Monday, May 12, 2008

A Bank Stalks a Dragon: Australian homebuyers lament and shareholders rejoice

What do you think happens when one bank controls 25% of the home loan market in Australia? We are about to find out if Westpac is successful in taking over St George Bank. For those looking for a house in Australia, this could potentially be poisonous to the competitiveness of the Australian bank industry.

In Australia, there is a four pillar policy which effectively disallows the big four banks from merging with one another in order to ensure there is enough competition. However, they are free to consider smaller competitors but ultimately the Government does have a say on the matter and the country should be hoping that this recent merger proposal will be enough to awaken the new Labor treasurer. He has been often criticised for not being strong enough to stand up against the banks so it will be interesting to see how things pan out in the coming weeks.

Here is a recent article that appeared on the ABC News website:

Westpac St George merger will reduce Competition: Choice

Consumer advocates are concerned a proposed merger between Westpac and St George Bank would reduce competition in the banking sector.

If successful, the merger would be the biggest in Australian banking history, making Westpac the nation's dominant home lender with a 25 per cent market share and a 10-million strong customer base.

Shares in the two banks have been suspended this morning on the Australian Stock Exchange.

The offer comes little more than three months after Gail Kelly jumped ship from St George to become chief executive at Australia's fourth biggest bank.

(Extract from this article)

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