Find out the story behind each bank and how they came to be
Ownership of banks and lenders has become more concentrated in recent years. In essence, the big banks own more of the pie than ever before. Although the obvious outlier in this is ANZ, which hasn’t made any significant acquisitions of local smaller lenders or competitors.
For consumers looking out for a better deal, it may be of concern that many of the alternative lenders are actually owned by the big three banks; Commonwealth Bank, Westpac and NAB. It seems the banking Goliaths are closing the net on the whole market. In this article, we give you the full scoop on who owns what in Australian banking.
At a glance: Overview of Australian banking ownership
Commonwealth Bank
Westpac
NAB
Bankwest
RAMS
UBank
Aussie (as a major shareholder)
St. George
BankSA
Bank of Melbourne
As it happened: The history behind the conquests
BankSA bought by St.George
In 1992, St.George Bank acquired the Bank of South Australia. The latter was a merger of the State Bank of South Australia and the Savings Bank of South Australia, which were both guaranteed by the government. The bank collapsed after having given out too many loans in the 80s that didn’t have enough security.
However, they were bailed out by the government thanks to the guarantee. At the time the bank was split in two, with one side retaining all the non-performing loans while the other bank kept the good debts. The latter was acquired by Advance Bank in 1992. It was then bought out by St.George.
After it was bought out, BankSA was still run as a separate organisation by both Advance Bank and St.George. The bank continues to operate as a separate brand, even after Westpac bought out St.George, and has 55 branches in metropolitan Adelaide, 66 in rural South Australia, four in the Northern Territory and one in Queensland. Overall, the bank has more than 121 branches in South Australia, which means it has a more powerful presence than any other bank in the region.
RAMS goes to Westpac while RHG is left behind
RAMS Home Loans has trouble with funding at the end of 2007 due to the credit crunch. This led to a dramatic fall in share price that gave Westpac an opportunity to forward an offer, which they did. The following January, the transaction went through, with Westpac paying $140 million for RAMS’ distribution business. The latter was comprised of 99 stores that were owned and run by 54 franchisees. While the acquisition did not include RAMS Home Loans Group as a whole or the company’s mortgage book, Westpac purchased the ‘RAMS’ brand. This meant that what was left of the company had to change its name to RHG.
However, this was not the end for RHG. In February 2008, they made a deal with the National Australia Bank (NAB) and sold them home loans worth approximately $1 billion. NAB had previously been the company’s banker. While RHG continued to manage these mortgages until April 2009, these loans were transferred to Anchorage Home Loans management. Anchorage Home Loans is a subsidiary that is fully owned by NAB.
Ever since it changed its name, RHG has had a lot of bad press. The company was involved in a very public test case legal action that was led by the Consumer Action Law Centre for Emily Hamilton regarding exit fees. Hamilton stated that she had to pay early termination fees that were too high to refinance her mortgage, despite the fact that RHG increased interest rates well above the RBA’s headline rate and significantly in excess of what the rest of the market has done.
A confidential settlement was reached in January 2009, but the Consumer Action Law Centre claimed that they had been contacted by approximately 100 other people claiming they had similar problems with RHG.
However, the problems didn’t end here. Sometime around the middle of 2012, ASIC had to intervene after receiving a significant degree of complaints. The result was that more than 6,400 customers received refunds totalling more than $3.3 million representing early termination and discharge fees. RHG also agreed to lower its discharge fees on the loans it already held and to remove early termination fees in a staggered manner.
Clients weren’t the only ones who were displeased. Towards the end of 2009, a group of shareholders voiced their displeasure, demanding that a board member be removed from their position. They also wanted improved communication and a higher return on their investment. As if that wasn’t enough, the company’s creditors weren’t all that happy either, which led to RHG being the target of numerous court proceedings.
In regards to RAMS, at the beginning of 2010, Westpac decreased the size of the RAMS Home Loan business. The result was that financial products under the RAMS brand name were only available to customer via RAMS franchisees and the lending conditions became much stricter.
Adelaide Bank and Bendigo Bank unite
Adelaide Bank was founded on January 1st, 1994, from the merger of Australia’s biggest building society, the Co-operative Building Society of South Australia Limited with the Hindmarsh Building Society.
On August 9th, 2007, the Adelaide Bank agreed to a merger with Bendigo Bank, after the latter rejected a merger offer from Bank of Queensland. On November 12th, 2007, more than 98 per cent of the Adelaide Bank Ordinary Shareholders voted in favour of the merger. The merger was approved on Friday, the 16th of November by the Federal Courts. The implementation date of the merger was the 30th of November.
In March of 2008, the shareholders of the merged bank voted to officially change the organisation's name to Bendigo and Adelaide Bank Limited.
Before the merger, Bendigo Bank offered the market their products and services via almost 900 outlets all over the country, which included 160 branches, 220 community owned Community Bank branches, 100 agencies and 400 Elders outlets. After the merger, the bank owns more than 400 branches, which includes the 25 branches from Adelaide Bank.
