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Wesfarmers banks on financial services

WESFARMERS CEO Michael Chaney is open to the idea of expanding the rural group’s finan-cial services to providing more comprehensive advisory and branch banking services.

Speaking to Business News, Mr Chaney said Wesfarmers Dalgety already provided financial services by acting as an agency for the Primary Industries Group. With the purchase of IAMA, Mr Chaney expects the financial services to be expanded.

Over the past two years, Wesfarmers Dalgety has built up its loan book from nothing to close to $300 million.

“Occasionally we have thought about taking on other finance activities like advisory services and other products but to date we haven’t done that,” he said.

“It’s tempting to say well we should be able to add on those other things, but they are different skills set. You need financial advisory types and you may not already have them in the branch network.

“We might do that sort of thing in due course but it’s a pretty crowded market.”

Mr Chaney believes there is a natural synergy between providing financial services and selling farming products.

But to match what Elders was now doing with its joint venture with the Bendigo Bank would require a lot of capital.

“If you are going to do the Elders thing, you’ve got to make the commitment to put a large amount of capital in and you need a heck of a lot of lending to service that capital – several billions of dollars worth of loans,” he said.

“But the way we are doing it there is no capital at all involved.”

Providing full branch services to fill the vacuum left by bank closures would be very costly to implement but it’s a journey Mr Chaney does not rule out.

“That’s something we might be looking at,” he said.

Elders Rural Services Limited, which is half owned by Futuris Corporation, has been operating the Elders Rural Bank under a joint venture arrangement with the Bendigo Bank.

In the six months ending December, deposits grew 160 per cent to $864 million and they posted an after-tax profit for the half-year of $4.3 million.

By July, the bank is hoping to achieve $1 billion worth of assets.

Speculation has been rife over the past few weeks that Wesfarmers was interested in purchasing the majority share in BankWest from the Bank of Scotland. Mr Chaney declined to comment on the issue.

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