HBOS today agreed to sell its Australian lender BankWest, providing an injection of badly needed capital.

The Commonwealth Bank of Australia is to pay HBOS A$2.1 billion (£859.7 million) for BankWest, headquartered in Western Australia, the country's fastest-growing state.

HBOS today said the sale would have a “substantial funding benefit” of around £8 billion. The price is some 20% below book value, though in another Aussie deal Westpac bank is paying 2.7 times book value to take over smaller lender St George.

While relieved to see the deal done, analysts are disappointed by the price. HBOS said the loss on the sale is expected to be about £440 million, with £250 million of goodwill also written off at group level.

HBOS shares slid 61% last month on concerns about a shortage of funds to back its mortgages, despite raising £4 billion in July in a share sale. The shares fell more than 40% yesterday.
Lloyds TSB, which says its supports the BankWest deal, agreed last month to buy HBOS in a stock swap then valued at £12.2 billion. HBOS shareholders will receive 0.83 Lloyds TSB shares for each HBOS share, with the swap completed by. early next year.

HBOS Australia, which employs more than 6000 staff at BankWest, Capital Finance Australia, consumer credit insurance and life insurance firm St Andrew's Australia and other businesses, posted a 15% increase in pre-tax profit to A$757 million in 2007.

The BankWest sale marks the end of a long disposal process for HBOS. Other lenders in the country including National Australia Bank, owner of the Clydesdale and Yorkshire brands, looked at a deal but walked away.