Commentary

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ANZ will always be a major

Paul Edwards, ANZ

Published 8:49 AM, 7 Sep 2009



In a contributed opinion article in Business Spectator last week, Christopher Joye asked whether ANZ was becoming a “non-major” arguing our focus on growth in Asia represented a shift way from Australia.

The answer is unequivocal. Having a strong franchise in our key domestic markets in Australia and New Zealand is a core part of building a super-regional bank – to sustain growth in Asia, ANZ needs to keep growing in Australia.

The importance of having a strong domestic franchise as a foundation for growth is demonstrated by other leading regional banks such as HSBC with their domestic Hong Kong franchise. Equally, the impact of weakened domestic franchises can be seen in the recent retreat of some European and North American banks from Asia.

So, ANZ’s super-regional ambition is about growth in all our businesses – in Australia, New Zealand and Asia Pacific.

In Asia however, ANZ’s market share is small which makes it easier to grow organically or by acquisition. In Australia this is harder work, but in terms of strategic opportunities, our chief executive Mike Smith has recently made it clear that they are now just as likely to come in Australia as they are in Asia.

So strategically Australia is important, but there are other practical reasons that we need to keep growing in Australia. For example, ANZ needs to maintain a large, strong business here in order to continue to fully frank dividends for our shareholders.

In his article Joye also raises a number of issues to support his views which require closer examination.

First, he links to APRA data for July which showed ANZ underperforming in new mortgage lending, supposedly to focus on growth in Asia. In fact, the two are unrelated.

ANZ made a conservative call on the economy and housing market late last year and it’s taking time to adjust our business to the economic conditions we are actually experiencing. In the meantime, the result is ANZ has longer mortgage approval times than we would like and we have relatively tight lending criteria in place with less emphasis on discounting. Having said that, ANZ has still grown mortgage funds under management by 10 per cent over the past year.

Secondly, while there may be a number of reasons why Australia’s banking system has remained strong during the global financial crisis, Joye’s suggestion that off-shore operations are a source of instability is open to question. In fact, banks in Asia have performed relatively well during the GFC.

An alternate view is that the structural weakness in the Australian banking sector has also been a strength. The sector’s reliance on offshore markets to fund a material portion of lending has also meant that liquidity was simply not available to invest in the toxic sub-prime assets.

Finally, contrary to the implication of Joye’s article, Australian banks have not required taxpayer money to support them. While deposit and wholesale funding guarantees are in place globally, these come at a price for Australian banks, generating $576 million in revenue for the federal government as at the end of July. At the same time, ANZ has been at the forefront of banks calling for an orderly unwinding of wholesale guarantees.

The bigger picture here for Asia-sceptics is that Asia, lead by China, is emerging as a clear winner from the global financial crisis and this is already bringing huge benefits to Australia.

Given the trade and investment flows between Australia and Asia, it natural for ANZ to follow its clients into the region and to build greater engagement with Asia. As companies like BHP have already demonstrated, greater engagement with Asia is an essential part of Australia’s long-term growth and for the growth of Australian businesses.

Despite the logic of engaging with Asia, the negativity about the ability of Australia to be successful outside this country is surprising. As with any country – including the US and the UK – it’s easy to find companies and individuals who haven’t succeeded offshore.

Australia, however, has a large number of companies of all sizes that punch above their weight in global markets.

Since Mike Smith arrived at ANZ almost two years ago, we have hired very experienced international hands at all levels to ensure we successfully execute our leading super-regional objective. At the same time you will see Australian and New Zealand executives at all levels of the Bank around the world.

The bottom line is that growth at ANZ and building a super-regional bank is as much about opportunity in Australia as it is looking to the bigger picture of opportunities in our region.

Paul Edwards is ANZ's group general manager corporate communications.

ASX Stock Chart for ANZ

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2 Comments


James wrote:

Joye appears to want to encourage excessive lending in residential property. (See ANZ will always be a major, September 7.)

I think ANZ will do well to stay away from this bubble market until after it inevitably bursts.

7 Sep 2009 12:13 PM

Brendan Guthrie wrote:

The track record of Australian banks investing outside the country is mixed at best. (See ANZ will always be a major, September 7).

The track record of foreign banks investing in Australia is very mixed, also. Why? Because of the business cycle. History repeats and management theory is fulfilled – let's see if they pull back when a crisis internal or external arises.

7 Sep 2009 11:04 PM



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