Westpac's grounded Kiwi may fly another day - Reuters

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A pedestrian looks at his phone as he walks past a logo for Australia's Westpac Banking Corp located outside a branch in central Sydney, Australia, November 5, 2018. REUTERS/David Gray

MELBOURNE, June 24 (Reuters Breakingviews) - Westpac (WBC.AX) will keep its New Zealand business after all. Some three months after putting the operation under review for a potential sale, Chief Executive Peter King has decided it “would not be in the best interests of shareholders”.

King, who has been flogging insurance and other overseas units, wants to invest in technology and cut costs. Meanwhile, New Zealand is increasing bank capital requirements and its central bank in March censured Westpac for risk and liquidity lapses. Offloading the unit, and bagging perhaps NZ$11.5 billion ($8 billion), per Breakingviews calculations , was tempting.

Buyers are probably scarce, however: Four banks control 80% of the market, which is probably too small and mature for a new competitor. A spinoff might work, but only after A$95 billion ($72 billion) Westpac cleans up the division. At least topping up capital shouldn’t be much of a stretch. And maybe then King can see if a new Kiwi deal approach will fly. (By Antony Currie)

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Editing by Jeffrey Goldfarb and Katrina Hamlin

Reuters Breakingviews is the world's leading source of agenda-setting financial insight. As the Reuters brand for financial commentary, we dissect the big business and economic stories as they break around the world every day. A global team of about 30 correspondents in New York, London, Hong Kong and other major cities provides expert analysis in real time.

Sign up for a free trial of our full service at https://www.breakingviews.com/trial and follow us on Twitter @Breakingviews and at www.breakingviews.com. All opinions expressed are those of the authors.

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