ACCC pushes Suncorp merger with Bendigo as a counter to big banks

The consumer watchdog has supported a regional bank merger rather than the troubled $4.9bn tie-up between Suncorp and ANZ.

The ACCC would prefer a regional tie-up between Suncorp and Bendigo Bank.

The Australian Competition and Consumer Commission is pushing a merger between Suncorp Bank and Bendigo to take on the market dominance of the big four banks.

The ACCC told the Australian Competition Tribunal on Wednesday that a merger between the regional banks was preferable to the planned $4.9bn tie-up between Suncorp and ANZ that it rejected earlier this year.

The ACCC was giving evidence to the tribunal, which will decide whether it will uphold the watchdog’s original decision in August or allow the deal to proceed.

Garry Rich SC, counsel for the ACCC, said a merger between Suncorp and Bendigo would create a more competitive environment in home lending, which was dominated by the big four banks. Mr Rich pointed to the success of Macquarie Bank in picking up a slice of the home lending market against the big banks in recent years.

“In our submission, having a merged entity with a market share comparable to, or greater than, that of Macquarie will make it harder for the major banks to sustain any co-ordinated behaviour in the future,” Mr Rich said.

“A larger merged entity will mean that the majors need to worry about Bendigo and Suncorp more than they do at the moment. And we need to stress of course that this is a world in which ANZ has not acquired that additional market share. The tribunal has seen evidence as to how Macquarie has managed over a decade to win share in this segment of the market.

“Given the value proposition of regional banks, there’s a real likelihood that a Bendigo-Suncorp entity would compete for different customers, including those with more complex needs and who care about non-price aspects of competition.”

Bendigo Bank argues the ANZ-Suncorp deal is a threat to competition, noting it had made repeated overtures to Suncorp to buy its bank.

Mr Rich said if ANZ proceeded with the purchase of Suncorp it would catapult to third place in the market and have greater incentive to “co-ordinate” with the other big banks.

“ANZ will have more incentive to co-ordinate with the other major banks than it does at the moment,” Mr Rich said. “Since ANZ will no longer be the smallest of the four majors, it will have more to lose and less to gain by deviating from its peers on price and quality.

“With the increased share and lower average costs that will accrue to it from the proposed acquisition, ANZ would find it more profitable than it does currently to adhere to a tacit understanding with the other major banks that home loan interest rates remain elevated to ensure lending margins stay above the level that would be achievable through price competition.”

Earlier in the week, the ACCC told the tribunal an ANZ takeover of Suncorp Bank would entrench the already dominant power of the major banks in home lending.

The hearing continues until Friday with a final decision likely before February.