SYDNEY May 14 Australia and New Zealand Banking Corp pulled off a major coup on Wednesday by poaching a senior Citigroup executive with extensive experience in Asia, where it has been bolstering its presence in recent years.
Farhan Faruqui's appointment to head up international banking from Hong Kong is the latest in a string of appointments by ANZ designed to boost growth in Asia at a time when it is reshuffling its organisational structure and exiting non-performing investments.
Faruqui's appointment follows that of Sameer Sahwney who became the head of global banking for international and institutional banking this April. Both report to Andrew Géczy who was appointed CEO of ANZ's international and institutional banking late last year.
ANZ first announced its "super regional strategy" in 2007/08 to step up income from outside Australia, but made slower-than-expected progress, missing its own initial five-year targets.
The business has since grown, but driving revenues faster and improving investor returns remain key challenges in ANZ's push to become a major regional player amid stringent capital rules and growing competition.
"We have seen returns inching lower in recent periods and this is a banking market which is well contested. So, certainly there is a growth-return trade-off," James Ellis, a banking analyst at Credit Suisse said.
ANZ's Asia business posted a 40 percent growth in net profit at $455 million in the first half of the year ending in September. Its Asian share of institutional banking has risen to 27 percent from 14 percent four years ago.
It expects to see return on equity (ROE) at 16 percent by 2016 from 15.5 percent now, raising scepticism from both investors and analysts about its ability to achieve that target as margins shrink.
In a recent presentation, ANZ said it was focussed on geographies offering scale and increasing its product mix as it looks to leverage itself as a trade bank. At home, ANZ also has a retail presence.
ANZ exited a partnership in Vietnam in 2012 and may exit stakes in Cambodia and Indonesia as it looks to own 100 percent of the business rather than small stakes to improve investor returns.
The strategy, which aims to capture booming Asian growth, trade and investment flows, differentiates ANZ from its peers in Australia, although analysts say it was too soon to compare it with Standard Chartered, HSBC and Citi - who already derive most of their income from Asia.
Géczy told Reuters that the bank will take advantage of strong trade flows and foreign investments into Asia.
"What I aspire to do with the organization structure that I've created and the appointments that followed on is to derive on getting delivery of our strategy and to make it come alive," Géczy said by phone.
ANZ shares have gained almost 13 percent since Géczy took over in September, better than its local rivals and outperforming the benchmark index, Citi, Standard Chartered and HSBC.
"I think the business is progressing. There is a concern that it's capital intensive, it requires a lot of capital support, but the last results showed they are doing okay," said John Buonaccorsi, banking analyst with CIMB.
(Editing by Matt Driskill)