Australia's Westpac to exit China, other Asia markets as focus swings to home
Australia's Westpac Banking Corp WBC.AX is exiting banking operations in China and some other Asian markets to focus on its core domestic and New Zealand businesses, as it grapples with capital constraints amid the COVID-19 pandemic.
The country’s second-largest lender, whose capital has been
eroded by a record lawsuit settlement and a surge in bad-debt provisions due to
the pandemic, said on Wednesday it will exit operations in Beijing, Shanghai,
Hong Kong, Mumbai and Jakarta, where it does business with institutional
clients.
It will instead consolidate its international operations
into branches in Singapore, London and New York.
Under pressure from regulators to increase their capital
bases, and from investors to show higher returns from their investments,
Australian banks have been selling non-core assets, including their offshore
operations.
Following a failed big push to Asia under its previous CEO,
Westpac's rival Australia and New Zealand Banking Corp ANZ.AX in 2016 exited
operations in Singapore, Hong Kong, Vietnam and Taiwan. The Melbourne-based
bank now lends only to big corporate clients in the region.
Westpac’s move is expected to impact between 150 to 200
staff, mostly based in Shanghai and Hong Kong, and will be done in stages
taking between 12 to 24 months to complete, a person familiar with the bank’s
plans told Reuters.
With one of the weakest capital positions out of the four
major banks that dominate the local industry, Westpac said the changes will not
affect its cash earnings materially but will help improve capital efficiency by
reducing its risk-weighted assets by over A$5 billion ($3.6 billion).
“These are the actions of a bank that is
capital-constrained,” said Brian Johnson, senior banking analyst at Jefferies
in Sydney. “This will release capital even if it won’t have much impact on
earnings.”
Westpac shares fell 1.4% on Wednesday, in line with the sector
which underperformed the broader market's .AXJO 0.3% loss on the day.
The bank’s move comes as relations between Australia and
China continue to sour, following Australia’s call for an independent inquiry
into the origins of the novel coronavirus - which first emerged in China.
Westpac has been hit by steep costs from a money-laundering
lawsuit settlement and a surge in charges for bad loan provisions due to the
coronavirus outbreak, triggering a review of its underperforming wealth,
pension investments and Fiji and Papua New Guinea banking units earlier this
year.
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