07/10/2008 - 08:10

CBA confirms talks to buy BankWest

07/10/2008 - 08:10

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A possible deal for the acquisition of BankWest by the Commonwealth Bank of Australia is likely to be reached tomorrow, as the major bank confirmed it was in exclusive talks with HBOS Plc to buy the Australian retail banking arm.

A possible deal for the acquisition of BankWest by the Commonwealth Bank of Australia is likely to be reached tomorrow, as the major bank confirmed it was in exclusive talks with HBOS Plc to buy the Australian retail banking arm.

The nation's biggest mortgage lender today confirmed it was in talks, just five days after saying it did not have an offer on the table.

"Whilst discussions are continuing, the parties have not reached agreement," Sydney-based CBA said in a statement today.

In a memo to BankWest staff obtained by WA Business News, the company said a deal could still be reached tonight, however it seemed more likely that negotiations will continue tomorrow.

CBA's acquisition of BankWest, which could cost it about $2 billion, would create a bigger bank than a combined Westpac Banking Corporation-St George Bank Ltd. Westpac's $20 billion takeover of St George was approved by the competition watchdog in August.

The acquisition will also give CBA the biggest market share in Western Australia, which has among the highest growth rates in the country because of the mining boom.

For UK-based HBOS, which is being taken over by Lloyds TSB Bank Plc to prevent its collapse and to create that country's biggest bank, the sale of BankWest would provide some much needed cash.

"This allows Commonwealth Bank to get market share cheap," Craig Young, portfolio manger of Tyndall Investment Management, which manages about $4 billion in assets, including CBA shares.

"It's a good fit with the sellers keen to get some cash out and Commonwealth Bank is in a good position to provide cash," Mr Young said.

Mr Young said CBA was almost unique among banks because of a strong capital position and a relatively strong share price, which meant it could sell more shares to raise money if necessary.

Shares in CBA fell 12 cents, or 0.27 per cent, to $43.88 as of 1328 AEDT as the S&P/ASX200 index lost 1.09 per cent as investors around the world dump equities on fears the global financial crisis will worsen.

CBA stock has declined 26 per cent this year, compared with the ASX 200 Financials index which has lost 32 per cent.

CBA spokesman Steve Batten said the statement released by the bank was as much as it would say today.

HBOS Australia spokesman Adam Connolly confirmed that HBOS was in acquisition talks with CBA.

CBA's acquisition would add BankWest's portion of HBOS Australia's $1.01 billion in operating income for the six months to June. CBA's operating income for the same period was $7.38 billion.

In comparison, Westpac's operating income in the six months to March was $5.79 billion and St George's income was $1.69 billion, for a combined $7.48 billion.

The Australian Competition and Consumer Commission (ACCC) said a merger of the pair was unlikely to substantially lessen competition in the banking sector.

CBA will gain BankWest's 860,000 customers, which include a quarter of all deposits in Western Australia. BankWest will also bring the majority of the 6,000 people employed by HBOS Australia.

STANDING BY BUSINESS. TRUSTED BY BUSINESS.

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