CBA Acquisition of Bankwest: Back to the Future?

CBA acquisition of BankWest: back to the future?

The recent opportunistic purchase of BankWest This market consolidation will result in CBA being by the Commonwealth Bank (CBA) brings further propelled into the position of the biggest changes to Australia’s banking landscape that transaction banker in the SME segment, with has already been reshaped by the global credit nearly one in four customers now belonging to crisis. The past five years were marked by one of the bank’s franchises. This means that intensifying competition in all parts of the National Australia Bank (NAB) will be nudged Australian banking markets and saw the down into the second spot in a market segment “challengers”, led by St George and BankWest, which it has traditionally dominated. This is a successfully nibbling away at the market major change in the market landscape – even dominance of the Big Four banks. the combined market share of Westpac and St George falls short of NAB’s and CBA’s customer With CBA now swallowing up BankWest, reach in transaction banking. Westpac’s acquisition of St George and Suncorp being courted by a variety of suitors, the Big Four The considerable transaction banking footprint banks are once again starting to reassert their in the SME segment gives CBA a strong platform alpha status in the Australian market. to cross-engage with customers across other product lines such as deposits and in lending. Irrespective of whether the BankWest franchise Doing so however will mean getting in the ring remains ‘independent’ in its operations and with the incumbents in each particular market. even if the fire of the St George dragon For instance, NAB’s position as a lender to SMEs continues to burn in the market, both of these remains head-and-shoulders above the challengers are now effectively in the stables of combined market share of either Westpac and the Big Four banks. St George or CBA and BankWest.

When it comes to market share in the business The latest round of consolidation in Australia’s banking markets, CBA’s acquisition of BankWest business banking markets will therefore bring is a significant boost to its already lofty footprint. substantial changes to the competitive In particular, the combined strength of these dynamic. The range of unique offerings two brands means that CBA will emerge as the associated with the larger number of providers biggest business transaction bank across all in the market will almost surely shrink. On the turnover segments. This is an important position other hand, intensifying skirmishes between the to occupy since transaction banking is the Big Four banks are equally likely as some banks stickiest of all the banking relationships and one look to leverage their greater footprint while which is regarded as the most important by others brace themselves to defend their hard business customers. won market share gains.

Primary Transaction Bankers to SMEs – Market Shares after Consolidation

% of Primary Change in Market

Relationships Share Ranking

NAB 23.3 ª

Westpac & St George 22.9 ―

ANZ 10.6 ― October 2008