DBS Bank said today that it will acquire the wealth management and retail banking business of ANZ in five markets including in Singapore, Hong Kong, China, Taiwan and Indonesia, for approximately SGD 110 million above book value.
The portfolio of businesses being acquired represents total deposits of SGD 17 billion, loans of SGD 11 billion, investment AUM of SGD 6.5 billion and total revenue of SGD 825 million for FY2016. They serve about 1.3 million customers, of which over 100,000 are affluent/ private wealth customers and 1.2 million are retail customers.
DBS expects the transaction to create significant value for the bank. With its scale in the five markets, it will be able to bolt on the ANZ business to its existing platform, and benefit from efficiencies especially in technology and branch distribution. The transaction is expected to be ROE and earnings accretive one year after completion. DBS said the it made the transaction for cementing its position as a leading wealth manager in Asia, to enable rapid scale-up of digital strategy in Indonesia and Taiwan and to creates financial value – ROE and earnings accretive one year after completion.
Over the past five years, DBS has consistently grown its wealth management business and is today among the top five private banks in Asia. With the acquisition, DBS will add SGD 23 billion in wealth AUM to its books, with high net worth clients accounting for SGD 6 billion. This will take DBS’ high net worth AUM and total wealth AUM to SGD 115 billion and SGD 182 billion respectively.
The acquisition will also add a large customer franchise to DBS in Indonesia and Taiwan, which are key markets for the bank. In Indonesia, DBS will gain about 410,000 customers, effectively increasing its base by six times. In Taiwan, DBS will add around 530,000 customers, expanding its base by 2.5 times. A significant portion of these are credit card customers. With a larger scale in both markets, the bank will be able to fast-track the build-out of its digital strategy.
Tan Su Shan, DBS Group Head of Consumer Banking & Wealth Management of DBS, “Over the years, DBS has made significant strides in the wealth business, and recently became the first Singapore and Asian bank to break into the top five private banks in Asia-Pacific. This acquisition will further cement our leadership position. It also gives ANZ’s wealth customers access to more tailored solutions and a full suite of universal banking products supported by Asian insights, research and investment advice. At the same time, the transaction provides us with a significant consumer platform in Indonesia and Taiwan that will enable us to more quickly build out our digital agenda.”
NZ Chief Executive Officer Shayne Elliott said: “Our strategic priority is to create a simpler, better capitalised, better balanced bank focussed on attractive areas where we can carve out winning positions. “Asia remains core to ANZ’s strategy. This transaction simplifies our business while allowing us to continue to benefit from higher levels of growth in the region through a focus on our largest, most successful business in Asia – banking large corporate and institutional clients driven by trade and capital flows particularly with Australia and New Zealand. “By focussing our resources in Asia – whether that is capital, technology or people – on Institutional Banking, we can continue to build a world-class, capital efficient business by strengthening our network and the support we provide to our key institutional clients. “In Retail and Wealth, although we have grown a profitable business in Asia, without greater scale ANZ’s competitive position is not as compelling.
“Having looked carefully at the business in recent months, it is clear the environment we face has changed and 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. Further investments do not make sense for us given our competitive position and the returns available to ANZ,” Mr Elliott said.
ANZ said it will focus on the Group’s core Asian business in Institutional Banking. The Retail and Wealth business being sold includes AUD 11 billion in gross lending assets, AUD 7 billion in credit risk weighted assets and AUD 17 billion in deposits. In the 2016 financial year, the business accounted for approximately AUD 825 million in revenue and net profit of AUD 50 million. Most people currently employed in ANZ’s Retail and Wealth business will join DBS providing continuity for customers and greater opportunities for staff. Sale price represents an estimated premium to net tangible assets at completion of AUD 110 million. ANZ will take a net loss of AUD265 million including write-downs of software, goodwill and property, and separation and transaction costs. The impact is expected to be slightly higher in the first half of FY2017, but offset back to ~$265m in subsequent periods. ANZ said the sale is expected to increase ANZ’s CET1 capital ratio by around 15-20 basis points and is expected to be broadly EPS and ROE neutral. The transaction is subject to regulatory approvals in each market with completions anticipated over the next 18 months progressively from mid-2017.
Transaction Terms and Funding
DBS said the transaction is not expected to have a material impact on DBS’ capital position, earnings or net asset value per share this year. The acquisition of the businesses in each jurisdiction is independent of each other. Subject to obtaining regulatory approvals, the transaction is anticipated to be completed progressively from 2Q2017 onwards, and the target is for full completion in all markets by early 2018.