Struggling non-bank lenders such as RAMS Home Loans, Mortgage Choice and Wide Bay Building Society are all under threat of takeover thanks to the recent liquidity crisis, according to the latest report from Citigroup.
The research said the bigger banks would likely emerge stronger from the credit crunch, but less diversified non-bank lenders would be weakened and likely to become acquisition targets.
It said mortgage manufacturers in particular were threatened, and cited increased funding costs and the latest Basel II banking reforms as factors that would compromise their business models.
"We believe non-bank mortgage players are coming under pressure, and the opportunity exists for a major bank with a diversified funding base to lift its scale by acquiring one of these businesses," Citigroup said.
It also named Liberty Financial, Bluestone Group and Aussie Home Loans as potential targets of the big Australian banks.
The report said it would be the smaller mortgage lenders among the major banks, such ANZ, Westpac or National Australia Bank, that could emerge as likely bidders.
On the wealth management side, Citigroup predicted that AMP, Challenger Financial Services, Australian Wealth Management and IOOF could all become the targets of acquisition hungry banks.
Out of the four, however, it said Challenger was the most likely target.
"At a market cap of $3.1 billion, Challenger is a far more digestible bite than AMP," the investment bank said.
Mortgage lenders across the world are struggling thanks to the recent crisis in the credit markets, brought on by the failure of the US sub-prime market.
The UK's fifth largest mortgage provider, Northern Rock, was last week forced to go cap in hand to the Bank of England for emergency financial support.
