ANZ considering acquisitions to raise Asian revenue?

To reach CEO Mike Smith's target, the bank will need to double revenue in three years.

Owen Raszkiewicz

Owen Raszkiewicz is a Motley Fool Contributor. Owen has been a Contributor since 2013, having also spent time as a Fool writer/analyst. He also worked as an Investment Analyst at Zenith Investment Partners, Australia's top research house specialising in managed funds. Owen has appeared on Channel 10's The Project and was invited on the BBC. He holds a Masters of Applied Finance, Masters of Financial Planning, Bachelor of Technology, Advanced Diploma of Financial Services and Diploma of Mortgage Broking Management. In addition, Owen has passed Level 1 of the Chartered Financial Analyst (CFA) Program. He has taken the Banking + Finance Oath (BFO). When he is not writing, Owen is Managing Director of Rask Finance, an Australian financial education company. You can email him: [email protected].

Published September 30, 2013 10:47 am AEST

Rumours are swirling that ANZ (ASX: ANZ) and Singapore's United Overseas Bank are interested in Hong Kong's Wing Hang bank. According to the Wall Street Journal, people close to the deal say both parties are interested in gaining greater exposure to Chinese mainland and a "big deposit base in Hong Kong."

Wing Hang's two biggest shareholders are the Fung family and The Bank of New York Mellon. The Fung family controls the bank but, combined, they own around 45%. The bank's share price has risen 40% since September and currently operates on a price-to-book value of about 1.78 times. This is still below the country's M&A average of 1.9, which would value it at $5 billion.

The Australian reported the "major shareholders earlier this month revealed they had been approached with offers for their shares, but did not name the bidders."

An acquisition such as this would make sense for ANZ, which is looking to double its Asian revenues in the next three years as part of CEO Mike Smith's strategy to generate 25% to 30% of group revenue by 2017. An ANZ spokesmen was reported by Reuters saying, "From time to time we look at opportunities as part of our super regional strategy however we don't comment on market speculation."

Foolish takeaway

After pulling out of the running for Lloyd's $1 billion Australian assets it is obvious ANZ has Asia in its crosshairs. Investors have valued the diversification of revenues that ANZ is trying to offer. Less reliance on mortgages and Australian banking seems to be a positive move for shareholders and although ANZ may have underperformed the Commonwealth Bank (ASX: ANZ) in recent times, this Fool thinks it has good prospects for future growth. However at current prices it is fairly valued for short or medium term gains, therefore investors should be focused on ANZ's long term potential.

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Motley Fool contributor Owen Raskiewicz does not have a financial interest in any of the mentioned companies.

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