Westpac argues case for National

By PAULA OLIVER

Westpac argues that it should be allowed to buy its largest competitor because New Zealand banking is competitive and there is little to stop other players from expanding or entering the market.

The argument is outlined in the public version of Westpac's application to the Commerce Commission for clearance to buy the National Bank.

The document is notable for being less forthcoming and more censored than that of its rival ANZ.

In it, Westpac does not reveal whether the takeover would breach the commission's "safe harbour" guidelines - the market share, after acquisition, below which the merged entity is unlikely to raise competition concerns.

The part of the document that states why Westpac wants to acquire the bank is censored.

Westpac is one of three banks that are considered frontrunners to buy the highly prized National Bank.

The others are ANZ and HSBC.

ANZ revealed in the public version of its application last week that it would be outside the safe harbour guidelines in most of the markets it operated in if it did buy the National Bank.

Westpac, being considerably larger than ANZ, is seen as the contender that will struggle the most with competition hurdles.

If it was allowed to proceed, the takeover would mean combining the two largest operators in the country.

Westpac argues in its application that the merged entity would not find it easy to exercise market power - pointing to constraint from existing major players as well as up and coming small operators.

Kiwibank is singled out several times for compliment.

Westpac identifies the state-owned bank as a "vigorous competitor" with a large branch network, and says that it is "starting to make inroads in particular areas".

Superbank, the fledgling supermarket banking business owned by Australia's St George Bank, is also identified as a vigorous competitor.

Westpac says that Superbank's backing means it has the capacity to rival the major banks.

A crucial part of the commission's determination will be how it chooses to define the markets the banks operate in. It can look at them geographically and in product terms.

Westpac argues that the markets should be split into the following categories: corporate banking, non-banking financial services, retail lending, deposit accounts, transaction accounts, small- and medium-sized business banking, rural banking and credit card merchant servicing. It argues that all of the markets should be viewed nationally rather than split into regions.

Like ANZ, Westpac states that branch networks are no longer as important as they once were because of new technology.

It notes that even when Westpac has had the last branch in a region, customers from competing banks have not tended to switch to it.

Instead, they find other ways of banking, such as using ATMs and agency facilities.

Westpac also states that the Australian Competition and Consumer Commission favours viewing markets nationally. Even when it has split markets into states, those are larger than New Zealand's market.

ASB owner Commonwealth Bank of Australia last week ruled itself out of the race for the National Bank.

BNZ owner the National Australia Bank is seen as a dark horse that has not yet declared its hand.

A local group headed by a Waikato accountant also says it is in the running.