Anz Merger In Nz Under Scrutiny
Sydney Morning Herald
Friday March 12, 2004
ANZ is facing tougher-than-expected scrutiny by New Zealand's central bank over its plans to reap the benefits of merging its two NZ banks following last year's $4.9 billion purchase of National Bank of New Zealand.
ANZ's head of integration planning Grahame Miller told analysts in New Zealand that the next big milestone was the legal amalgamation of the two banks, which must be approved by the Reserve Bank of New Zealand before any substantial merger activities are undertaken.
The bank hopes to get the all clear by June. However, under new powers granted to the central bank last year, the RBNZ remains concerned about ``hollowing out". The central bank is worried lest the outsourcing of many of NBNZ's back-office and technology functions to its new parent put depositors' funds at risk in the unlikely event that ANZ went broke.
The central bank, which also has sovereignty concerns due to Australian ownership of most of its banking sector, wants to ensure ANZ's New Zealand business could continue to operate on a stand-alone basis in the event of a failure and is also taking a close look at other Australian-owned NZ banks which now dominate the NZ banking scene.
Mr Miller said ANZ had come up with a ``concept" that would satisfy the central bank. This is believed to relate to the location of facilities such as data centres, which could be located in NZ rather than Australia.
ANZ said the potential delay to its plans was not a concern because the focus was on increasing customer numbers, whereas the projected cost synergies ($110 million over three years according to last year's rights prospectus) are relatively modest since the ANZ and NBNZ brands will continue to be run separately. Most of the back-office integration work will happen next year.
ANZ also revealed in its first update on the acquisition that ANZ NZ, which has suffered from unhappy staff and client dissatisfaction, has lost some customers, but this has been offset largely by NBNZ's customer gains.
The old ANZ business is also underperforming NBNZ in lending growth and market share.
Chief financial officer Peter Marriott said: ``In the first half the old ANZ NZ business will be relatively flat but that's partly because of investment to improve that franchise."
Despite some market scepticism about ANZ's real intentions, Mr Marriott said it was still ANZ's objective to ``seriously consider" a float of a minority interest in the bank's NZ division.
Massey University's banking expert, David Tripe, said the poor performance of the ANZ franchise underlined the reason for the NBNZ acquisition.
But he also warned it would take some time for ANZ to switch NBNZ's core banking system to those run by ANZ, rather than the easier option sticking with the NBNZ system.
ANZ is retaining some NBNZ ``front-end" systems, such as internet banking.
ANZ also revealed NBNZ full-year results for 2003, which included a 12.3 per cent rise in net profit to $NZ565 million ($499 million), excluding one-offs and acquisition related adjustments.
ANZ still expects roughly 9 per cent earnings per share growth this year and, despite little new information in the briefing, the shares jumped 25c to $19.20.
© 2004 Sydney Morning Herald
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