ANZ harvests $2.4bn loans

The move is the latest in a string of acquisitions for the cashed-up ANZ as it takes advantage of fallout from the global financial crisis.

The loans book was operated inside AWB's Landmark rural services business. It also comes with about $300 million in debentures, which ANZ expects to eventually convert to deposits.

ANZ will take charge of the lending book for essentially no cost, meaning its obligation is to set aside $160 million in capital backing for the loans.

The sale allows AWB to immediately free itself of $2.1 billion of debt. It also stands to release $155 million in cash for AWB, given that it will no longer need to hold capital to back the loan. There is potential for an additional $13 million over time.

Still, with the loan book being transferred at net asset value, AWB warned it would take a one-off loss on the deal of $62 million this financial year.

AWB has had its loans book on the block for nearly a year. The skyrocketing cost of funding has seriously squeezed returns and made it tougher to provide financing for its farm-based customers.

Given tough growing conditions over recent years, the farm sector has relatively low debt levels. This means the sector could be a key growth market for banks as commodity prices begin to recover and farmers look to expand.

But with agribusiness banking, the economic cycles are often more volatile and banks need to be prepared to stand by farmers for long periods during the down times.

ANZ's commercial banking boss, David Hisco, said the acquisition fitted well with the bank's so-called super regional strategy that is, its ambition to expand across Asia.

Demand for food and soft commodities throughout the region was forecast to grow substantially over the next decade, he said.

"The super regional strategy is not just about Asia, it's about bulking up here in Australia as well," Mr Hisco told BusinessDay.

In recent months, the bank has spent more than $2 billion acquiring small banks across Asia as well as the ING Australia wealth management business.

The move will see ANZ jump from third spot to second behind National Australia Bank in terms of agribusiness.

As part of the deal, ANZ has also secured a distribution and referral arrangement with AWB's Landmark rural services business, giving the bank access to about 100,000 customers.

Following the deal, ANZ's tier-1 capital ratio a measure of its capital strength will slip to 9.9 per cent, from 10.6 per cent at the end of September.