Robyn Edie/StuffWestpac says that as part of its “fix, simplify and perform” strategy, it is considering the businesses it operates.Westpac is considering a “demerger” of its New Zealand business. In a statement to the sharemarket, the bank said that as part of its “fix, simplify and perform” strategy, it was actively considering the businesses it operated in. That had involved consolidating Asian businesses. “Westpac is also assessing the appropriate structure for its New Zealand business and whether a demerger would be in the best interests of shareholders. Westpac is in the very early stage of this assessment and no decisions have been made. READ MORE: * Government’s banker Westpac warned by Reserve Bank over risk failures * Reserve Bank says banks ‘stepped up’ during Covid-19 – despite slap from Government * NZ banks not allowed to pay dividends until recovery, RBNZ announces Stacy Squires/StuffThe local banking industry could be in for a shake-up if Westpac decides to sell off its New Zealand business. “This will also consider the impact of the Reserve Bank of New Zealand’s (RBNZ) reviews which were announced today.” It said Westpac NZ was a valuable part of the Westpac Group and had been for more than 160 years. “The business continues to perform well with a strong position in retail and commercial banking. However, given the changing capital requirements in New Zealand and the RBNZ requirement to structurally separate Westpac’s NZ business operations from its operations in Australia, it is now appropriate to assess the best structure for these businesses going forward.” From next year, banks will be required to hold more capital against their lending. It was reported on Wednesday morning that Westpac, banker for the Government, had been ordered by the Reserve Bank to pay for two independent reports into its risk governance processes.ROBERT KITCHIN/STUFFFinancial Markets Authority chief executive Rob Everett and Reserve Bank governor Adrian Orr deliver the findings of their joint review into the conduct and culture of banks in New Zealand. The Reserve Bank, which is tasked with ensuring the stability of the financial system, said the Australian-owned bank needed to take a “close look” at its risk governance practices. “We have experienced ongoing compliance issues with Westpac NZ over recent years, most recently involving material failures to report liquidity correctly, in line with the Reserve Bank’s liquidity requirements,” deputy governor Geoff Bascand said. Bascand said Westpac had continued to operate outside its own risk settings for technology for a number of years. A spokesman said the bank would not comment further on the potential sale which has been greeted with some surprise by banking experts like Claire Matthews, of Massey University. She said it was something she would expect the bank to be considering but the timing was surprising given the bank was making reasonably good profits.MARK TAYLOR/STUFFReserve Bank of New Zealand governor Adrian Orr may want to have say over any purchaser of Westpac NZ, according to KPMG head of banking and finance John Kensington. The bank reported a profit drop of 38 per cent in the year to September 30, making $649 million. KPMG head of banking and finance John Kensington said it would be interesting to see how the whole process played out and it could take up to a year or more. “In a way it might be quite exciting, I am not too sure how Westpac might look at potentially disposing of their New Zealand operation but it may mean an IPO (initial public offering) on the New Zealand Australian stock exchange if there was interest from the public, and there might be because there is a lot of investor money out there looking for a home.” Kensington said he doubted any of New Zealand’s big three trading banks would be allowed to buy Westpac’s New Zealand business because of the competition issue, and any purchase might well require regulatory approval from the Reserve Bank and possibly the Commerce Commission. However, he believed it was an attractive proposition for a mid-sized bank owned by one of our overseas trading partners because the New Zealand economy had come through Covid-19 comparatively well.SuppliedMassey University professor of banking David Tripe says Westpac may struggle to find a buyer for its New Zealand arm. Massey University professor of banking David Tripe is more cautious about the prospects of a sale outside New Zealand because of the difficulty in finding a buyer prepared to make such a large purchase. “We are talking about a transaction in the region of NZ$10b-$15b and I think Westpac would be looking for closer to $15b. “I don’t think the Reserve Bank will be incredibly keen on having it purchased by a private equity firm, for example, because with banks you want some stable ownership and solidity, you don’t want a fly-by-night profit grabber. All of that will make a potential purchase a bit challenging.”Stuff
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