OREANDA-NEWS. Fitch Ratings says Macquarie Group Limited's (MGL; A-/Stable) agreement to acquire the Esanda dealer finance portfolio from Australia and New Zealand Banking Group Limited (ANZ; AA-/Stable) for AUD8.2bn will not affect the ratings of MGL, its Australian bank subsidiary, Macquarie Bank Limited (MBL; A/Stable), and ANZ. The acquisition further increases MGL's exposure to more traditional leasing and lending activities, while the sale continues ANZ's focus on its core activities and releases a modest amount of capital.

We believe the deal is likely to improve MGL's earnings stability, while the funding and capital requirements have been largely offset through new facilities and capital management activity. We do not anticipate a material weakening of MGL's funding structure or liquidity as a result of the acquisition as the group's policy requires long-term assets to be funded with long-term liabilities. Most of the non-equity funding component will be met through a new third-party facility.

The portfolio will carry a Tier 1 capital requirement of about AUD800m. This is to be funded through a AUD400m institutional equity placement, a share purchase plan for retail shareholders, and earnings retained from the group's 30 September 2015 (1H16) half year profit. MGL expects the half year profit will be up 55% on 1H15's net profit after minority interests of AUD678m, while the dividend payout ratio is likely to fall to 50% in 1H16 from 62% in 1H15. As a result, we expect there to be limited negative impact on capital at MGL or MBL. We also believe MGL's capital position is well placed for upcoming regulatory changes. The group carries excess capital and also has a significantly smaller residential mortgage portfolio than Australia's major banks.

ANZ expects the sale to increase its Common Equity Tier 1 ratio by about 20bps. This is part of a broader trend, which we expect to continue, where the capital holdings of Australia's large banks increase as regulators seek to improve the resilience of the financial system.

MGL's Australian motor vehicle finance portfolio will almost double as a result of the acquisition, leaving it as one of the leading players in the market. The asset quality of the acquired receivables appears to be broadly in line with MGL's existing portfolio, while MGL expects the acquisition to be earnings accretive in the first year. The Esanda portfolio consists of AUD6.2bn of retail receivables and AUD1.6bn of wholesale finance provided to dealers, equivalent to 11% of MGL's gross loans at end-FY15. MGL and ANZ expect the deal to close by 31 October 2015, with all assets transferred by 31 March 2016. Australia's competition regulator has already indicated it has no objections to the deal.