ACCC launches review into NAB’s swoop on 86 400 neobank

The deal requires approval by the Australian Competition & Consumer Commission, the Australian Prudential Regulation Authority, the Federal Court and Treasurer Josh Frydenberg.

Photo by William WEST / AFP

The nation’s competition regulator has launched an informal review into National Australia Bank’s $220m swoop on neobank 86 400 last week, to gauge whether the move would be a brake on “future competition” for the big four banks.

On Friday, NAB announced it plans to lift its 18.6 per cent stake in the neobank 86 400 to 100 per cent through a scheme of arrangement.

The deal requires approval by the Australian Competition & Consumer Commission, the Australian Prudential Regulation Authority, the Federal Court and Treasurer Josh Frydenberg.

NAB plans to merge 86 400 into its online UBank and “deliver a market-leading digital experience and new product propositions to customers”.

In a letter sent to 86 400’s major customers and other businesses, the ACCC said it was examining whether the neobank was “uniquely placed to provide significant future competition to the major banks”.

The ACCC will also probe “the likelihood of other banks with a similar business model and product offering, or other non-bank lenders, entering and expanding in Australia”.

The competition regulator said it would review “whether 86 400 plays a critical role in the market by providing competitive products or better service and infrastructure to customers not otherwise available”.

Headquartered in Sydney, 86 400 does not operate a physical branch network, or online browser-based banking facilities, with the key customer interface a smartphone application.

It has offered online transaction and savings accounts since September 2019, and launched a home loan product sold through a network of selected brokers in November 2019.

The neobank has a lending book of $148m, mostly owner-occupied mortgages. The bank had $365m of deposits at the end of December, according to APRA.

It said December was its best ever month for home loan applications through mortgage brokers.

The swoop on 86 400 follows the departure of high-profile player Xinja, which handed back its banking licence in December after failing to secure more than $400m in funding.

NAB also benefited from Xinja’s demise, absorbing more than $250m worth of deposits.

The shift to ultra-low interest rates since the onset of COVID has accelerated the capital burn of neo-banks which had been targeting deposits, analysts said.

Brokerage Citi said the bid by NAB showed the majors banks are likely to maintain their dominance.

“The recent demise of Xinja Bank, and now the sale of 86 400 to NAB, is highlighting to investors the current challenges for independent neobanks,” Citi said in a note to clients.

“A modern tech infrastructure and innovative customer experience are clearly not enough.”

NAB chief operating officer Les Matheson said the acquisition was consistent with the bank’s plan for growth.

“Bringing together UBank and 86 400 is consistent with NAB’s long-term strategy and will enable us to develop a leading digital bank that can attract and retain customers at scale and pace. The combined business will deliver accelerated innovation and an enhanced customer experience.”