Westpac taps Goldman Sachs for wealth assets sell-off

Westpac says it will move its wealth platforms business into a ‘specialist businesses’ division Picture: Getty Images

Investment bank Goldman Sachs is believed to be working with Westpac to assess options for the retail bank’s wealth management assets, which are expected to be placed up for sale.

Westpac announced on Monday, while delivering its interim results, that it would move its wealth platforms business into a “specialist businesses” division, overseen by Jason Yetton, along with other units that were non-core.

These include its auto loans business, Pacific Bank and insurance operations.

Previously, investment bank Morgan Stanley has had a role working on the auto loan assets, which were earmarked for sale, while JPMorgan had been hired to sell its life insurance arm.

However, the understanding is that Goldman Sachs has been close to Westpac when it comes to its wealth management operations and may have even been discretely sounding out the market to test buyer interest.

Another bank may also be mandated to handle its Pacific Banking business.

The assets are expected to appeal to a range of buyers, but major private equity firms such as Blackstone, TPG Capital, Kohlberg Kravis Roberts, The Carlyle Group and JC Flowers are seen as the obvious contenders. However, most are spoiled for choice right now when it comes to options.

Other Australian banks are also selling their wealth management operations, including Commonwealth Bank and NAB, which is offloading MLC.

Banks are searching for cash as COVID-19 and lower interest rates affect their profits.

This week, Westpac chief executive Peter King announced the bank had deferred a first-half dividend decision on the back of the pandemic and announced a 70 per cent fall in its cash profit to $993m, its lowest interim profit in almost two decades.

Westpac’s results came as analysis of the major banks’ reporting season showed a combined slump of almost 43 per cent in interim profits, including CBA, which has a June 30 year end.

Analysts estimate Westpac’s wealth platform could be worth between $700m and $1bn, while its insurance business could be worth between $500m and $1bn.

Its car loans, equipment and auto loans business were earlier estimated to be worth $4.9bn.

Citi analysts in a research note said a potential sale of wealth operations by Westpac was a positive for groups such as Netwealth and HUB24, with industry consolidation also to be positive.

The assets in the specialist businesses unit are subject to a strategic review.

Westpac, with its Panorama wealth management platform, is the largest platform provider in Australia. It has a 19 per cent market share, and it started a price war in 2018 by lowering its platform pricing.