ANZ’s move to buy Suncorp’s banking arm for $4.9 billion to face intense scrutiny

ANZ Bank’s move to secure Suncorp’s banking arm for $4.9 billion is set to face tight regulatory and political scrutiny before it gets the green light.

In what would be the biggest banking deal in Australia in over a decade, ANZ announced on Monday it would seek to raise about $3.5 billion in new equity to help fund the all-cash purchase of Suncorp’s bank.

The deal would allow ANZ to further expand into the retail banking market and pick up Queensland customers, bringing about $47 billion in home loans.

ANZ Bank has signed a deal to buy Suncorp’s bank for $4.9 billion.Credit: Attila Csaszar

Under the deal, Suncorp’s banking arm will continue to operate under the Suncorp brand for five years, led by its current chief executive, Clive van Horen, who will report to ANZ chief executive Shayne Elliott.

Elliott, who described the deal as a “historic step forward” on Monday, said for the next three years ANZ pledged to keep Suncorp branches in Queensland open. He also promised there would be no Suncorp job losses in the bank’s home state.

“We’re also allocating additional lending to support Queensland’s renewable projects and the green Olympic Games infrastructure, as well as billions of dollars of new lending for energy transition projects over the coming decade,” he said.

However, the deal will need approval from federal Treasurer Jim Chalmers, the Australian Competition and Consumer Commission (ACCC), and will require amendments to Queensland legislation.

The bank said it intendedto discuss amendments to the State Financial Institutions and Metway Merger Act 1996 with the Queensland government in coming weeks.

Queensland Treasurer Cameron Dick on Monday said the government would be looking to protect the state’s interests throughout discussions.

“Suncorp Bank is a product of Queensland. It wouldn’t exist without Queensland,” he said. “We will be driving a hard bargain to ensure the new entity’s Queensland presence is preserved. Queenslanders deserve nothing less.”

Elliott said on Monday he was confident they would get a “fair hearing” by the authorities and believed they could make a strong case in the interests of consumers.

“We believe a stronger ANZ here in this state in particular will actually increase competition and drive better outcomes for consumers,” he said.

ANZ chief Shayne Elliott said the bank had committed to not closing Suncorp branches in Suncorp’s home state of Queensland for at least three years from when the deal is completed.Credit: Alex Ellinghausen

An ACCC spokeswoman said they would start a review of the acquisition after receiving an application for merger authorisation from ANZ, which is not expected for several weeks.

The ACCC will consider the role of regional banks in competing with and challenging the major banks, and the extent to which Suncorp competes on price or offerings such as innovative products and services, despite being smaller than the major banks.

Treasurer Jim Chalmers said he would be guided by the advice from the consumer watchdog.

ANZ is helping to fund the purchase through a fully underwritten entitlement officer, which will allow retail and institutional shareholders to buy one new share in the bank for every 15 shares held. It is selling the new ANZ stock at $18.90, which is a 12.7 per cent discount to its last trading price.

Morningstar analyst Nathan Zaia said the deal made strategic sense for ANZ, but noted there were risks.

“They’re doing an equity raising, which is a pretty big discount to our valuation. There’s still a lot of integration costs in doing the deal and the cost synergies don’t come for quite a while,” he said.

“It does give [ANZ] a larger customer base where they could grow more strongly than we’re currently factoring in, but there is a lot of risk around even retaining the existing business you have, let alone growing it. There is a lot of potential there, but it’s still a lot of risk and a lot of those benefits not for a number of years.”

Zaia said it would be interesting to see how the competition regulator views the deal.

“I’ve always been sceptical that an Australian major bank would be allowed to participate in any further consolidation. So it is a bit of a surprise that ANZ has announced this potential acquisition,” he said.

“If it does go through, does it materially alter the banking landscape? Probably not. But you can’t argue that it’s good for competition, you’re losing one of the top 10 largest home lenders. It’s going to be interesting to see where the ACCC lands on this.”

Jarden chief economist Carlos Cacho said while ANZ’s increased scale would be a positive, the lack of cost synergies for several years meant it would take time before the benefits were seen.

“Importantly, the expected cost savings are likely to also be dependent on Queensland regulatory change,” he said.

Despite generally positive sentiment from analysts, others in the banking sector criticised the deal, with the Finance Sector Union predicting job losses and branch closures.

“This deal shows the ANZ is not the least bit concerned with the public interest. It is not, as the bank claims, an investment in Queensland ... This deal is all about profits for the ANZ Bank,” said secretary Julia Angrisano.

The deal, which comes after ANZ’s retail banking business has struggled in recent years due to delays in its mortgage processing, is targeted at bulking up ANZ’s presence in the home loan market, where it is the country’s fourth-biggest lender. The acquisition includes $47 billion in home loans, $45 billion in deposits and $11 billion in commercial loans.

ANZ on Monday also released a trading update , saying it had helped to turn around the performance of its home lending business, which posted 3 per cent growth in loans during the quarter. It also benefited from rising interest rates, which helped to lift net interest margins by 3 basis points in the quarter.

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