NAB Acquisition Quandary

Post by Sharat on June 10, 2009 · Under Capital Markets, Mergers & Acquistions, Wealth Management, banking · Comment

Australian banking major National Australia Bank (NAB) is weighing up potential acquisition targets and may have to decide whether it wants to bulk up its presence in the wealth management space by bidding for insurance major Aviva’s wealth management business, or continue to increase its retail banking market share by buying ING Direct, according to the trade publication The Sheet.

In its report, The Sheet suggested that a bid for ING Direct was the more likely option, though ING has denied that its Australian online banking business was even for sale. There has been market speculation that ANZ and NAB are both interested in acquiring the venture, which is the sixth largest in Australia and has a 5 per cent market share.

Using 2008 earnings, the valuation of ING Bank Australia is in the region of $2.5 billion to $3 billion, and NAB would most likely have to raise capital in order to finance a purchase. NAB raised $3 billion at the end of 2008, allocating half to its Clydesdale Bank unit in the UK.

Speculation over Aviva’s wealth management business continues with the financial press tipping AMP and NAB as front runners to acquire the business. The Financial Review in its report suggested that any bid emerging from NAB would “opportunistic” and talked down price expectations, which it pegged at $600 million.

Other potential targets in the Banking space include insurer Suncorp’s banking unit, and regional lender Bank of Queensland, both of which have undertaken strategic reviews of their business, with the possibility of a merger between the two a potential option.

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