WESTPAC Banking and smaller rival St George agreed to a takeover deal yesterday worth A$18.6 billion (US$17.5 billion) that would create Australia's biggest bank by market capitalization.

Senior Westpac executives expressed confidence antitrust regulators and the federal government would not block the deal, the biggest takeover in Australian banking history.

Westpac, Australia's third-biggest bank, is offering 1.31 of its own shares for each in St George Bank, the country's fifth-biggest bank. The deal values the smaller lender at A$18.6 billion, or A$33.10 per St George share.

The deal would create Australia's largest financial services company worth more than A$66 billion.

St George's share price surged almost 26 percent yesterday when a trading halt was lifted, ending trading in Australia only slightly below that point at A$33.37. Westpac shares dropped about 3 percent to A$25.11. Trading in the banks was suspended on Monday pending the announcement.

Australian antitrust regulator said it had begun a review of the takeover bid.