The general malaise in the financial services sector — and the US economy in general — has pretty much put the kibosh on any big mergers here (unless, of course, there’s a failed investment bank that needs to be bailed out). The news is a continuous drumbeat of recapitalizations, losses, and further collapses.
But that doesn’t mean they can’t get together Down Under, where subprime mortgage foreclosures haven’t hit as hard. Earlier this week, one of Australia’s biggest banks, Westpac, inked an agreement to buy smaller rival St.George Bank for more than $17 billion. And like any big business deal, it’s not without its drama.
Not coincidentally, Gail Kelly, who has been Westpac’s chief executive for less than four months, led St. George Bank for five-and-a-half years before moving to the larger firm. And Australian law prohibits its “Big Four” banks (National Australia Bank, Commonwealth Bank of Australia, ANZ, and Westpac) from merging with one another. Conveniently St. George is the fifth-largest bank, and the combination of it and Westpac would not only be one of the largest mergers ever in Australia, but would also create the second-largest financial institution in the country by assets (behind NAB), as well as its largest home lender and asset manager.
Predictably, Australian regulators are dubious, concerned not only about the size of the companies involved, but also that such a large merger could trigger a wave of consolidation in an industry already dominated by four players. For their part, Westpac and St. George are saying that the smaller bank would maintain its identity after the merger in hopes of getting the government’s blessing.
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