ANZ New Zealand has canned plans to sell its UDC Finance arm and will instead seek to grow the country’s biggest finance company.
The local subsidiary of Australia & New Zealand Banking Group was investigating an initial public offering for UDC after a sale of the company to Chinese conglomerate HNC fell through last year. The decision against listing comes as stock market valuations are increasingly stretched after an extended bull run and volatility re-emerged with major central banks raising interest rates.
“UDC has continued to perform strongly while we have been looking at our strategic options,” ANZ New Zealand chief executive David Hisco said. “While we may still consider a sale in the future, we have decided to put a hold on all sale discussions for now and focus on continuing to grow the business.”
ANZ agreed to sell UDC to HNA for $660 million but had to change tack after New Zealand’s Overseas Investment Office rejected the application. The group clawed back A$18 million in cost recovery relating to UDC in the year ended Sept. 30, although it incurred another A$7 million of transaction costs in the latter half of the period.
The decision comes as ANZ New Zealand reported a 3 percent increase in September year cash earnings to $1.9 billion. Net interest income rose 3 percent to $3.18 billion, rising at the same pace as operating costs, which totalled $1.01 billion. Impairment charges on bad debt shrank 10 percent to $53 million.
“The continued strength of the economy – strong exports and tourism sector aided by a lower dollar, continued demand for houses, and growth in household incomes – has been good for our business,” Hisco said.
Including unrealised gains on financial instruments and insurance policies, net profit climbed 12 percent to $1.99 billion.
Net loans in the New Zealand region also grew 3 percent to $128.68 billion and customer deposits were up 7 percent at $104.06 billion. The lender widened its New Zealand net interest margin to 2.36 percent from 2.31 percent a year earlier and cut its operating cost-to-income ratio to 36.8 percent from 37.6 percent.
Full-time staff were trimmed to 6,165 in New Zealand from 6,372 a year earlier, a smaller worker cull than across the Tasman. ANZ’s New Zealand arm also increased its use of digital channels for customer service.
“Getting the right balance between technologies that are convenient and still presenting a human face is the challenge for all retailers, and banking is no different,” Hisco said.
Group chief executive Shayne Elliott used the New Zealand business as a case study for simplifying the wider business. He pointed to the merging of the ANZ and National Bank brands to focus the business.
“Today we run the bank for less cost than we used to in 2010, we make more revenue, have more customers, have more brand engagement, higher employee engagement and better returns for shareholders,” he said.
New Zealand was the best performer for the group. ANZ’s cash earnings from continuing operations shrank 5 percent to A$6.49 billion in the year ended Sept. 30, as retail banking in Australia struggled with a slowing property market and dwindling capacity of people to take on more debt. The bank has also spent A$55 million on external legal costs for the Royal Commission into conduct in the wider financial services sector .
The Australian bank is simplifying its wider business and cut headcount by 11 percent across the group to 39,924.
ANZ’s board maintained its returns to shareholders with annual dividends of A$1.60 a share. The dual-listed shares increased 1.6 percent to $28 on the NZX.