Should Westpac be permitted to gobble up St George?

Evan Jones

Last February, Gail Kelly, long-time chief executive of St George Bank, became chief executive of Westpac. In May, Westpac launched a takeover bid for St George, highlighting that this brazen move had been long in the planning.

The financial media thrive on takeovers but public interest is typically absent from the calculus. For the finance media as for Westpac itself, this takeover is a done deal.

Surprisingly, in August the Australian Competition and Consumer Commission approved the takeover by Australia's third largest full-service bank of Australia's fifth largest.

The ACCC has apparently interpreted the bipartisan "four pillars" policy to mean not merely that there will be not fewer but that there will be no more than four major banks.

As a jaundiced colleague quipped, these days the ACCC would approve the merger of heaven and hell on the basis that purgatory provides competitive tension.

"These days the ACCC would approve the merger of heaven and hell on the basis that purgatory provides competitive tension."

The ACCC's "public competition assessment" is embarrassingly shallow, though it claims to have conducted a "comprehensive review".

The ACCC condones Westpac's acquisition of market share through financial muscle which it couldn't achieve directly by satisfying customer needs.

The most troublesome segment is the small- and-medium-enterprise market. Typically for financial regulators, the SME market is lumped in with the "retail market" category, obscuring its peculiarity.

The assessment does distinguish the estimated market shares for personal banking and for SME facilities both for St George and for the merged entity. The report also acknowledges, but then ignores, the "relationship driven" nature of SME and agribusiness banking.

Adequate potential competition is envisaged for an ill-defined generic retail banking market.

The SME market is profits fodder for the four big banks, the product of a deeply unbalanced relationship.

The bank wants profits with minimal input; the SME firm wants competence, commitment and integrity. The bank meets few or none of the firm's expectations. Consider two pertinent examples.

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