By Robb M. Stewart
MELBOURNE, Australia--Westpac Banking Corp. (WBC.AU) agreed to
buy the Australian assets of U.K. lender Lloyds Banking Group PLC
(LLOY.LN), further concentrating a local banking market in a move
that could draw scrutiny from regulators.
Australia's second-largest bank by market value said Friday it
would pay 1.45 billion Australian dollars (US$1.37 billion) for
Lloyds's vehicle, equipment and commercial lending units in its
largest acquisition since it paid A$12.6 billion for St George Bank
Ltd. in 2008.
The latest deal will result in the Sydney-based bank obtaining a
more-than 40% share of the Australian leasing finance market and
help broaden its business away from a reliance on home loans.
Westpac will get a loan book worth about A$8.4 billion, including
equipment finance, the lender said in a stock exchange filing.
Chief Executive Gail Kelly downplayed the regulatory risk of the
deal Friday. Still, competition watchdog the Australian Competition
and Consumer Commission said in advance of the deal it would likely
conduct a public review of any acquisition of Lloyds's Australian
business by Westpac.
Thanks to prudent lending practices, Australia's four largest
banks--Commonwealth Bank of Australia Ltd. (CBA.AU), Westpac,
Australia & New Zealand Banking Group Ltd. (ANZ.AU) and
National Australia Bank Ltd. (NAB.AU)--emerged from the global
financial crisis relatively unscathed. The four managed to maintain
their AA credit ratings even as many banks in Europe and the U.S.
had theirs chopped, increasing their market dominance by buying up
smaller players who struggled as the credit crisis spread in late
2008.
"Our capital position going into this is strong and it will
remain strong," Westpac's Chief Financial Officer Phil Coffey said
Friday. He said the purchase was expected to add at least A$100
million to cash earnings by fiscal 2015.
Shares in Westpac were 2.3% higher at A$32.93 late in Sydney
trading Friday, in line with a rise in the shares of other
Australian lenders.
The deal confirms a report earlier this week by The Wall Street
Journal, which said Westpac was the frontrunner in an auction that
also included Australian investment bank Macquarie Group Ltd.
(MQG.AU) and a consortium led by non-bank lender Pepper Australia
Pty. Australia & New Zealand Banking Group Ltd. withdrew from
the process before final offers were due Sept. 30.
The acquisition includes Lloyds's A$3.9 billion motor vehicle
loan portfolio, A$2.9 billion in equipment finance and A$1.6
billion in corporate loans, Westpac said in a stock exchange
filing.
The effective exit of Lloyds from the Australian market comes as
the U.K. government begins returning its bailed-out banks to
private hands. Last month, it reduced its stake in Lloyds to 33% by
selling a 6% interest that generated 3.21 billion British pounds
for the U.K. Treasury.
By disposing the units, Lloyds will be left with a minor
presence in the Australian market, where it will provide services
such as interest-rate swaps and foreign-exchange hedging to
clients. It follows a series of other divestments by the lender,
which is taking steps to meet the U.K. government's orders to pare
back assets to boost capital buffers.
Goldman Sachs Group Inc. and Credit Suisse AG advised Lloyds on
the sale of its businesses while UBS AG advised Westpac.
-Gillian Tan in Sydney contributed to this article.
Write to Robb M. Stewart at robb.stewart@wsj.com
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