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Date [ 2016-10-31, 11:23 ]

ANZ’s chief executive has defended the Australian bank’s embattled presence in Asia following the sale of its retail and wealth management units — businesses that his predecessor had described as “stepping stones” into the region.

Shayne Elliott, head of the Melbourne-based lender, on Monday announced the sale of operations in Hong Kong, Singapore, China, Taiwan and Indonesia, marking the bank’s second major Asian divestment this year.

Singapore-based DBS agreed to buy the businesses, which represent total deposits of S$17bn and loans of S$11bn, for S$110m above book value.

The bank’s “super-regional strategy”, which was launched by ANZ’s former chief executive Mike Smith in 2007, was based on a build-up of retail, wealth management, commercial and institutional banking across the region.

The strategy saw ANZ pay $550m for Royal Bank of Scotland’s retail, wealth management and commercial businesses in Taiwan, Singapore, Indonesia and Hong Kong in 2009. The move was considered Mr Smith’s first major step toward expanding its regional presence.

Nine years on, the institutional business is ANZ’s remaining prong of its Asia strategy.

Mr Elliott, who took the lead role at the bank in January, said its retail banking and wealth management operations lacked scale, and increased regulatory costs in the wake of the global financial crisis have made further investment in the area unappealing.

“In the regulatory framework of the day, that was a reasonable strategy,” Mr Elliott said in Hong Kong, insisting that ANZ was not pulling back from Asia and that institutional banking had always been the core of the regional build-up.

ANZ announced earlier this year that it would sell stakes in several regional banks, citing the increased cost of capital, with the hope of raising $3bn.

Over the past two years, the bank has cut its commercial and small-medium enterprise businesses across Asia. Mr Elliott intensified the exit from that segment of the market in March by closing what it called its emerging-corporate business in Hong Kong, Singapore, Vietnam, Indonesia and Taiwan.

ANZ said it would take a A$265m charge from the sale to DBS, which relates to software, goodwill, and fixed assets, separation and transaction costs.

“ANZ’s Asia strategy hadn’t delivered much in terms of shareholder value by the time Mike Smith departed and the wind back of the strategy is now costing shareholders,” said Brian Johnson, analyst at CLSA.

While banks such as Credit Suisse have focused on managing wealthy Asians’ assets as part of their global growth strategy, the pullback by ANZ illustrates the difficulties of competition for banks that fail to achieve scale in the business.

ANZ is the latest bank to pull back in Asia after Barclays this year sold its private banking business in Singapore and Hong Kong to OCBC as part of a restructuring. DBS bought Société Générale’s Asian private bank in 2014.

DBS last year became the fifth largest private bank in the Asia-Pacific region, after UBS, Citi, Credit Suisse and HSBC, according to a ranking of assets under management for high net worth clients published by Private Banker International. It is the first time a Singapore bank has broken into the top five in Asian wealth management.

With the ANZ acquisition, DBS adds S$23bn in assets under management to its books, with wealthy clients accounting for S$6bn. Its total assets under management for wealthy clients, once the ANZ deal closes, is S$115bn. 
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