Anz takes a 265 million hit in asia

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IN A major backwards step for its overseas operations, ANZ has struck a deal to sell off its retail and wealth operations across Asia.

Singapores DBS bank will pay book value plus $110 million for assets in Singapore, Hong Kong, China, Taiwan and Indonesia, which hold $11 billion in loans and represent the bulk of ANZs Asian retail and wealth management business. The sell-off will hit the banks bottom line to the tune of $265 million.

Chief executive Shayne Elliott, who is scaling back the expansion into Asia undertaken by predecessor Mike Smith, said Australias fourth-largest lender is likely to also exit the four remaining countries in which it has a presence. Mr Elliott said ANZs businesses in Vietnam, Laos, Cambodia and the Philippines were under review but would not be drawn on a timeline for a possible broader exit.

This is the heart of the business and were continuing to look at the other franchises, Mr Elliott told analysts.

We dont see a future for us in retail and wealth businesses across Asia and we will exit at the right time.

Chief financial officer Michelle Jablko said ANZs return on equity and earnings per share will be subject to a small impact.

ANZ did not give a price tag for the transaction but said the impact on its bottom line including writedowns and transaction costs will be a net loss of about $265 million.

It will be initially higher in the first half of the banks 2017 financial year but will be offset back as the sales progress over future periods.

A trading halt placed on ANZs shares ahead of the announcement on Monday was lifted an hour after the market opened.

At 2.20pm, the shares were up 28 cents, or 1.01 per cent, at $27.90 broadly in line with gains by rivals Commonwealth Bank and Westpac.

DBS will acquire 1.26 million customers across the five countries, and deposits of about $17 million. About 80 per cent of staff will move across.

The businesses being sold are expected to contribute $825 million of revenue and $50 million in cash profit to ANZs 2016 full-year results, due on Thursday.

In May, the bank cut its interim dividend for the first time in seven years after first-half cash profit dropped 24.3 per cent, with a $260 million impairment on its investment in Malaysias AmBank among the one-off hits.

ANZ said its focus in Asia will now be institutional banking across 15 countries.

In retail and wealth, although we have grown a profitable business in Asia, without greater scale ANZs competitive position is not as compelling, Mr Elliott said in a statement.

To make a real difference for our retail and wealth customers, we would need to make further investments in our Asian branch network and digital capability ... (which) do not make sense for us given our competitive position and the returns available to ANZ.

The sales are subject to regulatory approval and are expected to take 18 months.