ANZ heading back to Asia after sell-off

After a painful few years selling off its consumer and commercial businesses in Asia, ANZ is now looking to expand there again.

ANZ head of institutional banking, Mark Whelan.

After a painful few years selling off its consumer and commercial businesses in Asia, ANZ is now looking to expand there again, says the bank’s head of institutional banking, Mark Whelan.

“We are back in growth mode,” he told The Australian at the bank’s office in Singapore.

He said the focus this time would be on institutional customers, the big companies that operated in the region, especially resources, financial services, technology and agribusiness.

“We are not trying to do everything for everybody,” he said.

“We are focusing on key customers who have significant business and trade flows in the Asia-Pacific region.”

The bank’s earlier sell-off of its business in Asia saw major cutbacks in staff and customers, reversing the grand super-regional bank strategy of former ANZ chief executive Mike Smith and leading to ongoing doubts about its commitment to the region.

ANZ executives were asked about this at the bank’s first Finance and Treasury Forum in Singapore last week, a conference attended by more than 300 people. The forum was intended to tell customers that its major re­structuring in Asia is almost finished and that the bank is now focused on steady expansion in the region.

It has sold the businesses bought from RBS under Mike Smith’s leadership in the wake of the global financial crisis, and is selling off stakes in local banks in Malaysia, Indonesia and China that no longer make sense under the new Basel rules on capital ­adequacy.

“One of the constant frustrations for us has been, while we have been reshaping our business, many people had the impression that we have been exiting Asia,” Mr Whelan said. “We are still in 15 countries in Asia and we remain committed to them, particularly for our institutional business.”

Mr Whelan was appointed head of institutional banking — which includes oversight of the bank’s international operations — in February 2016 as part of a management restructure by incoming chief executive Shayne Elliott, who took over the month before, overseeing a more domestically focused ANZ.

By the time he left, Smith’s grand Asia strategy was already being criticised by analysts.

ANZ executives argue that the Smith strategy was right for the time, but the ground rules changed, with much stricter bank regulations in the wake of the ­financial crisis and technological changes that made the big Asian branch networks that ANZ had acquired expensive and far less cost efficient.

At its height, ANZ had more than a million retail customers in Asia and 27,000 corporate customers around the world.

Once it completes its restructuring, including selling off its commercial business in Papua New Guinea, Mr Whelan estimates that this will be down to 8000 to 9000 customers.

“We have already exited about 8000 corporate customers over the last three years,” Mr Whelan said.

“They were commercial customers in Asia. We just couldn’t service them well and there were others in the institutional framework we felt we couldn’t service appropriately.

“We have chosen the customers we want to deal with.

“They are predominantly in four or five key sectors. We are very heavily focused on financial institutions, including banks and funds.

“We have always been a resources bank, with a focus on resources, energy and infra­structure.”

Mr Whelan said agriculture was another area where the bank planned to step up its focus in Asia, given the increasing demand for high-quality food from the growing middle classes of the region. “We bank the agriculture sector heavily, which ties into Asia.”

Mr Whelan said technology was another area of interest.

“We were one of the first bankers to [Chinese e-commerce giant] Alibaba,” he said.

“We have some really big relationships [in the technology area] that we have had for a long time. We are building that sector out. There are other services areas such as tourism and education which are massive and will get more of our focus as well.

“We have been the most outward-focused Australian bank in the region. We are very strong in trade, in loan syndications and debt capital markets. If we focus on those sectors in the region, we can provide high-quality service and if we can provide high-quality service, we can make good returns.”

Mr Whelan said global companies could decide to give the bank more business in Australia because of their ties in Asia.

“A multinational might decide that because we can lend to them somewhere in Asia they will also give us their foreign exchange and other business,” he said. “Customers think of their business with us in a global sense.”

He admitted there was a “back to the future” tone about ANZ’s slimmed-down Asia strategy.

In essence it is going back to the kind of business it was doing before Smith’s grand super-regional Asian strategy.

“After Mike left and Shayne came in, we had a rethink of the strategy. We repositioned the Asian business in reflection of that. It is almost like we were reverting to the original strategy, which was to focus on big end customers — customers looking at capital and trade flows across the region.

“The returns on equity we were getting in the retail and commercial businesses (in Asia) were unsustainable.”

The bank is still the process of selling its 39 per cent stake in Panin Bank in Indonesia, a relationship going back to 1998, and its 24 per cent stake in AmBank in Malaysia it bought in 2007.

Mr Whelan said the investments have been profitable for the bank but no longer fit with its strategy for Asia.

Its investment with AmBank in Malaysia has generated some embarrassment given the recent financial scandals in the country during the reign of former prime minister Najib Razak. 1MDB, the sovereign wealth fund Mr Razak set up, had accounts with AmBank. Mr Razak was arrested in July on charges that as much as $1bn of the fund’s money flowed through his personal account at AmBank.

Mr Whelan is a former director of AmBank, as was Shayne­ ­Elliott.

“We were happy with our investment in AmBank and we remain so,” Mr Whelan said. “But we don’t see it as part of our ongoing strategic asset portfolio. On that basis, we are looking to sell it to the appropriate person at the appropriate price, with the approval of our joint venture partner. We are not in a major hurry.”

Mr Whelan admitted the past few years had been painful for the institutional bank.

“In our division we have lost about 21 per cent of our workforce and about 25 per cent of our risk-weighted assets globally,” he said.

“Excluding our business in PNG, we have dropped about 30 to 40 per cent of our customer base.

“It has been painful. We have taken some products off the shelf and significantly simplified the business. That is always painful, but that is behind us.

“There is now a pivot to growth and a focus on revenue generation from the customers and the sectors we are in now. We are just going to be a much stronger business.”

The reporter attended the ANZ Finance and Treasury Forum as a guest of ANZ