ANZ remains keen for AMP bank deal: sources

AMP building, Sydney. Picture: Hollie Adams/The Australian

ANZ Bank is still believed to be circling AMP bank after being ousted in its efforts to buy ME Bank, which has been sold to Bank of Queensland for $1.325 billion.

Bank of Queensland confirmed details of its highly anticipated ME Bank acquisition on Monday, with the transaction to be fully funded through a $1.325bn equity raising at $7.35 per share through Goldman Sachs and UBS.

The group will secure $1bn through an entitlement offer and the remainder through an institutional placement at a discount of 12.6 per cent to the last closing share price of $8.41.

Bank of Queensland, advised by Luminis Partners, is understood to have been the frontrunner in the contest for days before the deal was announced.

Final bids in the Macquarie Capital-run competition were received about three weeks ago, say sources.

Also in the process to buy the bank had been ANZ as well as Bendigo and Adelaide Bank, as first reported by The Australian.

ANZ is known to have been an interested buyer in the AMP banking operation when the financial group’s advisers and suitor Ares Management first started testing interest.

DataRoom revealed it had made an offer for AMP bank, but the understanding is that its offer was below AMP’s price expectations.

Some have also questioned whether such a transaction would receive approval from the Australian Competition and Consumer Commission which has kept close tabs on the top four banks in connection to their level of pricing power over customers.

Sources say that AMP had been hoping to achieve a price of 1.3 times the bank’s book value, and with the Bank of Queensland deal struck at 1.05 times ME’s book value, the thinking is that AMP may now look to adjust its initial price expectations.

The challenge with the AMP bank centres on the difficulties separating the operation out from the wealth and funds management divisions of the business and the company earlier indicated that a sale of the bank was on hold for now.

An acquisition of AMP’s bank makes sense for ANZ, with chief executive Shayne Elliott indicating that acquisitions were on the agenda to fuel growth.

Mortgages are the most lucrative area of business for ANZ.

Industry observers will be closely watching Bank of Queensland to see whether it slashes a large number of jobs at ME bank’s 1100-strong workforce and whether mortgage rates increase to achieve its anticipated pre-tax synergies of between $70m and $80m.

ME is known to have lower margins and higher funding costs than Bank of Queensland.

Bank of Queensland boss George Frazis is known to be a keen on boosting revenue, overseeing the strong growth of St George Bank while at Westpac, while chairman, former investment banker Patrick Allaway, is known to be open to deals.

The other area of interest remains what this means for other regional banks, Bendigo and Adelaide Bank and Suncorp, with consolidation always thought to have been on the cards for the regional industry for some time.

The logical move is for Bendigo and Adelaide Bank to merge its bank with Suncorp’s, although Suncorp boss Steve Johnston recently flagged to investors that the Queensland-based financial had aspirations to growth organically rather than through acquisitions.

After Suncorp management explored a sale of its bank, the strategy now was for it to be retained.

Based on the organic growth focus, it calls into question how serious Suncorp really is in its pursuit of CBA’s $1bn general insurance operations that are currently for sale.

The group was considered to be giving competition favourite IAG a strong run for its money, but QBE is also expected to be waiting in the wings should IAG face opposition over a transaction from the competition watchdog.

One market expert said Suncorp’s strategy was to provide products for its own customers rather than providing products for another group’s brand.