The A$40 billion managed by BT in Australia dwarfs the $2.5 billion currently under management in New Zealand.

In August when the Australian BT Funds Management Group revealed plans to partially list its funds management arm, Richardson said the inclusion of New Zealand was likely.

However, he said a "mutual" decision was made to shelve BT NZ's involvement after examining the legal expenses of listing and also taking into account the KiwiSaver costs the New Zealand business is carrying.

"It's unfortunate in some respects but on the other hand nothing has changed," Richardson said. "The clear message we got is that [Westpac and BT Australia] support the idea but the timeframe wasn't right."

But in an announcement to the Australasian stock exchanges yesterday, Westpac confirmed its plan to float a slice of the Australian BT funds management business was "on track".

Industry veteran, Brian Scullin, was named as chair of the new entity (BT Investment Management) with the board also including independent director Gavin Walker as well as Westpac and BT representatives Rob Coombe, Dirk Morris and Carolyn Hewson.

It is understood Westpac will free float about 30% of the BT investment business with 10% allocated to staff and the remaining 60% to be held by the bank. The investment arm only constitutes 10% of the total BT Financial Group with the proposed entity to exclude the BT wrap, insurance, multi-manager products, insurance and distribution arms.

"The IPO is expected to occur towards the end of this calendar year, subject to market conditions and regulatory approvals," the statement said.

In announcing the float in August Westpac said it was chiefly designed as a staff retention tool.