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UPDATE 2-ANZ sells Shanghai Rural stake for $1.3 bln to boost capital ratio

Global Jan 03, 2017 13:53
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© Reuters. UPDATE 2-ANZ sells Shanghai Rural stake for $1.3 bln to boost capital ratio
 
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* China COSCO and Shanghai Sino-Poland buyers of ANZ stake

* Sale will bolster ANZ's capital ratio

* ANZ shares hit 16-mnth high

* Follows similar sales by Deutsche, Citigroup (NYSE:C), Bank of America (NYSE:BAC) (Adds analyst quote, details on capital ratio, background, changes slug)

By Tom Westbrook

SYDNEY, Jan 3 (Reuters) - Australia and New Zealand Banking Group Ltd ANZ.AX said on Tuesday it will sell its 20 percent stake in Shanghai Rural Commercial Bank Co Ltd SHRCB.UL for A$1.8 billion ($1.3 billion), as part of its broader sell-down of Asian assets.

Australia's most Asia-focused bank and the country's No.2 lender by assets has been cutting its exposure to the region in order to meet tougher capital requirements and concentrate on its core domestic business. by Chief Executive Shayne Elliott at a Reuters event in November, the Shanghai Rural sale follows the sale of ANZ's wealth and retail businesses in Singapore, Hong Kong, China, Taiwan and Indonesia to DBS Group DBSM.SI in October. COSCO Shipping Corp and Shanghai Sino-Poland Enterprise Management Development Corp would buy the stake at a price-to-book ratio of about 1.1 times Shanghai Rural's net assets as of December 2015, the Australian bank said.

"The sale reflects our strategy to simplify our business and improve capital efficiency," ANZ Deputy Chief Executive Graham Hodges said in a statement.

ANZ shares rose 1.7 percent to a 16-month high in morning trade, as the benchmark S&P/ASX 200 .AXJO rose 1.2 percent.

Western banks had grabbed minority stakes in Chinese lenders as stepping stones into the huge Chinese market, but ANZ now joins others such as Deutsche Bank DBKGn.DE , Citigroup C.N and Bank of America BAC.N in backing out of such investments.

With China's banking market still closed and its economy slowing, top Chinese lenders including Industrial and Commercial Bank of China 601398.SS , Bank of China 601988.SS and Agricultural Bank of China 601288.SS all trade below their book value.

"There's always an issue with minority stakes," Bell Potter's head of research, TS Lim, said.

"Traditionally you don't have too much control over the fortunes of the investment and you bear proportionately more risk."

CASH IN HAND

ANZ said the sale would boost its Tier-I capital ratio by about 40 basis points, putting it in slightly better shape than its major Australian rivals as they face tougher regulatory requirements.

The Sydney-based bank said its ratio was 9.6 percent in November, slightly lower than National Australia Bank's NAB.AX 9.8 percent, but just ahead of the Commonwealth Bank of Australia CBA.AX and Westpac Banking Corp WBC.AX .

Such capital levels are still on the low-side by the standards of major deposit-takers globally, prompting Australian regulators to tighten the screws amid concerns about the market dominance of Australia's "big four" banks. invested a total of A$568 million to acquire the Shanghai Rural stake in 2007. The sale, agreed on Saturday, is subject to conditions and regulatory approvals and is expected to be completed by mid-2017.

($1 = 1.3899 Australian dollars)

UPDATE 2-ANZ sells Shanghai Rural stake for $1.3 bln to boost capital ratio
 

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