Westpac almost wraps St George

The Australian Competition and Consumer Commission raised only one area of concern about the proposed merger of Westpac and St George. It is uncertain about the impact on competition of the combination of the banks' wealth management platforms, BT Wrap and Asgard.

BT Wrap and Asgard are two of the three biggest wrap services in the wealth management market.

In a statement of issues on the merger, released yesterday, the ACCC said it had received mixed responses on the question of the degree of substitutability between master trusts and wraps. It intends to make further inquiries on this matter.

The issue comes down to a question of how specialised the platforms are, in terms of legal structure, fees and range of investments, and how easily financial planners can move to a competing platform.

The ACCC said it will seek "further information from market participants regarding the competitiveness of the various providers of wrap platforms".

The ACCC said competition issues were not likely to arise in relation to retail banking, corporate and institutional banking, wholesale funds management, financial advisory services and non-advisory broking.

The commission's view of retail banking is that in some respects it is a national market but in others, such as transaction accounts, SME and agribusiness banking, "the local dimension of service provision is still an important element of customer choice".

At a national level the combined entity would have a market share of 19 to 25 per cent across the various segments.

"In each of the retail markets the competitors include the other major banks, regional banks, credit unions and building societies. The foreign banks and niche players also compete in some markets."

At the local level, aspects of competition relate to branch presence and service levels.

"The ACCC notes that key competitors in these local markets (New South Wales, ACT and South Australia) are the other major banks, regional banks and niche players such as Rabobank."

The ACCC said market participants and survey respondents noted the importance of St George in driving price and non-price competition. The Commission did not agree.

"The ACCC has not seen evidence to suggest that St George is a price leader in any of the relevant markets.

"St George consistently outperforms the major banks (other than ANZ) on measures of customer satisfaction. However, the ACCC notes that the smaller regional banks and credit unions perform even more strongly against these measures."

The ACCC's view on corporate institutional banking was even more clear-cut. It said: "The corporate and institutional banking space appears highly competitive.

"It is contested by all national banks as well as the large merchant banks and international securities houses. St George has a minimal presence in large corporate/institutional banking."

The combined entity would not have sufficient market share in wholesale funds management, financial advisory services, non-advisory broking, and life and general insurance sales to raise any competition issues.

The ACCC expects to publish a final view by August 20. The two banks aim to formally merge in December.