Australia & New Zealand Banking Group is expanding its Asia-Pacific footprint and expects the region to make a significant contribution to earnings over the next three to five years.
One particular area of interest for ANZ is China, where rival Commonwealth Bank of Australia is also making guarded investments.
At the moment the Asia-Pacific region contributes just 3.3% to ANZ’s earnings in the first half of its financial year to the end of March.
Setup costs associated with ANZ Royal Bank operations in Cambodia and the costs of building partner relationships in China and Vietnam led to a 6% slide in the division’s net profit year-on-year to A$48 million (HK$290 million).
ANZ Asia-Pacific group managing director Elmer Funke Kupper said there are no set targets for the regional contributions to group earnings.
Melbourne-based ANZ has invested A$600 million in the region and has more than 2,000 employees in 10 Pacific and 11 Asian countries.
Besides full service operations, it has formed strategic partnerships.
These include its 29% stake in Indonesia’s Panin Bank and an A$34 million investment for a 10% stake in Vietnam’s Sacombank.
“For us, it is material in terms of investment and people. And by growing it and doing these partnerships we hope it becomes material in a profit and loss sense as well over the next three to five years,” Funke Kupper said. ANZ is Australia’s third-largest bank.
ANZ’s planned investment in Shanghai Rural Credit Cooperatives Union, a mid-sized lender, is on track as it is expected to incorporate this year, freeing the way for ANZ to invest up to A$200 million for a 20% stake in the next year or two.
Funke Kupper refused to elaborate on plans for a second investment in a north China bank other than to say it “is at a very early stage, although we are developing a very good relationship.”
An investment of between A$100 million and A$200 million in each opportunity in China is “about the right size for something that gives you a real option but doesn’t break the bank in the short-term,” he said.
Commonwealth Bank, the nation’s largest, last month announced its second investment in China, a stake in Hangzhou City Commercial Bank, following its purchase last year of a stake in Jinan City Commercial Bank.