Westpac Bank will take over the future business of RAMS Home Loans Group, swooping on the assets of the lender which struggled to refinance its debt following the US subprime mortgage crisis.
RAMS shares tumbled as much as 22 per cent today after Westpac, Australia’s fourth-largest bank, said it would buy the RAMS franchise and brand for $140 million and refinance some of its debt, but not take on its existing mortgage book.
The deal was hailed as a cheap buy for Westpac which is seeking to expand its mortgages arm, but will leave RAMS as an operation with no new business from November that will service only existing loans.
“RAMS looks like a business in run-down, it doesn’t have much of a future at all,” said Argo Investments Managing Director Rob Patterson.
“I’m surprised they couldn’t cut a better deal elsewhere, but it’s symptomatic of the times in credit markets.
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