ACCC gives NAB the greenlight for Citigroup acquisition

  • By Zilla Efrat

NAB says it’s working on completing its proposed acquisition of Citigroup’s Australian consumer business in the first half of 2022.

This follows yesterday’s announcement from the Australian Competition and Consumer Commission (ACCC) that it would not oppose NAB’s acquisition after a review found the transaction would not substantially lessen competition.

The proposed acquisition, however, remains subject to certain other conditions, including regulatory approvals from the Commonwealth Treasurer and the Australian Prudential Regulation Authority (APRA).

According to a statement from the ACCC, NAB and Citi overlap in the supply of consumer banking products and services, including credit cards, personal loans, wealth management and investment products, transaction and savings accounts and home loans in Australia.

The ACCC says its review considered whether NAB’s acquisition of Citi would reduce competition both in the overall market for credit cards and in particular segments such as credit cards with rewards programs.

During its review process, the ACCC consulted with a broad range of stakeholders including credit card suppliers, third party distributors of Citi’s white label credit cards (known as white label partners), and consumer groups. Very few concerns were raised by those stakeholders.

The ACCC concluded that, following the proposed acquisition, NAB would continue to face competition from a range of suppliers of credit cards.

“Credit cards continue to be an important product for consumers, despite increasing use of other unsecured lending products such as buy now, pay later,” says ACCC chair Rod Sims.

“However, market feedback suggested that Citi is not unique with respect to its credit card offering, and many different credit card providers remain for consumers. NAB today is smaller in credit cards than its major bank rivals, and we don’t consider adding Citi’s card operations to NAB will materially change the level of competition.”

Following the acquisition, the ACCC says NAB will be the dominant white label credit card supplier to several commercial partners and will compete with those partners in the consumer-facing credit card market.

The competition watchdog focused on whether NAB might then offer less favourable terms to these white label partners, such as smaller banks, to boost its own branded credit cards.

However, the ACCC found that post-acquisition, NAB would be unlikely to have an incentive to act in that way.

Firstly, it says scale is very important in credit card operations, including white label credit card operations, such that issuers have strong incentives to have a larger consumer base (including white label consumers) over which to spread out the large fixed costs of investment in a credit card issuing platform.

Secondly, the ACCC considered it likely that if NAB caused white label partners’ credit card offerings to become less competitive, or exit the market altogether, many consumers would switch to non-NAB credit cards, making such a strategy unprofitable for NAB.

Finally, banks that are white label partners may also have the ability to invest in their own credit card issuing platforms, although at a cost, which could limit or remove their reliance on NAB’s white label credit cards post-acquisition.

“We are very concerned to ensure that mergers in the financial industry do not limit the competitive constraint provided by providers outside of the major four banks. However, in this case, the ACCC did not consider there would be a substantial impact in any market,” says Sims