DBS is buying the retail and wealth businesses in much of Asia from ANZ, the Melbourne-headquartered bank that has been reviewing these operations' future.

Australia and New Zealand Banking Group today announced it will sell its retail and wealth management business operating from Singapore, Hong Kong, China, Taiwan and Indonesia to DBS Bank, becoming the latest firm to spin off such operations to Singapore-headquartered lenders. Earlier this year, ANZ said it was reviewing these operations, prompting speculation about a sale.

The businesses are being sold at a price that represents an estimated premium to net tangible assets at completion of about A$110 million ($83.6 million), ANZ said in a statement. The transaction is subject to regulatory approvals in each market with completion anticipated over the next 18 months progressively from mid-2017. In a separate statement, DBS said it was paying S$110 million for the business. (For the purpose of the amount, DBS said it is assuming a 1:1 Australian dollar : Singapore dollar equivalence.)

The retail and wealth business being sold includes around A$11 billion in gross lending assets, A$7 billion in credit risk weighted assets and A$17 billion in deposits. In the 2016 financial year, the business accounted for approximately A$825 million in revenue and net profit of A$50 million, ANZ said.

The deal means DBS, which reported Q3 results today, showing a rise in wealth management assets under management, has added another business following its purchase of Societe Generale’s Asian private bank in 2014. Other non-domestic firms selling Asian wealth businesses have included Barclays (selling to OCBC), while Netherlands-headquartered ABN AMRO is said to be considering a sale of its Asian private bank. 

The move by ANZ is the latest in a number of changes brought about by Shayne Elliott, who was appointed as chief executive of the bank, taking the helm from Mike Smith, who stepped down after an eight-year stint as CEO. Elliott said the bank intends to focus on corporate and institutional clients in Asia and remains committed to the region. 

“Our strategic priority is to create a simpler, better capitalised, better balanced bank focussed on attractive areas where we can carve out winning positions. Asia remains core to ANZ’s strategy,” he said. 

“By focussing our resources in Asia - whether that is capital, technology or people - on institutional banking, we can continue to build a world-class, capital efficient business by strengthening our network and the support we provide to our key institutional clients,” he said.

“In retail and wealth, although we have grown a profitable business in Asia, without greater scale ANZ’s competitive position is not as compelling. Having looked carefully at the business in recent months, it is clear the environment we face has changed and to make a real difference for our retail and wealth customers, we would need to make further investments in our Asian branch network and digital capability.
Further investments do not make sense for us given our competitive position and the returns available to ANZ,” Elliott said.

ANZ will take a net loss of A$265 million including write-downs of software, goodwill and property, and separation and transaction costs as a result of the sale to DBS. It said this impact is expected to be slightly higher in the first half of the 2017 financial year, but offset back to A$265 million in subsequent periods. 

The sale is expected to increase ANZ’s CET1 capital ratio by around 15-20 basis points and is expected to be broadly neutral for return on equity and earnings per share.