Second bid for Lloyds TSB's New Zealand unit

Westpac Banking Corp is in talks to buy Lloyds TSB's New Zealand banking unit, pitting it against its main Australian rivals in bidding for New Zealand's biggest bank, which analysts have valued at about £2.5bn.

Westpac, Australia's third-biggest bank by assets, yesterday sought approval from New Zealand's competition regulator to buy the National Bank of New Zealand.

The Sydney-based bank is the second bidder for National Bank to approach the regulator after the Melbourne-based Australia and New Zealand Banking Group (ANZ) applied last week.

New Zealand's central bank governor, Alan Bollard, has expressed concern that the nation's major banks may all be controlled by Australian companies, which already own the next four biggest banks. Commonwealth Bank of Australia's chief executive, David Murray, has said he may be interested in National Bank.

"It's clearly going to be a contest which is good for the seller," said Robert Patterson, from Argo Investments in Adelaide. "Probably Australia and New Zealand is the best fit" because, as the smallest of Australia's four largest banks, it has the greatest need to increase its assets, Mr Patterson said.

ANZ and Commonwealth Bank may face lower regulatory hurdles than Westpac or National Australia Bank, Australia's biggest bank, because they are the smallest of New Zealand's five largest lenders, investors said.

ANZ may have more to gain than Commonwealth Bank from expanding in New Zealand because its local banking profits rose by a fifth in the six months to 31 March, lagging a 25 per cent rise in first-half earnings at Commonwealth's ASB Bank unit.

The purchase of National Bank, the country's biggest lender, would give the successful bidder a bank with 22 per cent of New Zealand's loans market and 159 branches, allowing it to expand its existing business in a nation of four million people.

ANZ has 143 branches and Westpac has 200. Five foreign lenders own more than 90 per cent of the bank assets in New Zealand.