The renminbi is a big topic for treasurers though it remains an unknown quantity. What trends are you seeing from your clients concerning the currency, and what are your broader plans for China?
We are open for business regarding the “redback” both onshore and offshore, and we have a foreign exchange license quota for CNY and for CNH [CNY is the onshore counterpart of CNH, which is offshore renminbi]. Every large bank with a presence in Beijing, Shanghai and Hong Kong has developed onshore and offshore renminbi capability for clients, but we are the first Australian bank to do so. As the renminbi becomes more flexible and freely tradable, clearly it will become a dominant currency in Asia. However, at the moment, we are seeing a relatively small number of transactions and these are mostly from our smaller clients. It will take a while for long-term US dollar and euro-denominated contracts for goods and services to switch to renminbi, but some of our smaller commercial corporate clients who are using renminbi say it is straightforward to use and their suppliers are happy to use it.
For larger companies, the fact that the renminbi remains highly regulated and lacks investment opportunities means there is an inherent risk for very large companies to denominate much of their trade in the currency. Certainly in the longer term, liberalisation seems likely, but the current environment is a bit uncertain. So for firms to denominate much of their trade in a relatively regulated currency is probably not the best idea from a liquidity point of view.
ANZ also has a network of six branches in China. ANZ opened a branch in Chengdu in October last year where we are going to base many of our cash management operations, particularly for China. We see Chengdu developing into an important centre for us. There are plenty of universities there and the city has a very fast growing economy. We recognise that there is more to mainland China than just Beijing and Shanghai.
What do you see as the major challenges for treasurers and what kind of technology platform and products can ANZ offer to tackle them?
Post the global financial crisis, challenges for treasurers have remained relatively constant. However, during late 2008 and early 2009 they changed quite dramatically. Before the crisis treasurers had to deal with how to deploy all their excess liquidity, particularly in Asia-Pacific, but post-crisis they are asking where they can find liquidity. I think the situation will stay like this for a while and liquidity will remain at the top of most treasurers’ agendas.
In some ways ANZ has been a beneficiary of the post-crisis approach to diversifying banking providers. We also think that we are strategically positioned to grow in Asia Pacific, the fastest growing region in the world, given our home markets of Australia and New Zealand. These markets have strong trading links with Asia based on significant agricultural and natural resource exports, which I think are long term in nature. The challenge now for treasurers is to establish and effectively maintain regional connectivity.
On the technology front, we already have regional transaction banking capabilities in Asia Pacific via ANZ Transactive, which is used by many of our clients. We are continuously investing in our platforms to enhance the client experience through advanced capabilities in terms of payments, liquidity, receivables and reporting. Later this year, we will be launching new capabilities in Singapore and Hong Kong by November, which will be rolled out in the region from 2012.
What is your view of the competitive environment, and how does your expansion strategy fit around it?
We see ourselves as a bit of a hybrid bank in that we are neither a local nor a global bank. We do not aspire to be a global player, but in Asia-Pacific we see ourselves more and more in the top league of banks. Following Mike Smith’s appointment as chief executive, we have turned from an Australia/New Zealand focused bank into a super-regional bank with significant longer-term ambitions. For instance, the fact that ANZ has an on-the-ground presence in the entire Mekong area of Vietnam, Laos and Cambodia is pretty unique for an international bank. We also have an established trade business in 26 countries in the region including the Pacific, which is more than any other bank.
Our long-term model is to grow organically and to expand into as many countries as is consistent with our strategy, though we could build our presence in other markets either by acquiring new assets or increasing our stakes in existing partnerships. Our foothold in the region is more substantial than the newer US and European banking entrants, and in many markets we are more substantial than some existing players. Having a head office in the same time zone is also a tremendous benefit compared to a US or European bank managing its Asian operations from the other side of the world.
We are also getting a number of enquiries from foreign banks about servicing their clients in Asia. As we build our services in Asia, we will be able to forge complementary relationships with US and European banks as we do not compete in their home markets. This is one of the big strategic advantages of our business model and geographical footprint.
What has the integration with RBS’s former assets meant for ANZ?
The integration of our new assets is just about completed. We will shortly conclude our migration of clients onto ANZ systems in Taiwan, which is the single biggest asset we purchased from RBS. With the exception of Taiwan, integration has been largely a lift-anddrop of clients into our franchise. Taiwan has been a lengthier integration process as we bought the entire RBS franchise including its network of nearly 30 branches.
The whole integration process has been a great catalyst for action within the bank as well. It has been an excellent learning experience and focused our minds on building capabilities efficiently and rapidly. It has also given us main street frontages in six key markets, and left us well positioned in Hong Kong, Indonesia, the Philippines, Singapore, Taiwan and Vietnam.
This story was first published in the Corporate Treasury Yearbook 2011 supplement to the June 2011 issue of FinanceAsia magazine.