Customers lose out as banks merge, say analysts

Signage of the Australia and New Zealand Banking Group (ANZ) bank is seen in Sydney.
Signage of the Australia and New Zealand Banking Group (ANZ) bank is seen in Sydney.PHOTO: EPA

Deals like DBS' buyout of ANZ's Asian units may cut competition, lead to fewer client perks

DBS Group's purchase of ANZ Banking Group's wealth management and retail banking business in five Asian markets for $110 million barely caused a ripple in a market that has become used to such acquisitions over the years.

But some analysts say the stream of mergers could mean that customers lose out as less competition could lead to fewer attractive loan and credit card offerings.

While it was still in the game, ANZ had some attractive offerings. In an aggressive bid to gain market share, its Travel Visa Signature Card and Optimum World MasterCard offered some of the best air mile and cashback rewards among credit cards here.

Mr Duckju Kang, an analyst with personal finance adviser ValuePenguin, said the DBS-ANZ deal will be a loss for consumers.

"By taking out an aggressive competitor, DBS could reduce the level of competition in various products like credit cards, and increase margin by reducing reward rates," he said in a report yesterday.

Personal loans could be affected too, he warned. "Such a consolidation in the market could lead to fewer promotions or higher rates for borrowers in Singapore, Hong Kong and Taiwan."

CIMB Research analyst Jessalynn Chen said it is also unlikely consumers will get to continue enjoying ANZ's deposit rates, which were higher than those at local banks.

"Given that DBS has ample liquidity, especially in Singapore dollars, it is likely to wean off those expensive deposits," she said.

That said, she added, some other foreign banks here still continue to offer a premium in deposit rates, even higher than the rates offered by ANZ, so consumers are not entirely losing out.

Others agreed. Mr Ng Wee Siang, the senior director of Fitch Ratings' financial institutions team, said: "One less player - in this case, a marginal one - is unlikely to cause any less benefit to customers."

There is still a healthy degree of competition and innovation between the three local banks and remaining foreign players, he added.

Mr Simon Chen, a senior analyst at Moody's financial institutions group, said ANZ's exit from retail and wealth banking in the region shows how tough it is for foreign banks to succeed in the business in a new market.

"To create a successful retail business, a bank needs to invest a lot in its distribution network, such as branches. And you need to achieve economies of scale so you can generate sufficient revenue to overcome the cost," he said.

"A few of the foreign banks have done it here but it took them a long time."

A version of this article appeared in the print edition of The Straits Times on November 02, 2016, with the headline 'Customers lose out as banks merge, say analysts'. Print Edition | Subscribe