Bankwest

This article is about the Australian bank. For the Canadian bank, see Bank West. For the United States bank, see Bank of the West.

Bankwest

Type	Division of Commonwealth Bank of Australia
Industry	Financial services
Founded	1895
Headquarters	Perth, Western Australia
Key people	Rob De Luca, Managing Director Andrew Whitechurch, EGM Retail Sinead Taylor, EGM Business Andrew Doyle, CFO
Products	Transaction accounts Savings accounts Home loans Term deposits Credit cards
Revenue	A$752 million net profit after tax (2015)
Website	Bankwest

Bankwest, previously known as The Bank of Western Australia is an Australian full-service bank based in Perth, Western Australia. Formerly a wholly owned subsidiary of HBOS plc, it was sold in October 2008 to the Commonwealth Bank of Australia for A$2.1 billion and operates as a division of its parent company.

Bankwest also has offices in Adelaide, Brisbane, Canberra, Melbourne and Sydney.

History

In 1895, the Government of Western Australia established the Agricultural Bank of Western Australia as a rural lender to support the State's farming industries. Despite its name, it was technically not a bank, in that it did not collect deposits from the public, its liabilities being government bonds. It was a government instrumentality that lent exclusively to farmers.

In 1945, the Agricultural Bank became a full trading bank and changed its name to the Rural and Industries Bank of Western Australia (also known as R&I Bank). This enabled it to expand its retail and commercial banking services throughout the state. In 1956 it became a savings bank, and in 1985 the first Sydney stores opened.

The bank was incorporated in 1990, and then in 1994 changed its name to the Bank of Western Australia Limited, with the trading name Bankwest, in preparation for privatisation. In December 1995, the Bank of Scotland acquired the bank, and as part of the sale agreement, offered 49 per cent of the shares in Bankwest to the public. Bankwest shares listed on the Australian Stock Exchange on 1 February 1996.

In 2001, Halifax Group (a large UK financial institution) merged with Bank of Scotland to form HBOS plc. HBOS then acquired all the outstanding shares of Bankwest, making it HBOS's wholly owned subsidiary.

In 2003, Bankwest announced the acquisition of API Finance from Australian Pharmaceutical Industries Ltd (API) for $300m in line with its industry specialisation growth strategy in the business banking segment.

Late in 2006, Bankwest announced it would be leaving their landmark tower, in favour of a new complex at Raine Square.

In early June 2008, reports began to circulate that HBOS intended to sell Bankwest.

In September 2008, Lloyds TSB bought HBOS in a deal worth over £12.2 billion. This was followed in October 2008 when, with significant problems of their own, HBOS/Lloyds TSB agreed to the sale of Bankwest and St Andrews Insurances to Commonwealth Bank of Australia (CBA) for an initial purchase price of A$2.1 billion.(Refer Share Sale Deed)

Forthcoming Royal Commission and Class Action concerning the BankWest Commercial Loan Book

At the time both HBOS and the CBA reported provisions for remaining consideration of circa $300 million. The acquisition was completed on 19 December 2008. (refer note 14 of the CBA 11 February 2009 half year profit announcement)

The BankWest pre acquisition loan book was funded by 66% in depositor funds, $530 million in Preference Shares, $17 billion in parent company wholesale funds, $2.1 billion in ordinary shares, $1.1 billion in retained earnings and a $597 million pre tax 2008A profit.(Refer the BankWest 2008A financial statements, the Share Sale Deed, and the CBA 11 February 2009 Investor Presentation).

At the time of acquisition BankWest was reporting to the Australian Prudential Regulation Authority (APRA) under to Basel I requirements, and under CBA ownership began reporting under Basel II Pillar 3 standardised approach requirements on 1 January 2009.(Refer the CBA 2009 Profit Announcement).

The BankWest performing loan book at the time of acquisition had a value of approximately $55 billion most of which was Non Investment Grade Standard and Poors (S&P) credit rated loans of BB to CCC.(Refer the BankWest Credit Policy, the BankWest 2008A financial statements and the CBA Answers to Questions on Notice to the Parliamentary Inquiry(PJC)).

Under the standardised Basel II approach, BankWest's Tier 1 Capital holding requirements were to increase from approximately $4 billion to $20 billion (a $16 billion increase).

An increase from an 8% Tier 1 Capital requirement under Basel I to an average 38% under the Basel II standardised approach .(Refer Fitch Ratings 2005 The Impacts of Basel II on Credit Markets Slide Presentation).

At the time of acquisition the CBA operated under Basel II advanced accreditation and its $285 billion loan book most of which was Standard & Poor'sAAA to BBB+ rated (Investment Grade). (Refer the CBA 2009 Results Presentation and the CBA 31 March 2009, Basel II Pillar 3 report).

