ANZ has entered an agreement to sell its Kiwi finance arm to a Japanese buyer but is still sweating on regulatory approval for the deal.
Under a deal announced on Tuesday Shinsei will pay NZ$762 million for the business, which has been sitting on the ANZ balance sheet as an asset held for sale for more than four years.
While the transaction is expected to release A$439 of common equity tier one capital for ANZ, it requires approval from New Zealand regulators, including the Overseas Investment Office.
In 2018 the OIO blocked an attempt by ANZ to offload the UDC subsidiary for NZ$660 million to controversial Chinese finance services company, HNC.
The regulator said it could not approve the sale because the identity of HNC’s owners could not be established.
It turned out to be a wise decision, with HNC now mired in financial strife after pursuing a debt-fuelled growth strategy that was brought unstuck by the Covid-19 crisis in China.
Although Shinsei’s ownership is clear, the transaction is expected to attract scrutiny from the OIO given that entities owned by the Japanese Government control 30 per cent of the bank’s common equity.
Other investors in Shinsei include State Street and the Chinese-based Anbang Investment Company.
Shinsei has a chequered history in Japanese banking.
It was established in 1952 as the Long Term Credit Bank – the institution that racked up huge bad debts in the wake of the collapse of the Japanese asset bubble in the early 1990s. LTCB was reconstructed as Shinsei Bank in 2000.
ANZ’s New Zealand chief executive Antonia Watson said UDC needed an owner that could invest in and grow the business.
“Shinsei Bank intends to preserve UDC’s operations, retain UDC employees and provide long term capital to maintain and grow customer lending in New Zealand,” she said.
“The sale will also mean UDC Finance will continue to operate as an independent finance company and enhance competition in the asset finance market.”
UDC has turned consistent profits in recent years despite its strategic uncertainty within ANZ.
In the 12 months to the end of September last year UDC grew net earnings by 7 per cent to NZ$70 million.
However, earning momentum appears to have tapered this year, with the business posting earnings of NZ$24.5 million in the six months to the end of March.
Shinsei CEO Hideyuki Kudo said he was excited to acquire UDC, noting that the business would be “a major asset” for the group.