ERIC JOHNSTON

A MEETING of the AMP board this month mapped out the options for the wealth giant if, as widely expected, National Australia Bank emerged with AXA Asia Pacific.

One of these is a defence strategy aimed at ensuring AMP remains the so-called ”fifth pillar” of the nation’s financial services market, should a big-four bank begin circling.

The logical poison pill in any takeover attempt would be for AMP to try to turn the game on its head and make a play for a regional bank. Such a move would result in AMP becoming too large for a big-four bank to digest, both in terms of pricing and likely competition hurdles.

The aim of the banks over the past decade has been to diversify into wealth management, so it should not be too much of a stretch for a wealth manager to buy into a mid-sized bank.

Among the most obvious targets for AMP would be Bank of Queensland, given the regional lender’s willingness to enter into a partnership. And at the same time, a deal is affordable and its share registry is largely wide open.

Other candidates include the banking arm of Suncorp Metway, although its new chief executive, Patrick Snowball, has said he is keen to retain the business, which is largely focused on the Queensland market. Bendigo Bank, while attractive with a national footprint, is regarded as less likely, given cultural differences.

AMP is no stranger to lending and transaction accounts, having operated a small banking business for the past two decades. The chief executive of AMP, Craig Dunn, has talked up a greater strategic focus on its banking business to position itself a alternative to the big four lenders.

Of the eight non-executive directors on AMP’s board, three, including the chairman, Peter Mason, and director Paul Fegan, come from a banking background. When it comes to AMP, ANZ is widely regarded as being the best placed to make a takeover offer for the wealth giant.

Any deal would transform ANZ into a dominant player in the financial services market, but it would come at a cost.

On Axiome Equities calculations, ANZ would have to pay about $16.5 billion for AMP for the acquisition to be mildly dilutive, but this would mostly be financed by a monster $10 billion capital raising.

PETER MARTIN ECONOMICS CORRESPONDENT

CUSTOMERS angry at the big interest rate rise imposed by Westpac are leaving the bank, according to Australia’s largest mortgage broker.

AFG said a ”large proportion” of its business last month came from Westpac customers switching to other lenders in protest at the bank’s outsized rate rise in December.

AFG would not reveal the number of customers it switched but said anti-Westpac sentiment pushed refinancing to a high for the year and made the Commonwealth Bank its largest source of mortgages, replacing Westpac.

”There are people who are fed up with Westpac and are making a stance,” the AFG sales manager, Mark Hewitt, said.

People did not typically think it worthwhile to change lenders if their rate exceeded the market by 20 basis because rates could change again, he said.

”But in this case people are making a protest. It’s hard to switch banks but when you feel strongly about something you tend to endure a bit of pain to get your point across.”

Westpac disputed the AFG analysis. A spokesman said growth in new lending remained strong. Asked why it should remain strong when Westpac’s rates were well above those of other lenders, he said the bank offered a good discount to ”premium customers” and other benefits such as no credit card and account-keeping fees.

Westpac had not noticed an ”abnormal level” of refinancing last month. AFG might merely have been logging more inquiries from disgruntled customers.

Westpac’s decision to increase its variable rates by 45 basis points, compared with the Reserve Bank’s 25-point rise has opened the biggest gap between the rates of the big banks.

A National Australia Bank mortgage is now 0.27 points cheaper than a Westpac one, representing a saving of $50 a month on a $300,000 loan.

The consumer group Choice said the move by AFG customers was welcome, but only a start. ”There’s a public appetite for switching and some pioneers are already doing it. But they are going to be necessarily small in number until it is made easier to switch and borrowers know the interest differential will be maintained,” a spokesman, Christopher Zinn, said.

Customers who want to switch to banks with which they do not already have an account will need to prove identity, using documents such as driver’s licences and passports. They will also need to produce bank statements and group certificates to establish savings and earnings records and obtain or pay for a property valuation. They will need to provide other documents on request, such as rates notices and child support agreements.

Mr Zinn said: ”It needs to be much simpler in terms of the costs and paperwork. The Government’s bank-switching package wasn’t enough.”

The AFG figures reveal the near death of fixed-rate mortgages, with the proportion sold by AFG falling to a record low of 2 per cent last month, down from 22 per cent two years before.

Loan volumes slid in October, November and December after the Reserve Bank’s rate rises. The average mortgage size hit a record of $414,200 in NSW.

MORTGAGE provider RAMS Home Loans says it will offer the fixed rate component of a new home loan product at half a percentage point below the variable rate.

The Westpac-owned RAMS is making the offer just three weeks after raising the interest rates on some of its existing fixed rate mortgages.

The new spilt home loan allows new customers to fix up to 50 per cent of the loan for two years at an interest rate of 4.99 per cent, with the remaining half charged a variable interest rate of 5.49 per cent.

RAMS said the split loan would be available to low-documentation loan applicants, who would be charged a fixed rate of 5.49 per cent and a variable rate of 6.69 per cent.

RAMS spokeswoman Melanie Monico said the loan may be offered for about two weeks only as the mortgage provider had a limited tranche of funding from its parent.

RAMS last month raised the interest rates its fixed mortgages

by between 10 and 40 basis points, but its one-year fixed rate remained at 5.09 per cent and kept its standard variable home loan rate at 5.59 per cent.

Commonwealth Bank, National Australia Bank, Westpac and St George Bank raised interest rates on their fixed home loans in mid June.

Resi Mortgage Corporation head of consumer advocacy Lisa Montgomery said most split loans offered a fixed interest portion for three years.

“It’s the middle ground and a good option for those considering a fixed rate loan,” she said.

Borrowers unsure of their long-term needs could used split loans to avoid hefty break fees associated with standard fixed rate mortgages.

Ms Montgomery said customers needed to be confident that the interest rate on the fixed portion of the mortgage was not going to rise above the variable portion.

“With any fixed rate loan – whether it’s for 50 per cent of the loan or 100 per cent – there’s always going to be a risk for the borrower.”