Westpac sells Pacific division to Kina Bank

Westpac takes further step to trim its international operations, selling Pacific businesses to ASX-listed Kina Bank for up to $420m.

Westpac is retreating from international markets, selling its Pacific businesses to ASX-listed Kina Bank. Hollie Adams/The Australian

Westpac has taken a further step to scale down its international presence, offloading its Pacific banking businesses to ASX-listed Kina Bank for up to $420m.

Kina’s shares surged more than 13 per cent on the news, rising to 94c on Monday. Westpac’s shares closed steady at $20.27.

The sale of Westpac Fiji and the bank’s 89.91 per cent stake in Westpac Bank PNG comes months after the lender said it would prioritise its Australian and New Zealand businesses and flagged a move to consolidate its international operations into three branches across Singapore, London and New York.

The sale price is made up of $315m, payable at completion, and a further $60m to be paid on a six-monthly basis over the following 18 months.

It also includes earn-out payments of up to $45m over 24 months, which are subject to Westpac Fiji’s business performance over the period.

Westpac expects a $230m accounting loss on the sale, including a foreign currency translation reserve loss based on exchange rates at completion.

Announcing the sale to the market, Westpac chief executive for specialist businesses and group strategy, Jason Yetton, said it followed the strategic decision taken in October to focus on consumer, business and institutional banking in Australia and New Zealand.

“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 well as providing new opportunities for our people,” Mr Yetton said.

Kina chief executive Greg Pawson, who was previously Westpac’s regional head of South Asia Pacific, said the acquisition would allow the lender to achieve scale and enhanced its regional footprint

“We are very excited about this opportunity and creating a stronger and more effective banking competitor for PNG and Fiji.

“The acquisition is perfectly aligned with our current strategy to be a dynamic and innovative full service regional bank with a market leading digital platform,” Mr Pawson said.

The sale to Kina comes months after Westpac chief executive Peter King refused to rule out selling the bank’s Pacific operations to a Chinese buyer, telling a parliamentary committee that “all considerations” would be taken into account as part of the review.

“That (strategic review) process is ongoing and we haven’t made any decisions about what we will do,” he said at the time.

Westpac on Monday said it was pleased the businesses were being acquired by Kina Bank.

“Choosing the right purchaser for our businesses is important to us, our people and the communities we serve,” Mr Yetton said.

As part of its retreat from the international market, Westpac in October said it would shutter its operations in a number of countries, including China, culling about 200 staff in the process.

Alongside the sale of its Pacific businesses, the bank will wind up its presence in Beijing, Shanghai, Hong Kong, Mumbai, and Jakarta over the coming 12 to 24 months.

Westpac expects the sale, which is subject to regulatory approvals in Fiji and PNG, as well as approval by Kina shareholders, to be completed by the second half of fiscal 2021.