Takeover Time?
The St George and Bankwest residential lending levels have been outstanding since the respective Westpac Bank and Commonwealth Bank takeovers, raising the question: should the big four be able to consume more Tier 2 banks?
The Bankwest mortgage book jumped 23.7%, or $7.5 billion to $39.2 billion, for the year to March 2010, as the Rate Tracker product continues to outperform and provides a very real (and potentially cheaper) standard variable option than its parent and big four peers.
The St George mortgage book increased 15.0%, or $11.4 billion to $89 billion, over a similar 12 month period, showing the success of the subsidiary brand post takeovers.
St George and Bankwest now have the funding power of a AA rated bank, allowing them to compete more efficiently against pervious Tier 2 banking rivals on both volume and price.
Allowing the big four to increase current mortgage market share past the current 76.2% of all Australian Deposit-taking Institutions (ADI’s) seems preposterous, but this might actually help competition, at least in the short and potentially medium term.
For example the Suncorp mortgage market share is just 2.6%, Bendigo and Adelaide claim 2.2% and Bank of Queensland 2.0%. All are struggling to lend desired levels due to a lack of liquidity.
Even foreign owned ING Direct, the fifth biggest lender, only has a 3.3% mortgage market share, with this market share continuing to decline due to lack of funding lines to allow at least system growth to be achieved.
Allowing a big four bank to take over one of these Tier 2 banks would boost combined market share to around 80%, while providing a banking brand alternative with access to sufficient economically priced funding lines.
With Tier 2 bank mortgage lending relatively stagnant, and the big four continuing to gain market share organically, Tier 2 banks should consider themselves open to a takeover from one of the big four.
Data for this blog was sourced from the CoreData-brandmanagement’s Australian Mortgage Report Quarter 2 2010.
