NAB (ASX:NAB) - CEO, Ross McEwan
CEO, Ross McEwan
Source: NAB
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  • The Australian competition watchdog greenlights National Australian Bank’s (NAB) proposed buyout of Citi Australia’s retail consumer business
  • The buyout would see NAB become the second-largest credit card provider in the country, controlling 21 per cent of the credit card market
  • However, the Australian Competition and Consumer Commission (ACCC) says a review into the market found that the NAB-Citi transaction would not substantially impact comptetion
  • Other big banks control conisderable amounts of the credit card market, and the sector in general faces pressure from unsecure loans such a buy now, pay later services
  • Shares in NAB are down 0.32 per cent on the ASX at 2:30 pm AEDT, trading at $28.36 each

The Australian competition watchdog has greenlit National Australian Bank’s (NAB) proposed buyout of Citi Australia’s retail consumer business.

The buyout would see NAB become the second-largest credit card provider in the country once it snaps up Citi’s 9 per cent share of the credit card market. NAB first flagged the $1.2 billion deal back in August.

The Australian Competition and Consumer Commission (ACCC) said though NAB and Citi overlap in the supply of banking products and services, Citi’s share of the credit card market was far larger than any of its other business segments. As such, a takeover by NAB would be unlikely to lessen competition in the other overlapping areas.

ACCC Chair Rod Sims said the regulator consulted several stakeholders during its review process, including credit card suppliers, third party distributors of Citi’s white-labelled credit cards, and other consumer groups.

According to the ACCC, “very few concerns” were raised by the stakeholders.

“Market feedback suggested that Citi is not unique with respect to its credit card offering, and many different credit card providers remain for consumers,” Mr Sims said.

“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.”

He added that the credit card market in general faces pressure from unsecured lending products such as buy now, pay later services.

The takeover will substantially increase NAB’s share in the credit card market from 12 per cent to 21 per cent, but it will still be second to Commonwealth Bank, which holds a 23 per cent market share. The remaining two of the ‘big four’ banks, Westpac and ANZ, control 18 per cent and 15 per cent of the market, respectively.

A key concern for the ACCC was NAB’s potential dominance of the white-labelled credit card market, which refers to a branded credit card owned by private labels or smaller banks, designed to be used at specific retailers.

Citi bank is a major player in the white-label card market, meaning NAB’s acquisition would make it the dominant supplier of such cards in the country.

ACCC said it was concerned that by owning a bigger share of this market, NAB may offer less favourable terms to white-label partners with the aim of enhancing the position of its own branded cards.

However, ACCC said it found such a move would likely drive consumers away from NAB credit cards in general and end up being unprofitable for the big bank.

“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,” Mr Sims said.

The NAB-Citi transaction is still subject to a number of regulatory approvals, but the tick of approval from the ACCC is a key milestone to finalising the deal.

Shares in NAB were down 0.32 per cent on the ASX at 2:30 pm AEDT, trading at $28.36 each.

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