Business
ANZ's Micronesia Thrust
ANZ Acquision Marks New Chapter For Two Banks
The purchase agreement between Guam’s Citizens Security Bank and ANZ, Australia’s third largest bank, signals the beginning of new chapters for both institutions and for the financial services industry in Guam. Though ANZ has locations in 28 countries around the world, 11 of which are in the Pacific, the $25 million deal—still subject to shareholder and regulatory approval—will mark the beginning of the bank’s expansion into the islands north of the equator.
“It is our hope that this is just the first step,” said Michael Guerin, ANZ managing director, Pacific, “to build, essentially a business model and an operation that looks similar to what we presently have in both the Melanesian Pacific and Polynesian Pacific.” ANZ is the largest bank in the Pacific with more than 1,500 employees and 48 branches in the region. American Samoa, in which the bank began operations in 2001, remains the only other Pacific U.S. location that the bank serves (it has an office in New York). “Guam is the logical starting point. [It is] the regional center, if you like, of Micronesia and the only place with the style and the strength in our view, to start working our way into Micronesia.”
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As the acquisition brings ANZ into the “Micronesian Pacific,” it significantly expands the range of services to be offered by Citizens Security Bank. CSB is Guam-owned and was incorporated in 1990. It has four branches, all in Guam, and 67 employees. The bank handles six percent of the commercial bank loans in Guam and seven percent of total deposits. The bank has an impressive record—during each of the past six years, it has posted record net income gains which grew by 24 percent during 2005 and again during 2006, when it grew from $1.37 million to $1.70 million. Loan delinquency ratios have dropped to below one percent for the last two years.
CSB will retain its name, management team and employees. All CSB board members have been asked to stay on and Kurt Moylan will continue as the bank’s board chairman. While the bank’s shares have a net book value of $36.60, shareholders will receive $59 per share in this transaction.
Our primary emphasis has been small business loans, [U.S. Small Business Administration] loans and home mortgage finance,” said Larry Butterfield, who will continue as the CSB president and chief executive officer. While the bank will continue to offer those products, the merger will permit it expand its services significantly. Citizens is making plans to operate ATMs and implement online banking, both of which it has not offered previously.
While ANZ intends to rely on the CSB management’s experience and market knowledge as it commits to specific products, it acknowledges its ability to engage in activities only afforded by a bank with ANZ’s assets and network. “We won’t necessarily run ANZ’s model straight through Guam through CSB,” said Guerin. “We’ll sit down and talk about what the obvious opportunities are. We can see things like, for example, trade finance as being a logical product add-on to existing CSB customers. We have a lot bigger balance sheet so we’re able to do some of the big lending...the lease financing, the performance guarantees and all those pieces for our existing clients.”
Those activities—trade finance and large loans—will fill a banking niche that was vacated a little more than four years ago when, after 26 years in Guam, global banking giant HSBC left the island after complaining about local statutory restrictions on foreign banks. “Our leaving...reflects the fact that it is made so very difficult for us to bank here,” said Guy Priestley, then-HSBC chief executive officer in a 2003 interview. “We’re not allowed to take deposits. We’re not allowed to do checking and savings. We’re not allowed to have more than one branch and we’re not allowed to have an ATM network.”
By purchasing CSB’s local charter, ANZ avoids those restrictions. Interestingly, one of the factors in Citizens’ solid performance was its purchase of about $30 million of the more attractive loans from HSBC’s portfolio as the British bank was leaving.
Real estate developer Michael Ysrael welcomes ANZ’s entry into Guam. “In the free enterprise system, more competition ends up benefiting the customer, always,” he said. He is hopeful that as the bank grows in Guam, it does indeed commit more capital into the market. “It’ll be a nice replacement for [HSBC].”
Guerin emphasized that ANZ is coming into Guam to stay. “One of the things that we’re very proud of and that supports our brand in the Pacific is we have never, ever withdrawn from a geography that we’ve gone into,” he said. “We operate in some pretty harsh environments in the Melanesian Pacific, places like Timor, Papua New Guinea and in the Polynesian Pacific...Once we’ve made a decision to enter we treat it long-term investment and we work through the thick and the thin.”
Butterfield summed the bank’s new position in the Guam market: “What it really does is it enables us to compete effectively with our good friends: Bank of Hawaii, First Hawaiian Bank and Bank of Guam. That’s the exciting part.”
