ACCC calls for feedback on Citi acquisition

The Australian Competition and Consumer Commission (ACCC) is seeking views on the proposed acquisition of Citigroup’s Australian consumer banking business (Citi) by National Australia Bank (NAB).

Given the size of the acquisition, the deal is subject to certain conditions, including approvals from federal Treasurer Josh Frydenberg, the Australian Prudential Regulation Authority (APRA) and the ACCC.

Specifically, the ACCC is now seeking to understand whether the proposed purchase would breach section 50 of the Competition and Consumer Act 2010 (which prohibits acquisitions that are likely to have the effect of substantially lessening competition in the market).

The commission noted that both NAB and Citi “overlap” – and therefore compete – in the supply of Australian consumer banking products and services, including:

• credit cards;
• home loans;
• low interest credit cards;
• personal loans;
• transaction and savings accounts; and
• wealth management and investment products.

As such, the competition watchdog is now investigating its impact upon competition and is seeking feedback from interested parties on the matter.

The ACCC said: “In particular, we are seeking views on: how closely NAB and Citi compete in the supply of various consumer banking products and services; the likely impact of the proposed acquisition on fees and/or service levels; and the availability of alternatives to customers.”

The ACCC said that relevant factors to consider may include: price, product ranges, service offering (including branch networks and technological platforms) and ancillary benefits (including rewards programs). 

It also seeks to understand who would be alternative suppliers (particularly those who would be considered “particularly vigorous or effective competitors”) for each area of overlap and how they compete with NAB and/or Citi in respect to these areas.

As well as seeking views on the immediate impact, the commission is also asking what would happen should NAB increase prices or decrease its service offering in each area of overlap following any such acquisition; and how expected industry developments in the next three to five years would impact competition in the supply of the “overlap” products and services. This could include the role of digital disruption, the presence and/or growth of buy now, pay later services, and changes to regulation.

The ACCC has said it would be also interested to hear from retail suppliers of credit card services, those who acquire white label credit card services funded by a financial institution, and new entrants looking to compete in the overlap spaces, to understand the impact of the acquisition on these areas.

This includes feedback from new entrants on the steps required to enter and/or expand in each area of overlap and become profitable; the time and costs to build a digital banking platform, obtain a banking licence and build a brand to attract customers; and the effects of economies of scale (for example, having a larger customer base, in each area of overlap, and the minimum efficient scale of market entry).

Responses will be accepted via email until 5pm on 13 September 2021.

What the deal entails

Earlier this month, it was announced that NAB had entered into a sale and purchase agreement with USA-headquartered Citigroup to purchase its Australian consumer business for $1.2 billion.

The proposed purchase would include a home lending portfolio, unsecured lending business (operating under the Citigroup brand as well as white label partner brands), retail deposits business and private wealth management business.

NAB has also agreed to acquire the shares in Diners Club as part of the proposed acquisition, subject to certain additional conditions.

As at 30 June 2021, the Citigroup consumer business had lending assets of around $12.2 billion (comprising around $7.9 billion in residential mortgages and around $4.3 billion in unsecured lending), and deposits of around $9.0 billion.

Citigroup’s institutional business in Australia is not included in the proposed acquisition.

Should all approvals be met, completion of the acquisition is expected by March 2022.