Westpac Banking Corp said on Wednesday it would sell its 10.7 per cent stake in buy-now-pay-later firm Zip Co Ltd in a deal valued at about A$368 million ($260 million), as it aims to trim its portfolio and improve its capital position.

Australia’s second-largest lender, whose capital has been eroded by a record lawsuit settlement and surge in bad-debt provisions due to the coronavirus outbreak, said the sale will add around 8 basis points to its common equity tier 1 capital ratio.

Also read: Australian bank Westpac to pay record $920-million fine to settle money laundering case

The offer price for the sale is A$6.65 per share, a discount of 6.1 per cent to Zip’s last closing price of A$7.08, and implies a deal value of about A$368 million for Westpac’s stake, based on Refinitiv data.

This week, Westpac teamed up with Zip’s rival Afterpay Ltd to offer savings accounts and budgeting tools, marking a push into the buy-now-pay-later sector.

The sector’s popularity has surged due to an online shopping boom triggered by the pandemic.

“We are continuing to explore opportunities with Zip, including working to integrate their buy-now-pay-later functionality into our mobile banking apps across Westpac and our regional bank brands,” said Westpac Chief Information Officer Gary Thursby.

Westpac said settlement of the sale, a bookbuild to institutional investors being managed and underwritten by UBS, is expected to occur on Oct. 26. ($1 = 1.4136 Australian dollars)

comment COMMENT NOW