Seal Media Group, Australia
ANZ institutional bank managing director for Australia Tammy Medard said the bank was seeing many large customers move away from a just-in-time approach to sourcing goods given the challenges thrown up by the pandemic. “We’ve seen some customers opting for airfreight where they didn’t really have the opportunity to wait for the containers to move,” she said. The accelerated opening-up of markets such as the US and Europe was also creating “a lot of competition” for volume from suppliers, Ms Medard said. The supply dynamics were prompting many customers to pre-order goods earlier or purchase stock in larger quantities, often to lock in prices. “We are seeing a lot of that … it’s actually filtering in through industrial warehousing so we’re seeing significant growth from an industrial property perspective as companies are opting to get their hands on the goods when they can, and hold it onshore in an industrial warehouse to make sure they have certainty,” she said. Ms Medard noted that the past 18 months had underpinned more consideration by ANZ about how to better use technology and data to improve supply chain functionality for its largest customers. The bank has a project team working on how to better link the tracking and financing of goods, which it believes will benefit customers but also ANZ’s risk management. “This is some of the stuff we’re really starting to get under the bonnet of … the use of data and technology to be able to streamline supply chains, know exactly where your goods are and also from a financing perspective know where your security is,” Ms Medard said, noting it wouldn’t be long before supply chains would connect automatically. She likened the project in supply chain improvement to an initiative announced by ANZ jointly with Commonwealth Bank, Westpac, IBM and Scentre last year involving a blockchain platform that cut the time to issue a bank guarantee from a month to a day.Ms Medard – who was elevated to her current role about a year ago – said ANZ’s largest corporate customers had moved on from the pandemic’s early days in 2020, when balance sheets were shored up to the tune of $7bn in credit growth for the month of March. Mergers and acquisitions were now a big focus as many companies were flush with capital and seeking growth via deals over capital expenditure. “M&A activity is through the roof,” she quipped. “There’s nothing that’s giving me any concern that it’s going to pare back.”ANZ’s first-half results showed income in the Mark Whelan-led institutional division declined to $2.51bn in the six months ended March 31, as markets revenue fell following a very strong period a year earlier. But corporate finance income rose.Across the economy and including outbound deals, announced Australia M&A is sitting at a record year-to-date tally of almost $US291bn as at September 7, according to Refinitiv. Even excluding outbound transactions, Australia targeted M&A is at historic highs so far in 2021, as deals such as Bank of Queensland’s purchase of ME Bank and the $21bn Santos and Oil Search marriage are consummated.Citigroup’s Australia chief Marc Luet is also confident robust M&A will continue well into 2022, last week saying “conditions are right for these transactions”. Ms Medard said her optimism on M&A activity centred on the strength of company balance sheets, non-performing loans sitting at record lows and “pretty reasonable acquisition prices” being tabled.“We’re seeing cash balances at 20 per cent higher levels than they were pre Covid,” she added. “I will be keeping my eye on whether we are seeing M&A activity or asset prices stay reasonable. “Will we start to see spikes (in prices), will we start to see highly leveraged deals? To me, to be honest, Covid or no Covid, that’s the kind of stuff that worries me if I start seeing that kind of behaviour. “I’ve actually seen people being quite prudent and even erring on the side of conservatism.” ANZ is also targeting more growth in the domestic institutional bank in areas including property, health, technology and sustainable finance. Last month, ANZ joined BNP Paribas and Rabobank as a co-ordinator on supermarket giant Coles Group’s $1.3bn in four-year sustainability-linked loans, which replaced existing debt commitments. Coles is incentivised through margin adjustments to achieve and accelerate sustainability targets related to emissions, reducing waste to landfill and increasing the percentage of women in leadership roles. Separately, ANZ’s Ms Medard shrugged off questions about Commonwealth Bank’s intentions to step up its presence in institutional banking and lending to small and medium businesses. She said CBA’s plans didn’t worry her and cited the 2021 Peter Lee Associates survey that ranked ANZ the top institutional bank for outright and lead banking relationships for a sixth straight year.ANZ’s institutional bank is also pushing further into the payments sector, with its interim results showing it introduced the ability for customers to track cross-border payments via digital platforms. It increased the number of real-time New Payments Platform payments for other banks by 115 per cent in the first half, compared to the same period in 2020.Ms Medard said smaller regional banks or large foreign banks didn’t necessarily want to make the domestic infrastructure investment for the real-time payments platform, and ANZ saw that as a good way to service other players. She is also closely monitoring the work life balance of staff caught in Melbourne and Sydney’s extended lockdowns, and to ease pressure decided for September to cancel all non-regulatory internal leadership team meetings.