HONG KONG: Against a backdrop of massive business retrenchment and the biggest loss in British corporate history at the Royal Bank of Scotland (RBS), the Australia and New Zealand Banking Group (ANZ) said yesterday that it has reached an agreement to acquire RBS Asian assets, including Hong Kong branches for $550 million. After reporting its losses last year, RBS has been selling or closing businesses in two-thirds of the 54 markets it operates. The Edinburgh-based bank has operated six branches in Hong Kong, covering retail and commercial banking business of $1.6 billion in deposits, while serving around 30,000 customers.

The acquisition includes RBS' retail, wealth and commercial businesses in Hong Kong, Taiwan, Singapore and Indonesia, as well as institutional businesses in Taiwan, the Philippines and Vietnam.

"It (the deal) increases our business base in Greater China, particularly in our Taiwanese and Hong Kong businesses," chief executive officer Michael Smith said in Hong Kong yesterday.

The acquisition portfolio represents 54 branches, with $3.2 billion in loans and $7.1 billion in deposits, serving a client base of around 2 million affluent and potentially affluent clients.

A customer uses an ATM machine at an RBS branch in Singapore yesterday. The UK bank is selling retail and commercial banking assets in six Asian markets, including Hong Kong, Taiwan and Sigapore. The Australia and New Zealand Banking Group has agreed to buy its Hong Kong assets for $550 million. Bloomberg News

European banks have been leaving their Asian operations, as they are forced to focus more on the home markets after the global financial crisis whittled down earnings.

ANZ, the fourth largest lender in Australia, is paying 1.1 times the recapitalized book value of the RBS assets, while Credit Suisse Group acts as the financial adviser in the deal.

"We are fortunate to be in this situation," Smith said, "If the market were in a different cycle, we would have to pay more."

He also noted that the acquisition of RBS businesses is "a further stepping stone in our super-regional strategy", while it creates a new platform for the bank's retail and wealth businesses in Asia.

The deal will add $460 million to ANZ's operating income, increasing Asia's contribution to overall operating income to 18 percent, up from 14 percent.

The Australian lender has been expecting the Asian markets to generate around 20 percent of the group's earnings by 2012.

On the mainland, ANZ owns 19.9 percent of Shanghai Rural Commercial Bank and has a 20 percent stake in Bank of Tianjin.

"We have just opened a branch in Guangzhou, and are also planning to open a rural bank in Chongqing in September," Smith said.

The Melbourne-based ANZ earlier planned to establish 20 branches on the mainland by 2012, and is also applying to open a wholly-owned, locally-incorporated bank subsidiary in the country.

The bank will consider having a secondary listing in Asia, after the business in the region becomes significant, Smith added.

After the acquisition, the Tier 1 capital ratio of ANZ will rise to 9.5 percent from 8 percent. The bank has an Aa1 credit rating from Moody's Investors and an AA rating from Standard & Poor's.

(HK Edition 08/05/2009 page4)