Westpac is reviewing its New Zealand business and may look at demerging from its Australian parent via a sale.
"Westpac has already placed a number of businesses into a specialist businesses division, for ultimate exit," the bank said in a statement to the NZX. The bank has reported appointed Macquarie as an advisor.
"We have also announced the consolidation of our international operations in Asia. Westpac is also assessing the appropriate structure for its New Zealand business and whether a demerger would be in the best interests of shareholders."
It said it was in the very early stage of this assessment and no decisions had been made.
"This will also consider the impact of the Reserve Bank of New Zealand's (RBNZ) reviews which were announced today.
"The business continues to perform well with a strong position in retail and commercial banking. However, given the changing capital requirements in New Zealand and the RBNZ requirement to structurally separate Westpac's NZ business operations from its operations in Australia, it is now appropriate to assess the best structure for these businesses going forward. Westpac will provide further updates as required."
Westpac is New Zealand's third-largest bank with about 20 per cent of the market.
The bank's New Zealand's cash profit dropped 38 per cent, or $393 million, to $649m for the year to September 30, 2020 - driven by lower income and higher impairments caused by the fallout from Covid-19.
The bank's impairment charges were $320m, up from a $10m benefit the prior year.
Earlier today the Reserve Bank told Westpac it must commission two independent reports to address concerns the regulator has around the bank's risk governance processes.
Geoff Bascand, deputy governor and general manager of financial stability at the Reserve Bank, said it had experienced ongoing compliance issues with Westpac New Zealand in recent years.
Bascand said most recently it had dealt with the bank over material failures to report liquidity correctly and the bank had continued to operate outside of its own risk settings for technology for a number of years.
"Westpac NZ needs to take a close look at its risk governance practices. To ensure this happens we are requiring them to provide an independent report that assesses Westpac NZ's risk governance processes and practices applied by the Westpac NZ Board and executive management."
It had also required Westpac to provide a separate independent report to provide assurance that the actions they have taken to improve the management of their liquidity risks, and the culture surrounding it, are effective.
Bascand said until it was satisfied that Westpac's remediation work was complete and effective it was increasing the bank's required holding of liquid assets.