ANZ bank to buy rest of ING venture for $1.5 billion

Australia & New Zealand Banking Group Ltd agreed to buy ING Groep NV’s stake in their life insurance and wealth-management venture for A$1.76 billion ($1.5 billion) in the bank’s biggest acquisition since 2003.

Australia’s fourth-biggest lender will pay cash for ING’s 51 percent stake in ING Australia and ING New Zealand, the Melbourne-based bank said in a statement today. Amsterdam-based ING, which received a ¤10 billion ($14.6 billion) lifeline in October from the Netherlands, will book a profit of ¤300 million from the sale, it said in a statement.

Australian banks, which remained profitable throughout the financial crisis, have raised capital via share sales to help fund asset purchases from distressed sellers. ANZ Chief Executive Officer Mike Smith, who previously headed HSBC Holdings Plc’s Asian division, in August agreed to buy Royal Bank of Scotland Group Plc’s units in six Asian countries.

 

“ANZ is taking advantage of the retreat by international banks,” said Tim Schroeders, who helps manage about $1 billion at Pengana Capital Ltd in Melbourne. The deal is “symptomatic of a very healthy domestic banking sector.” ING, which is seeking to raise funds to repay the Dutch state, and ANZ merged their insurance and wealth management divisions in Australia and New Zealand in 2002.

Under the terms of the joint venture, ANZ and ING were unable to independently undertake wealth management takeovers without opening the deal to the other partner.

ING’s other businesses in Australia — ING Direct, ING Investment Management, ING Wholesale Banking and ING Real Estate — are not affected by the transaction, the Dutch company said.

“ANZ has been in the joint venture for seven years now and will have a pretty good handle on what it is buying,” Ken Hanton, senior credit analyst at National Australia Bank Ltd. in Sydney, said in a note today. “From a credit perspective, this makes the acquisition far more attractive than higher risk alternative options.”

ANZ shares climbed 1.3 per cent to A$23.79 at the close in Sydney. The shares have surged 56 per cent this year, the second-biggest gain in the six-member S&P/ASX 200 Banks Index.

ANZ will fund the purchase through internal capital, and will have a Tier 1 capital ratio of 9.5 percent after the deal, down from 10.2 per cent at the end of June. The price tag for ING’s stake in the venture equates to around 11 times normalised 2008 earnings, ANZ said.

“The price looks reasonable,” said Tom Quarmby, an analyst at Macquarie Group Ltd in Sydney with a “neutral” rating on ANZ. “This gives ANZ options to look for more acquisitions in wealth management.”

The purchase, ANZ’s biggest since the 2003 takeover of National Bank of New Zealand, is subject to regulatory approvals and is expected to close in the fourth quarter, the companies said.

Smith is expanding at home and abroad after ANZ’s profit fell 28 per cent to A$1.42 billion in the six months ended March 31, from a year earlier, as credit impairment charges almost doubled to A$1.44 billion. ANZ in July sold A$2.2 billion in shares to existing holders, after raising A$2.5 billion in sales to institutional investors in May.

National Australia Bank, Australia’s third-largest bank, in June agreed to buy Aviva Plc’s Australian wealth advisory and life insurance units for A$825 million. Commonwealth Bank of Australia, the nation’s biggest, bought HBOS Plc’s Bankwest unit in October last year.

Australian banks continue to weather the global recession as a surge in earnings from lending to home buyers offsets rising bad debts, the central bank said yesterday.

The resilience of Australia’s four biggest banks, which are among only nine of the world’s 100 largest lenders to hold a Standard & Poor’s credit rating of AA or higher, was helped by an economy that expanded 1 percent in the first half of the year as the US, the UK and Japan fell into recessions.

The nation’s four largest banks posted combined after-tax profits of A$8.6 billion in the latest half year as their net interest income jumped 22 per cent, the central bank said.

“There’s no doubt Australian banks are carrying less risk than many global banks,” said Angus Gluskie, who manages about $300 million at White Funds Management Pty in Sydney. “They do have some scope to be acquirers.”

ING’s second-quarter profit fell 96 per cent, more than analysts estimated, as it set aside money for risky loans and reduced the value of its real-estate holdings.

The firm raised ¤1.4 billion in February by selling its 70 per cent stake in ING Canada Inc., that country’s largest property and casualty insurer, and the company has agreed to sell its annuity and mortgage businesses in Chile to Corp Group Vida Chile SA. The Dutch bank is also selling its private banking operations, people familiar with the plan said in August.