On this basis the CBA had a credit rating of AA, and its Tier 1 Capital holding requirement was approximately $20 billion. (Refer the CBA 2009 Profit Announcement and the CBA Basel II Pillar 3 31 March 2009 disclosure statement).

The BankWest Commercial Loan Book as it stood at the time of acquisition, would have reduced the CBA's Commercial Loan Book from 66% investment grade to 53% investment grade, threatening its AA credit rating and its cost of interest across its entire $285 billion loan portfolio.(Refer the CBA 31 March 2009, Basel II Pillar 3 report)

HBOS was forced to sell BankWest due to its inability to replace the $17 billion in wholesale funding as it fell due, BankWest had replaced $3.75 billion in subordinated debt from the Reserve Bank of Australia (RBA) in replacement of some of that $17 billion that had become due.(Refer the 2012 Senate Economics Reference Inquiry 2012)

There was also a $12.2 billion run on BankWest's deposits in the 6 months ending 30 June 2010, adding further pressure on the BankWest wholesale funds. (Refer the BankWest 30 June 2009 Balance Sheet).

At the CBA 2014 Annual General Meeting (AGM) in answer to a question by Mr Francis Gilbert the CBA chairman Mr John Turner admitted that the CBA at the time the CBA bought BankWest it was not able to replace the BankWest wholesale funds. He stated:

“If you think back to 2008-2009, when all this occurred and you think about the executive of the Bank the top of the Bank they were deeply concerned that the Bank continued to exist....It was the time when wholesale funds for banks were almost impossible to obtain, it was the time when the Commonwealth Bank bought BankWest because Bankwest was in an awful lot of trouble........ and the board had auditors in to every meeting to ensure just to ensure that we came through this financial crisis satisfactorily right through to 2010” .

Mr. Ian Narev the current CBA CEO was "Group Head of Strategy, with responsibility for corporate strategy development, mergers and acquisitions and major cross- business strategic initiatives. He led the Group’s $2.1 billion acquisition of Bankwest in 2008", and developed the strategy outlined below.

The Share Sale Deed provisions provided the CBA at clauses 4 & 10 with price adjustment provisions. The Warranty Clauses are, 15.1, 15.3, 16.1, 16.2, schedule 6 cl 5.1 and clause 12 (c) of the Share Sale Deed provided the CBA with a $4 billion short term loan in support of the Warranty Clauses. (Refer the Share Sale Deed and the December 2015 CBA testimony to the PJC).

The warranty provisions of the Share Sale Deed, enabled the CBA to deduct amounts from the HBOS $4 billion loan it had secured, for pre acquisition BankWest loans it (the CBA) deemed retrospectively impaired.

BankWest operated under its own banking license until 2012, and the CBA had planned to operate BankWest under its own (CBA) license and extend to BankWest its Basel II advanced accreditation by 1 October 2012.(Refer the CBA 2009 and 2012 Profit Announcements and Results presentations).

Had the CBA kept the BankWest Commercial Loan Book, it (the CBA) would have faced a $45 billion increase in, recurring interest costs, and regulatory and capital holding costs.(Calculation estimate)

For the reasons of avoiding these costs the CBA unconscionably wrote off 1,958 BankWest pre acquisition Commercial Loans. Loans having a total combined value of $22,869 million and deducting the losses incurred in the write off process, from the $4 billion loan it (the CBA) secured from HBOS.(Refer the CBA Answers to Questions on Notice to the PJC, the BankWest 31 December 2008 financial statements and the Share Sale Deed).

In a recent supreme court case in NSW, the CBA admitted that this alleged conduct (should it be proven in court) is fraudulent and is the worst conduct imaginable levelled at an Australian Banking License holder.

At the 2 December 2015 PJC inquiry hearing, the Honourable Phillip Ruddock offered for the CBA to accept the appointment of "Independent agreed mediators" to determine the facts and circumstances relating to the impairment of the BankWest Commercial Loan Book, as opposed to the establishment of a forthcoming "Royal Commission". The CBA refused.

An information Memorandum, contemplating a $100 billion class action against the CBA, on behalf of the BankWest Commercial Loan Book Victims is presently under review.

Provided products and services

Bankwest offers a full range of banking products, including loans, credit cards transaction and savings accounts.

In 2007 Bankwest launched the Bankwest Regular Saver account for individuals.

See also

• Timeline of banking in Western Australia

Sources

• Spillman, Ken (1989) Horizons: A History of the Rural and Industries Bank of Western Australia. (Perth: University of Western Australia Press.)

External links

• Official website of Bankwest