(Adds further details on sale, statement by Westpac Chief Information Officer and background on capital)
Oct 21 (Reuters) - Westpac Banking Corp WBC.AX said on Wednesday it would sell its 10.7% stake in buy-now-pay-later firm Zip Co Ltd Z1P.AX in a deal valued at about A$368 million ($260 million), as it aims to trim its portfolio and improve its capital position.
Australia's second-largest lender, whose capital has been eroded by a record lawsuit settlement and surge in bad-debt provisions due to the coronavirus outbreak, said the sale will add around 8 basis points to its common equity tier 1 capital ratio.
The offer price for the sale is A$6.65 per share, a discount of 6.1% to Zip's last closing price of A$7.08, and implies a deal values of about A$368 million for Westpac's stake, based on Refinitiv data.
This week, Westpac teamed up with Zip's rival Afterpay Ltd APT.AX to offer savings accounts and budgeting tools, marking a push into the buy-now-pay-later sector. sector's popularity has surged due to an online shopping boom triggered by the pandemic.
"We are continuing to explore opportunities with Zip, including working to integrate their buy-now-pay-later functionality into our mobile banking apps across Westpac and our regional bank brands," said Westpac Chief Information Officer Gary Thursby.
Westpac said settlement of the sale, a bookbuild to institutional investors being managed and underwritten by UBS, is expected to occur on Oct. 26. ($1 = 1.4136 Australian dollars)