BankWest sold for deep discount

The transaction will consolidate CBA as the nation's biggest bank, dominating mortgages and deposits while the combined entity will count around one in two Australians as customers.

CBA was able to swoop on the fast-growing BankWest business as shockwaves from the global financial crisis crippled the regional bank's owner, the British bank HBOS, which in turn has put itself up for sale. The sale, priced at just 0.8 times BankWest's book value, comes in the midst of an unprecedented upheaval of the global banking industry, with giant US banks including Washington Mutual and Wells Fargo forced into a sale.

At the same time the credit crunch is playing havoc with Europe's banking system leading to the nationalisation of banks from Iceland to Germany while doubts are mounting over the health of some of Britain's biggest lenders.

"The fact that the parent was in some difficulty as we all know in the UK, so we obviously saw to undertake an acquisition that 12 months ago wouldn't have been possible at this price," CBA's chief executive officer, Ralph Norris, said. "But we do live in turbulent times."

Even with the BankWest deal, Mr Norris said he would still push ahead with an attempted move on Suncorp-Metway, which said this week it might put its banking and wealth assets on the market.

However, a move on the Suncorp assets - which are also expected to be contested by ANZ and National Australia Bank - would be made only if it made sense to shareholders.

The BankWest transaction is expected to be immediately positive for CBA's earnings. The cashed-up CBA was able to cherry-pick the best assets from the HBOS Australian businesses - including the 148 BankWest branches and the $2 billion in funds under management from the St Andrew's Australia wealth arm. CBA turned its back on the institutional and corporate financing book which are believed to be sitting on large holdings of higher risk loans.

Taking on these businesses - the $15.6 billion BOS International corporate book and the $12 billion asset finance book - which are regarded as vulnerable in economic downturns - would have more than doubled CBA's funding requirement, Mr Norris said.

Following the transaction CBA will emerge with about 1160 branches and a loans book of more than $420 billion.

The combined bank will have nearly 23 per cent of the nation's home lending market and about $300 billion in deposits, representing a third of the nation's total deposits.

Still, Mr Norris said the acquisition did not preclude CBA from acquiring the banking operations of Suncorp-Metway. Most bank transactions over the past decade have averaged 1.9 times book value, with Westpac's move on St George measured at 2.7 times.

Mr Norris said he remained committed to BankWest's 100-strong branch network in Western Australia as well as jobs in that state. However, the opening of more than 160 branches on the east coast - including more than 70 in NSW - will stop.

Some analysts, including Goldman Sachs JBWere's James Freeman, questioned whether CBA would able to acquire Suncorp at the same time as integrating the BankWest assets. The transaction comes as CBA is pushing ahead with a major replacement of its banking system.

Last night CBA was concluding a $2 billion share placement to institutional investors to fund the transaction.