Successful NAB Axa Bid Will Hurt Competition According To Report

Post by Sharat on April 19, 2010 · Under Business News, Company News, Mergers & Acquistions, Wealth Management, banking · Comment

A new report suggests that should National Australia Bank be successful in its bid to acquire Axa Asia Pacific Holdings (APH), it may result in rival bidder AMP remaining competitive force in the Australian wealth management segment.

The report, which was commissioned by AMP, and was undertaken by research firm Frontier Economics, found that NAB’s successful acquisition of APH would have significant negative market effects on AMP.

The Australian Competition & Consumer Commission (ACCC) is expected to announce its decision on the NAB bid this Thursday, but many believe the regulator will deliver its verdict even earlier.

The Frontier Economics report suggests that should NAB ultimately be successful in its bid to acquire APH, Australia’s fourth largest bank would come to completely dominate the wealth management sector.

Te report goes on to claim that the wealth management industry would come to be so concentrated around NAB, following the lenders acquisitions of MLC, Aviva Australia and JBWere, that AMP’s growth prospects might end up being stunted.

“A NAB acquisition would harm competition compared with an acquisition by AMP because it would lessen competition in the activity of wealth management. It would lessen the likelihood that AMP would remain a strong competitor because a NAB acquisition would decrease the likelihood that AMP would invest heavily in developing a leading-edge wrap platform to invest in funds. If AMP can acquire APH it will acquire the base from which it will be profitable for such investments to be made.” the report said.

The report added that consumers would suffer from less choice should the NAB bid be successful.

“A NAB acquisition of APH would mean that APH would become part of an organisation that was reluctant to engage in aggressive behaviour to any of its big four competitors. They all operate in a large number of banking and wealth management markets and if they behave aggressively in one they will invite retaliation in one of the markets in which they are less strong.”

NAB is apparently confident that the regulator will approve its bid but many believe that the competition regulator will extract its pound of flesh and force some concessions.

Federal Treasurer Wayne Swan must also give his blessings, and some suggest that he may be hesitant in doing so, due to sensitivity over the banking sector during an election year.

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