by Ganesh Sahathevan
ANZ's 1MDB problems are not going away, despite CEO Shayne Elliot's best efforts to distance himself from that theft.
Readers of this blog will recall that in August this year former Bank Negara Governor Zeti Aziz informed a Malaysian court that she had no record of letters that were said to have been provided the Central Bank by AMBank/ANZ's Ashok Ramamurthy in support of Najib Razak's 1MDB linked transactions.
Her testimony adds to the evidence against ANZ chief executive Shayne Elliot whose statements regarding AMBank, ANZ and 1MDB, including statements before Senate inquiry remain problematic. Information in the public domain suggests that ANZ misled an Australian Senate inquiry where questions about 1MDB were raised.
It has been estimated that the quantum stolen via and from 1MDB is approximately USD 20 Billion, but only approximately USD 4 Billion has been located, even if not recovered.
As previously mentioned the stolen 1MDB funds and anything related to those funds, including funds connected to former Prime Minister Najib Razak are funds that can only be managed at the institutional level at ANZ. ANZ has recently made announced that it is expanding its institutional fund banking services in Australia, with an emphasis on ESG. The question then arises as to whether ANZ is greenwashing 1MDB funds via Singapore.
Apart from its own institutional banking infrastructure ANZ has also invested AUS 50 Million in Pollination, which ANZ sees as another means of "unlocking APAC’s decarbonisation opportunity". Pollination has recently opened shop in Singapore.
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ANZ eyes ESG, supply chain shifts in South-East Asia comeback
Michael SmithNorth Asia correspondent
Updated Oct 2, 2023 – 7.02pm,first published at 6.46pm
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Singapore | ANZ Banking Group says it will deploy more capital and assets in South-East Asia as it chases a bigger slice of transactional banking and payments revenues from large corporates shifting supply chains into the region and investing in green energy.
Almost a decade after retreating from the region, ANZ executives meeting in Singapore last week said there was a push to allocate more capital to the institutional business to take advantage of an expected surge in the issuance of green bonds and other activity in the environmental, social, and governance (ESG) space.
Mark Whelan, ANZ’s institutional bank boss, on the bank’s trading floor in Singapore. Geraldine Lim
The bank would also seek to capitalise on shifting geopolitics to target strategically important customers moving manufacturing and other operations out of China into Vietnam, India and other countries in the region.
Mark Whelan, ANZ’s institutional banking boss and a potential successor to chief executive Shayne Elliot, said the bank was already investing heavily in a new technology platform for the region and in key personnel in Singapore, to take advantage of growth in the region.
He would not give targets for capital being deployed in the region, but stressed it was not a return to the days under former CEO Mike Smith, when the bank invested heavily in a failed Asian retail strategy. Growth would come from investing in capital-light payments and transaction banking services rather than lending to companies.
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“We will allocate more capital here; that will freak out some of the analysts,” Mr Whelan said during an interview with The Australian Financial Review in Singapore last week.
“Lending will always be a part of what we do, but we are not going lend without getting the other additional business. We want more customers in the right growth sectors.
“We couldn’t have done that previously because our business was earning 3 per cent ROE [return on equity]. I wasn’t exactly going to get capital thrown at me for that return. But now we are earning in the mid-teens. I wouldn’t have allowed us to go after the growth option until we were fit for it. Now we’re fit for I think we should be doing it.”
‘De-risking’ from China is benefiting South-East Asia economies such as Vietnam. Bloomberg
Return on equity in ANZ’s institutional bank is now about 14 per cent compared with 7 per cent when Mr Whelan took over the business in 2016. He has slashed the number of the institutional customers since 2015 from 27,000 to 7000, and costs by $550 million as part of a strategy to refocus on key and less risky clients.
However, he and his senior executives in Asia are now indicating they want to grow the customer base again, although this time they will be picky.
