Westpac Sells Down Third Of Us Assets
The Age
Tuesday April 13, 1993
Westpac has sold $US5.5 billion ($A7.7 billion) of its US credit commitments to Toronto-Dominion Bank of Canada.
The sale, which amounts to a third of its US assets, is part of its recovery strategy to scale down overseas operations and concentrate on banking in Australia and New Zealand.
The lines of credit, to more than 100 big US companies, represent $US3 billion in risk-adjusted assets. They were sold at book value, with the deal to take effect from the end of August.
Westpac said last year it would sell $10 billion in corporate lending risk assets by 1995.
Last month it announced it would withdraw from any business not linked with its home markets. It has already cut back operations in Asia and Europe.
A Westpac spokesman yesterday said the bank planned to keep a fifth of its US loan book, estimated at about $9 billion. It would hold only loans to Australian companies in the US, or US companies with Australian operations.
Westpac's managing director, Mr Robert Joss, said in a statement that the sale was ``tangible evidence that we are achieving the goals set to implement successfully the bank's overall recovery program".
Brokers said the announcement was positively received. A banking analyst for J.B. Were, Mr Craig Drummond, said the sale would add about 0.25 per cent to the bank's tier-one capital, which is now about 5.7 per cent. Westpac is third of the top four banks in capital adequacy. It is ahead of ANZ.
Mr Drummond said the sale eliminated an element of risk and positioned the bank for higher returns by transferring assets from the US to Australia. Investors also preferred a bank with strong domestic operations.
About $50 billion of Westpac's $70 billion loan portfolio is based in Australia.
Westpac's US division has been badly affected by slow economic recovery and an unexpected $115million tax liability, discovered after the bank's results were released last year.
Westpac completed a review of its US operations in December. It also plans to cut staff and consolidate its six US offices into a single office in New York by September next year.
Last year, Westpac made provisions for big loans to the department store Macy's, which filed for Chapter 11 bankruptcy, and the collapsed Canadian property developer Olympia & York. Both loans were sold in the second half.
The Westpac spokesman said the US loans were all now performing, after most problem loans were sold last year.
© 1993 The Age
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