Three Years Before Full Bank Merger

The Age

Friday October 24, 2008

Tim Colebatch, Economics Editor, Canberra

WESTPAC will have to wait three years before combining its retail outlets with those of St George, after Treasurer Wayne Swan approved the merger of the two banks.

Mr Swan said the merger, which removes the main challenger to the Big Four banks, was in the national interest.

"The merged entity will have a larger balance sheet and capital base, as well as broader access to funding markets, making it better placed to withstand systemic shocks," he said. "The St George brand will also benefit from Westpac's lower funding costs, helping it to offer lower interest rates on loans."

However, any change will be tiny. The standard variable home loan rate is 8.57% at StGeorge and 8.56% at Westpac. A three-year fixed rate loan is 7.39% at both banks.

Westpac and St George welcomed the approval of the $18.6billion merger, which will make it Australia's biggest bank. "Westpac is very pleased," Westpac chairman Ted Evans said. "The merger will create an even stronger bank, important in these times of global economic uncertainty."

St George chairman John Curtis said the approval passed a milestone before St George shareholders vote on November 13. Its board has unanimously recommended the bid.

The conditions will require Westpac to maintain St George as a separate brand for three years, along with its net numbers of branches and ATMs, including in regions. It will remove foreign ATM fees for Westpac customers using StGeorge ATMs and vice versa.

But these conditions will lapse after three years, allowing Westpac to combine the two networks and staff.

Mr Swan said the banks would not welcome these conditions, but Mr Evans shrugged them off. "The core of our strategy for the combined organisation has always been to retain the distinctive brand and distribution networks of St George and Westpac," he said.

© 2008 The Age

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