Birth of banking colossus

After a record $5.68b merger, the new leader of ANZ and National Bank promises to focus on growth, writes PAULA OLIVER.

The relief was obvious when the powerbrokers of ANZ and the National Bank yesterday revealed a landmark takeover that had been cooking for months.

"It's a great relief that the process has finished," National Bank chairman Sir Wilson Whineray said with a sigh. "It's been unsettling."

Beside him, ANZ's chiefs nodded in unison at the understatement that summed up the seven-month sale process of the National Bank.

Then they began the hard sell of a deal that has had the public and banking regulators twisting uncomfortably since April.

ANZ yesterday revealed that it had agreed to buy the black-horse bank from its British owner, Lloyds TSB, for $5.68 billion, in a deal that seems to be tailored to quell public ill-feeling.

It is believed to be the biggest single investment transaction in New Zealand and it makes ANZ the largest bank in the country.

The purchase came as no surprise for those who had been watching the sale process closely - ANZ was the only bidder left in the marathon.

The ink on the agreement, signed at 11.20am, was barely dry when ANZ's Australian chief executive, John McFarlane, took the stage to begin repeating his message of how unique the acquisition was.

"This is about customers and growth, not about costs," the humorous Scotsman told a briefing in Wellington, beamed to Australia by video link-up.

"It's different for customers; it's different for staff. We will have two brands. We will bring the best of both to serve our customers."

Under the deal the two brands will continue to exist for "the foreseeable future".

Where the National Bank brand is strong, such as in rural banking, it will be used. Where the ANZ brand is strong, such as in corporate banking, it will be used.

McFarlane said the issue of when the two brands became one had to be taken carefully.

"We want the customers to decide whether they want Holden or Ford.

"We have to take this carefully. There is no decision yet on the timeframe for it."

But ANZ does have a seven-year limit on its deal with Lloyds TSB to use the black-horse symbol and advertising trademark.

Customers will not see obvious changes as the banks continue to advertise and operate branches.

The head office will be in Wellington.

Some integration is planned. The two head offices will be combined, as will back-office operations and IT, and ANZ expects savings of A$110 million ($126.5 million) from that within three years.

Job losses will be centred in those areas, but the chiefs of both banks were keen to play down the likelihood of net losses over three years.

Natural attrition of about 800 or 900 jobs was possible, it was revealed, but no final figure had been worked out.

McFarlane said staffing losses would be "modest", and appointments would be made on merit.

But the real key to the deal, and the carrot that could keep many National Bank customers on board, is the decision to appoint Sir John Anderson to head the new enterprise.

Sir John, longtime leader of the National Bank, has been involved in four successful integrations in banking.

He has been credited with driving the success of the National Bank under the very hands-off ownership of Lloyds TSB, and is highly respected in the industry.

Sir John was adamant yesterday that the New Zealand operation of ANZ would largely be an autonomous bank run within this country.

"ANZ want us now, instead of having the previous models they've had, to be autonomous and a distinctly New Zealand company.

"We will keep the sponsorships and community involvement we have.

"This will differentiate us from the others," he said.

"We really want the cricket team to succeed."

The two banks have about 300 branches and that figure is not expected to change much.

However, Sir John told the Business Herald that in the 33 or so instances where two branches were near one another, one would probably close. But it would be replaced by another branch elsewhere.

"We are going to be a huge bank. We want representation in areas where we don't have it now. Particularly in Auckland, into Torbay, Whangaparaoa, we are already opening new branches.

"It's a matter of what the best configuration is."

If a new branch opened, he said, there would not be a "civil war" over which brand it ran under.

"We don't want legacies. We have a new organisation. We want to make this good."

Sir John was confident staff could learn new skills and move into different positions if necessary, because he had seen it happen before after mergers.

Bank workers' union Finsec said it was pleased to see that lessons had apparently been learned from previous merger disasters.

General secretary Andrew Casidy said the decision to run two separate brands was a recognition of that.

"It's very good news. It gives us some comfort, and hopefully the costs we've seen from mergers before will be mitigated to some extent."

It would be important, however, to find out how long that situation would remain.

There had been speculation that ANZ might choose to get rid of its brand in New Zealand in favour of the strong National Bank one.

That was driven by ANZ's consistently low performances in customer satisfaction surveys, and fears that people might desert the high-ranking National Bank if ANZ bought it.

But McFarlane strongly defended ANZ's brand, saying it was potent in Australia and the bank had nearly one million customers in New Zealand who "could have gone elsewhere but they haven't".

"They're choosing to be with ANZ," he said forcefully.

"We'd rather let them decide."

He said that ANZ had given up some financial gains to allow the two brands to operate, but he still admitted to being worried about customer flight after the merger.

"We will be very diligent to make sure that doesn't happen," McFarlane said.

ANZ is funding the acquisition, its largest, through a A$3.57 billion rights issue, and debt.

It revealed yesterday that a partial float on the New Zealand stock exchange of the new bank, once it had been integrated in 2006, would be considered.

Sir John said customers and staff might get first shot at the float if it went ahead.

The ANZ purchase has been tailored to gain the approval of the Reserve Bank of New Zealand.

It leaves ANZ with 30 per cent of its total earnings generated on this side of the Tasman - as opposed to the present 15 per cent.

Sir John said he was pleased to see the draining sale process end.

The grieving for Lloyds TSB had been done, he said, and everyone was looking forward.