HBOS's Australian Arm Sold to Commonwealth Bank of Australia

HBOS last night clinched the sale of its BankWest operation to Commonweatlh Bank of Australia as it part of its desperate action to shore up its balance sheet ahead of its rescue takeover by Lloyds TSB.

In announcing the sale, HBOS admitted it was taking a loss on the sale of £440m and would need to write off £250m of goodwill from the transaction. The original transaction by HBOS in 2003 to buy the remaining stake in BankWest that it did not already own was itself the cause of controversy.

Because of the capital that will be released, HBOS said it would have £8bn of extra funds and would be able to boost its crucial regulatory capital cushion.

HBOS said Lloyds TSB was supportive of the transaction that has been rumored since its funding difficulties emerged in April.

Colin Matthew, chief executive of HBOS International, said the deal was in the best interests of shareholders. "This transaction will further enhance the group's capital position and reduce the group's wholesale funding requirements".

Shares in HBOS collapsed more than 40% on Tuesday as the City awaited details of a government bail-out of the banking sector. The slide its price means that Lloyds is offering to pay twice the current value of HBOS shares – leading to speculation that the deal was running into difficulties.