13 June 2000
The Commonwealth Bank of Australia may be about to rapidly step up its British expansion plans after being linked, as a buyer, to one of Britain's top lenders, Bradford & Bingley Building Society, for as much as #2 billion ($5.2 billion).
The West Yorkshire building society is poised to follow a number of other building societies by demutualising and becoming a bank in December this year, but this has become clouded by weak equity markets and poor valuations for the British financial sector.
B&B's 2.6 million members were originally hoping to get about #1,000 each for their shares but weak markets have opened the prospect of a trade sale.
Britain's Independent newspaper reported at the weekend that the soon-to-demutualise building society has had contact with CBA at an operational level, where CBA wants to access customers via Black Horse, B&B's estate agency chain.
However, it said in March it was not in talks with other parties, despite speculation that it might seek to be bought by British banks such as Abbey National and Northern Rock.
B&B yesterday denied it had received any approach from CBA and remained on course for its float.
A spokesman for CBA said yesterday it did not comment on market speculation. But it would be a surprise move to buy B&B, given the bank is now absorbed in the task of bedding down its $9 billion takeover of Colonial, which formally begins today.
CBA managing director Mr David Murray has already indicated that expanding into Britain is one of his priorities.
But the bank has heavily emphasised that the best way to do this is through online offerings building on the bank's success in Australia.
The bank took its first step into European financial services markets last month by taking a $15 million, or 23.5 per cent, stake in Property Internet plc and unveiling plans for a Web-based mortgage referral service.
It may be that a link with B&B would afford CBA some e-commerce opportunities, given B&B has just formed a mortgage technology alliance with US software company ALLTEL, involving plans to expand into Europe.
Earlier, CBA formed an international financial services division, indicating plans to increase the contribution of offshore revenues from 5 per cent to 25 per cent. B&B is considered Britain's second biggest member-based lender with 2.6 million members and more than 400,000 residential loans.
National Australia Bank has the biggest presence in Britain of the Australian banks, although it signalled at its half-year result last month that it was reviewing its British operations to ``enhance our strategic positioning in the northern hemisphere".
Those options include a dual-listed structure in Britain, where NAB owns Clydesdale Bank, Northern Bank, Yorkshire Bank and National Irish Bank. Meanwhile, NAB is pushing to expand its HomeSide mortgage origination venture in the US, possibly through an online distribution deal, while expectations earlier this year of a sale of its US bank Michigan National Corp, look to have dried up.
In an indicator of tougher conditions in Europe for the banking sector, NAB's net profit in Europe fell from $407 million to $402 million, in part because of unfavourable movements in exchange rates.
Westpac, meanwhile, has indicated offshore growth is a matter for the future, while ANZ has just sold the troublesome Asian banking venture Grindlays and is pursuing e-commerce ventures in Asia.
Forging connections
* B&B has 2.6 million members and 400,000 residential loans
* CBA established UK presence last month with stake in Property Internet
*Plans other ventures in European financial services markets to increase offshore revenues to 25pc of total