ANZ vows to still pursue Suncorp takeover as ACCC knocks back $4.9bn deal
ANZ and Suncorp say they will challenge the ACCC’s decision to block the $4.9bn buyout of the Queensland lender, flagging plans to continue their preparations.
ANZ and Suncorp have pledged to fight the competition regulator’s moves to block a deal between the two that would have seen the Melbourne heavyweight buy the Brisbane-based lenders’ operations in a $4.9bn sale.
The Australian Competition and Consumer Commission blocked ANZ’s purchase of Suncorp Bank, on grounds it would further diminish competition and lock in a “live and let live” banking culture.
It also signals a tougher approach from the regulator as it considers Australian corporate deals and may torpedo plans from ANZ’s management to rebuild its retail business at scale.
Buying Suncorp would have seen ANZ leapfrog NAB, but would still leave it trailing CBA and Westpac both of which each hold more than 21 per cent of the Australian banking market.
The purchase had been touted as an opportunity to grow ANZ’s customer base, adding a further 1.2 million new customers, adding weight to the efficiencies the bank is hoping to wring out of its years long technological transformation.
The ACCC said it hoped that by knocking back the deal it would encourage ANZ to compete with its rivals to grow market share and prompt Suncorp Bank to either strike out on its own or pursue a deal with a smaller stablemate.
ANZ chief executive Shayne Elliott said he was “naturally disappointed” with the ACCC, warning he disagreed with its findings and flagging plans to “seek an independent decision through the avenues of review available to us”.
“We believe the acquisition will improve competition, which will benefit Australian consumers, particularly in Queensland,” he said.
“All of the relevant markets are intensely competitive and will continue to be intensely competitive after the acquisition.”
Suncorp chairman Christine McLoughlin said the deal was in the “best interests of our customers, shareholders and employees”, warning the bancassurer did not share the ACCC’s views it would crimp competition.
Suncorp CEO Steve Johnston said the company remained fully committed to the sale of the bank, warning blocking the deal would stop proposed investments by ANZ and Suncorp in Queensland.
ACCC deputy chair Mick Keogh told The Australian the ACCC was concerned a lending market with four banks of near-equal size created a risk of “co-ordinated conduct” rather than “really strong competition”.
Mr Keogh warned allowing ANZ to buy Suncorp bank would “further entrench an oligopoly market structure that is concentrated, with the four major banks dominating”.
“It also limits the options for second-tier banks to combine and strengthen in a way that would create a greater competitive threat to the major banks,” he said.
Mr Keogh noted Suncorp Bank would take ANZ above its competitor NAB in market share, warning “increased symmetry between competitors can increase the likelihood of co-ordination”.
“If ANZ doesn’t acquire Suncorp Bank it will remain the smallest of the major banks, giving it a stronger incentive to disrupt any co-ordination in the market,” Mr Keogh said.
The ACCC warned recent moves in the lending market, by a number of banks to pull back from cashback offers, signalled the lack of competition in the space which would be further concentrated by ANZ’s buyout of Suncorp Bank.
The ACCC’s move also signals a willingness to encourage smaller banks to merge in a bid to compete with bigger lenders in a nod to Bendigo and Adelaide Bank’s attempts to woo Suncorp into a merger.
Mr Keogh said the possible merger of Suncorp Bank and Bendigo and Adelaide Bank, which has attempted to entice Suncorp into a deal, “would likely strengthen and diversify the competitive power of second-tier banks, reducing the likelihood of co-ordination.”
Bendigo and Adelaide Bank said the ACCC’s decision to block $4.9bn takeover was a “good outcome” for competition but stopped short of tipping another run at Suncorp.
Suncorp had repeatedly told the ACCC a potential tie-up with the Marnie Baker-led Bendigo and Adelaide Bank was not viable.
“We note that in making its decision the ACCC said that non-major banks are both an important source of competitive pressure and a competitive threat to major banks,” Ms Baker said.
ANZ has said its purchase of Suncorp was needed for the bank to lift its market presence and compete with the other majors CBA, Westpac, and NAB, during the “intensively competitive” banking market triggered by the pandemic and post-pandemic refinancing rush.
The pandemic has seen ANZ’s residential market share slide to circa 14 per cent, with a potential purchase of Suncorp set to add almost 2-3 per cent to the group thanks to a $65bn loan book.
But the ACCC warned if ANZ were allowed to buy Suncorp it would encourage “a ‘live and let live’ approach” that would see banks maintain or protect existing market share.
“This is instead of competing strongly on price, innovation and the quality of their service and products to win customers,” Mr Keogh said.
The ACCC deputy chair said the regulator was concerned over the implications to “the supply of home loans nationally, small to medium enterprise banking in Queensland, and agribusiness banking in Queensland.“
The ACCC said the recent pullback from the banks directly competing with each other in the home loan market through aggressive price driven promotions was a sign of the lack of competitiveness in the sector.
“If this market was truly competitive, we would not expect to see banks publicly flagging plans to reduce the competitiveness of their offerings,” he said.
Mr Keogh said ANZ’s decision to maintain its $4000 cash back offer in the market, at the same time its competitors were cancelling their deals, was unlikely to be “sustained in the long run”.
“This is an unusual situation, caused by some unusual circumstances,” he said.
Mr Keogh said the ACCC had not considered imposing conditions on the potential sale, such as forcing Suncorp Bank to offload its agribusiness lending arm, to secure a deal.
“This is instead of competing strongly on price, innovation and the quality of their service and products to win customers,” he said.
The fate of the deal now rests with the appeal to the Australian Competition Tribunal, headed by Federal Court judge Michael O’Bryan, with ANZ and Suncorp given 21 days to prepare their case in an argument set to be fought on legal grounds rather than a more policy-approach in the ACCC.
Treasurer Jim Chalmers said the government “respects the independence of the ACCC and does not intend to comment further” on the move to block the deal.
The Treasurer would have been called on to approve the Suncorp sale, alongside the Queensland government which requires the company maintain its headquarters in the state.
Suncorp said in June it had reached a deal with Queensland, in a deal that would see the government clear the way for the bank’s sale in return for a $25m jobs and skills investment package.
ANZ had also struck a deal with Queensland over the purchase, which would see it hire 700 staff in a tech hub in Brisbane over five years and lend $10bn to Queensland businesses to support the state’s economy in the lead up to the 2023 Olympic Games.
However, ANZ has flagged it intended to bank $260m in cost savings after a three to four-year separation period of Suncorp’s bank, in a move which will likely see branches close.
It had committed to no net job losses at Suncorp Bank in Queensland and to not closing Suncorp branches in the state for three years.
Suncorp said subject to all approvals being met, the group now expected the completion of the sale of its bank “by the middle of the 2024 calendar year”.
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