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The impending merger of Westpac and St George will create a bank with 5.04 million personal customers (14+) in Australia compared to the current market leader the CBA with 6.88 million personal customers (14+) in Australia.  Leadership will be retained by the CBA in all states except SA where the merged entity would be marginally ahead.

The compatibility of Westpac and St George personal customer profiles will increase the prospects for a successful merger.

The considerable publicity surrounding the proposed merger of Westpac and St George has focused on the creation of a major new banking entity, whereas Roy Morgan Research is more focused on the implication of this on personal consumers which make up the bulk of the customer base for both banks.

In Australia, the Roy Morgan Research estimate of personal customers of the Westpac Group in March 2008 (12 months to March, 14+) was 3.34 million and the St George Group number being 1.98 million.  When these two groups merge, they will have a combined personal customer base (14+) of 5.04 million rather than the sum of the two individual bases because 14.4% (286,000) of the St George customers are already customers of Westpac.

In order to understand the competitive position of a customer base of 5.04 million, it is best to consider it against the market leader, the CBA group which has 6.88 million personal customers (14+), which is 37% larger.

Table 1 shows that the CBA clearly leads the combined Westpac/St George in all major states except SA where it is only marginally behind.

Table 1: A comparison of personal customers by state

(Period: 12 months to March, 2008, Base: Australians aged 18+ with any banking / finance product)

Norman Morris, Global Finance Industry Director at Roy Morgan Research, says:

“The important issue of whether competition will be reduced with such a major bank merger must be seen in relation to whether the newly merged entity will in fact provide greater competition to the market leader.  The CBA is currently the market leader in all states in terms of personal customer numbers and will remain so in all except SA if the merger proceeds.

“The merger of Westpac and St George is likely therefore to provide greater competition in all states.

“An important aspect of this merger between two major financial institutions is the compatibility of the customer bases.  If there are not considerable synergies between the two merging entities then there can often be failure to extract maximum value from the merger.”

There are a lot of similarities between the personal customer bases of St George and Westpac, this is generally a positive for a successful merger.

Table 2 shows that in both demographic and customer focus terms, both banks are very similar in customer profile and performance.  Generally Westpac has only marginally more affluent customers than St George and St George is ahead of Westpac in terms of customer satisfaction.

Table 2: Customer Profile Comparison

(Period: 12 months to March 2008; Base: Australians 14+ with any banking/finance product)

About Roy Morgan Research:

Roy Morgan Research is the largest independent Australian research company, with offices in each state of Australia, as well as in New Zealand, the United States and the United Kingdom. A full service research organisation specialising in omnibus and syndicated data, Roy Morgan Research has more than 60 years’ experiences in collecting objective, independent information on consumers. In Australia, Roy Morgan Research is considered to be the authoritative source of information on financial behaviour, readership, voting intentions and consumer confidence. Roy Morgan Research is a specialist in recontact customised surveys which provide invaluable and effective qualitative and quantitative information regarding customers and target markets.

Contacts:

For comments or further detail, please contact:

Norman Morris, Global Finance Industry Director

Email: Norman.Morris@RoyMorgan.com

Telephone: +61 (03) 9224 5172

Mobile: 0402 014 474

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