The Australian Competition and Consumer Commission (ACCC) has approved the Commonwealth Bank of Australia’s acquisition of 67% of Aussie Home Loans.
The Commonwealth Bank already owns 33% of shares in Aussie Home Loans.
The Aussie Home Loans franchise includes a network of around 750 mortgage brokers and provides a distribution channel for bank and non-bank lenders for home loan products and retail banking and insurance products.
Brokers also supply what are called ‘white label’ products, which are financed by third-party lenders such as the Commonwealth Bank but rebranded by Aussie Home Loans under its own brand.
“In reaching its view, the ACCC took into account the competitive constraint arising from the presence of a number of alternative suppliers of home loan products and mortgage distribution services,” Rod Sims, ACCC chairman, said in a statement.
“While Aussie Home Loans franchisee brokers will still wish to offer home loans from a range of lenders, [the] Commonwealth Bank is likely to have the ability and incentive to increase the volume of, for example, ‘white label’ home loan products supplied through the Aussie Home Loans network,” the ACCC said in a statement.
The ACCC concluded the acquisition by the Commonwealth Bank would not substantially lessen competition, as Aussie Home Loans brokers only make up around 6% of mortgage brokers in Australia.
John Symond, chief executive officer at Aussie Home Loans, has told ABC Radio’s PM program that as long as he is in charge, consumers will receive independent advice.
“We’ve had a 21 -year track record. I think people have to now give me the opportunity to demonstrate going forward we will continue to do the right thing and in fact we will be bigger and stronger and hopefully more products and better pricing,” Mr Symond told the program.
Consumer advocacy group Choice has supported the ACCC’s decision, but does not necessarily support the acquisition.
Matt Levey, head of campaigns at Choice, told ANZPJ Choice did not question the ACCC’s judgement that the acquisition would not substantially lessen competition.
“But that does not mean it is good for competition, or for that matter that it won’t lessen competition. A substantial lessening of competition is the test that the ACCC is required to apply and we have no reason to doubt their judgement on this,” he said.
“This is a further sign of the veneer of competition tension that exists across much of the Australian banking sector, when in fact what we generally see is four very large banks getting even bigger and becoming more profitable.”
Mr Levey said Choice believes there should be a review of Australia’s financial services sector to look at barriers to competition and the ability of consumers to move around in the market.
“In this case, we see a brand that has traditionally pitched itself as the little guy taking on the big guys now being taken over by the biggest guy of all – [the Commonwealth Bank],” he said.
“That is not going to increase competition. In fact, it is going to see more profits going back to the largest of Australia’s major banks.”
The Commonwealth Bank announced in December last year that it had reached an agreement with Mr Symond to increase its holding in Aussie Home Loans to 80%, to eventually move to 100% ownership.
The bank stated Mr Symond would remain executive chairman of Aussie Home Loans.
BRW reported the Commonwealth Bank acquisition would be worth net Mr Symond $277 million.