CBA moves fast beyond BankWest

When CBA shares resumed trading yesterday for the first time since the bank unveiled its lightning transaction on Tuesday, they fell 6.1% to $42.40.

Still, the fall was not as large as had been expected after CBA raised $2 billion of new capital at $38 a share through the issue of nearly 53 million shares to pay for the deal.

CBA chief financial officer David Craig said the placement was a "great result" in the face of a challenging market.

It is believed the placement was fully subscribed and was issued to about 100 existing and new institutional investors.

Seeking to keep liquidity levels up, the Reserve Bank yesterday used its daily markets operators to inject $3.5 billion into the financial system. However, banks said the cash injection had little impact on short-term borrowing costs, which remained persistently high.

Deutsche Bank analyst Ross Brown said CBA had snared a good price for the BankWest franchise and at the same time removed one of its most aggressive competitors. "However, CBA has inherited some additional funding and credit quality challenges," he said.

Mr Brown said CBA's wholesale funding needs could rise sharply if it went ahead with the acquisition of Suncorp-Metway.

While several banks were in the race to buy Suncorp's banking and wealth management assets, any outcome on such a deal was expected to "take weeks, rather than months", said several people involved in the process.

National Australia Bank and ANZ are also eyeing the Suncorp assets, which it is estimated could fetch more than $7 billion.

Regional lender Bank of Queensland said the consolidation occurring in the Australian market would make it tougher for smaller players, but also presented an opportunity to tap resentment against the big banks, especially in Western Australia.

"Given the elephant has moved into Western Australia, it's going to be very, very competitive there," said Bank of Queensland managing director David Liddy.

BankWest parent HBOS said it would continue to manage its remaining Australian businesses, including Bank of Scotland International and Capital Finance.

HBOS's head of international operations, Colin Matthew, said the sale was in the best interest of shareholders.

"This transaction will further enhance the group's capital position and reduce wholesale funding requirements," he said.

Separately, CBA this week said it was comfortable with the range of analyst profit forecasts of between $4.4 billion and $4.9billion for 2008-09.

However, it revealed it would incur a $100 million write-down on an investment related to ABC Learning and a $100 million provision against collapsed US investment bank Lehman Bros.

Analysts said the BankWest transaction was likely to boost CBA's earnings per share by 0.5% in the first year, increasing to 2% by 2009-10.

KEY POINTS

BankWest will add 0.5% to CBA's EPS in the first year and 2% by 2009-10.

The Suncorp-Metway assets for sale have an estimated value of $7 billion.