ANZ will continue to back away from its "super-regional" Asia Pacific growth strategy following the sale of six Asian retail banks last week, says Morningstar.
With ANZ’s recent sales and closures of seven retail and wealth businesses in the Asia-Pacific region, the bank will continue to divest more of its Asia-based businesses, predicts Morningstar analyst David Ellis.
ANZ has already sold six retail and wealth businesses in Asia, with five (Singapore, Hong Kong, China, Taiwan and Indonesia) sold to Singapore-based financial services multinational DBS Bank. Shinhan Bank Vietnam acquired ANZ’s Vietnam business in December 2017.
Most recently, ANZ closed its Philippines-based retail business on 5 February and in October last year announced the sale of half its 40 per cent stake in joint venture Metrobank Card Corporation (MCC) to joint venture partner Metropolitan Bank & Trust Company (Metrobank).
However, the bank said it remained "committed" to its institutional business in the Philippines.
Morningstar's David Ellis says ANZ looks set to continue its withdrawal strategy, coinciding with similar sentiments expressed in January 2017.
Remaining wealth businesses based in Asia, such as Cambodia and Japan, are currently “under review" – and Morningstar is expecting ANZ to exit.
According to Morningstar, ANZ had hoped to “deliver long-term growth and attractive returns through funding ‘connectivity’, or ‘trade and investment flow’”, between countries in the Asia-Pacific region, including Australia and New Zealand.
But “despite high expectations, the ‘super-regional’ strategy is being de-emphasised as returns failed to match expectations”.
Mr Ellis pointed to tough competition in the region given the presence of major global banks that had been operating for several decades, as well as leadership changes in January 2016, which saw chief executive Shayne Elliott unwind the ‘super-regional strategy’ of his predecessor Mike Smith.
“We thought the super-regional strategy would, over time, be successful, but investors have not been patient, and returns have disappointed,” said Mr Ellis.
“We have always acknowledged higher risks of the growth strategy, and the ambitious nature of the super-regional concept has caught up with reality.”
Morningstar also noted risks associated with changes that came with new leadership.
“We are concerned shareholders may be in for a rough ride, with the new CEO announcing big restructuring with first-half fiscal 2016 results and a second round of write-downs and charges just prior to the release of full-year fiscal 2016 results,” the report said.