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Capital focus to drive bank divestment in 2016

The preoccupation of the big banks with their capital costs is likely to see increased divestment activity in 2016, predicts Herbert Smith Freehills.

In their predictions for 2016, Herbert Smith Freehills M&A partners Tony Damian and Rodd Levy said the "sectors to watch" in 2016 will be resources and financial services.

"In resources, we see a continuation of consolidation driven by cost concerns, as well as divestments driven by deleveraging concerns of major players, as driving M&A activity," said Mr Damian and Mr Levy.

"In financial services, the relentless consideration by banks of the capital costs of certain of their operations is likely to see divestment activity, coupled with some of the smaller and foreign players being in a position to take advantage of those divestments."

The current year has already seen a number of divestments by the big banks, with NAB announcing on 28 October 2015 that it had agreed to sell 80 per cent of its life insurance business to Japanese life insurer Nippon Life.

NAB has also targeted the end of calendar 2015 to complete the IPO and demerger of its UK-based banking arm, Clydesdale Bank.

Westpac announced on 16 June 2015 that it was reducing its holding in BT Investment Management from 59 per cent to 31-40 per cent, generating $600-$700 million for the bank and increasing its Common Equity Tier One capital by 10-15 basis points.

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ANZ sold its car financing business Esanda to Macquarie on 8 October 2015, raising $100 million for ANZ and increasing its Tier One ratio by 20 basis points.

 

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