Market Share

The rationale for this section is justified by the notion that market share is associated with better economic performance (Berger et al, 2004). The degree of competition within each of the PICs is the banks’ market share (the annual average share between 2000 and 2006). For instance, if one commercial bank is very dominant in both the deposits and loan market then it could signal a monopolistic situation.

On the other hand, if all commercial banks have a fairly even share of these markets, we would expect a more competitive local banking environment, an important determinant of bank efficiency (Bos & Schmiedel, 2007). However, this is unlikely since the number of commercial banks is small, and market structure is not an adequate indicator of banking competitiveness (Beck & Hesse, 2009).

Figure 2: Average Market Share for Assets, Deposits and Loans in Fiji

In Fiji, ANZ dominance is prominent, having expanded when it took over the

operation of the Bank of Hawaii in 2002. ANZ share in the loans market continues to grow and peak in 2005 at around 45%. WPC is steady in all three but peaking in 2004. CNB makes much progress in increasing its market share, deposits and loans share almost doubled between 2000 and 2006. BOB remains fairly steady in assets and in the deposits market, marginally losing ground in the loan market, their share dropping to 4% in 2006 from over 6% in 2000. The smallest bank HBB steadily losing ground in both deposits and loans market share. It was absorbed by the PNG-based Bank of South Pacific in December 2006, later acquired CNB in 2009. The obvious trend in market share is the increasing prominence of the three largest banks, while CNB outpaces both ANZ and WPC. The two smallest banks lost ground, hence, competition is driven by the performance of CNB.

The market structure in PNG is dominated by the fast growing BSP in assets and deposits market: starting at around 35%6 in 2000 and ends at 60% by 2006. This trend continues into the loans market but to a lesser extent, finishing at 50% by 2006

compared with a 35% in 2000. ANZ’s market share is fairly stable in all three variables at around 30%. WPC seems to be the least successful in asset’s share dropping to 14% by 2006 compared to a 35% share in 2000. This trend is repeated in the deposits market but marginally more successful in the loan market dropping to only 20% compared with over 30% in 2000. The smallest bank MBK is struggling for market share, where its minimum share in all three variables occurs in 2006.

The degree of competition in the banking industry is dominated by BSP, strengthened by its acquisition of the Papua New Guinea Banking Corporation (PNGBC) in 2002, and reflected by the sudden increase in its market share in 2002. However, ANZ’s acquisition of the Bank of Hawaii’s operation in 2001 had a short term effect in its increasing market share. The two Australian owned banks appear to exert little influence over BSP, and MBK is making very little difference.

Figure 4: Average Market Share for Assets, Deposits and Loans in Samoa

The entrance of the Samoa Commercial Bank (SCB) in 2003 triggered the restructuring of the local market share in Samoa resulting in ANZ losing a lot of dominance and the increasing gain by the two small locally owned banks. This increasing competitive pressure is most evident in ANZ’s decreasing dominance in

6 _{This proportion excludes the discontinued operations of PNGBC and BOH and their exclusion is}

based on the unavailability of banking data, although their inclusion could inevitably influence the market share of the other banks.

the local banking market from about 70% in 2000 to 50% by 2006 in all three variables. WPC seems to steady at around 25% in all three variables, while the two locally owned commercial banks: NBS and SCB are gaining grounds in assets size, deposits and loans.

Figure 5: Average Market Share for Assets, Deposits and Loans in Solomon Is

For Solomon Is, the changes in the market share for the commercial banks are quite interesting. NBSI was dominant in all three variables in 2000 by about 50% and by 2006 it lost about 10% in both asset and deposits and 20% in the loans market. ANZ is steady in both asset and deposit at around 30% but lost 10% in the loan market, dropping to 30% in 2006 from over 40% in 2000. The most successful story is the increasing share of the WPC in assets from 15% in 2000 to 25% by 2006, driven by a 10% increase in the deposit market and a 30% gain in the loan market to 40% by 2006 compared with just over 10% in 2000. In 2003 alone, WPC doubles its loan portfolio. Therefore, competition in the banking industry is most evident in the loan market. Figure 6: Average Market Share for Assets, Deposits and Loans in Tonga

The distribution of market share in Tonga across the three commercial banks is heavily compromised by the unavailability of the financial statements for ANZ for the first five years: 2000 – 2004. However, the last two years suggest that Westpac and ANZ dominate both deposits and loans markets by over 50% and 40% respectively and MBF pick up the rest with more than 5% share of the deposits market and less than 5% in the loan market. A small trend appearing in 2006, WPC’s dominance in both deposits and loans markets are marginally reduced, MBF loses ground in both markets, and ANZ is gains in both markets. The degree of competition in the banking market in Tonga is driven by the two large banks. MBF is too small to exert any competitive pressure.