Although it may be derailed by any deterioration in financial markets it appears that a new raft of competitors may be due to enter Australian banking. Following their peers in the UK, finance website the Motley Fool detailed reports of moves by Australia's big 2 supermarket groups, Coles and Woolworths to start offering fuller service banking services:
Wesfarmers (ASX:WES), the parent company of supermarket retailer Coles, will need to set aside at least $50 million if it wants to be successful with its application for a banking licence.
Coles wants to offer savings account to its customers under its own name, rather than in partnership with a bank, according to the Australian Financial Review. The Australian Prudential Regulation Authority (APRA) has strict rules for companies wanting to hold a banking licence or operate as an Authorised Deposit-taking Institutions (ADI), including holding at minimum of $50 million in Tier 1 Capital.
But it could have a major impact on Australia’s banks, by increasing competition for savings – an increasingly important source of funding for the major banks – as well as competition for mortgages and personal loans, should Coles role out the full ‘Tesco model’. The big four banks, ANZ Bank (ASX:ANZ), Commonwealth Bank (ASX:CBA), National Australia Bank (ASX:NAB) and Westpac Banking Corporation (ASX:WBC) get around 60% of their current funding from deposits, and control an estimated 80-90% of the mortgage market.(here)As this blog has argued for more competition in Australian banking, this is a welcome development...
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