ACCC worried about Aussie independence in CBA
As part of the review, the Australian Competition and Consumer Commission will also examine Aussie and CBA's role in mortgage distribution services, including how they provide mortgage brokers with access to a panel of lenders, and issues of technology and administrative support.
The ACCC has suggested that CBA's Finconnect business, which distributes mortgages through professional firms such as accountants and lawyers, may be a stumbling block to the deal given the extent of crossover in mortgage broking.
CBA last month outlined a plan to increase its holding in Aussie Home Loans to 80 per cent. It already owns a third of Aussie Home Loans. The sale was for an undisclosed amount, but BusinessDay believes the deal cost CBA in excess of $160 million.
The deal also gives CBA an option to move to 100 per cent, which the bank is expected to exercise by August 2018.
The ACCC will consider whether Aussie Home Loans is a "unique or a vigorous" competitor in the mortgage market and if this will change if CBA moves to majority ownership.
It will also examine whether the move to majority ownership "will increase prices or profit margins or decrease the quality of products" on offer.
The competition regulator has taken a tough view of banking acquisitions in recent years, including blocking NAB's move on wealth manager AXA Asia Pacific.
Aussie Home Loans is primarily a mortgage broking provider, with more than 900 mortgage brokers and 139 retail outlets, mostly under a franchise arrangement.
It also sells Aussie-branded retail banking products, including personal loans and credit cards.
The ACCC will take market submissions until the end of the month.
Banking analysts - who have valued Aussie at between $350 million and $400 million - have treated the planned acquisition with caution, saying it would be hard to boost Aussie's profits in the face of a slowing mortgage market.
After the deal, "Aussie" John Symond will continue as executive chairman of Aussie and will retain the outstanding 20 per cent shareholding, while continuing to be involved in the company's growth.
Frequently Asked Questions about this Article…
The ACCC is reviewing CBA's plan to increase its ownership of Aussie Home Loans to assess whether the move will reduce competition in the mortgage market. The review will look at mortgage distribution services, access to lender panels for brokers, technology and administrative support, and whether Aussie will remain a unique or vigorous competitor under majority CBA ownership.
CBA plans to boost its holding in Aussie Home Loans to 80 per cent. It already owned about one-third and the deal includes an option for CBA to move to 100 per cent ownership, which the bank was expected to exercise by August 2018. The sale price was undisclosed, though BusinessDay reported it likely exceeded $160 million.
Finconnect distributes mortgages through professional firms such as accountants and lawyers. The ACCC flagged Finconnect as a potential stumbling block because of crossover with mortgage broking — the regulator will consider whether Finconnect’s role, combined with CBA’s increased ownership of Aussie, could lessen competition in mortgage distribution.
The ACCC will specifically examine whether majority ownership by CBA would increase prices or profit margins, or decrease the quality of mortgage and related products on offer. The review is intended to identify any likely adverse effects on consumers or competition.
Aussie Home Loans is primarily a mortgage broking provider with more than 900 mortgage brokers and 139 retail outlets, mostly operating under a franchise arrangement. It also sells Aussie-branded retail banking products such as personal loans and credit cards.
Banking analysts have valued Aussie at between $350 million and $400 million. They have reacted cautiously to the planned acquisition, saying it may be difficult to boost Aussie’s profits given a slowing mortgage market.
The ACCC said it will push ahead with the review and is taking market submissions until the end of the month. The regulator has recently taken a tough view on banking acquisitions, including previously blocking other deals, so stakeholder submissions will feed into its assessment.
Yes. After the deal, John Symond will remain executive chairman of Aussie and will retain the outstanding 20 per cent shareholding, while continuing to be involved in the company’s growth.
Call 1300 880 160
Start a chat
Schedule a call
