Murray rejects bank buy-up - Brief Article

Business Asia, Oct 25, 1999

The Commonwealth Bank of Australia, the nation's No. 2 lender, wants to boost its business outside Australia, but won't buy troubled banks in Asia because of doubts about many countries' legal and accounting systems.

Nor will the Commonwealth buy top performing banks or financial service companies in Europe or North America, where "prices are just pretty high at the moment", managing director David Murray told investors. In developed markets, "that would be too much of a hurdle".

Still, the Commonwealth recognises the need to expand beyond Australia.

"We see a risk of being locked up in Australia, and we have as part of our strategy to get much more of our revenue from outside Australia," Murray said.

Buying "mismanaged banks or banks in difficulty" can only be done in countries with solid legal and financial systems, Murray said.

During South East Asia's two-year financial crisis that began in the summer of 1997, the Commonwealth was unable to find banks in markets with those qualities, or where such systems would be developed in the near future.

The bank also could not find mid-sized targets that were the size it was looking for.

The Commonwealth has also decided that buying distressed banks or financial service companies would keep it from expanding its business on the Internet in Australia, and forays into discount brokerage, mutual funds and in-store banks at Australian supermarkets.

Instead of buying overseas banks, the Commonwealth will try to transfer its advanced banking systems in areas such as credit management for companies and e-commerce to slowly enter overseas markets.