Westpac U-turns on demerger plans

Westpac has announced that it will be retaining its 100 per cent ownership of Westpac New Zealand Ltd (WNZL), despite previously looking to sell the company.

However, the major bank has now said that it will not be proceeding with this demerger.

Speaking of the decision, Westpac Group CEO Peter King said: “After a detailed review, we believe a demerger of the WNZL business would not be in the best interests of shareholders.

“Our review identified opportunities to improve service for customers and value across the WNZL business, and we will progress these with the WNZL board and management team.

“WNZL is a strong business that has been serving New Zealand for 160 years. We remain committed to delivering for customers and fulfilling our purpose of helping Australians and New Zealanders succeed,” Mr King said.

The WNZL board said that its priority now would be to finalise the appointment of a new CEO to replace David McLean, who will retire tomorrow (25 June 2021).

Simon Power, general manager institutional and business banking, will act as CEO from 25 June 2021.

Background to the demerger

In March, Westpac had said it was “assessing the appropriate structure” for its New Zealand business and “whether a demerger would be in the best interest of shareholders”, after earlier revealing it had been instructed by the Reserve Bank of New Zealand to commission a number of reports around its risk and liquidity management processes.

The arm has been a part of the Westpac group for over 160 years, but the banking giant had previously said that, given the changing capital requirements in New Zealand and the RBNZ requirement to structurally separate Westpac’s NZ business operations from its operations in Australia, it was “appropriate to assess the best structure for these businesses going forward”.

The review formed part of its “fix, simplify and perform” strategy, which has already seen its wealth platforms, super and insurance businesses placed in a specialist division, and its consumer and business divisions merged into a new consumer and business banking division. 

Earlier this year, the banking group also sold Westpac Lenders Mortgage Insurance Ltd (WLMI) to Arch Capital Group and entered into a 10-year exclusive supply agreement for Arch to provide LMI to the group.

[Related: Westpac mulls further business sale]