Many Asia-based banks had bold expansion strategies for 2014, yet only one turned such plans into big business. For building on its traditional strengths with moves to create a thriving pan-Asia franchise, ANZ is IFR Asia’s Domestic Bank of the Year.
Domestic bank of the year
ANZ had its work cut out in recent years to convince analysts and shareholders that Asia was the key to its expansion, but those efforts paid off in 2014 as it began to turn its new lending relationships in the region into sustainable, higher-margin businesses.
Australia’s third-biggest bank, in terms of market value, connected clients across Asia Pacific, delivering an enviable line-up of cross-border financings that highlighted its understanding of regional capital flows. It brought Australian borrowers to Asia, and led the pack in a record year for the Kangaroo bond market.
More impressively, however, it moved beyond its home markets and went far beyond vanilla products. Among other achievements, ANZ helped Chinese companies sell US dollar high-yield bonds, helped fund a casino project in Philippines peso notes, and participated in a Singapore dollar securitisation of credit card receivables. It also sold New Zealand dollar bonds to Taiwanese investors, and built on its presence in the offshore renminbi market.
It registered its best year to date in US dollar bond issues from Asia Pacific, ranking ahead of any other bank headquartered in the region.
ANZ also announced a number of high-profile hires in Asia during the year, a sign that it can compete for talent with its global rivals, as well as testimony to its continued ambitions beyond its home markets.
“We exceeded all our targets in the last 12 months,” said Dominique Blanchard, head of global markets, North Asia, and global head of global banking sales, global markets.
“We are trying to play a part in connecting countries and markets with each other, China and Taiwan, Japan with other Asian nations and clients. That makes us different from some of the local banks.”
Asia Pacific, excluding ANZ’s home markets, is now a key driver of revenue growth. In fiscal 2014, revenue from Asia Pacific (excluding Australasia), Europe and America, its so-called APEA network, accounted for 23.7% of group revenue – up 1.7% year on year – and executives say it is on target to make 25%–30% of group profit from outside of Australia and New Zealand come 2017.
ANZ’s aggressive “super regional” expansion strategy relies on the bank’s ability to use its longstanding strength in corporate lending to win new clients and develop new business lines.
The bank’s book of business for 2014 shows it is focusing on getting the most out of the capital it puts to work. This has become more important as international regulations have pushed up the cost of capital for firms everywhere.
“We were one of the first banks to start underwriting (in Asia) after the global financial crisis,” said Christina Tonkin, head of global loans and advisory at ANZ.
“Now, we’re optimising this entire business, and we’re seeing growth in DCM,” she said. “We’re ANZ, we’re not going to not lend, but we’re going to be strategic about our debt capital. Our balance sheet is important, but we want to provide all the other products.”
Trophy mandates
Acquisition-related financings proved a focus in 2014, with ANZ picking up trophy mandates on Vitol’s purchase of Royal Dutch Shell’s Australian assets and advising China’s Fosun International on a bid for Roq Oil, among others.
“We are looking to expand our Asian presence in debt capital,” Tonkin said. “For a while, it’s been about maintaining and growing our position in Australia and New Zealand, but more about growing our position across Asia and we’ve been really happy with that growth.”
However, the strategy is not about taking an eye off of the home markets. It is about using them to the firm’s advantage: as ANZ goes to Asia, a lot of Asia is coming to ANZ.
Building up a stronger business in Asia also allows ANZ to attract more clients to its home market. State-controlled Korea National Oil Corp, for instance, raised A$350m from its long-awaited Kangaroo debut in September. ANZ and UBS were joint lead managers for the dual-tranche five-year bond.
“From a loan perspective, the focus for us has been on cross-border business,” Tonkin said. “You have a lot of China investments coming now into Australia and New Zealand.”
For a bank many would have characterised three years ago as a pure commercial lender, ANZ has now built an enviable set of credentials in the debt capital markets – adding distribution capabilities that will only prove more important in the Basel III world.
ANZ made inroads in the US dollar primary market, but it was its ability to connect issuers and investors across Asia Pacific that particularly impressed in 2014.
For IFR’s review period, ANZ ranked 12th on the Thomson Reuters league table for G3 currency bonds in Asia Pacific, excluding Japan. It was ahead of all other banks with Asia Pacific headquarters on volumes of US$7.68bn, for a 2.8% share of the market.
Including all currencies, ANZ rose to seventh, up from No 21 in 2010.
“One of our key objectives is to continue to deepen our share in local markets, to diversify and be there on flow and non-flow business,” said Blanchard.
When AmBank wanted to sell its first US dollar senior unsecured bond in June 2014, it chose ANZ and AmInvestment Bank as joint leads and bookrunners. The Malaysian lender’s US$400m offering priced to yield 150bp over five-year US Treasuries, 25bp inside initial price talk. Asian buyers took 88% of the deal.
Indonesia’s Pelindo III also tapped ANZ as one of three leads to work on its first US dollar bond. On September 24, capitalising on post-election optimism, the company priced the US$500m 10-year bond to yield at 4.875%. US investors accounted for 42% of the allocation and Asia for 32%, with the remainder going to Europe.
It showed its ability to market far harder credits, too, as a joint bookrunner on a highly successful US$400m debut high-yield bond from aluminium producer China Hongqiao Group in August, coming after two earlier attempts had fallen through.
ANZ was also one of five leads on a high-yield offering from India’s JSW Steel in early November, another debut issuer and one that offered investors a chance to diversify beyond China, as well as helping to put Indian private-sector issuers back on the global capital markets map. In the end, Ba1/BB+ rated JSW priced a US$500m Reg S deal at par to yield 4.75%.
It also underlined its regional credentials in September. When Swiber Holdings set out to be the first Singapore firm to price an offshore renminbi bond cleared in the city state, it chose ANZ as one of four joint bookrunners and lead managers. The Rmb450m bond priced at 7.75%.
The deal was important because it allowed the marine services company to diversify its funding options beyond Singapore, and it expanded its investor base to Hong Kong, which took up 33% of the trade. Singapore and Taiwan took 65% and 2%, respectively.
Attracting talent
One big vote of confidence is the calibre of talent ANZ has been able to attract. In May, the firm demonstrated just how important its ex-Australia business was to the entire firm. It hired Farhan Faruqui away from Citigroup, where he had worked for 23 years, most notably and recently in Hong Kong, where he managed to help the US money-centre bank convert its substantial loan book in other more lucrative and less capital-intensive businesses.
At ANZ, he is CEO of international banking.
Its knack for attracting talent, however, did not begin or end with Faruqui. In November, for example, it appointed Huang Xiaoguang as CEO China and head of Greater China, reporting to Faruqui. He was most recently president of co-head of global corporate and investment banking at Bank of America Merrill Lynch China.
ANZ is investing in frontier markets as well. Take Myanmar, for example. In October, it was one of only nine foreign banks – and the only Australian – to be granted a preliminary banking licence in the country.
The Reserve Bank of India also recently approved ANZ’s plans to open two new branches in the country, in addition to the existing one it had in Mumbai. The new operations are slated for Gurgaon, near New Delhi, and Bengaluru.
ANZ is willing to invest where it sees opportunity, and big plans are in store for China. After another year of record profits, up 16.9% to A$7.38bn for the fiscal year ending September 30, it certainly has the firepower to keep investing in Asia.
“If you look at our overall business, the vast majority of loan growth has come out of Asia, where we continue to grow our customer base,” Tonkin said.
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