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Daily ShareChat: National Australia Bank / AXA

By Jenny Ruth

Tuesday 13th April 2010

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 Jenny Ruth

The Australian Competition and Consumer Commission's decision will make or break National Australia Bank's deal to buy the New Zealand and Australian AXA businesses, says Aegis Equities Holdings analyst David Ellis.

After delays in its decisions, there is speculation the ACCC may block the deal or impose sufficiently onerous conditions to cause NAB, which owns the Bank of New Zealand, to walk away. A decision is now due on April 22.

"A positive decision by the ACCC will result in a merged wealth management business that will benefit from a very strong market position with clear market leadership across key segments of the industry," Ellis says.

NAB wants to buy AXA Asia Pacific Holdings for $A13.3 billion ($NZ17.3 billion), retain the Australian and New Zealand businesses and sell the Asian business to AXA France for $A9.4 billion. NAB will also repay to AXA France $A0.7 billion of its target's debt.

Ellis says NAB benefits from a strong franchise in Australia and New Zealand but remains sub-scale in Britain. While increased bad debts in 2008 and 2009 increased perceptions of the bank's risk, capital raisings in 2009 underpinned its long-term growth prospects and boosted capital ratios, he says.

"NAB is well-positioned to leverage earnings as economic conditions continue to improve in Australia and eventually recover in NZ and the UK." Despite higher funding costs and slower volume growth, he expects a rebound in earnings in 2010 and 2011.


BROKER CALL: neutral.


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