ANZ Bank and Kina Bank have announced they have entered into an agreement for ANZ to sell its retail and commercial/small-to-medium-sized enterprise (SME) banking businesses to Kina for K24.2 million. Both banks claim the move is in line with their strategies.

Under the deal, Kina will acquire ANZ’s 15 retail branch premises, 72 ANZ ATMs and over 1800 ANZ EFTPOS terminals across PNG.

Before and after: Kina Bank’s metrics on the impact of the proposed acquisition. Source: Kina Bank

Kina claims this will ‘substantially’ increase the company’s retail banking footprint to 21 branches, 82 ATMs and over 1800 EFTPOS terminals.

The proposed purchase price of K24.2 million equates ‘to the goodwill attributed to ANZ PNG business’.

Kina says the acquisition, which is subject to regulatory approval, will be fully funded from existing cash and capital reserves.

Growth

Kina claims the acquisition will increase its lending market share to 8.8 per cent from 5.8 cent. It will more than double Kina’s market share in bank deposits to 9.9 per cent from 4.8 per cent.

Kina Bank, a subsidiary of Kina Securities, which acquired the PNG assets of Malaysia’s Maybank in September 2015 after listing on the Australian Securities Exchange and Port Moresby Stock Exchange, said the acquisition would be made on ‘attractive financial metrics’.

‘Both banks are claiming the acquisition will fit their strategic direction.’

Kina claims the acquisition will increase net loans by 50.6 per cent, deposits by 108.5 per cent, net profit after tax by 56 per cent and normalised earnings per share by 31.1 per cent.

Strategy

Both banks are claiming the acquisition will fit their strategic direction.

ANZ, for its part, said it will continue focus on larger-scale lending. In what is being interpreted as a partial retreat from Asia, the bank recently sold its retail and wealth operations in Singapore, Hong Kong, China, Taiwan, Indonesia and Vietnam, and last February it sold its Philippines-based retail business.

ANZ Managing Director, Institutional Australia, Graham Turley said the company ‘remain committed to running a world-class Institutional and Large Corporate banking business in PNG, where we see great opportunities for growth.

‘ANZ has been in this market uninterrupted for more than a century and we continue to have a positive outlook for the PNG economy.’

‘Under the deal, Kina will acquire ANZ’s 15 retail branch premises, 72 ANZ ATMs and over 1800 ANZ EFTPOS terminals.’

Kina Chief Executive, Greg Pawson, described the acquisition as ‘a key component of our refreshed five-year strategic plan’.

He pointed to improvements in empowering customers and giving communities financial independence and security.

‘The customers of ANZ PNG’s business will benefit from this transaction. On day one, there will be no change to their offering.

‘Over the near future, their offering is expected to be enhanced as Kina continues to execute on its digital strategy.

‘They will also experience Kina’s differentiated value for money proposition.’

Deposits

A Kina statement said total deposits in the acquired entity are expected to ‘materially exceed’ total loans.

According to the ANZ, the PNG entity has A$150 million (K364 million) in loans and A$450 million (K1.09 billion) in deposits.

This is a ratio of loans to deposits of about 40 per cent, which is significantly lower than elsewhere in the group.

ANZ’s Mark Baker. Source: WBG

According to the ANZ’s 2017 Full Year results, (non-institutional) net loans and advances are about 180 per cent of (non-institutional) customer deposits.

Managing Director of ANZ PNG, Mark Baker, said the ANZ has ‘undertaken the same exercise throughout its global group in various countries in the Asia-Pacific region over the last two years.’