Kina Securities acquires Westpac’s Pacific business

George Lekakis

Westpac is set to cash in its chips after 120 years of providing banking services in the Pacific region.

The bank revealed on Monday that it had agreed to sell its Pacific banking unit to ASX-listed financial services group, Kina Securities, for A$420 million.

Westpac seems to have been in a big hurry to exit the business given that the sale price equates to a deep discount to the $580 million book value of the assets held in the unit.
Westpac Pacific comprises the commercial banking activities of Westpac’s Fiji and Papua New Guinea subsidiaries.

Kina will acquire full ownership of the Fiji arm under the agreement, but will have to negotiate separate deals to buy out minority investors in the PNG arm who control 11 per cent of the business.

The transaction, which is expected to complete in the second half of 2021, is transformational for Kina’s banking operations.

It stands to more than triple the size of its loan and deposit books.

Pro-forma data published by Kina on Monday shows that the company’s loan book would expand by 275 per cent to 5.3 billion Kina ($A 2.03 billon) if the deal is approved by PNG and Fiji regulators.

The deposit base would expand by 218 per cent to 8.03 billion Kina ($A 3.06 billion).

The deal builds on Kina’s recent acquisition of ANZ’s retail banking operations in PNG and confirms the company’s status as the main competitor to the Bank of South Pacific in the Fiji and PNG markets.

Kina’s chief executive is the former general manager of Westpac’s Pacific unit, Greg Pawson.

“The Westpac Pacific businesses are well known to the Kina board and management team and this will assist a seamless customer and employee experience,” Pawson said.

“Kina has proven track record of strong organic growth and successfully completing acquisitions.

“The acquisition of Westpac’s Pacific businesses enables our organisation to achieve scale and enhances our regional footprint, at the same leveraging the benefits and optionality that come from being a larger group.”

Westpac’s head of specialist businesses, Jason Yetton, said the sale was another step towards simplifying the group’s operations.

“We are taking another step in becoming a simpler, stronger bank while ensuring a high standard of banking services is maintained for our Pacific customers,” he said.

“Choosing the right purchaser for our businesses is important to us, our people and the communities we serve.”

Westpac is expected to incur a $230 million accounting loss on the sale, including a foreign currency translation reserve loss which will be based on exchange rates on completion.

While Westpac shareholders are poised to take a hit on the sale, the deal might come as a relief to the Federal Government, which has viewed Australian-owned banking assets in the Pacific region as strategic in foreign policy terms.

Concerns aired in the AFR by the Loewe Institute in September indicated that the Morrison government had been concerned Westpac might have been contemplating a sale to a Chinese state bank.

While Kina Securities has its headquarters in Port Moresby most of its institutional shareholders are Australian-based investors that have acquired their interests through the ASX listing.

Kina’s largest stakeholder is Perpetual Ltd, which holds a 10.6 per cent interest in the company.

• Disclosure: the author holds shares in Kina Securities