ANZ boss says Asia too pricey

The bank wants to grow earnings to reach its Super Regional targets — but not at any price.

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ANZ (ASX: ANZ) CEO Mike Smith has said the banking heavyweight is open to acquisitions throughout Asia, but at the moment everything seems pricey.

As the Australian bank with the largest presence in Asia, the group hopes to draw 25% to 30% of revenue from the region by 2017. That would require it to almost double its current earnings in around three years. Acquisitions will be needed if the group is to achieve its goals.

Last month, ANZ was rumoured to be in the running for Hong Kong's Wing Hang Bank. Once the rumours spread however, the value of the bank skyrocketed, making a purchase too expensive for ANZ.

According to Mr Smith, paying "two times book [value] is ridiculous at these times." He does however acknowledge the opportunities throughout Asia, particularly China, could be very lucrative. "I have always been interested in this part of the world and Hong Kong obviously is an attractive market, but I feel they are overpriced," Mr Smith said in Hong Kong.

In Hong Kong two banks are up for sale, Chong Hing Bank and the more profitable Wing Hang, which could fetch as high as three times book value. Although they are expensive, Mr Smith recognises that a bank in the territory could create a base for entering China: "I look at Hong Kong as very much a stepping stone into China. Therefore, anything you look for has to have the strategic next step in terms of your expansion into the Chinese mainland… I am always looking at various opportunities but right now I think it is all too expensive."

Foolish takeaway

Of the 'big four', ANZ is the most highly leveraged to international growth although it is not alone in recognising the possibilities in Asian markets. NAB (ASX: NAB) and Westpac (ASX: WBC) have both begun to identify possible trade and business opportunities to and from Australia. Despite its ambitious goals, however, the bank has not let its Australian and New Zealand businesses slip as it continues to remain the most profitable of the big four in domestic markets.

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Motley Fool contributor Owen Raszkiewicz does not have a financial interest in any of the mentioned companies.  

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