What will the effect be on customers and staff?
Westpac New Zealand’s demerger from its parent company, Westpac Banking Corporation (WBC), could benefit New Zealand businesses, according to law firm MinterEllisonRuddWatts.
WBC recently announced that it is considering whether a demerger would be in its shareholders’ best interests. It also confirmed that it has already placed several businesses into a specialist businesses division for an ultimate exit, and announced the consolidation of its international operations in Asia.
WBC said in a release: “Westpac NZ is a valuable part of the Westpac Group and has been for over 160 years. The business continues to perform well with a strong position in retail and commercial banking. However, given the changing capital requirements in New Zealand and the RBNZ requirement to structurally separate Westpac’s NZ business operations from its operations in Australia, it is now appropriate to assess the best structure for these businesses going forward.”
Kate Lane, a partner at MinterEllisonRuddWatts, said the demerger could benefit New Zealand businesses. For example, it would:
- Be a hugely positive boost for capital markets in New Zealand;
- Provide New Zealand investors with a clear route to owning a major New Zealand Bank, arguably a proxy for investment in the country’s economy;
- Mean one of New Zealand’s four large banks would operate under the regulation of RBNZ only (rather than the “two-regulator” model which the Australian-owned banks currently operate under); and
- Also be a signal of independence to the global economy, demonstrating that it is a viable and prudent option for a major New Zealand bank to be locally owned and operated.
Meanwhile, the demerger’s impact on the bank’s customers, employees, and suppliers will be minimal, said Lane.
“Although there will likely be some detail around the markets business currently operated by a branch of Westpac Banking Corporation in New Zealand,” Lane continued. “This is because Westpac New Zealand Limited is already a separate legal entity, holding its own registrations and licences from the Reserve Bank and FMA, and operating with the degree of separation from WBC required by applicable banking standards. That is likely to continue as the main operating entity in the NZ group.
“It seems likely, but not inevitable, that a demerger might result in the renaming and rebranding of Westpac New Zealand Limited.”
