Go-ahead for ANZ criticised

By PAULA OLIVER and NZPA

Investment banks are lining up to help ANZ raise cash to bid for the National Bank, but the potential takeover is not proving as popular in other circles.

ANZ has the approval of the Commerce Commission to pursue the Lloyds TSB-owned bank, and it is deciding whether to lodge a binding bid.

The competition watchdog's clearance on Thursday moved some Australian analysts to rate the chances of an ANZ takeover as better than 50 per cent.

It is likely ANZ will need to raise as much as $4 billion to make the purchase - possibly through a rights issue, and several investment banks are keen to get a slice of the action.

But while they are sniffing an opportunity, in New Zealand the potential takeover and its clearance have come under heavy fire.

Massey University senior banking lecturer David Tripe yesterday said that ANZ's application was a shoddy piece of work.

Among the flaws was an argument that the Commonwealth Bank of Australia had built its local business from scratch, when it had not.

"If a student had done that sort of work for me and submitted it as an assignment they would have got a fail grade," Tripe said.

The bank workers' union, Finsec, also blasted the commission's work as not being worthy of a pass mark.

Contrary to the view of the commission, the market would not repel the negative effects of the takeover, union general secretary Andrew Casidy said. It needed to be taken much more seriously.

"The market does not work in the interests of bank customers because they cannot afford the fees, losses and inconveniences involved in shifting their mortgages and accounts from one bank to another.

"If it did, then banks that provide the poorest customer service would have bled their customers to other banks already."

Complicating the argument about the clearance is a delay in the release of the commission's full report, which will detail how it arrived at its decision.

That will not be made public until next week, and in the meantime observers wonder whether the commission sufficiently quizzed ANZ.

"The question has to be whether they'll stop anything going through ... Whether they're really interested in competition," Tripe said.

The clearance does not require ANZ to make any divestments.

ANZ admitted in its application that the merged entity would break safe harbour guidelines - the market share below which the merged entity is unlikely to raise competition concerns - in almost every market it operated in.

But it argued that it should be allowed to proceed anyway because competition was strong and customers could switch banks.

Tripe said switching was harder than ANZ said in its application.

ANZ is the only known bidder left in the National Bank sale process, although others have been rumoured to be involved.

The Australian bank's shares dropped sharply on its home stock exchange when news of its clearance filtered through.

Analysts have expressed concern about the potential that ANZ could pay too much and struggle to get its outlay back from the tightly run National Bank.

An ANZ takeover would result in a bank that is much larger by total assets than its nearest rival, Westpac.

At the moment ANZ is slightly larger than ASB in that respect, but it is the fifth-ranked home loan lender. ANZ has failed to capture a significant share of home loan growth during the housing boom.

Yesterday's National Business Review-Phillips Fox poll showed that 47 per cent of people were strongly opposed to an Australian bank buying the National Bank.

A further 14 per cent were somewhat opposed to the idea.