The shares of Australia and New Zealand Banking Group (ASX: ANZ) have climbed higher by almost 1.5% in early trade after the banking giant announced the sale of its 20% stake in Shanghai Rural Commercial Bank.
ANZ has offloaded its stake to China COSCO Shipping Corporation Limited and Shanghai Sino-Poland Enterprise Management Development Corporation Limited for approximately $1,838 million as part of its plan to simplify its business and improve capital efficiency.
Although ANZ's Asian adventure has been deemed a failure by many, this particular investment has provided a great return on investment in my opinion.
ANZ invested a total of $568 million in Shanghai Rural Commercial Bank, yet has received $1,838 million from the sale and a further $178 million in dividends.
As well as this the investment helped provide ANZ with a stronger understanding of the Chinese banking system. This has been integral to the expansion of ANZ's own branch network in China and the approval of its full banking licence in China.
After transaction costs and taxes, the sale price is broadly in line with the carrying value of the investment in ANZ's accounts. But importantly it will boost the bank's CET1 capital ratio by around 40 basis points.
Whilst I believe this is yet another astute move from ANZ's management team, I still wouldn't be in a rush to invest at the current price.
The days of ANZ being a bargain buy are long gone now in my view and I would therefore class it as a hold. I would suggest investors wait for a pull-back in its share price to around $28 or perhaps consider an investment in National Australia Bank Ltd. (ASX: NAB).
