Westpac selling its New Zealand business could inject fresh blood into sector - banking expert

Westpac has revealed it's considering a demerger.
Westpac has revealed it's considering a demerger. Photo credit: Google

The sale of Westpac's New Zealand operation could inject some fresh blood and some extra competition into the country's banking sector.

New Zealand's third-largest bank Westpac has revealed it's considering selling off its Kiwi business.

Just before the markets closed on Wednesday night, the bank told the NZX it was "assessing the appropriate structure for its New Zealand business and whether a demerger would be in the best interests of shareholders".

Its announcement landed on the same day the Reserve Bank told Westpac it must commission two independent reports to address concerns over the bank's compliance with liquidity rules.

A banking expert believes there could be New Zealand companies considering buying the bank. KPMG's head of banking John Kensington told Morning Report both Kiwibank and the Superannuation Fund are likely to consider making a bid for the bank.

"That's the exciting part, the possibility that a large new entity may come to the New Zealand sharemarket in part or in total and provide a bit more depth to what is able to be invested by New Zealanders and bring what is very good business to the market."

People have pitched possible prices in the $10 billion to $15 billion range, he said.

Kensington doesn't believe the decision to sell reflects a lack of confidence in the New Zealand economy but more than the regulator has signalled they'd need a higher level of capital here.

"I think one of the drivers that this probably stems back to is the Reserve Bank signalled years ago that they'd consult on increasing levels of capital - I guess if you own a business and you want to deploy the capital efficiently it there's a place where you have a business that requires a higher level of capital that might be something that you might want to look at."

He said Westpac's customers have nothing to worry about as the bank is well run and in a healthy financial state.

Deputy Prime Minister Grant Robertson told First Up that it's early days and Westpac hasn't made any decisions yet.

But he said it would be the role of the Reserve Bank to ensure those who bank with Westpac are supported and protected if the bank was to sell.