Bendigo Bank proposes a Suncorp merger as a better alternative to the ANZ buy

Bendigo and Adelaide Bank says the ACCC should reject the sale of Suncorp Bank to ANZ on the basis it would trash competition.

Bendigo and Adelaide Bank says the ACCC to reject the sale of Suncorp Bank to ANZ. Picture: Michaela Meade

Bendigo and Adelaide Bank has called on the competition watchdog to reject ANZ’s acquisition of Suncorp bank, saying that if it went ahead the deal would trash competition and rob the market of a potential mid-sized competitor.

The Bendigo-based financier said the $4.9bn takeover should be stopped and that a better pairing would be its own acquisition of Suncorp’s banking arm.

The Australian Competition and Consumer Commission is assessing the Suncorp-ANZ proposition, and will deliver its decision by June 12.

Bendigo Bank claimed Suncorp’s defence of its sale of the Suncorp-Metway bank to ANZ made incorrect assumptions about the Australian banking landscape.

Conversely, Suncorp’s own submission is that a potential tie-up with the Marnie Baker-led Bendigo and Adelaide Bank was not viable.

Bendigo Bank said the ANZ purchase would “substantially lessen competition in home loans, deposits, and agribusiness markets”.

The bank’s submission said the deal was “not to be likely to result in any public benefits that are sufficient to outweigh the public detriments likely to result from such an acquisition”.

Instead, Bendigo Bank said a potential pairing between it and Suncorp would better serve Australian consumers as it would “limit further concentration of the major banks and increase the likelihood of co-ordinated effects”.

Bendigo claimed a merger with Suncorp or the purchase of it would “effectively double its scale, which immediately enhances its competitive advantages such as the ability to achieve cost efficiencies from synergies, attract deposit funding, increase investment in technology accelerating the delivery of Bendigo’s digital capabilities and reducing its cost of funding and cost of capital”.

“Absent the proposed acquisition, there is a real chance that Bendigo would merge with Suncorp bank,” Bendigo Bank said.

Bendigo’s chief executive, Marnie Baker. Picture: Rob Leeson.

A potential deal between Bendigo Bank and Suncorp has been mooted for years, and the rural financier has attempted to woo the Brisbane-based bancassurer.

A potential courtship of Bank of Queensland and Bendigo Bank has also been mooted, and the Queensland-based financier has considered Suncorp in a similar combination.

Three weeks after Suncorp struck a deal with ANZ sell the banking arm, Bendigo made its latest approach for a potential tie-up.

But Suncorp boss Steve Johnson, in his submission to the ACCC inquiry said it wouldn’t stack up.

However, Bendigo Bank claims Suncorp never seriously engaged with it, noting its many overtures had been “resisted” by Suncorp and rubbishing Mr Johnston’s claims any talks were “preliminary and high level”.

“The evidence shows that BEN’s interest in Suncorp Bank was credible and well understood by Suncorp Group through the numerous engagements between Suncorp Group’s and BEN’s representatives, during which BEN sought to engage substantively with Suncorp Group on such a potential acquisition,” it said.

Bendigo Bank claims a merger with Suncorp would deliver a raft of benefits to competition and its own balance sheet, and said ANZ’s combination would further concentrate market.

A combined Bendigo Bank and Suncorp would control 5.2 per cent of all home loans in the market. This would be similar in deposits, with a combined Suncorp and Bendigo bank holding 4.3 per cent of national savings.

This contrasts with ANZ, which would grab 14.5 per cent of all deposits, according to Bendigo Bank’s estimates.

“The proposed acquisition would remove the opportunity for innovative and effective competition in savings and term deposit markets,” Bendigo Bank said.

“BEN considers it likely that a merger with Suncorp Bank would likely result in a credit rating uplift through the increased scale and revenue base it would gain through acquiring Suncorp Bank.”

Suncorp chief executive Steve Johnston said a deal to merge Suncorp Bank with Bendigo and Adelaide Bank was not viable. Picture: John Feder

Bendigo Bank also claimed the suggested cost savings from the ANZ buyout would not flow through to the broader market, referring to expert evidence from Professor Stephen King which found “it was unlikely that lower funding costs would be passed on to home loan customers by the merged ANZ/ Suncorp Bank entity”.

“There is a low likelihood that significant cost savings from the proposed acquisition will be passed on to customers,” Bendigo Bank wrote.

“If BEN were to acquire Suncorp Bank, there would be greater incentive to invest cost savings to improve its offerings and continue to compete with ANZ.”

ANZ’s home lending book contracted during the pandemic, as the bank was besieged by lenders offering fast turnaround of processing and approvals.

Professor King said the merger with ANZ would change the bank’s incentives to compete and “reduce ANZ’s incentives to arrest its declining market share in home loans through competition”.

“The government will face greater risk, by extending the ‘too big to fail’ guarantee from just ANZ to the combination of ANZ and Suncorp Bank,” Professor King said.

“In this situation there is no overall economic benefit associated with the reduced funding costs. Rather the reduced funding costs simply reflect a transfer of risk from the private sector to the government and taxpayers.”

Originally published as Bendigo Bank proposes a Suncorp merger as a better alternative to the ANZ buy