Possible Westpac NZ sale a complete bombshell for bank staff

Thursday, 25 March 2021

The sale of Westpac’s New Zealand arm is being considered as it reassesses the future of its business in this country.

The possible sale of Westpac’s New Zealand arm was a complete bombshell for bank staff, according to First Union.

The union’s national finance organiser, Callum Francis, said the announcement was a total surprise for the bank’s New Zealand workforce of about 5000 people, and union members had no idea Westpac Australia was even looking at selling the business.

“I can only imagine how shocked and terrible they are feeling about this.

“This is an extremely volatile and topsy-turvy time for our members. Nobody is quite sure what the future looks like and whether they will necessarily have a job.”

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Westpac’s New Zealand staff were completely in the dark over the possible sale of the business and are worried for the future of their jobs.

On Wednesday the bank issued a statement saying it was considering whether a demerger would be in the best interests of shareholders as part of its “fix, simplify and perform strategy” and it was in the early stages of assessing the future of its New Zealand business.

Francis said the union would be seeking more information from bank management about what was planned, and to ensure security of employment for workers if a sale occurred.

“It’s going to be interesting working through that considering they’re listed on the Australian stock exchange. I’d be surprised if it was not sold to shareholders, rather than a private owner, but we’ve not had any communication from Westpac about what that looks like.

“Who and how they will sell the business to another buyer will be first and foremost in our discussions.”

Westpac has closed a number of branches around the regions and main centres in recent years and more upheaval is on the cards as the bank ponders its future New Zealand structure.

There would be concerns about a sale to an existing New Zealand bank, and Francis said that could be ruled out on competitive grounds. However, a sale to an offshore buyer also raised issues.

“A private equity firm for most people spells considerable changes, to put it gently, and would probably make people quite anxious. So we’d be working very had to make sure employees are protected through any sort of transition.”

Francis said the union hoped the Reserve Bank would be heavily involved in any sale and purchase agreement.

“Westpac is one of the big four banks, so to have an unknown entity enter into the market in New Zealand could cause all sorts of issues for the banking sector.”

Westpac said the decision on its future structure would also take into account the Reserve Bank’s requirement, also announced on Wednesday, that Westpac pay for two independent reports into its risk governance processes.

But Francis said he did not believe the demerger option was a “knee-jerk reaction” to the Reserve Bank’s demand for action over compliance issues, and it had clearly been in the works for a long time.

International financial consultant Geof Mortlock said that given the value of the bank lay in its customer base, Westpac had a very strong incentive to keep its customer base well serviced.

“What happens down the track will depend on what rate of return the buyer is looking for and their risk appetite,” he said.

“They may decide to reduce lending in certain areas, for example reducing lending on high LVR [loan-to-value ratio] mortgages or reducing lending to the rural sector.”

But Mortlock said a sale had implications for Westpac staff if the new owner wanted to restructure the business to cut costs.

The costs associated with the very high capital ratios being imposed by the Reserve Banks could deter would-be buyers, and may encourage other New Zealand banks to consider exiting the market.

“That's undoubtedly a factor in Westpac wanting to sell, and it might influence how other banks think about it as well, whether they want to.”

Mortlock said the possibility of the Reserve Bank becoming more active in terms of policies to address the housing crisis was also adding to banks’ unease.

“I suspect Westpac and other banks are getting a bit worried about what kind of increased intrusive regulation the Reserve Bank might start to impose – not really for financial stability purposes, although they would dress it up as that, but really to help [Finance Minister] Grant Robertson out with trying to reduce house price inflation.”