SINGAPORE/SYDNEY: Australian and New Zealand Banking Group is reviewing its retail operations in Asia as it continues to "reshape" its institutional products and services in a bid to slash costs and boost returns, a senior executive told Reuters in an interview.
Australia's No.4 lender is alone among the country's four major banks to have a large business in Asia, but is pulling out of less profitable areas to bolster earnings as regulatory costs rise. Investors have long lamented ANZ's Asia push, citing the bank's struggle to generate steady returns.
"We are doing a strategic review on retail," said Mark Whelan, head of ANZ's institutional business, speaking in Singapore during a tour to explain the bank's strategy to Asia staff.
The move is expected to strengthen the bank's balance sheet, helping it meet more stringent capital rules that Australian and global regulators now demanded.
Whelan said that the retail review was part of a "reshaping" of the lender's Asian strategy that included exiting its commercial business in the region, and focusing on its core strengths in debt capital markets, syndicated loans and trading.
"We are pulling back in some risk-weighted assets but it's predominantly with customers that are not paying for the capital we're deploying," he said.
Still, ANZ's business stemming from Australian companies expanding in Asia was growing quickly, Whelan said. The trend should continue, he added, "because free-trade agreements are becoming more embedded, people are learning how to do more business into Asia".
Even as ANZ restructures its business model, one head-on challenge for banks in general is managing "reputational problems", Whelan said.
Australia's highly profitable banks are caught in the eye of a storm with politicians calling for a high-level public inquiry into a series of allegations of misconduct, including insurance fraud, improper wealth advice and interest-rate rigging.
Calls for a Royal Commission into banks gathered momentum last week after No.2 lender Commonwealth Bank Australia posted a seventh straight year of record profit, without passing the full impact of a recent quarter-point cut in official interest rates on to borrowers.
"I think some of the criticism is very fair and some of it is very unfair," he said.
"It gets back to the basic idea that if we've done something wrong, not necessarily legally but morally...then we should admit it and deal with it," said Whelan.
"I think the community expectation of banks has changed significantly since the global financial crisis. We need to take that seriously."
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