May 7, 2021

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Capital Calls: Westpac sets lofty M&A-style cost-cutting goal

2 min read

FILE PHOTO – A combination of photographs shows people using automated teller machines (ATMs) at Australia’s “Big Four” banks – Australia and New Zealand Banking Group Ltd (bottom R), Commonwealth Bank of Australia (top R), National Australia Bank Ltd (bottom L) and Westpac Banking Corp (top L). REUTERS/Staff/File photo

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CUT TO VICTORY. Australia’s big four banks are too dominant to be major acquirers. That’s not stopping A$95 billion ($73 billion) Westpac (WBC.AX) from cherry-picking one element of the M&A playbook. On Monday the country’s second-largest lender unveiled, along with decent first-half earnings, a plan to slash annual expenses by a cool 21% of the total. Usually only a merger generates that kind of figure.

There’s some corporate finance at work: Chief Executive Peter King hopes to get around a third of the savings from selling seven unwanted businesses, including general insurance and auto finance. The rest comes from closing branches or moving them to smaller premises as digital banking expands, and from shrinking head office.

The savings should be worth almost A$14 billion to shareholders, once taxed and capitalised. Westpac’s stock rose more than 4% by lunchtime trading, adding just over A$4 billion in value. With almost three years until the target is supposed to be hit, shareholders aren’t giving King the benefit of the doubt. (Antony Currie)

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Earlier in Capital Calls:

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