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NAB (ASX:NAB) share price in focus as Citi deal approved

The National Australia Bank Ltd (ASX: NAB) share price is in focus today as the Citigroup consumer business deal is approved.

NAB’s acquisition approved

The Australian Competition and Consumer Commission (ACCC) has decided not to oppose the proposed acquisition of CitiGroup’s Australian consumer business.

ACCC decided this after a review found that the transaction would not substantially lessen competition, despite the fact that both banks offer similar services.

The ACCC said that it consulted with a broad range of stakeholders, including credit card suppliers, third party distributors of Citi’s white label credit cards and consumer groups. Very few concerns were raised by this stakeholders.

It was concluded that NAB would continue to face competition from a range of suppliers of credit cards.

ACCC Chair Rod Sims said: “Credit cards continue to be an important product for consumers, despite increasing use of other unsecured lending products such as buy now, pay later.

However, market feedback suggested that Citi is not unique with respect to its credit card offering, and many different credit card providers remain for consumers. NAB today is smaller in credit cards than its major bank rivals, and we don’t consider adding Citi’s card operations to NAB will materially change the level of competition.”

The ACCC isn’t didn’t think there would be an incentive for NAB to offer less favourable terms to its white label partners.

What this deal could do for NAB

NAB likes the look of this business. This division of Citigroup had lending assets of approximately $12.2 billion, comprising residential mortgages of approximately $7.9 billion and unsecured lending of approximately $4.3 billion and deposits of around $9 billion.

For the 12 months to 30 June 2021, the business made $145 million of pro forma net profit after tax (NPAT). At the time of the acquisition, NAB said it was going to pay $1.2 billion for the business.

It’s expecting to achieve pre-tax cost synergies of approximately $130 million per annum over the next three years.

Summary thoughts on the NAB share price and the deal

It’s good news for NAB that this deal is going ahead as it will add to NAB’s earnings and diversify the profit.

I think NAB could be the most promising big four ASX bank, though there are plenty of other ASX dividend shares I’d rather look at with more growth potential.

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At the time of publishing, Jaz does not have a financial or commercial interest in any of the companies mentioned.

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