The Independent Consumer and Competition Commission (“ICCC”) has granted clearance to Kina Bank Limited (Kina Bank) to proceed with the proposed acquisition of the Retail, Commercial and Small and Medium Enterprise (SME) businesses of Australia and New Zealand Banking Limited (“ANZ PNG”).
ICCC Commissioner and Chief Executive Officer, Paulus Ain said that the ICCC assessed Kina Bank’s authorization application and was satisfied that the Proposed Acquisition, if it proceeds, would not lessen competition in any of the relevant markets and therefore granted clearance for the acquisition to proceed.
In its consideration of the likely effects on competition as a result of the Proposed Acquisition the ICCC had formed the following conclusions:
- Whilst ANZ PNG proposes to continue to carry on business in the corporate/institutional markets, its business in the consumer/SME/retail markets is proposed to be merged with that of the acquirer, hence, the number of competitors in the latter category of markets will be reduced because of the combination of the businesses of the proposed parties and, thereby, concentration in relevant markets would be increased.
- However, the Proposed Acquisition is not likely to either significantly increase, or create any new, barriers to entry or expansion in the market because Kina Bank is a small player and ANZ PNG is a relatively small player compared to the main incumbent, Bank South Pacific (BSP). Furthermore, while the incumbents have existing branch and ATM networks which are non-trivial barriers to new entrants, the proposed combination assists the proposed acquirer to expand and compete more effectively in a market characterized by a dominant presence of BSP.
- The Proposed Acquisition, if it proceeds, is not likely to give Kina Bank such power to significantly and sustainably increase its prices and profit margins because there are other effective competitors who will put competitive pressure on its products and services. It is noted that Kina Bank proposes to reduce its prices to maintain and capture some market shares, although that remains to be demonstrated;
- The Proposed Acquisition would not impact the extent to which substitutes are available in the market;
- The Proposed Acquisition does not remove a vigorous and effective competitor because ANZ PNG does not appear to have significantly expanded its business over recent past years. Besides, ANZ PNG has been more focused on its business interest in other areas and its business in the retail and SME markets have remained stagnant;
- The existing levels of vertical integration will not be impacted by the Proposed Acquisition; and
- The market is highly dynamic.
Commissioner Ain added that the Proposed Acquisition would generally involve ANZ PNG transferring to Kina Bank the retail customer deposits and loans including credit cards, commercial/SME customer loans and deposits (subject to minimum credit rating requirements), business premises including 15 retail branches and a portion of ANZ’s commercial office spaces in Port Moresby and Lae, ATMs and EFTPOS terminals, other fixed assets, some motor vehicles, and cash in hand, in respect of the relevant business and certain employees.
The Proposed Acquisition, however, did not include the sale of ANZ PNG’s corporate and institutional business in PNG.
“In complying with the mergers and acquisition provisions of the ICCC Act, Kina Bank submitted that the Proposed Acquisition should be allowed to proceed because it will not lessen competition in any of the relevant markets but instead will result in more benefits to the public,” Commissioner Ain said.
“Both Kina Bank and ANZ PNG offer retail, commercial and SME banking services in PNG, however, Kina Bank does not offer credit cards and operate a propriety Point of Sale Network.”
“In addition, Kina Bank only has branches in Lae and Port Moresby whilst ANZ has branches in Hides, Mt Hagen, Goroka, Madang, Kokopo, Kimbe and including Port Moresby and Lae.”
Commissioner Ain explained that, though Kina Bank applied for authorization under Section 82 of the ICCC Act, based on the conclusion that the Proposed Acquisition would not substantially lessen competition in any of the relevant markets identified, the ICCC was satisfied and has proceeded to give clearance, consistent with Section 82 of the ICCC Act.
The ICCC took into consideration comments from the applicant and other stakeholders, and considered that the Proposed Acquisition would affect the following markets:
- The provision of transaction account services in specific main centres around PNG;
- The provision of savings or term deposit accounts and investment services nationally;
- The provision of home loan services nationally;
- The provision of personal loan services nationally; and
- The provision of SME banking services in specific main centres around PNG.