ANZ eye RBS Asian assets after $2.5 billion capital raising
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ANZ has gone to the market and secured $2.5 billion in the space of 24 hours to support grand plans for securing the key assets from the Royal Bank of Scotland auction of it’s asian banking assets.
ANZ hopes to secure $2.85 billion in all, with a further $350 million to be secured through a share purchase plan. ANZ is competing with HSBC and Standard Chartered for the RPB assets but rumours indicate both failed to submit their bids for the assets by the cut-off date.
This would put ANZ at a strong advantage if the RBS wanted to quickly liquidate their assets. The raising of $2.5 billion was three times oversubscribed and at $14.40 per share, a discount of 7.5% to the stocks last trade of $15.57 before the announcement.
If successful in the bid the ANZ would secure a stronger position in Asia and would be well on the way to developing into the super-regional bank that CEO Mike Smith has been indicating since taking the helm.
Commonwealth Bank and Westpac dominate rival Big 4
The Australian publised a good article during the week indicating the amazing growth of retail deposits experienced by the merged CBA-BankWest which held a 40% share of retail deposits among the Big Four banks with a $137.1 billion deposit book, and the merged Westpac and St George banks had a 28% share with $98.6 billion.
Both Commonwealth and Westpac held a 68% share of the big four Australian banks retail deposits by March 2009 according to the review commissioned by Brandmanagement.
It was also revealed that the NAB has a $54.9 billion retail deposit book and ANZ a $56.4 billion book.
Which Australian bank has a plan for growth?
The Australian banking sector like the global banking sector has become risk averse and in a time where banks around the world are falling over the Australian banking sector still looks strong.
But if you were thinking a few years out and wanted to invest now, where would you put your money? The Australian banks have mostly followed the same path od de-risking and focusing on Australia so if you were investing you would want to consider what growth options they are aiming to access.
It would appear growth options are limited in Australia but and that NAB, Westpac and Commonwealth Bank all seem to be aiming at Australia for the future both short and long term. ANZ is the only bank that is aiming for a different path, they see growth in Asia as the major driver in the future.
ANZ have a defined strategy under Mike Smith, much like when McFarlane was in charge in the early days at ANZ. ANZ soon took the mantle of the best managed bank under McFarlane and I expect in a few years time people will be singing the praises of Smith.
Asia is a developing region and for business it is an area that needs to be invested in to benefit from growth as opposed to investing in old growth markets of Europe and Australia.
So which do you think is the best Australian bank if you are looking at a three to five year perspective?
Westpac leads in Australian banking sector
Westpac showed why it’s the most highly regarded Australian bank with a solid $2.18 billion profit amid a rise in debt provisioning to $1.6 billion on an increase in bad loans.
The interim result to 31 March indicated the rising bad debt impact on Westpac as has recent results for all the major banks. Gail Kelly the CEO of Westpac indicated that the economy was likely to worsen but Westpac was well prepared for the tougher conditions ahead.
Westpac anounced a cut to the first half dividend from 70c to 56c to preserve capital in what is stil very tough banking conditions. Of particular concern to Westpac was the increase in provisions of $156 million in the margin lending operations. In a positive, Kelly indicated the margin loan book had been reduced from $6.6 billion to $4 billion indicating this was managed well.
After seeing all the results it would appear Westpac delivered the best result overall and appear to be well supported by the strong focus on Australia but while they are managing risk what are their growth plans?
ANZ announcement better than expected despite rise in bad debts
NAB surge in bad debts amid profit announcement
The NAB commenced the Australian bank reporting season with a surge in bad debts to indicate the recession is finally taking a big toll on the Australian economy.
NAB’s bad debts rose from $726 million to $1.8 billion as the worsening business and consumer conditions start to show considerable strain on the banking sector. Cash earnings fell to $2 billion (down 9.4%) with rising impairment charges and higher funding costs. The net profit was only down 0.9% to $2.66 billion.
The NAB also announced a dividend cut as previously foreshadowed, the cut of 24c per share took the dividend to 73c per share. The cut will preserve capital and the dividend will also be partially underwritten by a $500 partially underwritten dividend reinvestment plan.
NAB shares retreated 76c to $21.82, as the bank slashed its dividend by 24c to 73c to preserve capital, and backed it up with a $500 million raising through a partly underwritten dividend reinvestment plan.
The result did nothing to soothe the markets expectations of further pressures on the banking sector and accordingly NAB and the other banks were sold off amid concerns of continued hard economic times.
NZ Reserve cut rates to 2.5%
During the week the New Zealand Reserve Bank cut the official cash rate by 0.50% to a record low 2.50%. The cut to the official cash rate is likely to stay at or current or lower levels into 2010 as the New Zealand economy continues to struggle.