BNZ and ANZ banks. Could they list on the NZX if the Aussie bosses don't get their way? Photo / File
BNZ and ANZ banks. Could they list on the NZX if the Aussie bosses don't get their way? Photo / File
Threats by Aussie bank bosses to sell down their investments in New Zealand if the Reserve Bank follows through on changes to capital rules have been welcomed by local market players.
In the submission on the proposed Reserve Bank capital reviews both the ANZ Group chief executive and BNZ parentcompany, National Australia Bank, warned that a lower return on equity would force them to review their investment in New Zealand.
If NAB can't maintain returns from BNZ at similar levels to the wider group's earnings, the bank would "need to divert capital away from our New Zealand business and toward assets with a more appropriate return profile, with proceeds that can be reinvested and distributed more freely," it said.
ANZ group chief executive Shayne Elliott said the capital changes could "require ANZ Group to "dispose, or cease operation, of the relevant underperforming New Zealand assets or businesses".
The NZX ticker on the building downtown. Could we see the big banks listed in NZ? Photo / Supplied
That's raised the prospect of the New Zealand operations being sold off and floated on the local NZX - something senior market players say they'd welcome...if they believed it was going to happen.
Unfortunately they don't.
"Truth be told I think it's a healthy dose of scare-mongering on the part of the banks," said Craigs Investment Partners head of Research Mark Lister.
"But if one of them did decide to pull the pin and IPO the New Zealand business, the local investment community would quite like that."
"Many commentators, from brokers to fund managers, for years, have been agitating for one of the banks to split off the New Zealand assets and list them here."
"The threat is hollow," said another senior market player who asked not to be named.
The Australian banks simply made too much money in New Zealand and even if the capital changes went through as proposed, they would be pressed to deploy their capital anywhere else as profitability for such low levels of risk, he said.
"But the market would be delighted to see them partially list."
Even a partial float of any of the big four Kiwi banking operations would be huge for the NZX.
Based on loosely on the ratio of profits the New Zealand operations deliver to their Aussie parents, ANZ NZ could have a market capitalisation of close to $17 billion.
That would make it easily the largest company listed in New Zealand.
The currently power company Meridian has a market capitalisation of about $12b.
ASB would potentially be the next biggest with a market capitalisation of $14b.
Westpac NZ and BNZ would be worth around $11b each.
Given the float of Meridian raised just $2b, would New Zealand have the capacity to handle the bank floats?
"Would there be demand? Absolutely," said Matt Goodson, managing director at Salt Funds Management.
Given the current state of the markets, funds from New Zealand and around the world would make short work of any sell down, he said.
"It would be a big part of our index and it would go into 50 or 100 passive indices all round the world."
Given the aggressive valuations on the NZX right now it was possible the banks could achieve a higher value on this side of the Tasman, he said.
"Secondly the banks are rather profitable in New Zealand and generate a lot of imputation credits which disappear into the ether, so they could pay attractive gross dividends which are in great demand," he said.
Mark Lister, head of private wealth research at Craigs Investment Partners. Photo / File
"It would be big," said Lister, "but on the other hand there is still a huge appetite for quality businesses. There's still a huge amount of money looking for a home. And a bank is business people would know and understand, the brand would resonate."
But there would be some downside risk, he said.
"A big bank is usually stronger than a small bank, so being New Zealand-centric could add risk and cost and making it harder to get funding and compete on interest rates."
