(Reuters) – Australia’s Westpac Banking Corp said on Thursday it will sell its lenders mortgage insurance (LMI) business to Arch Capital Group in a deal that will also make Arch Westpac’s exclusive LMI supplier for 10 years.
The sale, which is expected to close by the end of August, is the latest step in Westpac’s efforts to simplify its operations and cut costs by focusing on its core domestic and New Zealand businesses.
“The sale continues the simplification of our business and builds on our progress in becoming a simpler, stronger bank focused on consumer, business and institutional banking,” said Jason Yetton, chief executive, specialist businesses and group strategy.
Westpac, Australia’s third largest lender, said it will record a loss on the sale, though the deal is expected to add about seven basis points to its common equity tier 1 capital ratio.
In a separate statement, Arch said it intends to combine Westpac LMI’s operations with its existing Australian LMI company, Arch LMI Pty Ltd.
Lenders mortgage insurance covers Westpac for any shortfall if a customer defaults on a home loan or if the proceeds from the sale of the property are not enough to pay off the loan.
(Reporting by Shashwat Awasthi in Bengaluru; editing by Jane Wardell)