SYDNEY, Oct 14 (Reuters) - Australia's Westpac Banking Corp
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
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
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 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.
($1 = 1.3963 Australian dollars)
(Reporting by Paulina Duran in Sydney, Shriya Ramakrishnan and
Shashwat Awasthi in Bengaluru; Editing by Tom Hogue and