Westpac vague on market share
A perplexing element of the briefing documents published yesterday by Westpac on its proposed takeover of St George is the choice of source material for data on the combined market share of the two banks.
Rather than draw on the (presumably) ample research database of its own, and actual management information from the two banks following two weeks of due diligence on St George, Westpac simply recycled the latest monthly data on key product lines from the Australian Prudential Regulation Authority, and even then used the version published by investment bank Credit Suisse.
It's no stretch to wonder if the ACCC will be looking for a lot more insight into market share trends than that, including some nuanced understanding of the date and the sources.
Perhaps Westpac and St George will get around to making those measures clear further into the process.
As it stands, Westpac largely rehashed estimates referenced two weeks ago, and which in a number of product markets are misleading.
For example, a combined Westpac/St George entity will be Australia's largest residential lender. Westpac put the market share at 25.1 per cent but this newsletter puts it at 21.8 per cent (drawing on research published with InfoChoice in the report State of Play).
The Westpac market share is calculated from March 2008 APRA data, which only includes financials from entities required under the Financial Sector (Collection of Data) Act 2001, which excludes mortgages from mutuals, non-bank funders such as Challenger, GE Money and RAMS, or non-conforming funders such as Bluestone and Liberty.
These financial lending sectors add in excess of $120 billion to the $800 billion outstanding reported by APRA in March.
March APRA data reports combined outstanding mortgages at $197 billion (Westpac $126 billion and St George $71 billion), yet March 2008 interim financial statements have the figure at $205 billion (Westpac $132.8 billion and St George $72.6 billion), a nine billion dollar reporting hole.
Using Westpac's version of the Credit Suisse version of the APRA data, the banks estimate they would account for 21.6 per cent of all lending, and 16 per cent of corporate lending (in third spot behind National with 20.7 per cent and ANZ with 17.4 per cent).
Westpac estimates its credit card market share at 26.5 per cent. By contrast, in the cards sector MWE Consulting, using the same source material, estimates the merged entity would enjoy a share of 21.1 per cent of balances, 22.4 per cent of consumer
balances, and 7.8 per cent of commercial card balances.
Household deposits market share for Westpac and St George, at 23.7 per cent, would still lag Commonwealth, with 29 per cent.
Westpac would lead in business deposits.