National Australia Bank Ltd chief executive John Stewart has acknowledged his bank is underweight in NSW, the home state of takeover target St George Bank Ltd.

Mr Stewart said NAB was looking over St George but said it was in no rush to make a decision on whether to put up a bid.

Last week, Westpac Banking Corporation put Australia's fifth largest bank in play with an $18.6 billion bid.

"We're watching the St George situation with interest and it is changing," Mr Stewart told reporters at a business breakfast in Melbourne on Tuesday.

"We're having a look at how St George might fit with NAB but we haven't made any decisions either way - either to walk past it or to get involved."

"We have to try assess what the opportunities would be for synergies - that's cost synergies and revenue synergies."

"It's only by doing that, can you work out (at) what price you could put a bid in."

The NAB boss said he recognised that his bank was "overweight probably in Victoria and underweight in NSW", especially in the retail areas of mortgages and deposits.

As well, Mr Stewart acknowledged that NAB's improvement in its price/earnings ratio since its interim results compared to its peers would be in its favour if it were to make a move on St George.

"Were we to make a bid - and, as I repeated, we have not made any decision on that - then obviously the stronger the currency, the better."

But Mr Stewart rejected suggestions that there was any rush to make a decision, referring to Westpac chief Gail Kelly's comments that a deal could take three or four months to close.

Mr Stewart said a two-week exclusivity arrangement between Westpac and St George was for due diligence only.

"That's before Westpac come out with their final offer because I presume that isn't their final offer from what I read in your newspapers," he said.

"We're in absolutely no hurry. We're watching what's going on and we're watching it with interest."

In his address to the Melbourne Centre for Financial Studies conference on Tuesday, Mr Stewart said Australia was well-placed to become a major financial services hub of the Asian region.

To do so, at least one of Australia's four major banks needed to get a lot bigger before it could be seen a serious player and compete with international peers.

But Mr Stewart said it was pointless to simply call for the abolition of the `four pillars' policy which prevents mergers among Australia's four major banks.

"The reason why I'm not calling for the four pillars to go is (that) no one's going to listen," he told reporters afterwards.

"Government has a legitimate view that it's there to protect competition.

"The banking industry, and me in particular as chairman of the ABA (Australian Bankers Association), have got to work a bit harder.

"We can't just whinge about four pillars and expect it to go away."

Nevertheless, if Australia's banks did not get bigger they may all end up being foreign-owned in ten years' time, he said.