sign up log in
Want to go ad-free? Find out how, here.

ANZ could shuffle retail deposits from Asia to shore up its New Zealand funding base if necessary

ANZ could shuffle retail deposits from Asia to shore up its New Zealand funding base if necessary

By Gareth Vaughan

ANZ New Zealand's new chief executive says the ANZ Group could shuffle money from its "surplus" of deposits in Asia to New Zealand to bolster its local funding base if required, and will probably issue covered bonds.

David Hisco had his first meeting with local journalists yesterday since replacing Jenny Fagg as CEO in September. Hisco relocated to Auckland from Melbourne where he was ANZ Group's Australian commercial managing director. He previously worked in New Zealand as managing director of ANZ's finance company UDC between 1998 and 2000.

Asked about the Reserve Bank's core funding ratio (CFR), Hisco said the ANZ Group's "super regional strategy", championed by group CEO Mike Smith who is looking to grow ANZ's presence in, and earnings from, Asia, gave it an advantage over rivals.

"Being part of the super regional strategy, we’ve got a surplus of funding up in Asia," said Hisco.

"You would have read that we switched some of the Asian deposits back into Australia and we can switch it here if need be, and that’s a strategic advantage we have over the others."

ANZ last year struck a deal to acquire retail, wealth and commercial businesses in Asia from the Royal Bank of Scotland (RBS) in a A$685 million deal. In its September year results the ANZ Group said its Asian retail deposits doubled to almost A$10 billion over the year as a result of the RBS deal with retail deposits from its Asia Pacific, Europe and America operations increasing by A$18.9 billion, or 77%.

A Deutsche Bank analyst estimates by 2014 ANZ could add up to A$60 billion of deposits from Asia.

Hisco said ANZ had "switched" about A$8 billion of Asian retail deposit money to Australia over the past year.

 "(And) you can bring it in here if it’s needed."

Asked if there was any need to do this at the moment, Hisco said ANZ was aiming for diversified funding sources.

"We work with the group and put the money where it’s most effective," said Hisco. "So if we thought it was a good idea we’d do it. If there’s another effective way, we’d do that."

As for covered bonds Hisco said: "I think it’s worth probably getting a covered bond away at some stage, just so that our people know how to do it."

Covered bonds are senior debt instruments backed by a dedicated group of home loans known as a “cover pool.” So in the event of a default by the bank issuer, the assets in the cover pool are carved off from the issuer’s other assets solely for the benefit of the covered bondholders' thereby diluting depositors’ claims.

For this reason covered bonds are banned in Australia although the banks there are lobbying for their introduction.

In New Zealand the Reserve Bank wants Parliament to pass a law enabling banks to issue covered bonds backed by legislation to help them entice overseas investors. BNZ is so far the only New Zealand bank to have issued covered bonds raising NZ$425 million locally and 1 billion euros in Europe. Westpac aims to be next, with an issue targeted for the first half of 2011.

The Reserve Bank says it's comfortable with banks issuing covered bonds worth the equivalent of 10% of their total assets, which in ANZ's case, based on its total assets of NZ$127 billion at September 30, would be NZ$12.7 billion.

Introduced on April 1 by the Reserve Bank, the CFR sets out that banks must source at least 65% of their funding from retail deposits and wholesale funding sources with durations of at least one year. The central bank wants to increase the CFR to 75% by about the middle of 2012 to offset New Zealand banks reliance on international wholesale, or 'hot' money, markets. Our banks currently source about 40% of their funding from wholesale sources, with about two-thirds of this sourced overseas.

Asked if he was comfortable with the Reserve Bank's plans to lift the CFR to 75%, Hisco said what was proposed at the moment was "reasonable."

"If there are any regulatory changes all we’re asking is give us time to phase it in. If you want (us) to bring in increased capital, we can handle that if it’s phased. Increased capital ends up flowing through to customers so we need to be careful we don’t ask for anymore than what’s needed because eventually it will end up increasing bank margins to customers which we know people don’t want."

"So it’s a very responsible job around calculating how much capital is required," Hisco added.

* This article was first published in our email for paid subscribers earlier today.  See here for more details and to subscribe.

We welcome your comments below. If you are not already registered, please register to comment.

Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.


"We can shuffle this here and move that there...take your partners for this dance...round and round we go...shuffle along and sing our song...blow that bubble all day long....don't let on what ever you do...that Noddyland is in the poo."


"For this reason covered bonds are banned in Australia although the banks there are lobbying for their introduction."

Gareth, What about the CBA website.  It's clear that they have been securitising mortgages for years.… so where do get the above statement from?


Hi Fred. Securitising mortgages is a bit different to issuing covered bonds. There's more on the Aussie position here -…


It seemed to me that the differences are very much semantics.  A securitised mortgage is a "true sale" into a trust, but under a covered bond the mortgage stays on the balance sheet both turn an income stream into cash.  Maybe the price risk profile of the bond created is different, but both increase leverage, both recyle cash back to mortagege originators.  When the cash being recycled is bank credit created on a global scale by a global property ponzi bubble (well Western World at least), then you have to ask the question whether this is the invisible hand of the market or the invisible hand of the elites.