He decided to step down as group executive of the major bank's retail and business banking division, Westpac chief executive officer (CEO) Gail Kelly said in a statement.
In what is practically industry lore, Coombe's first bank job was with Commercial Bank of Australia, which bought Bank of NSW in 1982. Shortly after the acquisition, Bank of NSW changed its name to Westpac.
Coombe left the bank in 1991 to join BT, which was acquired by Westpac in 2002.
"I used to joke with [former Westpac CEO] David Morgan that I joined Westpac twice, but never out of free will," he has said.
Coombe was appointed chief executive BT in 2005 and in 2008, the bank named him head of the merged wealth business of Westpac and St George Bank following the major institution's acquisition of what was the nation's fifth largest bank.
Westpac distribution executive Jason Yetton replaces Coombe, effective immediately.
Yetton is a veteran of the bank. Most recently he developed and implemented the bank's strategy for distributing wealth products through its bank branches, a strategy heralded by Kelly as key to the division's robust earnings.
Coombe's decision to depart the group comes as the banking institution announces a new organisation structure.
"This restructuring is a move to accelerate the cross-selling of our wealth and insurance brands," a group spokesman said.
He added it was unrelated to the move by Phil Butterworth and other DKN executives across to Westpac's BT Financial Group.
He said the appointments were executive-level positions and did not warrant additional job losses.
As part of the new structure, Westpac has created two new divisions: an Australian Financial Services (AFS) division and group services decision.
The bank named Brian Hartzer head of the AFS division, saying the Royal Bank of Scotland head of retail and wealth management would take up his post in 2012.
Hartzer has spent three years at RBS which he joined from ANZ Bank, where he had widely been considered a frontrunner to succeed then chief executive John Macfarlane.
A Westpac Group spokesman said a date had not yet been set and an RBS statement said he would depart in the Northern Hemisphere summer of 2012.
AFS will be made up of Westpac retail and business banking, St George Banking Group and BT Financial Group, as well as banking products and risk management.
The group services division will be led by group chief operating offer John Arthur and encompasses technology, banking operations, property services and legal.
