Westpac NZ may be up for sale

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Forums › Finance and wealth management › Westpac NZ may be up for sale

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Smpl Mnmlst
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#2680114 25-Mar-2021 02:35

SepticSceptic:
k1w1k1d:

Yeah, time for another name change. I've been with them since the Canterbury Savings Bank days in the early 70's.

Wasn't Westpac a merger between CBA (Commercial Bank of Australia) and Wales Bank ? May have been Bank of New South Wales?
Recall my parents had CBA cheques..

Yep, that was the merger. In the early 1980’s. Bank of NSW was colloquially known as ‘the Wales’ - even in their own advertising - “You can bank on the Wales”.

And yes CSB became part of Trust Bank in 1984 after the deregulation of the NZ banking and finance system. In 1996 TB merged with Westpac NZ to become WestpacTrust. Later the ‘Trust’ was dropped from the name and it reverted to just Westpac.

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Stu1

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#2680120 25-Mar-2021 07:53

MaxineN:
https://www.rnz.co.nz/news/business/439034/westpac-nz-found-to-have-breached-mismatch-ratio-requirements

I think I might go back to ANZ.

ANZ were caught out as well in 2019 by the RBNZ for miscalculations on capital requirements, not to mention miss calculating loan payments and selling dodgy credit card insurance, none of the big 4 are squeaky clean

networkn

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#2680121 25-Mar-2021 07:59

I can think of things worse than Kiwibank purchasing Westpac... Another 10x more deadly pandemic, all the electricity in the world going out forever, oh, and ANZ purchasing them, but it wouldn't be so much worse... as just more as bad :)

sbiddle

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#2680134 25-Mar-2021 08:38

You very rarely get rid of a business that is doing well.. Why would Westpac truly want out, and who would be keen to buy something that Westpac no longer wanted?

This just reminds me of the My Food Bag IPO..

Earbanean

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#2680135 25-Mar-2021 08:40

This is really interesting. Why would they 'fly the kite' on the idea right now? The timing on an announcement this big isn't random. They either want to start generating interest for a sale they want to do, or maybe they're using the announcement for another reason. Maybe they're doing this to try to get the RBNZ to back off a bit around the liquidity limit breaches. i.e. 'if you penalise us too much, we'll just walk away'.

Note, the breaches weren't that they deliberately exceeded limits for 2 years. They were calculating the limits a different way and kept within those limits. Then they were subsequently told that their methodology was wrong. That's a slightly different case, but the subtlety kind of lost in the media.

Kiwibank would need backing to buy/merge. There's a lot of funds slopping around out there at the mo looking for investments, so that's possible. Maybe the Super Fund, Infratill etc could put something together. If it was going to be a big foreign bank, my money would be on one with an Asian focus - at a guess HSBC. Big Americans/Europeans like JP Morgan and UBS maybe less likely, although NZ has fared well through GFC and COVID so attractive and capital is really cheap for them to invest.

networkn

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#2680147 25-Mar-2021 08:46

With 600M in profits in a Covid year, one wonders, as others have intimated, what the 'real' reason behind this is.

Even if they get big fines, it's still good business. The fines aren't going to be in the hundreds of millions one presumes. You'd shrug and move on knowing in 2021 you'll probably make close to a billion as they have done in the past.

Feels very.... smoke screeny.

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sbiddle

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#2680152 25-Mar-2021 09:07

One key thing may be the BS11 requirements - banks in NZ are spending billions to be compliant with this. Maybe Westpac just see this as an opportunity to exit?

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#2680153 25-Mar-2021 09:10

ANZ bought National Bank while it was very profitable because the owner in the UK had other priorities than owning a NZ bank. Something similar apply to Westpac NZ if Westpac Australia have other priorities.

Earbanean

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#2680159 25-Mar-2021 09:18

networkn:

Even if they get big fines, it's still good business. The fines aren't going to be in the hundreds of millions one presumes. You'd shrug and move on knowing in 2021 you'll probably make close to a billion as they have done in the past.

They're not going to get a fine as such. The RB just announced that their capital requirements will go up until a full enquiry, review, assurance of controls etc is done. So that means they have to hold more capital and therefore it is more expensive to run the business on an ongoing basis until the RB is happy. They can't pass on the extra costs to customers due to the competitive market, so they'll just have to suck up lower profits for the time being.

