ANZ writes down Malaysia bank stake after 1MDB settlement

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ANZ will write down the value of its holding in its Malaysian affiliate after AmBank reached a settlement with Kuala Lumpur over the multibillion-dollar 1MDB embezzlement scandal, potentially clearing the way for a stake sale. 

The Australian bank said on Monday that it would take a A$212m ($164m) haircut on the carrying value of its 24 per cent stake in AmBank, which will drop to A$850m. 

AmBank on Friday reached a RM2.83bn ($698m) settlement with Malaysia’s finance ministry as Kuala Lumpur continues the clean-up of the scandal involving 1MDB, from which the US Department of Justice alleges $4.5bn was stolen. 

“With this settlement, the payment of the monies will be expedited, instead of being held up by lengthy court battles, and can be utilised to fulfil 1MDB’s outstanding obligations,” Zafrul Aziz, Malaysia’s finance minister, said in a statement. 

Nathan Zaia, an analyst at Morningstar, a research group, said that given ANZ’s A$74bn market capitalisation, the AmBank writedown was not material, but that the agreement would remove a risk for any potential acquirer of the bank’s 24 per cent stake in AmBank. 

ANZ is in the process of selling off a string of Asian investments as it refocuses on its core Australia market. This includes the disposal of its 20 per cent stake in Shanghai Rural Commercial Bank for A$1.8bn in 2017, and the sale of its 55 per cent holding in Cambodian joint venture ANZ Royal Bank to Japanese holding company J Trust in 2018.

As part of the settlement, Malaysia’s Securities Commission will require AmBank to take measures including improving due diligence systems. The lender has already paid RM53.7m in fines imposed by the central bank. 

AmBank was dragged into the scandal after Najib Razak — Malaysia’s former prime minister and founder of 1MDB — was accused of receiving illicit transfers from a former subsidiary of the fund into his personal accounts at the bank. 

Najib has been sentenced to 12 years in jail in a trial linked to these transfers and faces three more trials involving 1MDB and other government entities.

AmBank said in a statement that it had tightened governance. It added that while the settlement would “have a material impact on the current year’s profitability” the bank would not need to raise equity capital thanks to existing buffers.

The AmBank deal comes after Goldman Sachs in July struck a $3.9bn settlement with Kuala Lumpur linked to its involvement in arranging three bond sales for 1MDB in 2012 and 2013.

Shares in ANZ were up 1.3 per cent on Monday afternoon in Sydney. Trading in shares of AmBank was suspended on Monday and Tuesday pending an announcement. 

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