Bank float would spur domino effect

By Geoff Senescall

Westpac Banking Corp is understood to have pressed the go button on an $800 million New Zealand float.

The lead brokers to the issue, Ord Minnett and Credit Suisse First Boston, are believed to have begun work for a September listing.

It is most likely the Melbourne-based bank - the owner of New Zealand's largest bank WestpacTrust - will seek to raise the $800 million in two tranches - one $500 million tranche this year with the balance the following year.

The decision to proceed with the float follows two years of preparation to decide the appropriate structure. Earlier this year the Business Herald reported that a float was being considered.

But the first hint from the company that this might be on the cards came two weeks ago when Westpac's group treasurer Martin Touw said that a New Zealand listing was possible as part of a major restructure of the bank's capital base.

However, the bank would not comment on a timetable.

According to broking sources, once Westpac gets its New Zealand vehicle up and running other banks such as ANZ and National Australia Bank will follow suit.

One of the key reasons for Westpac creating this new vehicle is to give its New Zealand shareholders access to imputation credits they cannot get through owning Westpac shares in Australia.

Under existing rules, New Zealanders cannot access the imputation credits in Australia from the dividend payout.

This is despite about 20 per cent of Westpac's net profit (of $A1.34 billion for the year to last September) being generated from its New Zealand operation where tax is paid.

But imputation credits that are accrued here as a result of paying tax are effectively lost.

According to Westpac's 1998 annual report, 10,300 New Zealand shareholders cumulatively own about 6 per cent of the company, or $A1.2 billion worth of its shares.

A significant number of them have become shareholders from Westpac's purchases of former locally listed assets CBA Finance, Westpac New Zealand and TrustBank.

It is likely that the funds from a New Zealand listing will be used for Westpac's planned share buybacks, which could see the company cut as much as 25 per cent of its common equity.