ANZ agrees to sell its 20% stake in SRCB

Australia and New Zealand Banking Group Limited ABN 11 005 357 522
News Release
For release: 3 January 2017

ANZ agrees to sell its 20% stake in
Shanghai Rural Commercial Bank
- sale to increase ANZ’s APRA CET1 capital ratio by ~40 basis points -

ANZ today announced it had reached agreement to sell its 20% stake in Shanghai Rural
Commercial Bank (SRCB) to China COSCO Shipping Corporation Limited and Shanghai Sino-
Poland Enterprise Management Development Corporation Limited.

The agreement will see COSCO and Sino-Poland Enterprise each acquire 10% of SRCB for a
total consideration to ANZ of RMB9,190 million (A$1,838 million). The sale price represents
a price-to-book ratio of approximately 1.1 times SRCB’s net assets as at December 2015
*
.

The sale will increase ANZ’s APRA CET1 capital ratio by ~40 basis points.

ANZ’s relationship with SRCB has been a successful financial and commercial transaction
since the investment was made in September 2007.
 ANZ has invested a total of A$568 million in SRCB. Since 2007, ANZ has recognised
A$1.3 billion of equity accounted earnings and received A$178 million in dividends.
In the 2016 Financial Year the SRBC investment contributed A$259 million to ANZ’s
post-tax profits.
 ANZ’s minority investments in China have also helped provide ANZ with a stronger
understanding of the Chinese banking system which has supported the expansion of
ANZ’s branch network in China and the approval of ANZ’s full banking licence in
China in 2010.
ANZ Deputy Chief Executive Officer Graham Hodges said: “This partnership has been
beneficial for both ANZ and for Shanghai Rural Commercial Bank. SRCB is now a strong,
successful bank with a prosperous future.

“As we have previously stated, the sale reflects our strategy to simplify our business and
improve capital efficiency.

“The sale will also allow us to focus our resources on our Institutional Banking business in
Asia. This includes a significant commitment to China over the past 30 years with 100%
ANZ-owned branches in Beijing, Shanghai, Guangzhou, Chongqing, Chengdu, Hangzhou and
Qingdao serving our institutional clients," Mr Hodges said.

After transaction costs and taxes, the sale price is broadly in line with the carrying value of
the investment in ANZ’s accounts as at 30 September 2016. This includes accumulated
equity accounted profits and foreign currency translation reserves over the period of
investment. However, if completion occurs after the end of the first half of the 2017 financial
year, accounting timing differences will result in a negative impact to net profit after tax in
the first half, and a largely offsetting positive impact at completion.

The sale, agreed on 31 December 2016, is subject to customary closing conditions and
regulatory approvals and is expected to be completed by mid-2017.

For media enquiries contact:
Paul Edwards, +61-434-070101
Stephen Ries, +61-409-655551
For investor relations enquiries contact:
Cameron Davies +61-421-613-819
.....2.

2

Summary of ANZ Investment in SRCB and Financial Return

Total consideration to ANZ for sale of 20% stake in
SRCB
A$1,838m

ANZ CET1 capital benefit from sale


Equivalent to ~40bp

Total ANZ capital Investment in SRCB
 Initial investment (26/09/2007) - acquisition of
19.9% stake
A$318m
 Additional investment (27/10/2010) - pro rata rights
issue, increase to 20% stake
 Total investment

A$250m
A$568m
Financial contribution to ANZ (2007 to 2016)
 Equity accounted earnings (based on average FX rates) ~A$1,300m
 Dividends received (based on average FX rates) A$178m
Carrying value (ANZ financial statements 30/09/2016)
FX translation and available for sale reserves to be
released on completion
Taxes and transaction costs (estimated)
~A$1,990m
~A$300m

~A$145m
Profit and loss impact on sale
 Revaluation impact at signing – reclassifying the
investment as ‘held for sale’ (fair value for ‘held for
sale’ classification is consideration less taxes and
transaction costs)
1

~(A$300m)
 Release of FX translation and available for sale
reserves at completion
~A$300m
Net Profit and Loss impact from sale No material impact
Impact on ANZ FY17 equity accounted earnings from sale
of SRCB


Earnings to be recognised by
ANZ in other operating
income (Share of Associates
Profit), however as ANZ’s
carrying value will be
increased by a corresponding
amount, this will be offset by
a revaluation impact of the
same amount.
 1Q17 (October to December 2016)
2

 From end December 2016 Investment to be reclassified
to ‘Held for Sale’ asset until
completion of sale.

* Based on SRCB’s most recent audited accounts for the year ended 31 December 2015.

1. Final revaluation impact to be determined by end December 2016 carrying value, including impact of 1Q17
equity accounted earnings. Net profit after tax will increase by the amount of any equity accounted earnings to 31
December 2016, and the carrying value will increase by a corresponding amount, resulting in a revaluation impact
of the same amount.

2. For comparative purposes, in financial year 2016 ANZ recorded post-tax profit of A$259m (full year profit)
associated with its 20% stake in SRBC.

Note: AUD financial information is based on FX rates at the time of announcement of each event unless otherwise
stated.