U.S. private equity investor JC Flowers is circling Britain's weakened banking industry, prepared to swoop on forced divestments over the next 12 months, according to the firm's new European and Asia Pacific boss.
David Morgan, a former chief of Australia's Westpac Banking Corp
Partly nationalized lenders Royal Bank of Scotland (RBS)
RBS and Lloyds have had directions from the authorities that they do need to divest significant parts of their business, Morgan said in a phone interview from Brisbane.
Morgan, who was nine years at the helm of Westpac, Australia's third-biggest lender, has spent almost two years as Australian chairman of JC Flowers, which was founded by former Goldman Sachs banker Christopher Flowers.
Morgan is relocating to London to take up his new, full-time role with the firm, which invests solely in the financial services sector, where he sees the most immediate opportunities.
Morgan said his strong ties with Australian bank executives meant it was very possible JC Flowers could team with National Australia Bank Ltd
This month, the British government ordered the banks in which it is a major shareholder, including the wholly state-owned Northern Rock, to sell off assets over the next four years in order to repay their taxpayer-funded bailouts.
But Morgan said he expected the divestments to go ahead sooner rather than later, noting also a ruling by the British government that divestments be made to new players, not incumbents.
Once a unit knows it has to be divested, it probably makes sense to get on with it.
We're also in the process of discussing co-investment opportunities with a major sovereign wealth fund, so we think if we can identify the opportunities, the capital will be there, he added.
Of the Australian banks, ANZ and Macquarie are explicit in their desire to expand offshore, with ANZ focused on growth in Asia. NAB, which owns Clydesdale and Yorkshire banks in the UK, is in the process of deciding whether to expand in Britain or divest and leave.
Australia's other two big lenders, Commonwealth Bank of Australia