Buried in yesterday’s ANZ earnings announcement was intriguing news that the bank is moving towards a different structure – a holding company similar to how Macquarie (for example) is now configured.
(Macquarie Group is the listed company with Macquarie Bank the key operating company.)
ANZ said the holding company set up will allow it to “create distinct banking and non-banking groups within the organisation.”
The holding company is planned to be non-operational.
“This is consistent with how many Financial Institutions are structured and will provide ANZ with greater flexibility and the potential to create additional value for shareholders over time.
ANZ said it plans to ask regulators like APRA and Federal Treasury plus regulators in NZ and elsewhere for approval for the changes which on the surface seem cosmetic, but seeing it will cost money, there must for a good reason.
ANZ says APRA has already said it has no objections after preliminary talks and the bank added that it “has also consulted other key Australian and New Zealand regulators and to date has not received any objections. Consultation and engagement remain ongoing.”
Providing the restructure is approved by regulators, it will see a new listed parent holding company created with a “banking group” which would contain the current Australia and New Zealand Banking Group Limited and the majority of its present-day subsidiaries.
The other ‘Non- Banking Group’ “would allow banking-adjacent businesses to be developed or acquired to help bring the best new technology and non-bank services to our customers. The majority of ANZ’s 1835i investments and similar holdings would move to the Non-Banking Group.”
“Under this new structure there will be no impact on customers and no change to how ANZ’s banking operations are regulated,” the bank said in yesterday’s statement.
ANZ said that, as it moves to a formal application, “a comprehensive consultation program with shareholders, employees and other stakeholders will be undertaken. The proposal is subject to final ANZ Board approval and regulatory approvals and will require approval by the Federal Court and ANZ shareholders.”
In a bank produced internal interview, CEO Shayne Elliott said the NOHC arrangement (non-operating holding company) will allow the bank to add various non-banking business to its banking operations to help customers.
“A good example is the business we bought recently called Cashrewards. Cashrewards actually just helps people save money when they’re going about their daily purchases. It’s a great thing for customers, improves their financial wellbeing but it’s not banking.
“And so having a business like that sit within a banking group and subject to the same regulation as, say for example, our home loan business doesn’t really make a lot of sense. And what it does is it slows you down. And it imposes a level of structure and infrastructure and compliance on a business that really isn’t helpful.
“And so basically what we’re going to do is, if we’re approved, we’ll have a holding company – ANZ Group – and it’ll have a couple of subsidiaries under it; it will have a banking group that looks like ANZ today and will go about doing what it is and it will continue to be regulated just the same way it is today.
“…there’ll be this non-banking group and that’s really in a vehicle that – certainly in the early days – will be relatively small and modest. But allows us things like Cashrewards, it will give them an appropriate home and a way to run those.
“It’s also worth noting that it’s not entirely new here in Australia. Macquarie actually operate a very, very similar structure. So, it’s exciting for us and it’s actually the next step in the evolution of building an agile, contemporary organisation that’s better able to serve its customers,” Mr Elliott explained.
From what the CEO says the non-banking arm will contain businesses that while they will be overseen and checked by regulators, they won’t need the same capital structure as the bank or the same constraints in terms of prudential controls, regulation (like a bank) and compliance.
It should also allow greater flexibility in terms of speed of buying and selling assets and the type of businesses that can be bought or invested in. A new method of organising payments, a new way of transacting (the ANZ’s emerging online platform for example called ANZ Plus) or a buy now pay later operation.
ANZ shares rose 0.4% to $27.38 off the back of what was a pretty boring result. The future interest will come from the rate rise cycle now underway does to ANZ’s margins and results in its still lagging home lending business.
