Lloyds sells Australian operations for A$1.45 bn

Lloyds Banking Group agreed to sell its Australian operations for about A$1.45 billion. Picture: PA
Lloyds Banking Group agreed to sell its Australian operations for about A$1.45 billion. Picture: PA
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LLOYDS Banking Group is continuing its retreat from overseas markets after agreeing to sell its Australian operations for about A$1.45 billion (£859 million).

The deal, with Westpac Banking Corporation, follows the sale in August of Lloyds’ German life insurance business is part of the group’s strategy of focusing its efforts on its home market.

Lloyds, which was rescued by the taxpayer during the financial crisis, is slimming down as it prepares to return to full private ownership after the UK government recently began selling down its stake in the business.

Westpac, which is understood to have beaten a rival bid from Macquarie, is paying A$1.45bn in cash for the BoS International corporate lending business and Capital Finance Australia asset

finance division, which have gross assets of about £5.2bn.

Gail Kelly, chief executive of the Sydney-based group, said: “This is a value-creating, straightforward transaction that makes both commercial and strategic sense. These are strongly performing businesses that we know well and that will expand our reach and capability.”

Lloyds will receive an additional A$100m “pre-completion distribution” from the business before the deal is completed by the end of the year.

The deal will deliver Lloyds a gain of about £20m and boost its capital by about £550m – in June, the Prudential Regulation Authority identified an £8.6bn shortfall in its balance sheet.

A spokesman for the bank said: “The sale will enable our country exit from Australia, which will be effected a short time after completion, although we will continue to support core UK-linked clients in Australia.”

With the sale of most of its remaining Australian assets, Lloyds becomes the latest western

financial institution to retreat from the Asia-Pacific region following the 2008 global financial crisis.

French bank Societe Generale is selling its Asian private bank, while ING is also exploring the sale of its banking operations in the region.

Lloyds chief executive Antonio Horta-Osorio said in August that he was aiming to reduce the group’s international coverage to fewer than ten countries by the end of next year, down from 30 in 2011.

The group inherited the Australian business through its disastrous acquisition of HBOS in 2008, which precipitated its £20.5bn government bailout.

Investec analyst Ian Gordon said: “Australia was probably the worse example of ‘adverse asset selection’ in the entire ill-fated HBOS International debacle, generating cumulative losses of over £3bn despite Australia’s generally resilient performance.”

Lloyds, which owns Bank of Scotland and Halifax, is now 32.7 per cent owned by the state after the UK government sold off a 6 per cent stake for £3.2 billion last month, netting a £61m profit for taxpayers.

Mike Trippitt, an analyst at Numis, said the deal would boost the prospects for Lloyds to start paying dividends again next year for the first time since its state rescue.

The group has also spun off more than 600 branches under the resurrected TSB brand, a move forced on it by European rules on state aid, ahead of a planned flotation for the business next summer.