Past Merger Casts Doubt On Bank Promises

Past Merger Casts Doubt On Bank Promises

Sydney Morning Herald
23 August 2008
Phillip Hudson

AS THE Federal Treasurer, Wayne Swan, weighs up whether to approve Westpac's takeover bid for rival St George, questions are being asked about the durability of guarantees made about jobs and bank branches.

Westpac is promising to keep the banks as separate identities, even maintaining branches that are next door to each other. But similar pledges made when it took over the Bank of Melbourne 11 years ago have not stood the test of time.

To win approval for the 1997 takeover, Westpac said it would keep the Bank of Melbourne name and logo on all its branches in Victoria and maintain special trading hours. It pledged a degree of independence for the Bank of Melbourne and said it would preserve exemptions on fees and charges for its customers.

But those undertakings have been eroded. About 100 branches have been closed and the Bank of Melbourne name and services have vanished from Victoria, to be replaced by Westpac's national brands.

The man who gave the green light to that merger, the former Australian Competition and Consumer Commission boss Allan Fels, said the St George takeover needed "close scrutiny". He expressed surprise that the commission said last week it would not oppose the takeover and had found it was unlikely to substantially lessen competition.

"It must have been a close call for the commission," he told the Herald. "Ten years ago, the merger between Westpac and St George was unthinkable. The recent tightening in financial markets has strengthened the relative position of the banks, vis-a-vis non-bank competitors, and means that any increase in banking concentration needs close scrutiny.

"Of all the mergers approved in my time, the Bank of Melbourne was the most unpopular with consumers. People would stop me at parties and complain about it."

The government is battling the banks over competition and interest rates, and wants to make it easier for dissatisfied customers to switch accounts.

The Finance Sector Union's national secretary, Leon Carter, called on Mr Swan to stop the St George takeover.

"The Treasurer is responsible for maintaining meaningful competition in the banking sector and there is no point in bank customers being able to switch banks if there are fewer banks to switch to," he said. "Its about time someone factored employment and the community into the national interest test."

In a letter to customers, Westpac's chief executive, Gail Kelly, promised the bank would approach the St George merger "in a very different way from prior mergers within Australia".

"We will retain our branches and St George's, including in regional and rural Australia. Most importantly, this means that the wonderful employees from both St George and Westpac, whom you know and deal with day-to-day, won't change," she wrote.

Mr Carter said mergers in the 1990s showed promises could not be believed.

Back to News Index | Back to Home