NAB Challenged on takeover

What messages might the ACCC be sending in the early stages of its inquiries into the proposed takeover by National Australia Bank of the mortgage management business of Challenger?

Are the ACCC's inquiries routine, or might the approach taken to date suggest an agenda - and a preliminary inclination to block the deal - by the competition regulator?

This is a talking point in the mortgage market over recent days as a range of firms, from mortgage aggregators to mortgage managers to mortgage originators, receive letters from the Australian Competition and Consumer Commission asking for their views.

On a straightforward reading of the ACCC letter the competition regulator's approach is, well, straightforward.

Questions asked include the ease with which a new entrant in mortgage aggregation could enter, or an existing provider could expand, whether in the field of support services or mortgage funding.

How vigorous and effective are Challenger's aggregation and origination businesses, the ACCC wants to know.

And how likely is a NAB-owned Challenger to be subject to competitive forces restraining prices and profit margins and while also maintaining service quality?

The ACCC also wants views on NAB's ability to originate a larger share of home loans; the likelihood that NAB might drop other lenders from the panel of Choice, FAST and Plan (aggregators all owned by Challenger); the ability of NAB to induce brokers to favour NAB home loans; and the bargaining power of brokers with lenders.

What's driving the chatter this week is that the ACCC bothered to approach a range of mortgage market participants and ask these questions at all.

Those receiving letters were not asked, by the ACCC, for their views on the Westpac takeover of Rams Home Loans in 2007; the Westpac takeover of St George in 2008; the Commonwealth Bank takeover of BankWest in 2008; the CBA purchase of a one-third stake in Aussie Home Loans in 2008; or the Aussie takeover of Wizard Home Loans in 2009.

Maybe the ACCC has better researchers for this inquiry or has otherwise resolved to be more diligent.

Yet one background factor is the often repeated view, this year, of Graeme Samuel, the chair of the ACCC, that the commission waved through the CBA takeover of BankWest with the greatest reluctance and only because the two key financial regulators (APRA and RBA) made it clear that the stability of the banking system might be at stake.

So one theory doing the rounds is that the ACCC is looking for a bank, or quasi-bank, takeover to block and that the NAB proposal to buy Challenger is in trouble.