Westpac likely to delay capital management in Pillar 3 statement

Westpac is unlikely to complete a quartet of buybacks by the major banks when it releases its Pillar 3 statement on Tuesday.

Westpac CEO Peter King. Picture: Jonathan Ng

Westpac chief executive Peter King is unlikely to unveil a capital management initiative when it releases its Pillar 3 statement on Tuesday, with the bank failing to schedule a call with investors and previously dispensing with quarterly trading updates.

Commonwealth Bank set the industry standard last week with a $6bn buyback after a strong operating performance and completion of a raft of asset sales.

Before that, ANZ Bank and National Australia Bank announced buybacks worth $1.5bn and $2.5bn, respectively.

With three of the big four set to return up to $10bn to shareholders, Westpac is the only one yet to spend some of its surplus capital, despite Macquarie Research saying in a note that the bank will report a sector-leading common equity tier one ratio of 12.9 per cent.

Westpac is considered likely to launch a buyback when it reports its annual result on November 1.

Meanwhile, the PNG competition regulator heard from Mr King in hearings conducted last week over Kina Bank’s proposed purchase of 89.9 per cent stake in Westpac Bank PNG.

Kina said last December it would pay up to $420m for Westpac Fiji and the majority stake in Westpac Bank PNG.

Mr King told the Independent Consumer and Competition Comission that it was Westpac’s strong desire to divest its PNG business as a going concern.

“While it’s a difficult decision to exit PNG, it is one based on commercial realities,” he said.

“Sitting in Westpac’s portfolio, the PNG business has not been and will not be prioritised for investment or growth.

“As a result, Westpac PNG could not be regarded as a vigorous or effective competitor now or in the future, particularly in a market with such a big number one player which has economies of scale.”

Westpac, he said, did not identify any other potential buyers, so the only option would have been to run the business down and seek an exit whenever possible.

Kina said it had outlined a ­vision of greater competition, more innovation and increased customer choice for the country if the PNG part of the acquisition is approved.

Chief executive Greg Pawson outlined a 25 million PNG kina ($9.7m) investment in technology and digital innovation, expanding the current Westpac Bank PNG branch network by half in the first three years after the transaction.

“We will expand the distribution footprint of banking services across PNG to reach more Papua New Guineans,” Mr Pawson said.

“We will retain the existing Westpac corporate structure, banking licence, operations and technology – and simply rebrand as East West Commercial Bank.”

The new brand, he said, would also be used for Westpac Fiji, and positioned as PNG’s international bank brand.

The multibrand strategy would see East West Commercial Bank compete with Kina Bank, and provide customers with a full range of competitive financial services.

Originally published as Westpac likely to delay capital management in Pillar 3 statement