While the bank maintains a bigger presence in Hong Kong and mainland China than the other Australian banks, it is also investing more resources in Singapore. A large trading floor with about 200 staff at ANZ’s high-rise headquarters in the city is now close to rivalling the same facility in Sydney.
Some of the bank’s key personnel, such as the new head of global markets Anshul Sidher, are based there instead of Australia. ANZ’s Singapore operations employ about 700 people.
“A lot of the current Treasury activity has moved to Singapore. We have seen that with banks and with corporates. It creates a bit of war for talent,” Mark Evans, ANZ’s country head for Singapore and head of its South East Asia, India and Middle East operations, said.
“Our target banking market is large strategically important corporates ... so Temasek and GIC–related companies. The same across the region.”
Mr Whelan wants payments and cash management to make up 40 per cent of the bank’s revenues by 2030, compared with about one-third now, while the percentage of revenues from markets businesses is to also increase to 30 to 35 per cent. He said the bank would continue to invest in cash platforms.
ANZ would also target customers in multi-jurisdictions who were spending a lot on ESG. Executives cite an Asian Development Bank prediction that South-East Asia will need $US210 billion ($326 billion) annually on climate-resilient infrastructure until 2030.
ANZ has long talked up the potential of Asia, where it has a larger presence than the other three major Australian banks. While investors have warmed to the institutional bank’s performance since its turnaround, many are wary about deploying too much capital in a region where foreign banks have struggled to make money.
“We have held the view for a long time that Asia is the biggest developing market in the world. The demographics of ASEAN compared to China are significantly better, so we will see the benefits of that over the next 10 years,” Mr Whelan said.
“Vietnam, Indonesia, India are going to be massive.”
Not surprisingly, he welcomes the push by the Albanese government’s special envoy for South-East Asia, Nicholas Moore, to engage with ASEAN countries which combined are expected to make up the world’s fourth-largest economy by 2030.
Mr Whelan and other ANZ executives are careful not to discount China’s ongoing importance, partly to avoid any backlash from the Communist Party, but also because they still expect the world’s second-largest economy to grow at 5 per cent this year.
However, it hopes a shift in global supply chains as companies move out of China to generate work for the bank.
“No doubt we’ve seen more multinationals invest in other parts of the region. Obviously, we have seen a huge lift in India and Vietnam as well as part of this de-risking strategy. That trend in capital flows is definitely happening. It is a structural trend that will continue,” Khoon Goh, ANZ’s head of Asia Research told The Australian Financial Review.
He notes that even Chinese companies are part of the trend as they relocate some manufacturing and other operations out of China. “They also have the same concerns as multinationals in terms of geopolitical risk and the potential for sanctions,” he said.
Even bankers at some of ANZ’s rivals say privately the company is in a good position because it has the platforms and systems it bought from ABN Amro under Mr Smith’s Asia push, something no one would invest in now. However, it is also competing with local banks who have lower funding costs. ANZ says it does not aspire to be an HSBC or Citi in the region.
Mr Whelan, who met with executives from dozens of Singapore-based firms last week, said companies in Australia and Asia were sitting on large amounts of capital but were hesitant to invest until there was more clarity around where global interest rates and inflation were heading.
“The amount of money that’s on deposit with us today is extraordinary. From big corporates and medium-sized corporates. Many companies are itching to grow their own businesses, but there is nervousness,” he said, noting the loan market in South Asia is down 30 per cent this year, with companies paying down debt instead of rolling it over.
“You’ve got inflation rates at these record levels, interest rates at the highest levels we’ve seen since 2007, yet GDP is still reasonably resilient. So, it’s confusing people a bit, and they are thinking I’ll just sit and wait if we’re going to make an investment. We’ve certainly seen that in conversations here (in Singapore).”
Asked about suggestions he is a potential successor to ANZ chief executive Shayne Elliott, Mr Whelan is coy. “There’s certainly no drop off in energy from Shane. It will happen when it happens and when it does, there are some really good candidates internally,” he said.
Michael travelled to Singapore as a guest of ANZ
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