(11 September 2012 – Australia) The new global bank rules could hit ANZ hardest as the Basel III is rolled out, requiring banks to set aside more capital for investments in associates or partnerships.Throughout the past decade ANZ has built up a string of minority investments with a series of Asian-based partners, the Basel III rules threaten to weigh on the profitability of its string of joint ventures in the region.
Combined, the six partnership investments generate annual earnings of more than A$320 million.
The largest single investment, the 24 percent stake in Malaysia’s AmBank, delivers more than A$100 million in annual earnings.
Other partnerships include a credit card venture in the Philippines and a 39 percent stake in an Indonesian bank.
ANZ chief executive Mike Smith told a recent analyst briefing the bank’s partnerships were a ”strategic initiative” that gave ANZ exposure to organic growth in respective markets.
He said if there were ways to increase ownership or move to a controlling stake ”then that’s something we would look at”.
By holding more capital against the investments, this will reduce the rates of return on equity generated by the partnership investment. Return on equity is often used by investors to measure how well management is deploying the shareholders capital.
ANZ has already shown it is prepared to exit an investment – offloading a 9.6 percent stake in Vietnam’s Sacombank, earlier this year.