The latest instalment of the Australia and New Zealand Banking Group's sell-off of its Asian assets, a sale of a Chinese bank stake, has been welcomed by analysts as a "good start".
ANZ announced on Wednesday it would shed a 20 per cent stake in Shanghai Rural Commercial Bank for $1.8 billion.
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ANZ posts lower-than-expected earnings
In what is seen as a challenging time for banks, ANZ has posted weak results, including some 'bad debt'. Vision courtesy ABC News 24
The sale, to China COSCO Shipping Corporation and Shanghai Sino-Poland Enterprise, comes as the bank moves to shrink its business and scale back its presence in the region.
It will increase ANZ's capital ratio by 40 basis points, the bank said.
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ANZ deputy chief executive Graham Hodges said the sale reflects the bank's strategy to simplify and improve capital efficiency.
"[It] will also allow us to focus our resources on our institutional banking business in Asia," he said.
Good start
Analysts said the sale signalled a willingness to push ahead with other divestment plans in the region, particularly in Malaysia and elsewhere in China.
"They were going to divest non-core assets and this is hopefully the start of something else. It's a good start," Bell Potter banking analyst TS Lim said.
ANZ's stake in the Chinese bank contributed $259 million to ANZ's post-tax profits last year.
The sale represents a price-to-book ratio of 1.1 times SRCB's net assets as at December 2015, the bank said.
ANZ announced in October it would sell a group of Asian retail banking and wealth businesses to Singapore's DBS Bank, including businesses in Singapore, Hong Kong, China, Taiwan and Indonesia.
It also announced in November it was considering selling key parts of its wealth management arm after it launched a strategic overview of the business due to disappointing returns.
The lender is leading a sector-wide push out of Asia, which has seen Australian banks cut their lending to key Asian economies by $US18.5 billion in the past two years, responding to investor pressure to ditch lower-returning assets and focus on their core domestic businesses.
Higher costs
Mr Lim said the sale was in line with the bank's strategy to pull back from the region, which had become more expensive since former chief executive Mike Smith's expansion plan began.
"Given that, and given the fact that the regulators here want banks to hold more capital, it makes sense for them to pull out of Asia and focus on Australia where returns are much better," he said.
Mr Lim said the bank would likely continue to divest other non-core assets in the region.
"Hopefully they can build off this momentum," he said.
ANZ still has a 12 per cent stake in the Bank of Tianjin, China, as well as a 39 per cent stake in PT Bank Pan, Indonesia and a 24 per cent stake in Malaysia's AMMB Holdings (AmBank).
Mr Hodges said the bank remained committed to the region, with 100 per cent ANZ-owned bank branches in China still serving institutional clients.
The sale will see COSCO and Sino-Poland Enterprise each acquire a 10 per cent stake in SRCB. It is subject to closing conditions and regulatory approvals and is expected to be completed by mid-2017.
Shares in the bank rose 1.7 per cent on the move, to close at $30.94 on Tuesday.