ANZ shareholders continue to pay a heavy price for the bank’s ill-fated foray into Malaysian banking, with the local bank flagging more losses from its exposure to the scandal-plagued AmBank group.
ANZ holds a 24 per cent stake in AmBank, the value of which has almost halved in the last two years owing to its involvement in a 2012 money laundering scandal involving disgraced former Malaysian prime minister, Najib Razak.
Since 2018 the Malaysian Government has been trying to retrieve more than $US5 billion allegedly stolen from a sovereign fund known as 1 Malaysia Development Bank (1MDB) that Razak previously chaired.
Malaysia’s high court last year convicted Razak on seven counts relating to money laundering, abuse of power and criminal breach of trust after he funnelled $US700 million of state monies to several of his personal accounts held with AmBank and another Malaysian deposit taker, Affin Bank.
ANZ revealed on Monday that its 2021 bottom line would suffer a $A212 million hit after AmBank’s board agreed to pay the Malaysian government US$699 million as settlement for potential claims flowing from the 1MDB scandal.
The AmBank investment has turned into a black hole for ANZ after the carrying value of the stake was slashed by more than A$530 million last year to $1.1 billion.
The latest hit means the carrying value will fall to around $850 million.
AmBank’s settlement is part of a global agreement between the Malaysian government and a swathe of financial institutions that that had business dealings or institutional banking relationships with 1MDB. Other banks caught up in the frauds include Goldman Sachs and Credit Suisse.
AmBank’s exposure to the massive swindle was compounded by its role as an arranger of several controversial bond issues that allegedly resulted in funds being fleeced from 1MDB.
ANZ became a part owner of AmBank in 2006 when then managing director John McFarlane agreed to pay $A 494 million for an initial 13.5 per cent stake in AmBank’s holding company, AMMB Holdings Berhad.
The stake was increased to 19.1 per cent in May 2007 when former ANZ senior executives Dr Bob Edgar and Peter Hodgson were invited to join the board of the holding company.
Under the deal, which was ANZ’s largest single investment in Asia at the time, a raft of ANZ executives were appointed to senior management roles at AmBank.
They included Anthony Healy as deputy group managing director and Ashok Ramamurthy as AmBank’s chief financial officer.
Andrew Kerr, a senior risk officer in ANZ’s institutional business, was appointed AmBank’s chief risk officer.
In a press release issued in 2007 Edgar described the ANZ hook up with AmBank as a “partnership” and believed that injecting ANZ’s risk management expertise in the Malaysian bank would create a “strong platform for profitable growth”.
“With the Malaysian economy performing well, the opportunity exists for the partnership to leverage AMMB’s large customer franchise and local expertise with ANZ’s capabilities in consumer and business banking, and risk management to create new momentum in AMMB,” said Edgar in May 2007.
However, ANZ’s perspective on the nature of its relationship with AmBank appeared