Last updated: September 25, 2009 10:54 pm

ANZ / ING

Joint ventures normally end in one of two ways: one partner simply needs cash, or one partner wants the other out. The dissolution of ANZ’s partnership with ING, announced on Friday, is a bit of both. The insurer is anxious for funds to repay the Dutch government; the Australian bank is just anxious to see the back of ING.

Partnerships between banks and insurers sound great in theory: one provides the branches and the customers, the other the products. But as in this venture, formed in 2002, expectations can be hard to align. While ING, the 51 per cent partner, seemed happy with a 7-8 per cent return on equity, ANZ pushed for more. Now, having paid A$1.76bn for control – a 15 per cent premium, on a trailing price/earnings basis, to National Australia Bank’s purchase of Aviva’s Australian life business in June – it has no excuses for not achieving it.

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But how shoring up the domestic franchise relates to ANZ’s “super- regional” strategy is unclear. Since Mike Smith took over as chief executive in 2007, he has emphasised international growth – viz last month’s acquisition of some of Royal Bank of Scotland’s Asian cast-offs.

But deals such as the ING buy-out are far easier to sell to an investor base sceptical of anything out of the ordinary. ANZ’s shares moved to a 17-month high on Friday, suggesting that shareholders are no less insular than in 2003, when ANZ said it was in talks to buy a fifth of Thai Military Bank, and investors swiftly stripped the value of the acquisition from its shares.

After buying out ING, ANZ will still have a buffer of about A$3bn in tier one capital over the rest of the Big Four. Investors may prefer Mr Smith to take another look at domestic opportunities, such as Suncorp-Metway’s retail bank, rather than assets overseas.

 

BACKGROUND NEWS

 

ANZ has agreed its second large acquisition in as many months after striking a deal to acquire ING’s 51 per cent stake in their wealth management and life insurance joint venture in Australia and New Zealand for A$1.76bn (US$1.5bn).

Fresh from agreeing to buy Royal Bank of Scotland operations in six Asian countries for US$550m last month, Mike Smith, ANZ chief executive, said his bank was only ”half pregnant” with its joint venture with the Dutch group.

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