ANZ, Suncorp breathe sigh of relief — but hard work starts now

For ANZ it has been a marathon effort to pull off the most substantive deal in the banking sector since 2008, but the hard work now begins as it seeks to retain Suncorp Bank’s customers.

ANZ's CEO Shayne Elliott, right, and Suncorp boss Steve Johnston were breathing a collective sigh of relief on Friday when ANZ’s purchase of the latter’s banking unit was approved by the federal government. Picture: Arsineh Houspian

For ANZ it has been a marathon effort to pull off the most substantive deal in the banking sector since 2008, but the hard work now begins as it seeks to retain Suncorp Bank’s customers.

Jim Chalmers greenlit the $4.9bn acquisition on Friday with strings attached that don’t throw the deal dynamics markedly out of whack, but do mean ANZ will not be able to cut staff on a net basis or close regional branches for three years.

When the deal was announced in 2022, ANZ initially committed to no net job losses at Suncorp Bank in Queensland for three years and not closing the target’s branches over the same period.

It didn’t make the same assurances for its own staff and ANZ branches.

The new commitments will have financial implications for the transaction. But given how much work has gone into getting the acquisition across the line, ANZ and Suncorp’s respective leadership teams and boards are breathing a collective sigh of relief.

Suncorp has also softened the blow on the financial hit by waiving licence fee costs that were to be levied on ANZ and tipping in for other additional costs.

Another condition was ANZ continuing its “ongoing best ­efforts” to working with Australia Post on an agreement to allow the lender’s customers to access services through postal stores.

This one is a nice-to-have, but given ANZ hasn’t had an agreement with Australia Post, unlike its three major rivals, it may not happen.

Speaking to this columnist, ANZ chief executive Shayne ­Elliott said getting the Suncorp Bank transaction across the line “was always going to be difficult”, but ANZ had done the groundwork to ensure the acquisition could be a success.

This includes migrating Suncorp Bank customers onto ANZ systems and platforms over time and being mindful of retention of key staff and customers.

The issue may be: do customers of Suncorp Bank, which opted to bank with a smaller regional institution rather than one of the big four, stay around?

It’s going to be a hard slog from here for ANZ and it will need to convince Suncorp Bank’s 1.2 million customers they should maintain their relationship with the new owner.

It will prove a key test for business, agribusiness and deposit customers, and less so for Suncorp’s home loan customers, given the lion’s share were introduced to the Queensland-based lender through a mortgage broker.

ANZ will need to convince Suncorp Bank’s 1.2 million customers they should maintain their relationship with the new owner. Picture: Dan Peled / NCA NewsWire

Large mergers and acquisitions are often fraught with risks and value destruction is common, so Elliott and his team will need to prove their mettle.

Asked about the task of customer retention, Elliott said: ­“Potentially that is a risk … we have done a huge amount of research on experience in Australia and globally about what happens when you do these migrations or these changes.”

ANZ will draw on its in-depth analysis of 20 banking deals globally, some executed well and others that encountered issues, to try to ensure it gets the customer ­migration right.

ANZ’s case studies included Pittsburgh-based PNC’s acquisition of BBVA, which involved the conversion of 2.6 million customers and completed in 2021. It also analysed US Bancorp’s more recent acquisition of MUFG Union Bank, completed last year.

“We have to hold the hands of all of those (Suncorp Bank) customers and make sure that experience is seamless and works really well and they get the benefits of what we think is better ANZ technology and systems and processes,” Elliott said. “The biggest risk of attrition isn’t at the migration, it’s prior to the migration.”

Investors will be on high alert for any delays or hiccups on the transaction and whether ANZ incurs any unanticipated costs from the customer migration.

ANZ isn’t well known for being savvy in technology either, so it will be interesting to see how it manages the process, particularly given ANZ has lagged its peers on its digital mortgage rollout.

The Suncorp banking deal also puts the spotlight on the tenure of Elliott, who has been in the top job at ANZ since early 2016, making him the longest-serving CEO among his big bank counterparts.

But he seems as energised as ever and keen to lead deal execution efforts.

“I’m really energetic about what we’re doing I haven’t lost any sort of focus,” he said.

“I can’t put any time on it. I’m not going any time soon.”

Either way you look at it, the deal is an important feat for the transaction teams, given it was knocked back by the competition regulator.

The Australian Competition Tribunal then signed it off in February this year, shifting the onus to the federal Treasurer.

ANZ’s purchase of Suncorp Bank is the largest deal in the domestic sector since 2008, when Westpac acquired St George and Commonwealth Bank snapped up Bankwest.

The Westpac transaction included conditions from the then government including maintaining branches in net terms and ATMs for three years.

Branches have certainly been in the firing line for banks, though, amid a digital banking push.

CBA, for example, this year has been dismantling Bankwest’s remaining branch network, leaving it a digital-only player.

The regional banking sector will start to look relatively sparse when the ANZ/Suncorp Bank tie-up is complete.

Bank of Queensland and Bendigo and Adelaide Bank remain, while Macquarie Bank is deemed to be a fierce challenger to the ­majors. Bendigo had expressed interest in buying Suncorp Bank, but was repeatedly rebuffed by the target’s board.

The approval of ANZ’s purchase of Suncorp Bank will put pressure on the remaining second-tier players in terms of beefing up, but that may be somewhat offset by the government’s review into challenges faced by small and medium banks. The review is being led by the Council of Financial Regulators, in consultation with the Australian Competition & Consumer Commission.

Any further bank tie-ups from here would be difficult, almost impossible for a major to acquire another regional player, but in a rapidly evolving sector they can’t be completely ruled out either.

That would be true perhaps of a marriage of BoQ and Bendigo, which may be viewed favourably, but differing operating models have always worked against a deal.

The competition argument is interesting given the ACCC had real concerns that the ANZ-Suncorp Bank deal would substantially lessen competition.

Digital banks such as Volt have fallen away, but players such as Macquarie are providing renewed competition.

ANZ has argued that the acquisition of Suncorp Bank will result in it being better able to compete with larger competitors, including CBA.

Time will tell.

Please explain, Cettire

Luxury online retailer Cettire received an ASX query on Tuesday relating to its share price rout after it warned of softer earnings in the fourth quarter. But the company’s response to the ASX wasn’t made available to investors until after 5pm on Friday evening, raising questions about Cettire’s compliance efforts.

Cettire doesn’t have a chief risk officer and it is unclear how many of its staff deal with governance matters, given it only has about 70 employees. The company has refused to answer questions on these topics too.

Cettire on Monday said its fourth quarter was hit by tough trading conditions in the luxury market, prompting its shares to plunge almost 50 per cent.

Originally published as ANZ, Suncorp breathe sigh of relief — but hard work starts now