ANZ to Sell Asia Retail and Wealth Businesses to DBS

The Wall Street Journal reported that Australia & New Zealand Banking Group Ltd. is further scaling back in Asia, selling its retail and wealth-management businesses in five countries to focus instead on institutional banking in the region.

Facing the need to invest more to build up the Asia retail business, ANZ said Monday it had instead agreed to sell operations in China, Hong Kong, Indonesia, Singapore and Taiwan to Singapore’s DBS Group Holdings Ltd. They include about 11 billion Australian dollars (US$8.35 billion) in gross loans and A$17 billion in deposits.

Major banks in Australia and around the world are focused on building capital and improving returns under the pressure of sluggish revenue growth, low interest rates and rising funding costs. ANZ, which moved more into Asia more energetically than its local peers, said it continues to look at opportunities to exit other businesses. “It is all about focus,” Chief Executive Shayne Elliott said, saying the bank remains committed to Asia but is consolidating resources in core areas such as trade finance, debt-capital markets and cash management.

Returns and capital ratios have become increasingly important for all major banks, and Asia is a competitive market–served by a large number of local banks plus global heavyweights– said David Ellis, an analyst at investment-research firm Morningstar. ANZ has conceded it lacks the scale to drive its retail businesses, he said.

Although the slimming in Asia was specific to ANZ, all banks are trying to refocus for higher returns, said Omkar Joshi, an investment analyst at Watermark Funds Management.

National Australia Bank Ltd., another of Australia’s “Big Four,” earlier this year spun off and listed its U.K. banking business as CYBGPLC, and last year completed the sale of its U.S. Great Western Bancorp Inc. unit–giving up income to bolster its capital position, strengthening buffers to meet future crises as encouraged by regulators.

Neither ANZ or DBS disclosed the price in this latest deal, although Melbourne-based ANZ said it represented a premium to net tangible assets of about A$110 million. It expects to book a net loss of about A$256 million on the sale, including write-downs of software, goodwill and fixed assets.

The value of the businesses being taken over by DBS is relatively small for ANZ, dwarfed by the approximately A$4.1 billion carrying value of its collective stakes in Malaysia’sAMMB Holdings Bhd., PT Bank Pan Indonesia, Shanghai Rural Commercial Bank and China’s Bank of Tianjin. On Monday, Mr. Elliott said some other countries in Asia are still under review, including Vietnam.