THE Commonwealth Bank of Australia, the nation's biggest provider of mortgages, has agreed to buy HBOS's Australian units for A$2.1 billion (US$1.5 billion) as the troubled UK bank sells assets amid the global credit crisis.

The purchase includes BankWest, a lender focused on Western Australia, and St Andrew's, an insurer and asset manager, Sydney-based Commonwealth Bank said. Analysts at Merrill Lynch and ABN Amro had forecast Commonwealth Bank would pay as much as A$4 billion for the two units, Bloomberg News said.

Commonwealth Bank, with the second-highest credit rating at Moody's Investors Service, is taking advantage of the financial-market turmoil that's forcing European banks to sell assets to stay afloat. Edinburgh-based HBOS, which is being bought by Lloyds TSB, sold the Australian units for 0.8 times book value, less than half the average valuation in the past nine Australian bank deals, Commonwealth Bank said.

Commonwealth Bank also said it had been in talks with Suncorp-Metway. Suncorp, Australia's third-largest insurer, said it had had approaches from potential buyers of its banking and wealth management units, without identifying candidates. Suncorp owns the nation's sixth-largest bank.

Buying BankWest and St Andrew's expands Commonwealth Bank's presence in Western Australia, the nation's fastest-growing state, the Sydney-based bank said. The deal allows Commonwealth Bank to maintain its lead in the Australian mortgage market, which was under threat from Westpac Banking's planned purchase of St George Bank.

"Rarely have we seen a quality asset such as BankWest become available on such attractive terms," said Commonwealth Bank Chief Executive Officer Ralph Norris.

Commonwealth Bank shares are suspended for two days as the company seeks to sell A$2 billion of new stock to fund the deal. The stock rose 2.6 percent yesterday to A$45.15, paring this year's decline to 24 percent. The bank is offering shares at between A$38 and A$43 apiece, according to three people involved in the transaction.

HBOS, Britain's biggest mortgage lender, plunged 41 percent in London trading, taking declines this year to 88 percent. The bank is being bought by Lloyds TSB in a deal brokered by the UK government after concerns about its ability to survive.

Commonwealth Bank will pay 11.2 times the HBOS units' combined 2007 net income, compared with an average price-earnings ratio of 16.6 for the last nine Australian banking deals, the lender said. The price-to-book value of 0.8 times compares with an average of 1.9 times for the last nine deals, it said.

BankWest's cost-to-income ratio is 67.6 percent, compared with 48.9 percent for Commonwealth, the Australian bank said. BankWest funds 63 percent of its business from deposits, compared with 58 percent for Commonwealth.