Uncertain future for 800 Lloyd's employees in Australia

The dust has settled on the announcement that Westpac will buy Lloyd's Australian assets for US$1.4bn, and conflicting views are now emerging about the merits of the transaction. However, recruiters believe that it will have a positive impact on hiring.

Westpac, one of Australia's big four banks, has secured wider market share in the country of asset financing, corporate and mortgage lending. The total loan book acquired has a market value of AU$8.4 billion, however, in the overall scheme of things, it represents a very small deal for the bank.

Westpac said at the time of announcing the transaction that 'most' of the 800 people working for Lloyds in Australia would keep their jobs, whereas reports suggest there will be layoffs. Westpac declined to comment on its staffing plans in the wake of this deal.

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Edmund Gill, a director of Hays in Australia, believes that the impact will ultimately be positive: "Westpac's acquisition of the Lloyds Australian lending book is more likely to lead to job hiring than consolidation since the deal is a transfer of the loans book, not a branch network that includes existing staff.”

Lloyd's had to offload its international operations to meet the demands of its single largest shareholder, the UK government, which insists that it focuses on UK domestic lending and other activities.

But for Westpac, the deal is small, even though it says that it will be earnings positive in the 2014 financial year. Bell Potter analyst TS Lim told Reuters that;  "...when overall credit growth is slow I think anything like this, which is also EPS accretive, would be considered a good deal".

Other analysts say, however, that the acquisition was the lesser of two evils, with the other being the low returns being earned on the bank's capital.

The Australian says that CIMB analyst John Buonaccorsi believes that the deal reduces the possibility Westpac will acquire assets in Asia in the medium term, while Nomura analyst Victor German said Westpac could have achieved similar EPS accretion by buying back shares with its surplus capital.