Westpac Banking Corp (ASX: WBC) has sold its Pacific operations to Kina Securities Ltd (ASX: KSL) for $420 million.
The Australian bank announced to the ASX before Monday's opening that Westpac Fiji and Westpac's 89.91% ownership in Westpac Bank PNG will be handed over to Kina Bank sometime before September.
The two arms are currently known together as Westpac Pacific. The business generated cash earnings of about $11 million for the bank's 2020 financial year.
As of the end of September, Westpac Pacific had $580 million in net assets, $1.58 billion on its loan books, deposits of $2.34 billion and risk-weighted assets totalling $2.9 billion.
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Westpac exiting non-core businesses
Westpac specialist businesses and group strategy chief Jason Yetton said the sale occurred from the company's decision to focus on its core domestic 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."
As part of the same strategy, Westpac last week sold Westpac General Insurance and Westpac General Insurance Services to Allianz for $725 million.
Yetton said Kina Bank is the right buyer for Westpac, its staff and the customer communities.
"We are pleased our Pacific businesses are being acquired by Kina Bank. Kina is a strong brand in the region and is well positioned with deep local knowledge to continue to help our consumer and business customers succeed."
Westpac revealed $315 million would be payable at the completion of the transaction, which still has regulatory approvals to cross. Another $60 million will be paid afterwards in six-monthly instalments for Westpac PNG, plus up to $45 million in annual earn-out payments for Westpac Fiji.
"It is expected there will be an accounting loss on sale of approximately $230 million, including a foreign currency translation reserve (FCTR) loss which will be based on exchange rates on completion," announced Westpac.
Kina Bank is a Papua New Guinean financial services company that is listed on the ASX, with a market capitalisation of $235.8 million, and on the Port Moresby Stock Exchange.
Westpac's announcement comes after a rough week in which it agreed to an enforceable undertaking with the Australian Prudential Regulation Authority (APRA) to improve its risk governance.
APRA found the bank had an "immature and reactive risk culture, unclear accountabilities, capability shortfalls and inadequate oversight".
