Westpac's big brotherly love

By PAULA OLIVER

Westpac's local boss has hit out at the anti-Australian feeling surrounding the sale of the National Bank - saying that the emotional debate is missing some crucial facts.

Ann Sherry, chief executive of Westpac's New Zealand arm for just under a year, told the Business Herald it was inevitable that emotion would play a part in the debate over the future of the bank.

But she said some of the issues being raised were distracting from the real situation.

"It's almost a back-to-the-future argument that we've got at the moment. It's 'let's have a New Zealand banking system without Australian-owned banks'," Sherry said.

"In reality that's been the bulk of the New Zealand banking system for a really, really long time."

Westpac is one of three frontrunners in the race to buy the National Bank. Along with ANZ it has applied to the Commerce Commission for clearance to buy the prized asset.

But the prospect of an Australian purchase has some vociferous critics turning up their noses.

Politicians have waded into the debate, and a local group headed by a Waikato accountant has thrust itself into the spotlight with a series of patriotic press statements claiming it wants to bid for the bank so that it can be New Zealand-owned.

The National Bank is owned now by British-based Lloyds TSB.

Sherry has closely watched the gathering storm. She said that it was healthy to have such a debate as long as all the information was on the table - but it wasn't.

First, the benefits of having the New Zealand banking system connected to a larger one were being forgotten. Better credit ratings, and therefore a cheaper cost of capital were two benefits.

Second, the two countries were linked economically, and their fortunes were ultimately linked by trade and geography.

An open backer of the notion of a European Union-style economic union in this part of the world, Sherry said: "We spend more time talking about why we shouldn't get on rather than how we use our combined strengths to take to the rest of the world. We should face outwards together rather than arm-wrestle with each other all of the time."

Third, and a sensitive topic for Westpac, was the general public statement that NZ depositors were not protected in the event of an Australian parent bank becoming distressed.

The Australian Banking Act puts its own depositors at the front of the queue.

But Sherry pointed out that Westpac, uniquely, had its own Act of Parliament which overrode that - the Westpac Banking Corporation Act which ranked NZ depositors ahead of other unsecured creditors.

"It actually has a guarantee. And the capital we hold in this market is almost twice what is required to cover the depositors at the moment," Sherry said.

Westpac had $40 billion in capital here in March of this year, and held deposits of about $22.5 billion.

The act is one of the reasons Westpac still refuses to submit to Reserve Bank of New Zealand requirements that it incorporate as a local business rather than operate as a branch of its Australian parent.

The tussle has been going on for four years.A growing tide of anti-Australian feeling in the National Bank debate, and political input has also troubled Sherry.

"There's a piece of this that I have to say I do struggle with a bit," she said. "It's probably inevitable that you'll get some political opportunism at a moment like this. It presents an opportunity for commentary that I guess would otherwise have no legs. I do think it's a bit of shame."

Sherry said the sale of the National Bank would potentially reshape the entire sector.

She was unsurprised by the emergence of a patriotic local group.

"Having competition in the process is not a bad thing. The only risk really is that you drive the emotion over the substance."

On the group's chances: "It's the reality of buying a business that size that will test the consortium." She grinned: "We wish them well."