Australia will provide ANZ with a decade-long loan guarantee of A$2 billion ($1.26 billion) to ensure the bank maintains its branch network across the Pacific. This move is perceived as a diplomatic triumph amid heightened regional competition with China.
The federal government assesses the probability of needing to utilize the guarantee as "very low." The agreement includes an annual fee that ANZ will pay to Canberra.
As part of the arrangement, ANZ will inject an additional A$50 million into its Pacific banking operations to bolster existing services and enhance its digital banking capabilities, according to a statement released by the bank on Friday.
This development aligns with efforts by Australia and the United States to fortify financial ties in the Pacific. In July 2024, officials from both countries committed to improving banking services in the region, aiming to address the challenges faced by Pacific Island nations in accessing global financial systems.
Numerous small Pacific nations have been grappling with the repercussions of Western banks scaling back their operations, leading to limited access to U.S. dollar-denominated accounts. This situation has provided an opportunity for Chinese financial institutions to expand their footprint in the region.
ANZ CEO Shayne Elliott revealed to Reuters in July 2024 that the bank's Pacific operations, although the largest network in the region, were not profitable, prompting discussions with the Australian government about their future. The company anticipates the loan guarantee to become effective in the second half of 2025.
In 2024, the Bank of China sealed a deal with Nauru to explore financial prospects, highlighting Beijing's strategic advancement in the area.
Currently, ANZ's shares are trading 0.1% lower compared to a steady broader financials sub-index.
($1 = 1.5911 Australian dollars)