ARMED with new electronic systems and a wealth of experience in cross- border lending, The Australia & New Zealand Banking Group (ANZ) is on the expansion trail in the Middle East. Through the region-wide network of its wholly-owned subsidiary ANZ Grindlays, the bank has plans for developing its retail business and carving out a niche in the fledgling project financing sector.

'It is all part of the group's plans to develop the international business,' says ANZ's executive director Alister Maitland. 'We are really looking to expand in those parts of the world where growth rates are higher than the OECD average and the Middle East comes into that category.'

Electronic systems are at the heart of the expansion strategy. ANZ views technology as the key to developing its business in a region where new branch licenses are at a premium. 'There are constraints on how far you can expand your network,' Maitland explains. 'Technology can be used to get around that problem. We are bringing in platforms for electronic and PC (personal computer) banking and introducing new retail services into the market, such as ATM (automated teller machine) and credit cards.'

ANZ has transformed its strategy since the advent of new technology and foreign competition in its home market of Australia. 'Quite simply, our bricks and mortar network became a millstone around our necks and we had to rationalise,' Maitland says. 'Overseas, we know that we are not going to get all the branches we want. But we also know that a PC in an office puts the bank in the office.'

The PC-based system, ANZ Link, which allows corporate clients to open letters of credit and conduct other bank business from their office was introduced to the Middle East last year. On 1 March, ANZ Access arrived in the UAE. This is a combined ATM and electronic funds transfer at point of sale (EFTPOS) card which can be used in ANZ Grindlays' machines in the UAE. It can also be used in 60 other machines run by members of Nswitch, which is operated by the local Network International.

The card will work in more outlets when ANZ Grindlays joins the UAE Central Bank switch network later this year. At the same time, the bank intends to add to the card deposit and utility payment facilities through ATMs. The card will later be integrated into ANZ's international ATM network.

Being in a position to offer its services globally is a priority for ANZ. Says Maitland, 'It obviously improves the economies of scale. The incremental cost of putting new cards into a market are small, when the infrastructure is already in place internationally. Customers also want to be able to use our products, wherever they are in the world.'

The Gulf is a pilot site for the group's new commercial banking system (CBS). Over the coming two years all existing computer and paper-based processing, accounting and management information systems will be replaced. Bahrain is already linked into the network; the UAE joins in April. 'The bank is looking to move aggressively into the retail end of the market,' Maitland declares. 'Increasingly banks are having to ensure they have the funding back up so that they can meet the commercial demands.'

Similar thinking prompted the decision last September to recapitalise ANZ's two-branch operation in Oman into a joint-stock, locally-incorporated bank. ANZ has a minority stake in the new institution, The Oman Savings & Finance Bank (OSFB), and provides technical and management support.

'In Oman, locally-incorporated banks are in a much better position to take advantage of the local market and that is why we decided to restructure our operations,' David Smith, Middle East general manager for ANZ Grindlays, said last October. 'We will assist it through our international network and OSFB will act as our point of contact. The bank will also have a strong emphasis on project financing and cross-border lending, which we will be able to participate in through our on-going involvement.'

Project finance is the other main focus in the region. A new division, ANZ Investment Bank, was set up in London last year, pooling the group's project financing and cross-border lending expertise in a single unit. The bank has two personnel in the Middle East who work closely with the division on project finance and syndication activity.

ANZ's project finance experience in other markets should prove useful. 'We are on the ground in most of the regions where the technique is being used,' Maitland says. 'We have developed particular areas of skill in the energy, roads and airport sectors. For the Middle East, project financing is a relatively new market, but is an area where we have the ability to fill a niche.'

ANZ has already acted as co-leader on the $880 million financing package for Saudi Iron & Steel Company (Hadeed). The deal was one of the largest multi-export credit agency transactions to date in the region and indicative of the gradual shift away from traditional forms of financing for large- scale infrastructure and industrial projects. Bank officers say that other prospects are being pursued throughout the area, and in Pakistan, the UAE and Qatar in particular.

To top off all these plans, the bank wants to expand its current representation beyond five Gulf states, Jordan, the West Bank and Pakistan. It is considering establishing a presence in Lebanon and Azerbaijan and will move its UAE and Gulf headquarters into new offices in Dubai in mid-1997. 'For us, the Middle East is a very promising market, an area where we can add value,' Maitland says. 'We have the relations already established at the domestic end, which allows us to bring in our global product capabilities.'