Bank of Queensland and Bendigo Adelaide Bank in early merger talks: sources

Bank of Queensland is talking to Bendigo Adelaide Bank about a merger. Picture: Jono Searle/NCA NewsWire

Bank of Queensland is in early talks over a $10bn-plus merger with Bendigo Adelaide Bank, according to multiple sources in the market, just months after the surprise departure of its chief executive George Frazis.

Mr Frazis stepped down as BOQ CEO in November as the lender’s board made plans to change its strategic priorities.

There are suggestions in the market that BOQ’s board has opted not to progress with a CEO search until it can determine whether a merger with its fellow regional bank could happen.

Yet a spokesman for BOQ said the search for a CEO was ongoing and denied talks with Bendigo Adelaide Bank are taking place.

But multiple sources in the market report that early talks have been happening, and experts say a deal makes sense.

BOQ and Bendigo Adelaide Bank are under pressure to join forces to compete in the highly competitive Australian mortgage market, particularly after ANZ agreed to buy its Queensland rival, Suncorp bank, for $4.9bn last year.

BOQ is believed to face a growing workload when it comes to meeting its obligations with the Australian Prudential Regulation Authority, as is the case with other banks in the sector, and is regular contact with the regulators.

Bank of Queensland’s market value is $4.54bn, while Bendigo and Adelaide Bank’s was $5.7bn.

Bendigo Adelaide Bank had been angling to buy Suncorp bank before it was sold to ANZ and had hired Bank of America for advice.

Bank of Queensland worked with Luminis for its purchase of ME Bank in 2021 and has also worked with Goldman Sachs.

In December, there was talk in the market that the departure from BOQ by Mr Frazis removed the stumbling block with a merger with Bendigo Adelaide Bank, given that he would not be the right cultural fit in the merged entity, and the theory was that a deal could be on the cards this year.

Both groups need to gain scale to remain competitive in the market.

At the time of Mr Frazis’ departure, Mr Allaway said that Mr Frazis had overseen a return to growth in all key channels across the bank, overseeing the acquisition of ME Bank for $1.3bn and overseeing its technology transformation.

Some analysts believe that BOQ overpaid for ME Bank, which was struck at 1.05 times ME’s book value and 11.9 times its annual cash underlying earnings.

But the board had formed a view that different leadership was now required for BOQ to be a stronger more resilient bank through future cycles.

In the past, there has been talk that Bendigo Adelaide Bank has also considered a purchase of AMP’s bank and there was talk in the market in 2019 that at that time it was exploring a merger with BOQ.

BOQ also tried to buy Bendigo Bank around 2006, which prompted Bendigo to buy the Adelaide Bank.

One challenge for any merger to overcome with Bendigo Adelaide Bank is its community structure, where profits are shared with Australian communities, where as BOQ has franchise branches.

BOQ has 163 branche and more than 900,000 retail and business customers, where as Bendigo Bank has 220 community owned branches and 400 Elders outlets with more than 1.9 million retail customers.