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Australia’s Big Four Lenders On Acquisition Frenzy
The Big Four Australian banking groups have begun preparations for an acquisition spree after having built up substantial war chests, which will enable them to capture market share largely at the expense of smaller regional rivals.
Last week NAB announced a deal to acquire the mortgage aggregation and origination business of Challenger Financial, controlled by Australia’s richest man, James Packer.
That Challenger deal follows almost immediately after NAB announced it would acquire an 80 per cent stake in a wealth management joint venture with Goldman Sachs JBWere.
The joint venture transaction was also immediately preceded by NAB announcing it intended to acquire Aviva PLC’s Australian operations, which span life insurance and wealth management.
ANZ joined the feeding frenzy and embarked on its expansion strategy of deriving 20 per cent of its income from Asia, by announcing that it would acquire the retail and commercial banking units of troubled UK lender RBS, in up to six Asian countries for $687 million.
The total value of all the deals being considered amount to more than $2 billion, and once they complete, will have done so without having any major impact on the lenders capital levels.
The Big Four Australian lenders which are all highly rated, have built sizeable war chests of up to $4 billion each, giving them the ability to be predatory when an acquisition opportunity arises.
However two major questions remain, where the next opportunity will emerge, in which sector, and which bank will seize the opportunity first.
The Australian Competition and Consumer Commission (ACCC), through its Commissioner Graham Samuel, effectively ruled out any possibility of further consolidation within the Australian domestic banking landscape. Which means that it is most likely, that the major banking groups, will have to look at opportunities which arise internationally, at least in the short run, if they wish to add scale to their core banking businesses.
Commonwealth Bank of Australia (CBA) traditionally the most conservative of the major banking groups has maintained its stake in Chinese lender Bank of Hangzhou. Last week it announced that it would subscribe to an equity follow on offer from the Chinese lender to the region of $160 million to $165 million, which would maintain its stake at just under 20 per cent, the largest stake that can be held by a single foreign entity in a Chinese financial institution under Chinese foreign investment regulations.
The feeding frenzy has not been confined to the Big Four retail banks, Australian investment banking powerhouse Macquarie has a $4 billion war chest of its own, and last week spent about an eighth of that or $516 million, to acquire a US based asset manager Delaware Investments.
As equity markets continue to recover globally, analysts believe that the Big Four will want to add scale to their wealth management businesses.
After announcing the RBS transaction, ANZ chief Mike Smith indicated a keenness, to increase market share in wealth management, which he is says the lender is prevented from doing immediately, because of an exclusive joint venture with Dutch financial services giant ING.
The recent acquisitions by NAB in the wealth management space, clearly highlights its intention to become a major player in the space, whilst Westpac is grappling with integrating and upheaval at BT investment, despite the investment management firm being given a long leash.
The spending power of the major banking groups has not gone unnoticed, especially by those who clearly have businesses they wish to exit or sell.
James Packer’s Challenger was said to have aggressively pitched all four of the majors in its bid to obtain the best sale price, which was originally valued at $400 million.
The market view of excess capital being held by the banking majors is largely positive, but there are concerns, that if banks begin to hold tier-one capital beyond 9 per cent, then under-gearing may become an issue.
Currently the only acquisition target remaining in the Australian banking landscape are the banking operations of bancassurance group Suncorp-Metway, which has made public its intention of jettisoning its captive banking unit, which is mired in funding difficulties and large exposure to property finance, in favour of becoming a pure play insurer and wealth manager.
ANZ had expressed its desire to acquire the banking operations of the bancassurance group and indeed even tabled a bid at the height of the global crisis in credit markets, which was rejected as being too low in the wake of the Federal Government announcing its relief measures for financial institutions.
Recently however, the competition regulator Mr. Samuel has signalled his reluctance to approve any further banking consolidation involving a Big Four Banking Group as an acquirer, after suggesting he had been forced to approve the CBA, Bankwest merger.
Given Mr. Samuel’s view, there are increasing expectations that the large banks will either seek international targets or increase their holdings in international strategic partners.
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2 Responses to “Australia’s Big Four Lenders On Acquisition Frenzy”
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Hi,I read the article in Money AU, re- Comm Bank being conservative and was wondering just how conservative.If the reader of this email is more in tune with money than I , can you please advise me.Just a short reply would be good.
I have only one credit card and it’s with CommBank. I am starting to really struggle to pay my bills but thought of approaching them with a request to settle my debt of $20,000.My father can help me out financially.
What do you think they might accept? Can I go as low as paying them only 40%= $8,000 or should I offer more? Are they looking to increase their coffers now and likely accept $8K as oppossed to my min monthly of approx $400?
Your’s Sincerely,
Glenn Boyd.
Basically Glen, settling, whilst getting you out of the debt does hurt your credit score and going forward in the future it may come back to bite you. If you are optimistic about the future in the sense that you believe that at some point you will be able to handle the minimum, but cannot do so just now, then I would borrow the 8K from your dad, and use it to make the instalments.
If you are not optimistic about the future or you want rid of the debt, then the short answer is I would start at 40 per cent, but expect to perhaps settle on 60.
In truth I don’t know what they would settle on, what I know is they would prefer some kind of settlement than a total default.
here is a piece we did on debt settlement.
http://www.money-au.com.au/finance-news/banking/eight-common-misconceptions-about-settling-credit-card-debt-4324/