Westpac (ASX:WBC) makes $420 million sale

Fiji and Papua New Guinea businesses are being sold off, as Westpac continues to get rid of its non-core operations.

| More on:
sale of asx share business represented by piles of cash sitting on pacific island

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Westpac Banking Corp (ASX: WBC) has sold its Pacific operations to Kina Securities Ltd (ASX: KSL) for $420 million.

The Australian bank announced to the ASX before Monday's opening that Westpac Fiji and Westpac's 89.91% ownership in Westpac Bank PNG will be handed over to Kina Bank sometime before September.

The two arms are currently known together as Westpac Pacific. The business generated cash earnings of about $11 million for the bank's 2020 financial year.

As of the end of September, Westpac Pacific had $580 million in net assets, $1.58 billion on its loan books, deposits of $2.34 billion and risk-weighted assets totalling $2.9 billion.

Westpac exiting non-core businesses

Westpac specialist businesses and group strategy chief Jason Yetton said the sale occurred from the company's decision to focus on its core domestic operations.

"We are taking another step in becoming a simpler, stronger bank while ensuring a high standard of banking services is maintained for our Pacific customers."

As part of the same strategy, Westpac last week sold Westpac General Insurance and Westpac General Insurance Services to Allianz for $725 million.

Yetton said Kina Bank is the right buyer for Westpac, its staff and the customer communities.

"We are pleased our Pacific businesses are being acquired by Kina Bank. Kina is a strong brand in the region and is well positioned with deep local knowledge to continue to help our consumer and business customers succeed."

Westpac revealed $315 million would be payable at the completion of the transaction, which still has regulatory approvals to cross. Another $60 million will be paid afterwards in six-monthly instalments for Westpac PNG, plus up to $45 million in annual earn-out payments for Westpac Fiji.

"It is expected there will be an accounting loss on sale of approximately $230 million, including a foreign currency translation reserve (FCTR) loss which will be based on exchange rates on completion," announced Westpac.

Kina Bank is a Papua New Guinean financial services company that is listed on the ASX, with a market capitalisation of $235.8 million, and on the Port Moresby Stock Exchange.

Westpac's announcement comes after a rough week in which it agreed to an enforceable undertaking with the Australian Prudential Regulation Authority (APRA) to improve its risk governance.

APRA found the bank had an "immature and reactive risk culture, unclear accountabilities, capability shortfalls and inadequate oversight".

Motley Fool contributor Tony Yoo has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on Share Market News

Three healthcare workers look and point at at medical image
Share Market News

Pro Medicus shares surge 10% to crack $300 as healthcare leads ASX 200 sectors

Pro Medicus shares just keep on going, rising 625% over the past three years.

Read more »

Magnifying glass in front of an open newspaper with paper houses.
Share Market News

How did ASX REITs vs. residential property investment perform in FY25?

We review the share price growth of the largest ASX REITs vs. residential property investment in FY25.

Read more »

A man and woman sit next to each other looking at each other and feeling excited and surprised after reading good news about their shares on a laptop.
Broker Notes

These ASX 200 shares could rise 55% to 65%

Analysts think these shares are dirt cheap at current levels.

Read more »

Young man with a laptop in hand watching stocks and trends on a digital chart.
Broker Notes

Top brokers name 3 ASX shares to buy next week

Brokers gave buy ratings to these ASX shares last week. Why are they bullish?

Read more »

a man sits at his desk wearing a business shirt and tie and has a hearty laugh at something on his mobile phone.
Broker Notes

Why DroneShield, Nickel Industries, and CSL shares could be best buys

Let's see why Bell Potter is so bullish on these shares.

Read more »

A group of executives sit in front of computer screens in a darkened room while a colleague stands giving a presentation with a share price graphic lit up on the wall
Opinions

2 ASX 200 large-cap shares that this fundie is cashing in after phenomenal growth

Shaw and Partners portfolio manager James Gerrish says he knows this will be an 'unpopular call'.

Read more »

Animation of a man measuring a percentage sign, symbolising rising interest rates.
Share Market News

Here's what Westpac says the RBA will do with interest rates next week

Are interest rates heading lower again? Let's find out what the banking giant is predicting.

Read more »

A handsome smiling man sits in the front seat of an electric vehicle with his hands on the wheel feeling pleased that the Carsales share price is going up and the company will shortly pay its biggest dividend ever
Share Market News

Are electric vehicle stocks a good investment today?

Did US President Trump just kill the EV industry?

Read more »