JAKARTA (TheInsiderStories) – Australian ANZ is speeding up the sale of its near-$1 billion stake in Indonesia’s PT Panin Bank Tbk (IDX: PNBN) as it tries to exit legacy equity holdings in Asian banks and avoid further dilutive equity raisings, The Australian reported. Investment bank Goldman Sachs is running the sales process for ANZ.
In an attempt to create price tension, ANZ will this week launch a formal sales process for its 39 percent stake in Panin after years of trying to release the capital or buy full control of the lender, according to sources.
While ANZ had held talks with Japan’s Mizuho Financial Group over a sale, putting the stake up through a formal auction highlighted the lender’s keenness to “accelerate” its exit from Panin, which was controlled by the Gunawan family, the sources said.
The move comes just one week after ANZ launched a $3 billion equity raising to avoid being rushed into asset sales, including its $4.6 billion portfolio of stakes in Asian banks, which have long been touted as a way to meet increasing capital requirements. ANZ shares crashed 7.5 percent on Friday after the bank secured $2.5 billion from institutions, sparking a market rout amid fears rival banks would also seek billions of capital from shareholders.
The timing of the Panin auction coincides with the later stages of ANZ’s sales process for its Esanda car dealer finance business, which sources said had received mixed interest.
Last week, ANZ chief Mike Smith said the regulator’s tighter-than-expected timetable to meet higher mortgage “risk weights” — requiring a $2.3bn injection into its home loan book — spurred the decision to raise capital quickly via an equity raising. He also wanted to avoid “fire sales” of the Asian bank stakes, but said they remained on the table.
“The worry I’ve got now is that with the asset sales we may be left with too much capital, but that’s going to be some time out, and I can guarantee our friends at Basel will find other ways to increase capital even more,” he told The Australian.
In the wake of ANZ’s equity raising, Goldman Sachs said the bank would “need to raise a further $3.3bn” to meet a common-equity tier-one capital ratio of 10 per cent, a level seen by analysts as the new minimum in coming years.
Macquarie analyst Mike Wiblin added that the equity raising suggested “asset sales are not progressing well”.
But sources said ANZ, by using a formal auction for Panin, could motivate other bidders that had shown interest and achieve its desired price of more than twice book value. There has been speculation Mizuho recently offered to buy ANZ’s Panin stake at the book value of $795 million, but was turned away. ANZ declined to comment.
ANZ has in recent years been open to selling its Asian equity holdings, known as “partnerships”, after rules were revised requiring them to be fully deducted from the group’s tier-one capital, rather than at 50 per cent previously.
Its most valuable asset is 24 per cent of Malaysia’s AmBank with a book value of $1.5bn, followed by 20 per cent of Shanghai Rural Commercial Bank, worth $1.4bn.
ANZ also owns 14 per cent of China’s Bank of Tianjin and 40 per cent of The Philippines’ Metrobank Card Corporation.
But CLSA analysts last week said the AmBank stake would be hard to sell amid concerns of a potential money-laundering breach, following media reports of suspicious flows through accounts, including the Malaysian Prime Minister’s.
AmBank, which has ANZ chief financial officer Shayne Elliott on its board, said it was not aware of any investigation, which would be disclosed to the market, according to CLSA.
Last week, Mr Smith conceded that the sales of Panin and AmBank were difficult, describing the latter as the “meat in a political sandwich”. On Panin, he said: “The Indonesian economy is not looking that good and has certainly slowed down. That one is like the babbling brook: it seems to go on forever, but at some stage we’ll get the deal done.”
Shares in Jakarta-listed Panin are down 31 per cent from their March highs, cutting the value of ANZ’s stake to $923m.
ANZ has had success in selling some of its smaller partnerships, such as holdings in Vietnamese stockbroker Saigon Securities and lender Sacombank.
While the sales raised capital levels, they obstructed Mr Smith’s plan to grow earnings from Asia to 25-30 per cent by 2017, up from 20 per cent, through his “super regional strategy”.
He has dumped his return on equity target of 16 per cent by next year, last week telling The Australian it was unachievable following the $3bn capital raising and regulatory headwinds.
“While Asian minority interest sales could be a short-term fix for the ANZ share price, investors need to remember that the partnerships account for almost 10 per cent of earnings. Hence a mass exodus of the partnerships would hit earnings,” Macquarie’s Mr Wiblin said in a recent note.
He added that sales would plug a capital “hole”, but did not solve ANZ’s problem of “higher capital intensity” from rapid growth in markets with lower returns.
However, after soft trading updates from Asian majors Standard Chartered and HSBC, Mr Smith said ANZ’s Asian business was still going “very well”.
“I’m not really concerned because in the overall scheme of things, in terms of the size of the markets, we’re tiny and the opportunity to grow is still very significant,” he said.
“We’re also much more of a niche player than someone like an HSBC, and therefore I think we are far more focused on where we can get return … more than half of our income from global markets now comes from Asia, so it’s still a very important part of the future.”
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