By Narayanan Somasundaram
SYDNEY, Sept 9 (Reuters) - Even for a man who swims with sharks, the Australian competition regulator's decision to block National Australia Bank's $12 billion bid for AXA Asia Pacific must really hurt.
NAB Chief Executive Cameron Clyne competed in an ocean race in the waters off Alcatraz prison in San Francisco in July, but failed to scale the regulatory wall on the AXA bid, stalling his wealth management growth strategy.
AXA Asia Pacific would have been the final piece in NAB's quest to dominate Australia's $1 trillion wealth management sector, one of his top priorities since moving into the job in January 2009.
While the deal looked tough from the start, given that the country's top four banks completely control financial services, investors thought Clyne had dodged the final barrier when the regulator agreed to consult the market on the deal last month, after blocking it in April.
With the regulator opposing the deal once again, Clyne, 42, needs to explain to investors why he pursued a deal that looked a hard sell for nine months.
The question now is how much stature has the 6-foot 6-inch former rugby player lost. Clyne does not seem to mind taking the heat. He's certainly not easy to miss on the bus he rides to work so he can field complaints from NAB customers. In the office, he sits in an open floor.
"This is not a must-do deal for him," said Paul Biddle, an investment analyst at Celeste Funds Management, which does not own NAB shares.
"It is an expensive one. The ACCC is doing him a favour. He must get over it. If he keeps fighting about it, the board will give him a tap."
NAB has yet to formally withdraw from the bid, in an indication that Clyne, who has drawn ideas from Starbucks, Toyota and Boeing, is still looking for a way to salvage the deal.
Clyne has tried to set NAB apart from its peers, moving first to cut fees and start offering the lowest mortgage rates among the top four banks to diversify from business lending. He has moved aggressively to expand in wealth management.
NAB bought Aviva's Australian wealth unit for $660 million in June last year and followed that up with the purchase of Goldman Sachs JB Were's private wealth unit, building on its MLC business.
"I wouldn't agree he pushed it too far," said Simon Burge, executive director at ATI Asset Management, which owns NAB shares. "There certainly was a disconnect between NAB and the regulator. But we broadly support his strategy to grow in wealth management."
While investors say AXA Asia Pacific would have added bulk, it would not have bought efficiencies for NAB, which is struggling to integrate all its acquisitions.
"We expect that NAB will likely let the deal rest now rather than challenge via the courts," Citigroup analyst Craig Williams said. "There is ample opportunity available in integrating its existing wealth businesses and better executing its banking strategies."
The former accountant will have to do so while navigating through global regulatory changes and economic uncertainties. NAB has more than 300 branches in Britain and was in the running to buy some of Royal Bank of Scotland's branches, before pulling out at the last minute. NAB has said it was comfortable with its UK operations and is under no pressure to sell or bulk up, after speculation it would soon choose to either buy more assets or quit.
Clyne, one of two Australians nominated as a 2008 Young Global Leader in an annual list of 250 people compiled by the World Economic Forum, should be thinking bigger and more globally, a banking colleague said.
"There is the UK, where he needs to set things right," said the banker who has worked with Clyne but declined to be identified as he is not authorised to speak to the media. "There is the Asian opportunity, which he might well miss.
"It is time to move on."
(Editing by Bill Tarrant)