(Reuters) - Australia's fourth-biggest bank ANZ Group ( ANZGF ) said on Wednesday it has agreed to sell a 16.5% stake in Malaysian lender AMMB Holdings for 3.85 ringgit ($0.8134) apiece through a block trade.

The deal has been upsized to a 16.5% stake sale from 9% previously agreed on March 5, according to a term sheet seen by Reuters.

The offer price is a discount of 8.3% to the closing price of AMMB's shares of 4.20 ringgit on Tuesday.

ANZ's shareholding in AmBank will reduce to 5.2% from 21.7% once the sale is completed.

The stake sale is in line with ANZ's strategy, which includes shrinking key business lines involving low-returning institutional loans and its exposure to retail and wealth banking in Asia as it looks to boost its return on equity.

Proceeds from the sale will increase ANZ's CET1 ratio by 16 basis points, but would not have an incremental impact on profits, the bank said.

The settlement of the sale is expected to take place on March 8.

($1 = 4.7330 ringgit)