Nicola Berkovic | October 09, 2008
CONSUMER advocates have condemned moves to consolidate the banking sector, saying the proposed takeover of BankWest by the Commonwealth Bank would erode competition, leading to higher charges and fewer options for customers.
The Commonwealth announced yesterday it would acquire BankWest for $2.1 billion from its British parent HBOS, subject to regulatory approvals.
The move -- which will end BankWest's east coast expansion -- follows plans by Westpac to snap up St George for $17.5 billion, and comes amid a tussle by the Commonwealth, ANZ and NAB for Suncorp Metway.
Financial analysts say the proposed BankWest takeover would dampen competition in the market, with the combined entity holding the lion's share of household deposits. Analysis by Cannex showed that 47c of every dollar saved by householders in August went to the Commonwealth Bank and BankWest.
Cannex senior financial analyst Harry Senlitonga said that, in recent years, BankWest had been a major innovating force, introducing the lowest-rate credit card and the highest-paying online savings account. "I hope with this merger they will still have that competitive approach," he said. "But it's still too early to tell whether this will favour or disadvantage consumers."
A new BankWest customer, electrical engineer Paul Jones, 37, who arrived from Wales with his wife and two children last week, said he would take his business elsewhere if the features that attracted him to BankWest were lost because of the takeover.
"I opened my first account with Bank West 10 minutes ago because they don't have monthly charges for my salary going in," Mr Jones said.
"If they change that, I'll go to someone else." he said. "In the UK, it's not common to get charged for transactions."
Fujitsu Consulting managing consulting director Martin North said the BankWest takeover and any subsequent financial acquisitions needed to be "looked at very carefully".
The Australian Competition and Consumer Commission confirmed yesterday it was "monitoring" the situation but declined to comment further.
Mr North said that before the credit squeeze, Australians already paid higher bank fees than consumers in other countries, and with the onset of the financial crisis, competition had declined to its lowest level in a decade.
Mr North said BankWest and Suncorp had relatively small national market shares so their takeovers would not make a substantial difference to the market. "To be honest, even if they got gobbled up, it wouldn't change the competition dynamic dramatically," he said.
Aussie Home Loans chairman John Symond said further consolidation would mean less choice for consumers, but it would also improve the stability of the Australian market, which was the priority at the moment.
"It certainly doesn't help competition but, at the moment, I think these smaller entities are better off merging or being taken over than getting into trouble waters," said Mr Symond, who agreed to sell a 33 per cent stake in Aussie Home Loans to the Commonwealth Bank in August.
Consumer groups were up in arms yesterday about the potential merger. Christopher Zinn, of consumer advocate Choice, said the move would erode competition in the banking sector, adding that the loss of mid-tier and regional banks would mean consumers could face higher prices and less product options. "Consumers will be the ones who suffer from a more concentrated banking sector," Mr Zinn said.
Additional reporting: Cath Hart