Australia’s Big Four Lenders Quarantined From Mergers

Post by Sharat on April 1, 2010 · Under Australian Economy, Mergers & Acquistions, banking, mortgages · Comment 

Ralph Norris, chief executive of Australian banking major Commonwealth Bank of Australia says the era of consolidation involving the major lenders is effectively over, suggesting that the competition regulator would no longer grant approvals, only giving permission for mergers between second tier players.

Prior to and during the financial crisis CBA and rival Westpac were the largest beneficiaries, with the former acquiring Bankwest for a song. And Westpac having acquired St. George in 2008.

Both lenders have used their acquisition to scale up their mortgage lending business, and obtained significant increases in their market share.

Last year Graeme Samuel chairman of the Australian Competition & Consumer Commission said he regretted the decision to approve the CBA Bankwest merger.

Mr. Samuel says the reason the ACCC blessed the deal was because of advice given by domestic regulators who told him HBOS, parent of Bankwest was facing an existential threat, and could no longer fund its Australian unit.

Speaking at an investor conference in Hong Kong last week organized by Credit Suisse, Mr. Norris says that it was extremely unlikely that the big four lenders would be given approval for further acquisitions, and that they were essentially quarantined from engaging in merger activity.

“There’s no doubt that it would now be very difficult for one of the majors to take over a second-tier bank; I see that as being unlikely. I think, at the current point, (consolidation) has done its dash. In wealth management, we’re seeing another round, with NAB’s offer to acquire (Axa Asia Pacific Holdings), and it will be interesting to see where the competition regulator comes out on that. But as far as further consolidation is concerned, it’s going to be limited unless it’s among second-tier players to create a fifth or sixth pillar.” he said.

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