Myanmar Approval for ANZ Shows Institutional Banking Hunt

Myanmar’s regulators, in granting bank licenses to nine foreign lenders yesterday, sought companies that could lure investment to a nation emerging from five decades of economic isolation.

The 25 banks that applied for licenses were expected to engage in institutional banking to facilitate the entry of foreign investors, said Andrew Geczy, Australia & New Zealand Banking Group Ltd. (ANZ)’s chief executive officer for international and institutional banking. ANZ was among the banks that won approval, along with Industrial & Commercial Bank of China Ltd.

The lenders are among foreign companies seeking to gain a foothold in Myanmar as the nation reconnects with the global economy following 50 years of military rule. Myanmar’s economy is projected by the World Bank to grow 7.8 percent this year, faster than the 4.8 percent predicted for developing nations.

“Our focus is really going to be on serving foreign multinationals and assisting the local financial institutions locally in their activities,” Geczy said in an interview from Melbourne yesterday. “The banking regulator did not really want to have a group that was competing on retail banking.”

ANZ opened a representative office in Yangon, Myanmar’s largest city, last year as it expands in emerging nations that are growing faster than its home market. Australia’s third-largest lender is close to lending in Thailand and plans to expand in India, Farhan Faruqui, head of ANZ’s international-banking unit, said in a Sept. 17 interview.

Coca-Cola, Ford

Companies from Coca-Cola Co. to Ford Motor Co. are investing in Myanmar, betting that economic development in a country almost the size of Texas will spur purchasing by its 66 million people. Myanmar’s economic output is expected to total $60 billion in 2014, compared with $374 billion in neighboring Thailand, according to the International Monetary Fund.

Mitsubishi UFJ Financial Group Inc. (8306), Sumitomo Mitsui Financial Group Inc., Mizuho Financial Group Inc., Bangkok Bank Pcl, Malayan Banking Bhd., Oversea-Chinese Banking Corp. (OCBC) and United Overseas Bank Ltd. also won preliminary licenses valid for 12 months in Myanmar.

During that period, the lenders will have to satisfy commitments they made in their requests for licenses, demonstrate functional banking operations and comply with other requirements from the Central Bank of Myanmar, the country’s foreign bank licensing committee said in a statement yesterday. If they are able to meet these criteria, the central bank will grant the final license.

Support Development

The selection committee had chosen foreign banks that “can support market development in Myanmar,” Central Bank of Myanmar Chairman Kyaw Kyaw Maung told reporters yesterday in Naypyidaw, the country’s capital.

OCBC, which has had a representative office in Yangon for the past 20 years, will offer services from cash management, project financing and trade finance to treasury and capital markets advisory to clients, the Singapore-based bank said in a statement yesterday.

Myanmar signed a foreign investment bill in 2012 to woo more interest from overseas corporations. The same year, the U.S. started easing economic sanctions against the Southeast Asian nation after President Thein Sein began a democratic process that elected opposition leader Aung San Suu Kyi to parliament after 15 years of house arrest.

Strong Prospects

Moody’s Investors Service said in April unrated Myanmar’s “strong growth prospects” are supported by the start of economic reform after its years of isolation from the global financial community. The country’s gross domestic product growth should exceed 10 percent over the next five years, ANZ said in yesterday’s statement.

“If you look at the growth in some of the key sectors we have there, whether it is natural resources or infrastructure, it’s clear that there is a significant opportunity for us in Myanmar,” Geczy said.

ANZ employs around 8,500 people in international and institutional banking in Asia. The bank plans to lend locally in Thailand, where a license has been granted, Faruqui said. The bank was authorized to operate in India in 2011.

“Growing our client base in Asia is going to remain our focus,” said Faruqui. “Asia is the growth center of the world.”

Source: Bloomberg Businessweek

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