Either Graeme Samuel can’t bring himself to say a firm and final ”no” or Cameron Clyne can’t take a series of ”nos” for an answer. The competition tsar is under pressure. Samuel is fighting a bellicose campaign of leaks and relentless lobbying from the banks and hedge funds.
They want to get this $13 billion bid for AXA over the line but the ACCC chairman knows that, should he allow the National Australia Bank to take over AXA Asia Pacific, he would have little justification in knocking back a Commonwealth Bank bid for AMP. And so on.
Already, this country’s financial services and banking sector is dangerously concentrated. Westpac’s bid for St George and CommBank’s takeout of BankWest got through in 2008 amid the emergency of the financial crisis. These deals should never have happened.
Already, the Australian sharemarket is dominated by two resources juggernauts and four banks. The banks, in turn, dominate superannuation, funds, insurance and the share registers of almost every leading company in the index – including the publisher of this august journal.
They enjoy evergreen exemptions from the corporate regulator to buy shares in themselves and, as a group, are their own biggest shareholders. Ad absurdum, our stockmarket is controlled by a bunch of big banks buying shares in each other. Not good for competition.
If you think the Woolies and Coles duopoly is powerful – potent in price control at both the customer and farmgate level – pause for a moment to consider that even these two grocery giants are controlled by the big four banks.
Should AXA fall to National Australia Bank, this bank alone would claim one quarter of the retail superannuation market, 21 per cent of the retail managed funds market, 19 per cent of the retirement income market and almost 30 per cent of the risk market.
Take one line of insurance: disability. According to Plan for Life estimates, NAB and ASX rank No. 1 and No. 2 with 22.9 per cent and 12.8 per cent shares respectively.
To pay NAB boss Cameron Clyne his due, this deal is clearly in the interests of bank shareholders. But that’s about it. Every business should have disability insurance but this one business would control 36 per cent of the market (against CommBank with 12.7 per cent at No. 2), should Samuel give Clyne the green light.
For Clyne’s part, adding more wealth management is a smart move. It doesn’t require the same level of capital, which means a higher return on equity (ROE). There is no reliance on wholesale funding – a delicate matter as the banks must fund a third of mortgages via overseas borrowings.
Moreover, the potential for cross-selling products between the various wealth platforms is as yet barely exploited despite two decades of consolidation. Twenty years ago the insurers, money managers and banks were quite separate. By 2000, it was game-on. CommBank bought Colonial for $10 billion, NAB swallowed MLC for $5 billion. Two years later, Westpac took BT for $900 million (and later Rothschild and Hastings) and ANZ took a 49 per cent stake in ING.
If anything, competition policy should be moving the other way, stripping insurance and wealth management from the grip of the banks. Surely the diversity would create a more vibrant market.
And Samuel surely knows this. In a national market of just 20 million people, the potential for dominance is everywhere: groceries (Woolies-Coles), beverages (Foster’s-Lion), packaging (Amcor-Visy) and newspapers (News-Fairfax, although the internet has shattered duopoly profits in traditional media).
In the case of financial services the tentacled reach extends further, through superannuation, property, debt and equity markets.
As the ACCC and NAB go head-to-pointy-head on minutiae of competition policy to dissuade the other from its natural course of action, common sense is crying out.
Yes, the interests of NAB are served by consolidation. Yes, the interests of AXA’s hedge fund shareholders are served by the acquisition. But yes, the public interest is in having AXA Asia Pacific fall to NAB’s rival, the AMP, thereby creating the banking system’s fifth pillar.
Michael West established Michael West Media in 2016 to focus on journalism of high public interest, particularly the rising power of corporations over democracy. West was formerly a journalist and editor with Fairfax newspapers, a columnist for News Corp and even, once, a stockbroker.