The proposed merger between Westpac and St. George Bank is a bold plan which, if successful, would undoubtedly deliver benefits to the shareholders. But would it be in the best interests of customers? That will be the question which treasurer Wayne Swan must consider. The plan comes on the eve of Wayne Swan’s first budget, and obviously presents him with a new and unexpected challenge at a time when his plate is already rather full. It will be a test of the direction this new government intends to take.
The so called “four pillars” policy makes it impossible for any of the “big four” banks to merge with or acquire each other, for reasons of preserving competition in the market place. This proposal is of a similar magnitude because St George has grown to be a significant player with substantial market share. If it goes ahead, the combined entity will be the biggest financial institution in the nation by far. It will hold 25% of the home mortgage market alone.
It’s no surprise that the Finance Sector Union is concerned that jobs will be lost. What is more interesting is that business groups such as the New South Wales Business Chamber are also concerned about the proposal. The Chamber has questioned the impact on competition in the banking sector if one player achieves so great a slice of market share.
Aside from the concerns of the unions and business leaders, the question remains about customer service. Westpac itself is spruiking the potential boost to customer service with talk of seven day a week banking. And to be fair, Gail Kelly has an excellent record of improving customer service. However past experience shows that when big banks swallow up smaller boutique style banks, the culture of those customer friendly operations is quickly dissipated. Remember the Colonial Bank? It was renowned for personal service before it was swallowed up by the Commonwealth Bank.
If St George goes the same way the shareholders might be richer, but the community will be the poorer.