Anz To Continue Push For Chinese Licence

Sydney Morning Herald

Saturday May 24, 2008

Danny John and Stuart Washington

ANZ is to extend its search for a banking licence to support its push into southern China after missing out on the $5 billion purchase of the Hong Kong's Wing Lung bank.

ANZ, Australia's fourth-biggest bank, was beaten in the final round of bidding by China Merchants Bank, which pipped it and another mainland rival, Industrial and Commercial Bank of China, to secure exclusive negotiating rights to buy a controlling 53 per cent stake in the family-owned institution.

The decision is a temporary setback for ANZ's Asian expansion ambitions which have targeted greater China - the mainland, Taiwan and Hong Kong - as well as Vietnam, Malaysia and Indonesia as the main countries in the region to provide at least 20 per cent of the group's profits by 2012.

Wing Lung was attractive to ANZ because it has a banking licence in the southern China where Australia's ANZ is under-represented through its partnerships with two of the country's other regional banks.

Founded in 1933 with capital of $5700, Wing Lung has 35 branches in Hong Kong and $12 billion of assets. On April 30, the bank reported a first-quarter loss after writing off $US61 million ($63.5 million) of investments in structured investment vehicles and collateralised debt obligations.

ANZ refused to comment yesterday.

The one benefit, for ANZ shareholders at least, is that it removes the need for the bank to make a rights issue partly to fund such a deal.

It is thought that ANZ's chief executive, Michael Smith, who is driving the bank's push into the region, and his Asian banking boss, Alex Thursby, are unperturbed by losing the bidding race and will turn their attention to other targets.

Hong Kong is still a big attraction to ANZ. Speaking at the Securities and Derivatives Industry Association conference in Melbourne on Thursday, Mr Thursby said he regarded the city as "the second international financial centre in the world".

"Its equity markets by market cap, I think, will surpass Tokyo, probably within another two to five years, and clearly the continuation of listing by Chinese enterprises [and] Western enterprises will only help development," he said.

"It's a place where liquidity meets demand. It's a free market, beautifully regulated with a light touch but tough, and a legal system that everyone can rely on."