National Australia Bank plotted hostile takeover

BRISBANE - The National Australia Bank, owner of the Bank of New Zealand, had secretly planned to take over the ANZ while the Commonwealth Bank confirmed it had informal merger discussions with Westpac, it has been revealed.

Outgoing Commonwealth Bank chief executive David Murray yesterday again called for talks over the Four Pillars policy which prevents mergers between the big four banks.

Murray confirmed in the late '90s Commonwealth, owner of ASB Bank, had informal merger talks with Westpac prompted by speculation of a relaxing of the Four Pillars and by the "fear factor" of a merger between the other two banks.

"You don't want to be left out if all the others are in, so that is the driver of the behaviour of the board and chief executive - trying to make sure they protect shareholders' interests," he told the Nine Network's Business Sunday.

The programme revealed that in 1998 NAB set up Project Edwin to prepare for a possible hostile takeover of the ANZ.

An anonymous source gave the show 1000 pages about the plan, which was the pet project of then NAB chief executive Don Argus.

NAB enlisted the services of KPMG to see if the takeover was financially viable, while the accounting firm was the auditor for ANZ at the time.

An ANZ spokesman said there were no informal or formal discussions with NAB.

He said the bank also had no problems with KPMG liaising with NAB.

"KPMG's corporate finance arm has Chinese Walls to protect it from other parts of the company," he said. "We are quite comfortable with that."

A NAB spokesman refused to comment.

Murray said none of the moves to merge would have come to fruition.

But he said there was always a concern that a foreign bank might buy an Australian bank.

"Whilst people might think that's remote in the world today because of the value of the Australian banks, it's always a possibility and the Government has to think of all the knock-on consequences of that," he said.

Murray, who leaves the job next month, said it was important there be the right arguments to carry any change in the Four Pillars policy.

"It may well be beneficial, I don't know," Murray said of changing the long-running policy. "[But] nobody's put down the set of arguments that demonstrates why it would be and that's in an environment where the dynamic competition between the banks over the last decade has caused radically reduced margins and radically increased value to the whole community."

Last week Murray challenged his counterparts at Westpac, ANZ and NAB to a more meaningful debate about the Four Pillars policy.

He will hand over his job to Air NZ chief executive and former CBA executive Ralph Norris on September 23 after 13 years at the helm.

Murray will become chairman of the federal Government's proposed $16 billion Future Fund.

- AAP