Commonwealth Bank snares Bankwest for $2.1 billion as sector shrinks

The global trend of banks swallowing other banks has finally reached Australia, with Commonwealth Bank announcing it will buy Bankwest for $2.1 billion from beleaguered British bank HBOS.

The global trend of banks swallowing other banks has finally reached Australia, with Commonwealth Bank announcing it will buy Bankwest for $2.1 billion from beleaguered British bank HBOS.

In another sign of how the financial crisis is causing consolidation in the financial services sector, CBA has also announced it is in “high level, exploratory discussions” with Queensland banking and insurance group Suncorp Metway, which is looking to sell its banking and wealth management divisions.

Banking mergers and takeovers have become commonplace in the US and Europe in the last few weeks as large investment and retail banks have found their funding drying up.

While the balance sheets of Australian banks are far stronger than many of their counterparts offshore, the turmoil is putting severe pressure on the second tier players such as Suncorp and Bankwest.

It appears Commonwealth Bank sees this period as on opportunity to establish a platform for future growth.

A potential stumbling block for CBA may be competition concerns. While the banking industry believes it is not likely that the Australian Competition and Consumer Commission will oppose CBA’s takeover of Bankwest, it would have big concerns about CBA grabbing Suncorp as well.

While a merged Westpac and St George entity would have market share of 21%, the combination of CBA, Bankwest and Suncorp would have 27%.

That may be a bridge too far for the ACCC.