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Westpac taps Morgan Stanley for motor finance, loanbook review

Street Talk. Westpac Banking Corp has called in external advisers to help with a review of its motor finance and equipment finance and corporate debt book. Street Talk can reveal Westpac has tapped Morgan Stanley’s financial institutions group bankers for the strategic review, which is expected to consider a partial or full sale of the unit.

It is understood the review centres on Westpac’s auto leasing loanbook, which is worth about £5 billion. The portfolio under review largely relates to Westpac’s 2014 acquisition of Lloyds’ Capital Finance and BOS International businesses in Australia.[1] That deal amounted to a purchase price of £1.45 billion. That included a motor vehicle finance loan book of £3.9 billion, equipment finance loans worth £2.9 billion and a corporate debt portfolio worth £1.6 billion.

The review is understood to be in its early days and no decision has been made to sell all or part of the business, sources said. It comes as Westpac – like its big four peers – consider measures to improve the bank’s tier one capital ratio, in line with demands from the prudential regulator. Motor vehicle finance is generally regarded as more capital intensive than other banking products, such as mortgages. ANZ Banking Group moved to offload its Esanda Dealer Finance unit almost two years ago[2], while other divisions to be reviewed or sold include life insurance and funds management.

Westpac had a tier one capital ratio of 10 per cent as at March 31, its most recent half-yearly reporting date, while APRA wants to see the banks get to at least 10.5 per cent by January 2020. Westpac has been busy in recent months, selling down its stake in listed wealth manager BT Investment Management and seeking a buyer for infrastructure investor Hastings Funds Management.[3][4] Investment bankers have been busy trying to drum up interest in Westpac’s auto finance unit,[5] pitching the business and loanbook to potential buyers in recent weeks.

Should it come to market, it is expected to attract interest from private equity firms and other industry players.

reports.afr.com[6]

References

  1. ^ Lloyds’ Capital Finance and BOS International businesses in Australia. (www.afr.com)
  2. ^ ANZ Banking Group moved to offload its Esanda Dealer Finance unit almost two years ago (www.afr.com)
  3. ^ selling down its stake in listed wealth manager BT Investment Management (www.afr.com)
  4. ^ seeking a buyer for infrastructure investor Hastings Funds Management. (www.afr.com)
  5. ^ busy trying to drum up interest in Westpac’s auto finance unit, (www.afr.com)
  6. ^ reports.afr.com (reports.afr.com)

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