Westpac Clear To Slay The Dragon

Sydney Morning Herald

Friday October 24, 2008

Phillip Coorey and Danny John

THE Treasurer, Wayne Swan, has approved Westpac's plan to take over St George, which would make it the nation's biggest bank.

Two weeks after the Prime Minister, Kevin Rudd, said bank stability was more important than competition, Mr Swan approved the merger with conditions that would apply for three years.

These include requirements that the existing number of Westpac and St George branches and ATMs be retained under their separate identities and that ATM fees be removed for Westpac customers using St George ATMs and vice versa.

The merged bank would have to retain a corporate headquarters at the existing site of St George HQ in Kogarah and staff affected by the merger must be given assistance.

Beyond the three years, Mr Swan could give no assurance that the St George brand would not disappear, as the Bank of Melbourne did when Westpac took it over in 1997.

"Three years is enough time for the merger to settle down," Mr Swan said.

"I can't see any reason why [St George] will be ripped up in three years' time."

Conscious of claims that competition would be reduced, Mr Swan said Westpac's lower funding costs would now be shared by St George, which would enable it "to offer lower interest rates on loans".

He also pointed to $8 billion the Government has extended to non-bank lenders to help them to keep operating in a tight credit market.

The Financial Sector Union said it would continue to oppose the merger and would lobby the bank's shareholders, who will have the final say at a meeting on November 13.

"Bank workers and customers are telling us that the takeover will cost jobs and erode competition," the union's acting national secretary, Rod Masson, said.

"The Treasurer's conditions placed on the merger today have not alleviated any of those fears."

After the merger the Westpac/St George group would just pip the Commonwealth Bank in terms of size as the largest bank in the country.

Its joint network would have 1300 branches and 2800 ATMs.