2nd UPDATE: ANZ Plans To Bulk Up Bank's Domestic Operations
August 05 2009 - 1:36AM
Dow Jones News
Australia and New Zealand Banking Group Ltd. (ANZ.AU) Chief
Executive Mike Smith Wednesday said he plans to bulk up the bank's
domestic operations, though an offer for a regional bank isn't on
the immediate radar.
Smith's remarks come a day after ANZ completed a US$550 million
deal to buy some of Royal Bank of Scotland's operations in Asia and
signal that although regional expansion is the priority, the bank
continues to keep a firm eye on domestic opportunities.
On the bank's home market share, Smith said its current slice of
16% is not enough, and he criticized both the government's four
pillars banking policy and comments from competition authorities,
which he said preempt possible mergers.
The four pillars policy bans any of the country's four major
banks from merging with each other.
Asked if the Australian Competition and Consumer Commission
policy on banking mergers would prevent ANZ making an offer for
regional bank Suncorp-Metway (SUN.AU), Smith said that it would
not.
He also said that "there are other opportunities and I would
very much like to build the business".
Smith said that Australia's four pillars banking policy has
restricted the development of domestic banking infrastructure.
"The actual investment in infrastructure has not been at a
global pace."
Speaking to reporters after a business luncheon, Smith said,
regional banks play an important role in Australia's banking system
and further consolidation would not "necessarily be a great
thing".
Asked if ANZ had any interest in making an offer for a regional,
Smith said: "you never say never, but right now it's not on the
radar."
The CEO of Australia's fourth largest bank by market
capitalization said still high funding costs means it's likely
banks will lift their mortgage rates ahead of any monetary policy
tightening, a move which could have important repercussions for
policy makers.
Smith said that the Reserve Bank of Australia should not "muck
around" with the official cash rate, as the cost of borrowing will
lead to a natural adjustment of mortgage rates and inflation can be
contained.
"The banks cost of funding is still high comparative to what it
was, and that is going to wash through, so there will be natural
adjustment anyway, so let that cycle take effect and don't muck
around with the official rate."
He also cautioned the RBA against hiking rates before its clear
the economic recovery is sustainable and whilst inflation is still
manageable.
"Mortgages are incredibly well priced," he said.
Responding to reporter's questions, Smith said it is possible
banks lift their mortgage rates before the Reserve Bank of
Australia officially tightens policy.
"If that's out of cycle, it's out of cycle," he said.
Although Australia will likely be the first country to emerge
from the global downturn, Smith said the recovery will be long and
gradual, rather than "V" shaped, although he added he does not see
risk of another systemic crisis emerging.
He said that Europe has yet to see a trough in its downturn,
while the U.S. is "talking itself up", with little to show for
it.
"Asia, meanwhile, is moving well."
Smith said the next chief executive of ANZ will be likely chosen
from within the bank.
"It's incumbent on me to have a choice of successors within the
ranks."
He added ANZ expects to make an announcement on a systematic
review of its fees in coming weeks.
-By Enda Curran, Dow Jones Newswires;
61-2-8272-4687; enda.curran@dowjones.com
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