Regulator reviews CBA's Aussie buy
THE competition regulator will push ahead with a review of Commonwealth Bank's move to majority ownership of Aussie Home Loans, raising questions whether the mortgage broker will remain competitive under the control of the nation's biggest bank.
The Australian Competition and Consumer Commission will also examine the role of Aussie Home Loans and CBA in mortgage distribution services, including how they provide mortgage brokers with access to a panel of lenders, and issues around technology and administrative support.
The ACCC believes CBA's Finconnect business, which distributes mortgages through professional firms such as accountants and lawyers, is a potential 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. The bank already owns a third. The sale was for an undisclosed amount but BusinessDay believes it cost CBA more than $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 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 the National Australia Bank's move on wealth manager AXA Asia Pacific.
Aussie Home Loans is primarily a mortgage broking provider and has more than 900 mortgage brokers and 139 retail store fronts mostly under a franchise arrangement.
Banking analysts - who have valued Aussie Home Loans at between $350 million and $400 million - have treated the planned buy-out acquisition with caution, saying it would be difficult to boost Aussie's profits during a slowing mortgage market.
After the deal, "Aussie" John Symond will continue as executive chairman of Aussie Home Loans and will retain the outstanding 20 per cent shareholding.