Westpac’s $21.4bn RAMS Sale Boosts Capital Ratio by 20bps Despite Loss
Westpac has agreed to sell its $21.4 billion RAMS mortgage portfolio to a consortium led by Pepper Money, KKR, and PIMCO, aiming to simplify operations and boost capital ratios despite an expected loss on sale.
- Sale of $21.4bn RAMS mortgage portfolio to Pepper Money-led consortium
- Transaction at slight premium to gross loan value but expects loss after costs
- Completion subject to regulatory approvals, expected in second half of 2026
- Westpac’s common equity Tier 1 capital ratio to rise by approximately 20 basis points
- RAMS customers retain current service channels with no immediate action required
A Strategic Shift in Westpac’s Mortgage Business
Westpac Banking Corporation has announced a significant move to streamline its mortgage operations by selling its entire $21.4 billion RAMS mortgage portfolio. The buyer consortium, led by Pepper Money alongside global investment firms KKR and PIMCO, marks a notable shift in Westpac’s approach to its non-core lending assets. This transaction follows Westpac’s earlier decision to close RAMS to new business in August 2024, signaling a clear intent to simplify its mortgage footprint.
Financial and Operational Implications
The sale price is reported to be at a slight premium to the gross loan value of the portfolio, yet after accounting for transaction costs and other adjustments, Westpac expects to record a loss on the sale. Despite this, the deal is expected to enhance Westpac’s capital position, with an estimated increase of around 20 basis points in its common equity Tier 1 capital ratio. This capital boost provides Westpac with additional strategic flexibility and a stronger buffer to support its core banking operations.
Customer Experience and Transition
Importantly for RAMS customers, Westpac has assured that their loan management experience will remain unchanged in the short term. Customers can continue to use the RAMS app, website, and call centre without disruption. The bank has committed to supporting customers through any transitional requirements as the portfolio changes hands, aiming to maintain service continuity and minimize any potential inconvenience.
About the Consortium
The acquiring consortium brings together diverse expertise – Pepper Money is a well-established non-bank lender in Australia and New Zealand, known for its innovative home loan products. KKR, a global investment powerhouse, and PIMCO, a leader in fixed income and credit markets, add significant financial muscle and asset management experience. Their combined involvement suggests a strategic intent to actively manage and potentially grow the RAMS portfolio under new stewardship.
Looking Ahead
The transaction remains subject to regulatory approvals and other customary conditions, with completion anticipated in the second half of 2026. This timeline introduces some uncertainty, but the deal clearly aligns with Westpac’s ongoing efforts to focus on its core banking business and improve operational efficiency. Investors will be watching closely for updates on regulatory progress and the eventual financial impact in Westpac’s future earnings reports.
Bottom Line?
Westpac’s RAMS portfolio sale marks a pivotal step in reshaping its mortgage strategy, with capital gains offset by a sale loss and a watchful eye on regulatory hurdles ahead.
Questions in the middle?
- What is the exact magnitude of the expected loss on sale after transaction costs?
- How will the new owners manage and potentially grow the RAMS mortgage portfolio?
- What regulatory challenges could delay or alter the completion timeline?
