ANZ making a regional banking push

A well-regarded set of regional banks emerged as the winners of nine foreign banking licences as they were announced in October.

Three of the Japanese megabanks snagged licences, along with two large Singaporean banks and one each from China, Malaysia and Thailand. Also included on the list was Australia and New Zealand Banking Group, commonly branded as ANZ.

At first glance it may appear the odd one out, currently being headquartered in Melbourne, Australia, and tracing its corporate lineage to an 1835 charter received in London for The Bank of Australasia.

However, while ANZ is currently among the four largest banks operating in Australia, it has made a significant push into Asia, including the Mekong Region. It operates one of the largest retail banks in Cambodia with a local partner and has a subsidiary in Laos, as well as previously holding a minority stake in a Vietnamese bank.

ANZ also won a conditional licence in Thailand’s foreign bank contest earlier in 2014. Grant Knuckey, CEO of Cambodia, Laos and Myanmar for ANZ Banking Group, said the firm will benefit from going through the process of setting up in both Thailand and Myanmar at roughly the same time.

“ANZ’s strategy is also about leveraging strong home market positions in Australia and New Zealand into profitable Asian expansion,” he said in an interview at the firm’s Phnom Penh offices.

ANZ and France’s BRED Banque Populaire were the only two Western-based banks among the 25 institutions vying for licences.

Notably, UK-based heavyweight Standard Chartered decided not to participate in the contest, although it has a Myanmar representative office.

Mr Knuckey said he was a little surprised ANZ was the only Western bank that emerged with a licence, but attributed it to the timing of the contest rather than interest from other banks.

“I think there’s plenty of intent from a number of Western banks around Myanmar and growth in Myanmar,” he said.

ANZ had already participated in a similar process for the Thai licence earlier in 2014, and had a Myanmar representative office after being issued a licence on December 6, 2012.

“We were very much in the mode of readiness in terms of market entry to Myanmar when it opened up. We were pretty ready to go,” said Mr Knuckey.

“Perhaps most other Western financial institutions weren’t at the same level of preparedness,” he added. “I have no doubt that if you fast-forwarded a few years that will be quite different. I think you will see a lineup of financial institutions coming or about to come.”

Myanmar is still at an early stage of its economic transformation, though is trying to compress reforms that would normally take decades into only a few years, he said.

“It means the opportunities arrive a little earlier and they need to be seized earlier, and it also means accelerated waves of investment and infrastructure are required,” said Mr Knuckey.

“It all adds up to an explosion of activity and a very rapid pace of reform and development that needs to happen for [the economic transformation] to be realised.”

While the introduction of foreign banks to Myanmar has been one of the more visible signs of the transformation, it has also proved controversial. Some local bankers opposed their introduction, claiming they are arriving too early and may be able to do business in areas that are still closed to local institutions.

Mr Knuckey said the foreign banks will face restrictions with their licences, adding it is important that national banking champions emerge for the country.

“If you don’t allow the banking sector to build that capacity, if it’s really just a free-for-all, than you won’t build those champions – at least not without some luck,” he said.

However, he added the licensing process had been well-crafted, allowing the demands of investors to be met but local banks to be able to preserve a large chunk of the market, while learning and working from foreign banks.

“This is not a situation of foreign bank hoards sort of coming over the hill and rolling over everything in their path, absolutely not,” he said.

In the “fullness of time” the restrictions on the foreign bank licences – such a prohibition from retail, a limit of one branch and a ban on kyat loans to domestic businesses – will likely be relaxed, as has happened in other regional countries.

ANZ is now working to set up its Yangon branch. The Central Bank of Myanmar as of October gave the foreign banks a year to set up and officially receive their licences.


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