ANZ’s $5bn acquisition of Suncorp bank rests on gaining permission to acquire the lender from the competition watchdog. If it faces opposition, buying part of the business could be the answer.
The big four bank is set to announce a $3.5bn equity raising through Macquarie and UBS to fund the deal, in what will be the largest cash call for the Australian equities market this year.
ANZ has always been considered the keenest buyer Suncorp Bank, as reported by this column last year.
But sources suggest the Australian Competition & Consumer Commission would be likely block a merger between the two operations.
Earlier, talks had been unfolding between Suncorp and the Bendigo and Adelaide Bank about a merger, which would likely involve scrip.
But in recent days ANZ was the only financial group talking to the Barrenjoey-advised Suncorp about a possible acquisition.
Suncorp recently told the market it was reviewing strategic options for its banking operations. The understanding is that Suncorp has been weighing a possible sale for some time, leaving it as an insurance pure-play.
ANZ can pay the most for the bank, but a deal has been dismissed due to concerns about gaining competition clearance.
A deal would come at a time it needs to boost market share in business banking and improve its technology and processes to retain customers.
One way around the ACCC would be for ANZ to buy just the business lending arm of the bank while another party acquires Suncorp’s mortgage book.
NAB, which would be keen to improve its position in residential mortgages, could be keen on the remaining Suncorp operations and might pay the right price.
Another option is for Bendigo and Adelaide Bank to take the mortgage book.
Bank of Queensland, while considered a logical buyer in the past, is believed to be busy integrating ME Bank and implementing a technology program.
If ANZ or NAB buy Suncorp bank, it is likely to lead to further consolidation.
Bank of Queensland and Bendigo and Adelaide Bank would then face pressure to merge to increase scale.
At the moment any Suncorp buyer currently has to make an undertaking to the Queensland government to retain its head office in the state, but this could be worked around.
ANZ could consolidate its existing Queensland offices into Suncorp to gain cost benefits.
While hiving off Suncorp bank to sell to different buyers may be complex and even costly, it is not out of the question – and something that Suncorp has thought about in the past.
The other challenge is that small business loans can be secured against residential properties. The retail book is also broker-driven, so a buyer might not be securing the customers it hopes for.
As well as the Queensland statutory requirement for the head office to remain in the state, another factor ANZ needs to weigh up is whether it wants to take on the bank heading into a downturn.
During the Global Financial Crisis more than a decade ago, a number of developers and builders collapsed in Queensland, and rising interest rates could prompt loan defaults.
ANZ’s talks with Suncorp bank come as it shelves plans to buy accounting software provider MYOB for close to $4.5bn.
The understanding was that move was being led by ANZ chairman Paul O’Sullivan.
Mr O’Sullivan has an information technology background (he previously ran Optus).
The way he probably sees it is that a deal would give the bank additional access to data from its business banking customers.
One market expert said it was hard to see ANZ buying both the Suncorp bank and MYOB, given the cost.
ANZ has been keen to gain scale in the banking industry.
The bank has a sizeable presence in the Victoria market, and reasonable scale in NSW, but it is in Queensland where it lags its competitors.
About $3bn to $4bn of the loans in Suncorp’s $12bn-odd business loan book are with small businesses.
It also has a sizeable home loan book.
ANZ is the second-largest lender in the agriculture market, behind NAB, which has about 30 per cent of the market.
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