Westpac’s Asian adventure

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Westpac Banking Corporation (WBC.AX) may be following Australia and New Zealand Banking Group’s (ANZ.AX) lead and moving further into Asia.

Westpac surprised the market with a $400 million bid for a stake in Hong Kong’s Bank of East Asia in December. Unfortunately for Westpac, it was outbid by a higher offer from one of Japan’s financial giants, Sumitomo Mitsui.

According to the Australian Financial Review (AFR), Westpac was looking for a long-term strategic holding in the business, but this move came as a surprise, as Westpac has traditionally been more domestically focused than the other banks. The majority of its $6.6 billion in profit last year came from Australia and New Zealand.

With domestic growth slow and slowing even further, Australia’s banks have been looking for other alternatives to grow their earnings. With fast-growing economies, a rising middle class and large savings, Asia is proving too attractive for our banks to ignore.

ANZ Bank has been expanding into Asia for a few years now, and has operations in 14 Asian countries, while the Commonwealth Bank (CBA.AX) operates in seven, National Australia Bank (NAB.AX) in six and Westpac currently in five countries. ANZ has repeatedly stated that it is aiming to derive between 25-30% of group profits outside of Australia and New Zealand by 2017.

Westpac is due to open a branch in India later this month, joining the other three majors who already have a presence there.

Foolish takeaway

Westpac investors will be hoping that its ‘Asian’ strategy has more success than NAB’s forays into international markets. NAB’s UK expansion has been deemed a disaster and follows on from its dismal US experience, where it was forced to incur write-downs of more than $3 billion in 2001.

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More reading

The Motley Fool’s purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool’s free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead.  This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson. Motley Fool writer/analyst Mike King doesn’t own shares in any companies mentioned.

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