Well, there’s either one last play left in banking in the St George takeover, or the market thinks there’s no point worrying about a forgone conclusion.
That’s after the Rudd government reaffirmed the four pillars policy of Peter Costello which has ruled out mergers between our big four banks: Westpac, the CBA, the NAB and the ANZ.
In a statement to parliament the federal treasurer, Wayne Swan said the Rudd government will maintain the "four pillars" banking policy, no matter the outcome of a planned merger between Westpac and St George.
"The strength and soundness of the Australian banking system over the past year further demonstrates the soundness of the four pillars policy," Mr Swan said in a statement.
"The government considers that Australia is best served by a stable banking system that can continue to draw on the strength and risk management skills of four major banks, rather than a lesser number.
"Accordingly, whatever may be the outcome of the banking merger now under consideration, the Rudd government sees no case for changing the four pillars policy which has served Australia well."
The news saw the banking sector sold off sharply because of the hopes of some investors that the St George deal with Westpac could see a counter offer for St George, and/or a merger between at least two of the other majors (the ANZ and perhaps the CBA).
The CBA fell 37c to $41.95, the NAB fell 88c to $30.43. The ANZ was off 78c at $20.90 and Westpac fell 58c to $22.67. St George though fell more than $2 to $31.95, compared to the value implied by the Westpac offer of $33.10 when announced three weeks ago.
The announcement, while expected, did take some of the market optimists by surprise.
But it does underline what has been apparent since Westpac moved on St George: that there was only one real deal in banking that was conceivable and that was snatching control of St George, the so-called mini major.
For that reason the CBA and NAB would now know they only have one chance to really gain a march on their competitors by acquisition and that is St George.
So the weakness in the prices of the NAB, ANZ and CBA might also be due to investor concern there might be one last grab: but then that doesn’t explain the sharp drop in St George’s share price, which seems to be saying there won’t be an auction.
There’s an additional point. APRA bank business figures for April show all the majors, bar the NAB, growing the business faster than the banking system, as a whole. While housing is weak because of the collapse of non banking enders, the banks are doing very well, along with maintaining strong lending growth to business.
Merrill Lynch said yesterday
"In housing lending, with the exception of NAB (+9.0%), the major banks as a group are growing above system (+12.8%), (2) Rolling 12 month annualised housing growth increased for CBA (+15.6%), NAB (+9.0%) and WBC (+14.1%) but weakened ANZ (+13.4%),
"The average 12 month rolling major bank underlying business lending growth rate (excluding financials) was 23.8%, with ANZ increasing from 24.2% in March to be growing above system (+28.7%). CBA (+21.4%) and NAB (+23.0%) experienced weakening growth rates while WBC (+22.0%) was up from last month,
"In household deposits ANZ (+17.2%), CBA (+16.5%) and NAB (+14.4%) exceed system growth (+14.2%) with WBC (+11.6%) up from 10.5% in March lagging system, SGB continues to achieve below system growth in housing and business lending however SGB data is distorted by its proportionally higher usage of bill acceptance funding, BOQ continues achieving above system growth rates in housing lending and household deposits. In business lending, BOQ was up from +28.8% to +28.9%, BEN’s housing loan growth decreased from +9.0% in March 2008 to +8.7% in April 2008 and still remains well below system, with household deposit growth (+13.8%) below system (+14.2%)."
"With that sort of growth and the elimination of most non bank lenders in housing due to the credit crunch and their own poorly constructed business models, the big Five banks are reveling in their regained dominance.”
For that reason, you might argue that the odds are rising of the ACCC taking a much tougher line on any bid for St George from Westpac or another major.
Meanwhile, in a separate statement Mr Swan said the government would follow a recommendation from a senior group of advisers and introduce a scheme to help depositors and policyholders in general insurance companies get access to their money faster.
It’s not a deposit insurance scheme: it’s more of a deposit access scheme.
This is what Mr Swan said in his statement.
Although Australia’s financial system remains sound in the face of significant turbulence on global financial markets, the Rudd Government is determined to provide as much certainty and protection to customers as possible.
Accordingly, the Rudd Government will introduce legislation to establish a Financial Claims Scheme (FCS).
The FCS follows thorough consideration by the Council of Financial Regulators dating from 2005, and reflects recommendations made by the HIH Royal Commission in 2003 and the global Financial Stability Forum earlier this year.
The scheme can assist depositors and policyholders in the unlikely event that a financial institution fails.
The Government has also accepted recommendations of the Council
