Suncorp-RACQ deal mooted as loyalty looms large

Speculation is mounting that a tie-up between Suncorp’s bank and the Royal Automobile Club of Queensland may be on the cards at a time that membership rewards remain a major selling point for big business.

The talk follows the appointment by RACQ last month of Suncorp’s former banking boss David Carter as its chief executive.

It also comes after Suncorp shareholders have lobbied for a sale of the banking operations of the Queensland financial group, so that it would be a pure-play insurer.

Suncorp has declined to comment on the speculation, but recently appointed chief executive Steve Johnston has said that retaining the bank is part of Suncorp’s core strategy.

RACQ also said it was not involved in any deal with Suncorp.

However, the motoring association and mutual organisation is one of the largest providers of insurance in Queensland, which may make some sort of deal attractive to the $16.7bn listed bank.

RACQ has 1.7 million members and, like Suncorp it is also a lender, through its Members Banking Group.

The idea of a tie-up between the pair has been mooted at a time that customer data, loyalty and membership rewards are increasingly attractive to big business when it comes to earnings growth.

The same logic is thought to have applied when AGL Energy moved to take over telecoms provider Vocus this year, and when Virgin Australia bought the part of the Velocity Frequent Flyers business that it did not already own.

Previously, investment bank UBS has worked with Suncorp, as has Luminis Partners.

One suggestion has been that Suncorp could sell white label banking products through RACQ or could acquire its insurance business while offloading the bank to the motoring agency.

However, most believe RACQ could not afford to pay more than $1.5bn for Suncorp’s bank.

Much discussion has centred on whether Suncorp retains its banking arm at a time of higher regulation costs and falling market share.

As reported by this column, Suncorp apparently explored a tie-up with rival Bendigo and Adelaide Bank in 2018.

Other lenders, including ANZ, have looked at RACQ’s banking assets in the past.

Others have suggested a roll up involving the regional banks could take place.

If Suncorp was a pure play insurer, it would be a higher returning business.

When starting in the chief executive role at Suncorp in September, Mr Johnston said the bank and insurance operations were complementary.