The New Zealand central bankers appear to have won their arm-wrestle with ANZ over who has ultimate control over the expanded Kiwi operation, as Barry Banker explains.
A good result from the ANZ, Chanticleer in the AFR getting it right this morning (afr.com.au). It really was a lesson to the other banks, especially the NAB and the CBA, on how to run a balance sheet without too much risk and too much hype about back office re-invention etc etc etc. And, it’s clear the stratergies of the NAB, Westpac, CBA and St George in going deep into funds management, is not the only way to produce above average earnings growth and keep shareholders happy.
But as you read the fineprint of the acres and acres of presentation material, there’s a gem or two, the most glittering being New Zealand where the ANZ has obviously made a good deal. Remember how Crikey has been warning that the Reserve Bank of New Zealand has been playing hardball with the ANZ and other Australian banks? And how the ANZ, on the acquisition of the National Bank of New Zealand last year, was going for full and total integration of everything, including back office systems, only to be brought up short by the independently-minded Reserve Bank of New Zealand?
Well, buried in the ANZ interim commentary was confirmation that the ANZ has accepted this, but found more ‘synergies’ (ie cost savings) to pay for the added cost. We hear that up to $60 million had been earmarked by the ANZ as cost savings in this area. No more. But the ANZ said total ‘synergies” for the integration were still around $110 million. That compares to a total cost of $230 million between now and the end of 2005 when the integration should be completed.
This is what the ANZ said in its releases. Firstly the media presentation lodged with the ASX said ” To meet RBNZ requirements, more technology processing than expected will be undertaken in New Zealand. The cost of this has been offset by additional synergies. The RBNZ focus is industry-wide, not just ANZ.”
And then it elaborated in its official media release when it said “The Reserve Bank of NZ in the context of national financial stability now requires that major banks including ANZ-National are able to operate independently in the event of a crisis of the bank or their parent. The board of the bank in New Zealand or a statutory manager acting in place of the board, needs to have unambiguous authority and practical ability to operate the bank and control its affairs. ANZ is confident its proposals satisfy these requirements.”
Seeing how the original plan was to centralise all back office functions in Australia but run them through two independent platforms, this represents a major concession to the Reserve Bank of NZ which has stood up well to the pressure to ease its policy.
Although not a big part in the whole ANZ universe, it indicates that the bank now understands that full integration will never take place, not matter how it finally describes it. And there will be a small on going cost additional to that originally projected, but that will not be material to the ANZ bottom line.
Up till now the ANZ has down played this. But it means the Reserve Bank of NZ has won a very important battle for control of the NZ banking system, which for all intents and purposes a series of offshoots of the Australian industry.
Rather than be dependent on the abilities of APRA and the RBA, the Kiwis now have direct and clear control over all parts of the banking system, from the branch teller to the processing operations, just like Australia.
No doubt the Kiwis are also very interested observers of what is going on at the NAB at the moment and having a few Trans-Tasman chats with APRA to keep up to speed. And, the ANZ is right to say that this is an industry-wide focus of the New Zealand central bank. Other Aussie banks are in various stages of negotiation on particular issues. Stay tuned