Four per cent of ANZ profits earned in Asia

Ian Rogers
How much profit does ANZ earn in Asia under its own steam?

Around four per cent.

This level of profit from Asia in the year to September 2012 is up more than one percentage point on the profit earned directly from the region in 2011.

It is also much lower than the shifting and aspirational targets ANZ sets for itself on its Asian strategy.
20121026_ANZ_Asia_profit_tab

20121026_ANZ_Asia_profit_tab


In 2008 this goal took the form of a target of earning 20 per cent of its profit in Asia within five years, a target later explained that needed to be understood broadly.

It's modern form, restated in the commentary on strategy in the profit release yesterday, is that "ANZ's aspiration is to have 25 per cent to 30 per cent of profit driven by network revenue, that is revenue sourced from the Asia Pacific region, by 2017."

As noted in the opening article of today's series of reports on ANZ's full year profit, the bank's chief financial officer, Shayne Elliott, points out that its " very easy to focus purely on the geographic aspect but super regional is more than that."

Even so, the geographic aspect is of interest, including a view on how much of the profit from Asia relates to business where the bank the customer is dealing with is ANZ and not a minority investor.

It is not clearly spelled out in the financial results but can be worked out, as shown in the accompanying table.

ANZ point out through one of its media relations team that calculation of the institutional banking profit in Asia will not accurately reflect the Asian component of this division's earnings and the bank does not disclose this. The disclosed retail profit also includes a contribution from activities in the Pacific.

The bank's Asian connections remains a driving force in the investment plans of the business.

Mike Smith, ANZ's CEO, said at the investor briefing yesterday: "We continue to invest in Asia. And if we can find good assets to buy then we will.

"Right now, assets are still quite pricey. It's hard to shake them out at the moment. But we can continue to look."

One aspect of ANZ's Asian connections going well is the rise in trade finance and foreign exchange volumes.

CFO Shayne Elliott said this line of business "used to be single digit [return on equity] on a standalone basis, just looking at trade assets.

"Today, it's in its teens, and that's been a tremendous, partly because we're getting benefits to scale. "

Mike Smith added on this point that ANZ was lobbying APRA to reduce the risk weighting applied to most trade finance loans.