Westpac will reap up to $700 million from selling off part of its controlling stake in BT Investment Management.
The banking giant said the reduction of its 59 per cent interest would significantly increase its tier one capital ratio, as new and tougher prudential rules force the banks to hold more loss-absorbing capital.
Cutting the BTIM stake to between 31 and 40 per cent is expected to generate a post-tax accounting gain of $600 million to $700 million for Westpac, and boost its annual cash profit.
Westpac's total stake had a market value of $1.5 billion before BTIM's shares were placed in a trading halt, with the stock up 31 per in 2015.
The bank will offer up to 19 per cent of its interest to institutional investors, while retail shareholders will get access to up to nine per cent of shares.
Chief financial officer Peter King said the sale would allow Westpac to realise part of its investment in BTIM, and increasing its capital ratios, while still maintaining a significant interest in the wealth manager.
"Wealth remains a strategically important focus for the Westpac Group and our continued investment in BTIM sees us maintain a stake in asset management, which is a key factor in having a strong and diversified wealth business," he said.
BTIM chief executive Emilio Gonzalez said the sell down would create a larger and more diverse shareholder base.
Westpac shares were up 58 cents, or 1.83 per cent, at $32.30.
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