Earbanean

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#2680162 25-Mar-2021 09:20

sbiddle:

One key thing may be the BS11 requirements - banks in NZ are spending billions to be compliant with this. Maybe Westpac just see this as an opportunity to exit?

Yep, that's right. BS11 is a very non-trivial cost and suck on resources and would definitely factor into this sort of decision.

networkn

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#2680164 25-Mar-2021 09:20

Earbanean:

networkn:

Even if they get big fines, it's still good business. The fines aren't going to be in the hundreds of millions one presumes. You'd shrug and move on knowing in 2021 you'll probably make close to a billion as they have done in the past.

They're not going to get a fine as such. The RB just announced that their capital requirements will go up until a full enquiry, review, assurance of controls etc is done. So that means they have to hold more capital and therefore it is more expensive to run the business on an ongoing basis until the RB is happy. They can't pass on the extra costs to customers due to the competitive market, so they'll just have to suck up lower profits for the time being.

Yes, but ultimately, it's temporary, it *delays* the delivery of profits right? Also, even if profits dropped from 680M to $300M which would be nigh inconceivable, it's not really material in the long term.

It's not likely tied to that IMO.

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Earbanean

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#2680170 25-Mar-2021 09:33

networkn:

Yes, but ultimately, it's temporary, it *delays* the delivery of profits right? Also, even if profits dropped from 680M to $300M which would be nigh inconceivable, it's not really material in the long term.

It's not likely tied to that IMO.

Yeah, they wouldn't sell WNZL because of this alone, but it will be a factor in any decision. Also, as I said above, the announcement could be just be 'flying a kite' to try to get the RB to back off a bit. i.e. if this resulted in the RB approving the review etc and reducing the capital requirements a bit quicker, then they'd save millions for the cost of a few press releases.

I'm not saying that is the case and is the reason for the announcement, but the timing of the announcement is interesting - being right after the RB announced the extra capital requirements etc. So it's interesting to speculate about all the motivations, strategies etc at play here.

networkn

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#2680176 25-Mar-2021 09:40

Earbanean:

I'm not saying that is the case and is the reason for the announcement, but the timing of the announcement is interesting - being right after the RB announced the extra capital requirements etc. So it's interesting to speculate about all the motivations, strategies etc at play here.

Inclined to agree that they probably aren't serious about selling. However, mention it, then people get interested, the right offer gets made and it happens anyway :)

MaxineN

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#2680178 25-Mar-2021 09:42

Stu1:
MaxineN:

https://www.rnz.co.nz/news/business/439034/westpac-nz-found-to-have-breached-mismatch-ratio-requirements

I think I might go back to ANZ.

ANZ were caught out as well in 2019 by the RBNZ for miscalculations on capital requirements, not to mention miss calculating loan payments and selling dodgy credit card insurance, none of the big 4 are squeaky clean

Right I forgot about that (and I got my refund too from credit card insurance and OD miscalculation recently!), I suppose none of the banks are clean but I've had less bad experiences with ANZ whilst Westpac managed to screw up a bunch.

Also no other bank does Airpoints rewards over debit cards as far as I know and that's a big thing for me. I haven't had the need for credit cards for a while and I know that ANZ do Airpoints rewards over their credit cards but debit cards is a preference for me.

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BlinkyBill

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#2680325 25-Mar-2021 12:46

“As part of Westpac’s fix, simplify and perform strategy we have been actively considering the businesses we operate in. Westpac has already placed a number of businesses into a Specialist Businesses Division, for ultimate exit. We have also announced the consolidation of our international operations in Asia.

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. This will also consider the impact of the Reserve Bank of New Zealand’s (RBNZ) reviews which were announced today.

Westpac NZ is a valuable part of the Westpac Group and has been for over 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.” (Westpac owner statement).

Although large in an NZ, the business is a bit of an outlier for the overall business, and when capital requirements make things even more difficult it’s appropriate to have a review.

What’s imperative here is shareholder return and value. Hence the fix, simplify, perform strategy the parent is currently undergoing.

Westpac NZ is a pretty profitable business standalone and would probably be a good investment as a retail investor. Large banking operations from Germany/China/India might be interested in acquiring the NZ business.

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