Australia’s Strategic Interests Influence Westpac Bank’s Pacific Sell-Off

Westpac Bank signage is displayed on a building in this photo taken in Sydney, Australia, on 13 July 2006. Greg Wood/AFP via Getty Images

Westpac Bank will take into account Australia’s strategic needs if it goes ahead with the sale of its pacific banking arms in Fiji and Papua New Guinea.

Westpac is reportedly looking to divest more than $3 billion worth of non-core assets, including its wealth management platform, general insurance business, car and auto loans business, as well as the long-running Pacific Bank.

CEO Peter King appeared before the House of Representatives Economics Committee on Sept. 11. The committee chairman, Liberal MP Tim Wilson, questioned whether King would consider the geopolitical risks to Australia associated with the sale of its pacific interests.

Asking twice, Wilson sought assurances from King that Westpac would rule out selling to a Chinese financial institution because of “issues around Australia’s national interest and strategic interests in the region.”

In response, King noted that currently Westpac had not yet decided on a path for its pacific operations, but said he would need to consider that aspect.

“I would take into account all considerations, think about the business, who are the potential owners, and whether they meet requirements,” said King.

Westpac Reduces Portfolio to Survive

On May 4, Westpac announced to the ASX (pdf) that it had experienced a 62 percent drop in profits in the first half of 2020 compared to 2019 with earnings of just $1.19 billion.

According to King the drop in profits was one of the most challenging results of the COVID-19 pandemic’s financial impact and it was clear Westpac needed to simplify and focus on its Australian and New Zealand banking businesses.

As a result, Westpac has moved its Pacific businesses, superannuation, wealth investments, insurance, and auto finance divisions into the Specialist Businesses division, under the leadership of Jason Yetton.

Yetton, a former CEO of the Commonwealth Bank of Australia is tasked with reviewing Westpac’s Pacific operations to see if they would be more successful under different ownership.

“The changes today are a significant step to reducing our portfolio and will allow the Group Executives to focus on improving performances in our Australian and New Zeland banking business,” King said.

Westpac has openly stated it sees its role in the Pacific is to be part of the economic stability and security of the region. One of the longest-serving banking institutions in the sphere, it has run financial operations in Fiji for 113 years and was also the first bank in Papua New Guinea.

In 2015 Westpac sold its South Pacific banking operations, including those in Samoa, Cook Islands, Solomon Islands, Vanuatu, and Tonga to the Bank South Pacific (BSP) for $125 million.

BSP is run by the government of Papua New Guinea.