ANZ-Suncorp deal to entrench big bank power: ACCC

Australia’s competition watchdog says ANZ’s planned $4.9bn takeover of Suncorp Bank would entrench the already dominant power of the major banks in home lending.

Australia’s competition watchdog says ANZ’s planned $4.9bn takeover of Suncorp Bank would entrench the already dominant power of the major banks in home lending.

The Australian Competition & Consumer Commission said its decision to kybosh the deal earlier this year was the correct one, given the power of the major banks to dictate terms to its customers and co-ordinate conduct with other lenders.

The ACCC was giving evidence to the Australian Competition Tribunal, which will decide whether it will uphold the watchdog’s original decision or allow the deal to proceed.

Garry Rich SC, counsel for the ACCC, said the tribunal needed to ask itself why for decades the same four banks – Commonwealth, ANZ, NAB and Westpac – had dominated home lending and no competitor had come close to matching their market share.

“The answer, revealed by the evidence, is that fundamentally, banking is a scale game,” Mr Rich told the tribunal. “Increased scale leads to lower costs, debt and equity funding.

“All else being equal, those lower funding costs enable the four major banks to increase their market share, or at least maintain their existing shares in the face of any challenge from other competitors because their marginal costs are lower.”

Mr Rich said increased profitability enabled the four major banks to increase their market shares even further. The ACCC argument counters earlier evidence by ANZ that the planned takeover would not undermine competition, given Suncorp was a relatively small player which had been losing market share in its home state. Both ANZ and Suncorp also argue there have been significant changes in banking markets in recent years, including brokers that had facilitated “price transparency” for consumers and the emergence of digital banks.

A pedestrian walks past a Suncorp Bank branch in Melbourne.

Mr Rich said ANZ’s claim that the Suncorp deal would only have a minimal impact on the home loan market was not borne out by the price it was prepared to pay to seal the deal or its own internal documents that highlighted the scale provided by the transaction.

“It is inconsistent with their own internal records which recognised that this kind of growth in market share could not be achieved organically except over a period of many years,” said Mr Rich. “That is a significant change to the structure of this market if one is considering the position of other competitors trying to compete with ANZ.”

Mr Rich said that without the transaction, the four major banks collectively had a market share of 74.5 per cent in home lending. “ANZ’s market share is almost three times that of Macquarie and more than 4.6 per times that of Bendigo Bank,” said Mr Rich.

He said that with the proposed transaction, the major banks collectively would control about 76.8 per cent of the market and catapult ANZ to third place.

“For ANZ, it is a step change in terms of their position in the market, not only from their own perspective, but we would submit from the point of view of everybody else in the market who already having difficulty competing with the major banks,” said Mr Rich.

The ACCC also poured cold water on evidence from ANZ that major banks were facing rising competition from non-banks, neo-banks and fintechs such as Peppermoney. “Non banks are called non banks for a reason in that they are not allowed to accept deposits,” said Mr Rich.

“Accordingly, they are reliant for their survival on wholesale funding. That may have looked like a feasible business model when the cash rate was point 1 per cent. But good luck competing against the major banks in a world when the cash rate is above 4 per cent.”

The ACCC rejected a $4.9bn merger between ANZ and Suncorp Bank earlier this year.