10 Feb 2023
Modern Asia offers great opportunities but many companies pause before investing, wary of the perceived complexity of doing business there.
But like anything, particularly in banking, the risks need to be balanced against the potential reward. Today we face high global inflation and a fluid geopolitical environment in a region that is not homogenous. There are always risks and opportunities.
"The international franchise is important for ANZ. It undoubtedly helps us as an Australian bank to win a bigger share of business, particularly with multinationals." - Farhan Faruqui
As an Australian bank which has embraced Asia for more than half a century, ANZ has worked quietly to build long-term relationships – while often being told such pursuits were too hard.
During the seven years I spent in Hong Kong as group executive of ANZ’s international business, I saw from the inside how ANZ transformed its Asian operations. Now, in the current environment, we see why that transformation was exactly the right thing to do.
The international franchise is important for ANZ. It undoubtedly helps us as an Australian bank to win a bigger share of business, particularly with multinationals.
But we must manage capital, returns and risk tightly. ANZ has done all those things and is now well placed to reap the rewards of that discipline.
Understanding a region involves constantly reassessing where the opportunities lie and where they don’t. A crucial move when I ran our international business was exiting retail banking in Asia. It was the right thing to do and, as we look back now, we know we did it at the right time.
Competition among the players has only increased and returns from retail banking in those markets have remained under intense pressure in the years since.
The fact we focussed on growing our institutional business has held us in good stead. Institutional banking is now in a sweet spot. Our cash management and trade business are supported by rate rises globally and there will be further acceleration in trade finance as supply chains are restored.
There is also more activity from mergers and acquisitions, investment and companies growing their capital expenditure spending.
Our focus in the International business has been to follow our clients’ capital and trade flows. The geographic strategy follows customer needs rather than the other way around.
We have also invested in capability in-line with shifting customer needs. That, together with a strong customer mindset, positions us well today to capture opportunities in a supportive growth environment.
I recently travelled to Japan with members of ANZ’s executive committee, our first trip back since the COVID lockdowns. The trip reflects the importance of Japan as a partner for Australian business.
All long-term relationships in the region are built on a growing understanding and an instinctive need of what both parties need. Our Japanese business is now 53 years old. Outside of the United Kingdom, Japan has been the longest and most consistent investment partner with Australia.
You get a very strong sense of that closeness when you see the affinity Japanese companies have towards their Australian and New Zealand partners.
Many Japanese companies view Australia as a safe and growing market. And a key focus for many Japanese companies is helping to finance green energy projects, particularly given their determination to reduce reliance on fossil fuels.
ANZ shares this passion for the energy transition opportunity and we have already committed $100 billion in total financing by 2030. This shared ambition gives ANZ enormous scope to partner with Japanese businesses to help reduce global emissions.
Nowhere is this goal more apparent than in Queensland. The state government has a very ambitious renewable energy agenda and plans to make huge investments ahead of the Olympic Games in Brisbane in 2032.
Given Japan’s historical investment in Queensland and the state’s proximity to the region, we expect Queensland to continue to be a magnet for investment and opportunity. Conversations we've had on this trip to Tokyo have only reinforced that expectation.
It’s further evidence of why a strong international business with long-standing relationships in the Asian region is a crucial part of ANZ’s success.
Farhan Faruqui is Chief Financial Officer at ANZ.
The views and opinions expressed in this communication are those of the author and may not necessarily state or reflect those of ANZ.
10 Feb 2023
09 Feb 2023