Morningstar analysts have flagged, as a “central theme”, slower growth in the Australian banking system over the coming years.
The prediction formed part of a Morningstar research note on ANZ Bank yesterday, following the release of the major’s first quarter results.
Morningstar analyst David Ellis noted that there is a structural shift in the world economy as economic growth shifts from the west to the east.
“ANZ is positioned in the right part of the world, with a credible plan at the right time”, Mr Ellis said.
ANZ’s ‘super regional’ strategy involves an aggressive push into the Asia-Pacific region, a product of group chief executive Mike Smith’s extensive experience in Asian banking.
“Our super regional strategy continues to provide us with growth options and we will also ensure our cloth is cut to suit the conditions,” Mr Smith said in a trading update this week.
While no Australian bank has built such a large platform in Asia before, Morningstar notes that the upfront investment in acquisitions, capital, branches, systems and staff is paying off with strong revenue growth and improving returns on equity.
“We expect further improvement in coming years,” Mr Ellis added.
The super-regional aspiration is for Asia Pacific-sourced revenue to provide 25 to 30 per cent of group earnings by the end of 2017.
Asia-Pacific regional profit accounted for close to 20 per cent of group profit in fiscal 2014, with revenue representing 24 per cent of group revenue.
However, Mr Ellis noted that the experimental nature of the super-regional concept is a risk.
Slowing economic growth in the region is an “increasing” risk, he said.