CBA to buy BankWest for $1.5bn

Commonwealth Bank agreed to buy struggling British bank HBOS's Australian unit BankWest and other assets for a cheap A$2.1 billion ($1.5bn), to boost its market share in fast-growing Western Australia.

The cash deal by Australia's second-largest bank by assets comes a day after HBOS's shares slid 42 per cent on Tuesday, leading a broad based sell-off in UK banks, as the UK government prepared to announce a rescue package for its crippled financial sector.

"It's certainly an attractive price, indicating some distress and willingness to sell. CBA's definitely got an attractive deal," said Mark Nathan, a portfolio manager at Fortis Investment Partners.

CBA's purchase of BankWest, at 20 per cent below book value, looks cheap compared to fellow Australian Westpac Banking Corp's takeover of St George Bank at 2.7 times book value for A$16.1bn.

The acquisition also includes HBOS's life insurance and wealth management business in Australia, St Andrews, but not any other HBOS's operations in the country.

Consolidation in Australia's banking sector has been widely expected as its big four players bulk up to weather the financial market turmoil.

The acquisition of BankWest would boost CBA's earnings per share immediately, and create annual pre-tax cost synergies estimated to be at 20-25 per cent of BankWest's cost base, CBA said.

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