TWO of Australia’s biggest banks have sounded out HBOS about a possible break-up of the British bank’s £3 billion antipodean business.

Commonwealth Bank of Australia and National Australia Bank have both spoken to advisers about a potential move on HBOS’s Bank West retail operation, which has 860,000 customers across Australia.

However, both prospective bidders are said to be reluctant to take on the rest of the bank’s Australian operations, which include corporate banking under the brands BOS International, Capital Finance and St Andrew’s.

Any deal would have to be aggressively priced to persuade HBOS to part company with Bank West. Although it remains under pressure from investors after its poorly received £4 billion rights issue, much of its promised growth is focused on its Irish and Australian arms.

However, HBOS chief executive Andy Hornby has said that there are no “sacred cows” in the bank’s continuing review of its assets. Selling the retail bank but retaining the corporate-banking business could allow Hornby to cling to part of the proposed growth strategy.

Neither of the Australian banking giants has yet made a formal proposal to HBOS.

The potential break-up follows weeks of speculation about a sale of the Australian empire. The bank’s shares climbed 3.2% on Friday as rumours of a possible sale swept across dealing rooms in the City. Some of the rumours were sparked by a large HBOS foreign-exchange transaction in Australian dollars, which was thought to be a possible prelude to a deal. A disposal of the business was considered by the HBOS board before the rights issue was announced.

Some banking experts believe HBOS has missed its chance to get a large premium for the business. Although Australian banks have weathered the global credit crisis comparatively well, all the leading institutions are under increasing scrutiny.

Commonwealth has said that acquisition opportunities may emerge from the credit crisis and last week bought a 33% stake in the privately owned mortgage broker Aussie Home Loans.

The potential move comes amid further signs of deterioration in the UK housing market. Bradford & Bingley revealed a sharp jump in arrears in its mortgage book on Friday as it plunged to a first-half loss of £26m.

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