SYDNEY // It is always interesting to see how a big player in a small market plans for becoming a small player in a big market. It does not matter what the industry is; if a business has had years of having market share thrown at them just for being there, they may be shown up when they move out of their protective sphere.
That sphere is exactly what Australia's four biggest banks have had. Not only do the ANZ, Westpac, the Commonwealth Bank and National Australia Bank collectively control 80 per cent of Australians' loans and 75 per cent of their deposits, but they were given a government guarantee in the global financial crisis that would have bailed them out, no questions asked, if the financial crisis had exposed any serious debt problems.
Some of the Big Four responded to this enviable position by buying up what they could while the economy was fragile and assets were cheap. While fear reigned, everyone lauded Westpac's acquisition of the mid-sized player St George and the Commonwealth's buy-out of BankWest. Intelligent consolidation in hard times is now looking like complete dominance now the local economy is beginning to strengthen. Now there is nothing left to buy.
Only last week Australia's competition regulator, the Australian Competition and Consumer Commission (ACCC), denied National Australia Bank's bid to buy AXA Asia Pacific. Most had expected another blank cheque to be handed out but this time the regulator baulked. As one banker said: "Axa is the last dance in town." Among the big four, ANZ - and to a lesser extend the Commonwealth - foresaw this impasse and have been shopping in Asia for much of the past two years.
It remains to be seen how either will shape up against the likes of Standard Chartered, HSBC and the Industrial Commercial Bank of China, all of which have long dominated market share in the region. ANZ's foray is tiny by the standards of these regional giants but not to be discounted. Last month the bank paid US$550 million (Dh2.02 billion) to buy Royal Bank of Scotland's (RBS) businesses in Singapore, Taiwan, Indonesia, Hong Kong, the Philippines and Vietnam. It got them for a song, bought at a discount from a distressed European bank.
In all, the businesses were acquired at about 1.1 times their current book value. Recent buys in the region have been in the order of three or even four times book value. The RBS business also brings with them deposit books that are, at $8.9bn, more than twice the size of their $4bn in outstanding loans. Now the ANZ is looking even further afield, flagging an interest in the Dallas-based Lone Star Fund's 51 per cent stake in the Korean Exchange Bank, said to be worth $4.1bn.
It is a takeover by stealth. The ANZ says it is not going for market share but concentrating on the wealthiest 5 to 10 per cent of customers from markets as diverse as China to Indonesia. But doing that means creating a brand and building a presence. Asia's wealthy are not known for giving small fry a chance, preferring put their money in safer houses. There are no guarantees out there, and ANZ knows it must add bulk.
It is already rebranding its key retail banking operations in China, Hong Kong and Taiwan as Au Sheng Yin Hang, which translates to Bank of Prosperous Waters. It also has some key experts on its team such as Alex Thursby, an old hand at Standard Chartered and more recently Mark Robinson, the former south Asia head of Citi and a renowned expert on banking in the Asian subcontinent. Let us hope Mr Robinson can improve on ANZ's last foray into India. Ten years ago, ANZ left that market, stung by its involvement in a securities scam.
Who bought them out? Standard Chartered got ANZ's Indian assets for a song. What goes around, comes around. @Email:firstname.lastname@example.org