents a share to around 88 cents. The interim was trimmed from 86 cents a share to 80 cents. The interim cut was made to conserve capital and build up reserves.
