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CBA confirms BankWest acquisition -

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CBA confirms BankWest acquisition

The World Today - Wednesday, 8 October , 2008 12:10:00

Reporter: Peter Ryan

TANYA NOLAN: In what could be a sign of things to come, the Commonwealth Bank has today swallowed
up its much smaller rival BankWest for $2-billion.

The deal will give the Commonwealth greater market share in Western Australia and access to
BankWest's growing retail network on the east coast.

The acquisition comes as Australia's big four banks fine tune their plans for consolidation, amid
the widening turmoil rocking the global banking system.

I'm joined in the studio now by our business editor Peter Ryan.

A $2-billion deal is not big bikkies in banking terms, what's so attracted the Commonwealth to
BankWest?

PETER RYAN: Well Tanya, this has been an open secret in the banking sector for the past few weeks,
and this morning the Commonwealth Bank confirmed it was swallowing up the much smaller bank
BankWest network for $2-billion as you said.

Now, this gives the CBA a new foothold in the fast growing West Australian market and access to a
big retail network that BankWest has built in shopping malls right along the east coast. Once this
deal is done, subject to regulatory approval, there will be 11 million customers in the combined
CBA and BankWest network; the BankWest brand will remain and we're told there will be no job cuts
at the moment.

This is also a rescue of sorts for Bank West, given that its parent company in Britain, HBOS, has
been under siege because of the credit crisis having accepted a government-backed takeover by
Lloyds TSB. But the bigger picture is that this is all part of market consolidation as Australian
banks batten down for rocky times ahead, already this year we've seen Westpac make move on the
number five bank St. George.

There's no doubt though that this is all about the Commonwealth strengthening its business given
the global financial turmoil. But according to the CBA's chief executive Ralph Norris, this wasn't
about bailing out BankWest, or becoming the rescuer of last resort.

TANYA NOLAN: And we are about to hear from Ralph Norris, the Commonwealth Bank chief executive, do
we have that grab?

PETER RYAN: No, but we can just move on then.

TANYA NOLAN: We'll move right along.

Did Ralph Norris have anything to say about yesterday's rates decision and criticism they that
should have passed on the full rates cut?

PETER RYAN: Well hopefully we'll be hearing from him, but as we know during 2008 all the banks have
raised their interest rates independently, something like half of one percentage point. So
yesterday's one percentage point cut was very important.

Ralph Norris has said though that as rates have moved up over the last year, they should be able to
come down once credit markets ease up and banks have the ability to pass on those cuts to
customers.

RALPH NORRIS: We see interest rates as declining equally in line with the way they have increased,
once markets stabilise. So once we get back to a normalised market situation I think it's fair to
say, you can expect to see reductions by the Commonwealth Bank which will be ahead, above those of
the Reserve Banks, OCR(official cash rate), and also you will see out-of-cycle decreases as we've
had out-of-cycle increases.

So you will see a situation where, what we have done on the way up in this difficult environment,
will be mirrored on the way down.

TANYA NOLAN: That's Commonwealth Bank chief executive Ralph Norris.

Today we're seeing more big slumps on financial markets around the world. What Australian stocks
are taking the biggest hits?

PETER RYAN: Well it is the banks, including the Commonwealth and all of the other big four banks.
Earlier today the futures market had been predicting a 5.7 per cent plunge after a similar lead in
from Wall Street; it hasn't turned out that bad, but still the market is down around 4.4 per cent.

The All Ordinaries Index down 197 points at 4,400.

As we were saying earlier the market had a reprieve yesterday closing one per cent stronger after
the Reserve Bank slashed interest rates by a shock one percentage point.

But that elation was quite brief, the banking sector, as I said, is weaker today with Westpac, the
NAB, the ANZ and St. George down around four per cent.

TANYA NOLAN: Well as you mention we saw a late but brief rally yesterday after the RBA rates cut.
But the fear remains; what is it that's so spooking the markets?

PETER RYAN: Well Tanya, optimism is in very short supply at the moment, we're smothered by
continuing fear and suspicion as the credit freeze heightens and of course more banks in the United
States and Europe are coming under pressure.

But put simply, the greater the interest rates cut, the deeper the fear the Reserve Bank has about
the threat to the global and local economy. Now borrowers might well be celebrating, but if
Australia is hit by a recession, that's expected to hit the United States and Europe, the good
times will definitely be over.

Now is the time to be battening down the hatches, paying off debt.

Most economists expected the Reserve Bank to keep cutting, for example, the National Australia Bank
thinks rates could fall to five per cent by March next year and the respected rates strategist at
the Macquarie Group, Rory Robertson is predicting rates will fall to 4 per cent in the cutting
cycle.

So like the banks, the share market is bracing for bumpy times ahead.

TANYA NOLAN: Our business editor Peter Ryan, thank you.