Banks Reap Profit From Visa's Float
The Age
Wednesday March 26, 2008
THE windfall reaped by the major banks from the listing of global credit-card provider Visa has given them funds to restructure key operations and invest in new ones.
Commonwealth Bank and St George, the latest beneficiaries from Visa's successful listing on the New York Stock Exchange, said yesterday that their one-off gains would be spent on projects such as new information technology systems and outsourcing projects. Commonwealth has topped ANZ, the biggest issuer of Visa cards in the Asia-Pacific region, by revealing it expects to make a pre-tax sum of $355 million from the listing, which saw the stock rise by $US12 ($A13.10) in its first day of trading last week from an issue price of $US44. Commonwealth's figure was $5 million more than what ANZ said it was likely to book as a result of selling just more than half its Visa shareholding into the listing and the value attached to its remaining stake. ANZ is planning to use the proceeds to underwrite a restructuring of its business, which will soon be carried out by chief executive Michael Smith and which may result in voluntary redundancies. Mr Smith is keen to make use of technological advances to reduce back-office processing work and push more of ANZ's investment into its mainline banking business. In a statement to the ASX yesterday, Commonwealth said it would use its gains to fund its "strategic investment program". The wide-ranging plan includes IT upgrades, expanding its car insurance business, boosting its anti-money-laundering operations and simplifying its home loans.As for St George, it will earn $75 million and look to invest the proceeds in its "strategic priorities". The bank also reiterated earlier statements that it is on track to increase earnings per share by 10% this year. Yesterday's announcements came as analysts forecast that the $270 million Visa "bonus" earned by Westpac would provide chief executive Gail Kelly with plenty of financial flexibility to shake up the bank under an organisational structure. Mrs Kelly, who joined Westpac on February 1 from St George, is due to outline her ambitions for the bank when she releases its half-year results on May 1. The only major bank yet to report its pre-tax gain from the Visa flotation is National Australia Bank, although the market expects the figure to be about $250 million. This would take the total amount recorded by the leading five institutions to $1.3 billion.KEY POINTS ? Local banks have benefited from credit-card provider Visa's listing on Wall Street.? Some will invest the gains in projects such as new information technology systems.
© 2008 The Age
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