National Australia Bank May Bid for HBOS Unit, People Say
By Ambereen Choudhury and Joyce Moullakis More Photos/Details
June 27 (Bloomberg) -- National Australia Bank Ltd., the nation's largest bank, may bid for HBOS Plc's Australian unit, said two people with knowledge of the matter.
National Australia, which hasn't approached HBOS, met with advisory firms in London this month to discuss the prospects for a successful bid, said the people, who declined to be identified because the deliberations are confidential. The Perth-based unit might fetch 3.7 billion pounds ($7.3 billion), analysts estimate.
HBOS, Britain's biggest mortgage lender, is seeking 4 billion pounds from investors in a rights offering to replenish capital depleted by writedowns on subprime-infected assets and rising loan delinquencies. Potential bidders would be tapping into growth in Western Australia, where a mining boom has spurred the economy and lifted home prices over the past three years.
HBOS Australia ``is probably quite attractive for an east coast Australian bank looking to diversify,'' said Alan Beaney, who helps manage $2 billion, including HBOS shares, as head of investments at Principal Investment Management Ltd. in Sevenoaks, England. HBOS ``would have to consider offers,'' said Beaney.
National Australia's shares dropped 5.1 percent to A$26.64, the biggest decline since June 10, as at 10:53 a.m. in Sydney. The 51-company S&P/ASX Finance Index fell 3.6 percent.
Australia's four-biggest banks, barred from acquiring or merging with each other under the government's so-called Four Pillars policy, are looking to buy smaller rivals to grow. Westpac Banking Corp., the fourth-largest, in May agreed to buy St. George Bank Ltd. to create the country's biggest lender after National Australia.
`Few Targets'
``There's value in the industry from an investment point of view, and Bankwest is one of the few targets left, said Steven Marsh, who helps manage the equivalent of $630 million, including National Australia shares, at Trust Co. in Sydney. ``When Westpac and St. George decided to get together, and the government declined to drop the Four Pillars policy, it was a signal to the banks they were going to have to look around for growth strategies.''
National Australia, whose board met in London this month, hasn't decided whether to make an offer, and Edinburgh-based HBOS hasn't solicited bids, the people said. Melbourne-based National Australia is mostly interested in HBOS's Bank of Western Australia Ltd., they said. Brandon Phillips, a spokesman at National Australia, declined to comment.
``There is speculation all the time about HBOS,'' Chief Executive Officer Andy Hornby said after a shareholders' meeting in Edinburgh to approve the rights offer. ``I am not going to comment on our Australian business. It is a great business and it is performing well.''
Rising Profit
HBOS Australia, which has more than 6,000 employees at units including BankWest, Capital Finance Australia Ltd. and St. Andrew's Australia, posted a 15 percent increase in pretax profit to A$757 million ($726 million) in 2007, boosted by higher deposits. Fee and commission income rose 36 percent while net interest income climbed 24 percent.
BankWest, with A$36.7 billion of deposits at the end of April, has about 121 branches in Western Australia and plans to open 160 more across the country, according to information on HBOS's Web site.
The economy of Western Australia state grew 1.4 percent in the first quarter from the previous three months, according to the Australian Bureau of Statistics, the second-fastest expansion among the country's six states.
National Australia, with a market value of A$44 billion, said in May it expects takeover opportunities as banks and securities firms sell assets amid a global credit crisis.
``There are going to be lots of opportunities over the next year or two,'' Chief Executive Officer John Stewart said in an interview with the Australian Broadcasting Corp. on May 11. ``As a matter of fact, they are coming thick and fast, simply because there are so many banks round the world that are damaged.''
To contact the reporters on this story: Ambereen Choudhury in London at [email protected]; Joyce Moullakis in London at [email protected] Last Updated: June 26, 2008 21:37 EDT
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