Currently, the Bendigo and Adelaide Bank Group has more than 82,000 shareholders and has four different brands. Thus, the retail side of the business operates under the Bendigo Bank brand, which offers banking and wealth management services to private individuals as well as small and medium businesses.
Via Adelaide Bank, the group offers home loans to a large number of Australians, while Adelaide Portfolio Lending offers funding to aged care and third party credit providers.
Currently, Bendigo and Adelaide Bank manages assets worth more than $52.1 billion and market capitalisation of approximately $3.3 billion.
BankWest snapped up by Commonwealth Bank
Bankwest, also known as the Bank of Western Australia Ltd, was bought out by the Commonwealth Bank of Australia in October 2008. After the acquisition, Standard & Poor’s increased Bankwest’s credit rating.
If you are a Bankwest customer, you can now use ATMs from CBA’s network without having to pay ATM fees. The reverse also applies.
St.George and Westpac merge
St.George and Westpac began talking of merging in May 2008 and received approval from the ACCC by August of the same year. They also needed approval from the Federal Treasury for the merger, which they received in October. On November 13th, shareholders agreed with the merger, with the vote revealing an overwhelming majority were in favour of the move. In fact, approximately 95 per cent of the votes were for the merger.
From the deal, St. George shareholders had their shares converted into Westpac stock at a rate of 1 to 1.31 Westpac shares. Thus, St.George’s shareholders ended up owning approximately 28.1 per cent of the new, merged organisation. St.George became a subsidiary fully owned by Westpac.
This merger led to the creation of one of the biggest companies in Australia, with a 25 per cent market share of the mortgage market and 10 million customers. The new entity would retain all Westpac and St.George brands, including Asgard and Bank SA, as well as all the branches and ATM networks.
St.George customers in Victoria saw their branches, ATMs, credit cards, cheque books and accounts rebranded with Bank of Melbourne, after an announcement of the move in March of 2011. The Bank of Melbourne brand was one that Westpac purchased in 1997 and then slowly absorbed into their operation between 2004 and 2006. The launch of the ‘new’ bank was supposed to take place in August of 2011, though some branches opened in July.
If you are a Westpac, Bank of Melbourne, St.George, or Bank SA customer, you can use any of the ATMs that are in the group’s network without having to pay any extra fees.
Aussie Home Loans green-lit for CBA to acquire
The Commonwealth Bank of Australia purchased a third of Aussie Home Loans close to the end of 2008. The bank named it a strategic move that was meant to help them increase their market share of the home loan sector. Aussie’s expectations were to get a bit more financial strength.
The ACCC stated that it would not stand against the purchase in September 2008 and the sale went through on the 31st of October, 2008. Aussie’s daily operations would not be affected, which included offers a mortgage-broking service for a number of lending companies, including CBA.
CBA were then further cleared to proceed with their plans to fully acquire Aussie on March 21st, when the Australian Competition & Consumer Commission issued a public statement that it would not challenge the Commonwealth Bank if it chose to buy the remaining 67% stake in AHL Holdings Pty Limited (Aussie Home Loans).
Wizard
Mark Bouris, now famous for hosting the popular Australian spin-off of The Apprentice, created Wizard in 1996 — a home loan lender. It was sold in 2004 to GE Money. Subsequently, in 2008, GE Money was in negotiations to sell Wizard to NAB but a better offer from Aussie saw Wizard going to the latter. GE Money’s goal was to remove itself from the home lending market in the area.
The ACCC approved the acquisition on the 24th of February, 2009 and, three days later, Wizard’s broking business came under new ownership.
The sale of Wizard also saw $4 billion of prime loans that were previously funded by Wizard going to CBA. The loans that CBA did not buy remained with GE Money and were rebranded as AMS Mortgage Services loans because the Wizard name was now owned by Aussie. AMS Mortgage Services is a GE Money subsidiary.
GE Money let home loan holders know that any mortgages they held would continue to be services as normal. However, they also let home loan holders know that they would not be able to ignore the serious rate cuts the RBA were making as some other lenders were doing and if their customers wanted to refinance through Aussie to go to another lender, they would not be required to pay a Deferred Administration Fee. Waiving this fee was an Aussie requirement when they purchased the Wizard home loans business.
Final word
While these certainly won’t be the last movements we see in the banking sector, they were the most notable of recent years. Further concentration of banking ownership is inevitable.
So, don’t be surprised if you receive a letter telling you that your current bank has come under new ownership. Australian banks are more profitable than ever. More than ever, they have the cash to act on their expansion ambitions. So it is no surprise that the ownership conquests as outlined above have occurred. Nor is that the end of their expansionary moves.
Regardless, banks will continue to buy each other out and merge with each other as it suits them to acquire greater market share and more power, but that is simply the nature of the beast.
Let us just hope that these mergers and buyouts can occur to the benefit of Australian consumers, and not the our detriment.
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