Who owns my bank now?
If, in the last couple of years, you came home to find a letter telling you that you and your mortgage were now the customer of a different bank, you're not alone. Australia saw a flurry of mergers, acquisitions and negotiations in the banking sector after the GFC; now that the dust has settled, it's a good time to have a look at some of the larger acquisitions made over the period and the changes that customers may have seen.
RAMS Home Loans experienced some funding difficulties near the end of 2007 due to the credit crunch, leading its shares to fall dramatically and to Westpac making the company an offer. The transaction was completed in the following January.
Westpac paid $140 million for the distribution business, which included 99 stores owned and operated by 54 franchisees. It did not acquire the RAMS Home Loans Group or its mortgage book, but it did acquire the "RAMS" brandname, leading what was left of the company to change its name to RHG.
In February 2008, RHG sold approximately $1 billion worth of mortgages to the National Australia Bank (NAB), who had been their banker. RHG continued to manage these loans until April 2009; after that, the loans were converted to systems managed by Anchorage Home Loans, a wholly owned subsidiary of NAB.
Since the name change, RHG has been plagued with bad press. It was involved in a high-profile test case legal action led by the Consumer Action Law Centre on behalf of an Emily Hamilton, about mortgage exit fees. Hamilton claimed that she faced an excessive early termination fee to switch her home loan, despite RHG imposing interest rate rises well in excess of the Reserve Bank's headline rate and the market.
The case was settled on confidential terms in January of 2009 but Consumer Action said that almost 100 other RHG customers had contacted them with similar complaints.
In mid-2012, ASIC intervened after receiving what it described as a "significant" level of complaint. Over 6400 consumers were refunded more than $3.3 million in discharge and early termination fees, and RHG also agreed to reduce its discharge fees on existing loans, and to the staggered removal of early termination fees.
Customers weren't the only ones that were unhappy: late 2009 saw a group of shareholders making noise as well, wanting the removal of a particular board member, better communication and more return on their investment; and the company's creditors were none-too-pleased either, leading RHG to be involved in a number of court proceedings.
As for RAMS, in early 2010, Westpac reduced the RAMS Home Loan business, making RAMS-branded financial products available only through RAMS franchisees and tightening their lending criteria.
BankWest (otherwise known as the Bank of Western Australia Ltd) was acquired by the Commonwealth Bank of Australia (CBA) in October 2008, with BankWest subsequently having their credit rating upgraded by Standard & Poor's.
BankWest customers are now able to use CBA ATMs and vice versa, without being charged fees.
The previous owner, HBOS, was itself formed out of the merger of Halifax Group and the Bank of Scotland in 2001 (hence the acronym). Three months after their sale of BankWest, HBOS were themselves acquired by the Lloyds Banking Group, one of the largest finance companies in the world.
St George and Westpac started discussions of a merger between the two ASX-listed companies in May 2008 and had the ACCC's green light by August of that year. The Federal Treasury also had to approve the merger, which it did in October. Shareholders voted to go ahead with the merger on November 13 in overwhelming numbers (around 95 per cent of votes cast were for the plan).
Shareholders received 1.31 Westpac shares for each St. George share held, and ended up owning 28.1 per cent of the new, combined entity, with St. George becoming a wholly owned subsidiary of Westpac.
The merger created one of the largest companies in Australia, with 10 million customers and 25 per cent of the home-lending market. All Westpac and St. George brands, including Bank SA and Asgard, as well as all the branches and ATMs, were to be retained.
In March, 2011, it was announced that St George banks and ATMs in Victoria were to be re-branded as Bank of Melbourne, a brand that had been acquired by Westpac in 1997 and then gradually absorbed into their own operations from 2004 to 2006. The "new" bank was set to launch in August, 2011 (although some branches opened in July). St George customers in Victoria saw their branches, ATM and credit cards, cheque books and accounts (including mortgages) rebranded.
Westpac, Bank SA, St George and Bank of Melbourne customers can use any of the group's ATMs across Australia without incurring any additional fees.
CBA acquired one third of Aussie Home Loans near the end of 2008, describing it as a "strategic" investment, to give them a bigger slice of the home loan industry's pie. Aussie expected, in their turn, a bit more "financial muscle".
The ACCC announced that it would not oppose the acquisition in September 2008 and the sale was finalised in October 31, 2008. Aussie's day-to-day business was not expected to be affected, including providing a mortgage-broking service on behalf of a selection of lenders that includes the CBA.
Wizard was formed in 1996 by Mark Bouris, and then sold to GE Money in 2004. Four years later, GE Money, who wanted to withdraw from home lending in the region, were in negotiations to sell Wizard to the NAB but then Aussie swooped in at the last minute with a more appealing offer.
The ACCC announced it would not oppose the proposed acquisition on 24 February 2009 and within three days, the Wizard broking business had a new owner.
The sale of the business also involved up to $4 billion of prime loans formerly funded by Wizard being acquired by CBA. The Wizard loans that were not acquired by CBA stayed with GE Money, re-branded as loans from their subsidiary AMS Mortgage Services (since the brand name "Wizard" was now owned by Aussie).
GE Money informed mortgage-holders that they would continue to service any mortgages that they still held in the "normal way". However, they also made it clear to mortgage-holders that they would not be able to pass on the aggressive interest rate cuts that the RBA were making at the time, in the same way that some other banks in the marketplace were doing; and that, if mortgage-holders chose to refinance through Aussie to another lender, they would not have to pay a Deferred Administration Fee (this fee-waiver offer was required by Aussie as a condition of its acquisition of the Wizard home loans business).
Challenger Mortgage Management
In August 2009, NAB reached an agreement with Challenger Financial Services to acquire its mortgage management business, including the PLAN, Choice and FAST mortgage aggregation businesses, Challenger's multi-brand white label product capability, a portfolio of approximately $4 billion of residential mortgages and a stake in the listed mortgage origination company, Homeloans Ltd (who, in their turn, own Access Home Loans).
Near the beginning of October, the ACCC gave the all-clear and NAB had completed the acquisition by the end of the month, announcing that it would rebrand the business as "Advantedge".
Spokespeople for NAB said that the acquisition would increase their presence in the broker distribution segment, helping them build relationships with brokers, mortgage managers and financial planners.