HBOS, the embattled owner of Halifax and Bank of Scotland, today announced the sale of its Australian operations to Commonwealth Bank of Australia (CBA) in a deal worth A$2.5 billion (£1.2 billion).

The bank, itself the subject of a recommended bid from Lloyds TSB, is selling the Bank of Western Australia — known as BankWest — and St Andrew's Australia. The deal includes its retail and business banking operations as well as its insurance and wealth management businesses.

HBOS will receive A$2.1 billion of cash and receive a return of excess capital in BankWest of about A$360 million. CBA will also redeem preference shares at their face value of A$530 million.

The deal, equivalent to a multiple of 13.1 times 2007 earnings, would be "meaningfully accretive" to HBOS earnings and its Tier one capital ratio. However, there will be a £440 million loss on the sale and a £250 million goodwill write-off at group level.

The group, which has received approval for the move from Lloyds TSB, said it would retain a presence in Australia through Bank of Scotland International and Capital Finance Australia.

Colin Matthew, chief executive of HBOS International, said: "The sale of BankWest and St Andrew's at this time is in the best interests of HBOS. This transaction will further enhance the group's capital position and reduce the group's wholesale funding requirements."

HBOS was advised by Morgan Stanley.

Times Recommends

• Equitable Life halts £7bn sale on market turmoil
• Potential buyers emerge to save Woolworths staff
• Terrorist attacks close Bombay Stock Exchange