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A banking lesson from ANZ

As wells dry up here in Australia, banks must start strategically placing themselves to take advantage of booming economies internationally. ANZ (ASX: ANZ) has done just that.

New CEO of the National Bank of Abu Dhabi, former ANZ international and institutional banking boss Alex Thursby has said “ANZ is no longer an infant in Asia, it’s now a strong adolescent and it’s powering ahead. I think its positioning is good. Its penetration on the institutional side is extraordinary”.

The ANZ’s super regional strategy has already begun to take hold throughout Asia and the company estimates 25%-30% of revenue from the APEA division by 2017. It is the only Australian bank to take serious steps to develop its international operations in Asia but it may soon start to pay off.

ANZ operates in 28 markets across Asia Pacific but it’s got more growing to do. The ability of Australia and New Zealand to produce hard and soft commodities will provide crucial links between suppliers down under and buyers in Asia and beyond. A 2010 survey by the bank found that 42% of its corporate clients relied on Asia for more than 25% of their business.

National Australia Bank (ASX: NAB) has also made many moves internationally in the past 30 years, including into the US and the UK. However, to date its international divisions have been a burden on its balance sheets. After selling its US assets it is only now starting to correct the damage from its UK businesses. Perhaps it was the fact the company did not strategically place itself in an emerging region.

In addition to Asia, Mr Thursby believes the opportunities in the Middle East are huge and “it represents another opportunity to transform a bank substantially into its next stage of development”. It seems Commonwealth Bank (ASX: CBA) and Westpac (ASX: WBC) have let their international opportunities pass them by and focused on domestic growth through acquisitions of smaller institutions like Bankwest and Bank of Melbourne.

Foolish takeaway

The massive surge in mining investment has all but passed us by. This, together with rate cuts and a falling dollar, paint a bleak picture for our biggest banks, particularly if they rely so heavily on deposits for funding. That’s not to say they’re going to disappear altogether, it just means investors must pay the best price possible for banking stocks in order to mitigate a potential fall in price. Currently, ANZ represents the best value and pays a 5% fully franked dividend.

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Motley Fool contributor Owen Raszkiewicz owns shares in ANZ. 

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