ANZ can buy Suncorp Bank, ACCC ruling overturned
The landmark decision grants ANZ the green light to acquire Suncorp’s regional banking arm for $4.9bn and has the potential to reshape the banking sector landscape.
ANZ’s $4.9bn takeover of Suncorp’s banking arm will add 1.2m home loan borrowers and business customers, catapulting it above NAB as the nation’s third largest lender, after a tribunal overturned the competition regulator’s rejection of the deal.
The Australian Competition Tribunal ruled against the Australian Competition and Consumer Commission’s decision in August to block the tie-up - the largest banking merger since the global financial crisis - over concerns it would likely lead to reduced competition and further entrench the big four bank oligopoly.
The deal will see Suncorp Bank disappear and ANZ leapfrog rival NAB to become the third largest lender, behind the two largest CBA and Westpac. Together, the big four already account for 72 per cent of banking assets.
Summarising the ACT’s determination, deputy president and Federal Court justice John Halley said the tribunal disagreed with the ACCC’s argument that the merger would substantially lessen competition in home loans, and in the agribusiness and business lending markets in Queensland.
“The tribunal has concluded that the small increase in the market share of ANZ, if the proposed acquisition proceeds, would not have a meaningful impact on the degree of likelihood of the major banks engaging in successful co-ordination,” he said.
The term describes companies acting together to limit competition, even without explicitly agreeing to do so, in order to preserve the status quo.
‘There is nothing the ACCC failed to do’
The verdict grants ANZ the green light to acquire Suncorp’s regional banking arm and has the potential to reshape the banking sector landscape, as it sets a new precedent for future bank mergers.
It is also a blow for the regulator, who on Tuesday was putting a brave face highlighting that despite arriving at fundamentally opposite decisions, scrutiny had been appropriately applied to the dynamics of a concentrated sector impacting millions of Australians. She also noted the tribunal had agreed with a number of important points raised by the ACCC.
That included that both agreed there is “coordination” in the key home loans market, that there are “material” barriers of entry to potential competitors, and that a potential merger with Bendigo and Adelaide Bank the regulator preferred was “commercially realistic.”
The ACCC and second-tier player Bendigo and Adelaide Bank had argued a Suncorp-Bendigo marriage would be better for competition than the agreed deal. But Suncorp and its shareholders had no interest in that scenario with ANZ’s $4.9bn bid still on the table.
“There is nothing the ACCC failed to do,” ACCC’s chair Gina Cass-Gottlieb told The Australian in an interview.
“When we come before the tribunal … we are telling the tribunal about the views that we formed and why we ruled that the merger should not be authorised, but the tribunal stands in our shoes and the tribunal makes its own decision, and reasonable minds differ that always happens in legal matters. ” she said.
“And the tribunal found a number of fundamental underpinnings which we say, going to the future, are significant if there were to be other proposed acquisitions by major banks of regional banks, for instance.”
The tribunal accepted banking is a “concentrated” market with conditions conducive to “coordination” and that Suncorp’s lending to small and medium sized businesses was a differentiated offering that will no longer put competitive pressure on ANZ after the deal goes ahead.
But the tribunal’s decision also highlighted the conditions for “coordination” were “likely to continue reducing” due to factors such technology, the role of mortgage brokers facilitating customer switching, and the emergence of “mavericks” like Macquarie Bank. The latter is now the fifth largest lender after more than doubling its market share since 2020 to account for over 5 per cent of mortgages.
The tribunal ruled ANZ’s and Suncorp’s “alleged” public benefits to the state of Queensland were “either not public benefits or were not specific” to their deal. But said the planned “integration and productive efficiencies” from the deal constituted “real and tangible benefits to the public,” representing a real saving of resources that were likely to be sustained.
“The tribunal is satisfied that the proposed acquisition represents a net public benefit because any detriments arising from any reduction in competition are unlikely to be sufficiently certain and significant to outweigh the more certain integration and productive efficiencies forecast to arise from the proposed acquisition,” justice Halley said.
ANZ and Suncorp had argued the acquisition would deliver a boost to the Queensland economy, after ANZ promised to invest up to $35bn in the state if its deal went ahead.
But the merger is also expected to lead to job cuts as ANZ integrates Suncorp Bank’s operations in coming years.
At Suncorp, the sale removes a distracting asset and allows it to focus on its core insurance business, even if it will mean losing the stable earnings generated by its regional bank.
Senior Suncorp executives will reportedly now be in line for generous bonuses following the sale.
Shares in Suncorp rose 5.9 per cent on the day following the decision as investors cheered the outcome. ANZ shares, however, fell 2.2 per cent in a sign of investor disappointment as the verdict kills the possibility the extra cash could be returned back to shareholders. Investors have also feared implementing the deal will be difficult and costly. Bendigo shares closed 1.13 per cent higher.
Following the ruling the Finance Sector Union called on ANZ to extend the 3-year job guarantee it offered Suncorp staff in Queensland to its own employees.
“It is a concern that the Australian Competition Tribunal can overturn the ACCC’s determination on the basis that the takeover would not substantially reduce competition and that the public would benefit from greater efficiencies,” she said.
“Bank workers understand that talk of ‘efficiencies’ is code for job losses in the longer term. Unless ANZ offers its own staff job guarantees, there is nothing to stop the merged bank from shutting down more ANZ branches in locations where both brands have a presence.”
Ms Streets said the big four banks already had too much power and further concentration would remove a significant competitor from the banking sector.
The deal will bring 1.2m Suncorp’s customers and ANZ 8.5m home loan and business customers into one roof, and will instantly expand ANZ’s footprint in Queensland.
The Melbourne-based bank had argued this would allow it to compete more effectively with the other big four majors and achieve efficiencies through economies of scale.
The last significant hurdle for the deal is now the official sign-off from Treasurer Jim Chalmers. The deal also requires modifications to existing legislation through the Queensland parliament, but both conditions are on track for approval.
In a statement, Treasurer Chalmers said the deal first needs approval from the Financial Sector (Shareholdings) Act.
“Once I receive ANZ’s FSSA application and Treasury advice, I will carefully and methodically consider whether the proposed acquisition is in the national interest under the FSSA and then announce a decision in due course,” he said.
Mr Chalmers noted the regulator and other interested parties can seek a review of the ruling.
ANZ chief executive Shayne Elliott welcomed the decision saying the bank remained “committed to completing the acquisition as soon as possible once all sale conditions are met.”
“Thank you to everyone involved,” Mr Elliott wrote in a memo to staff on Tuesday morning, adding that while there were some conditions to be met before the deal completed, it was “important” to mark the milestone.
“We’re excited about the opportunities for ANZ and our customers in Queensland, and the benefits of bringing Suncorp Bank and its customers and team into the ANZ Group,” he wrote.
“The acquisition will create a combined bank which is better equipped to respond to competitive pressures, and will deliver significant benefits, particularly in Queensland.”
Suncorp chairman Christine McLoughlin said the company would “work constructively with the Queensland Government and Federal Treasury to secure the remaining approvals.”
The company still expects the deal will be completed around mid 2024 and said the board was “committed to returning to shareholders any capital that is in excess to the needs of the business,” Ms McLoughlin said.
The tribunal’s full determination and reasons will not be available for at least 21 days. It gave ANZ, Bendigo Bank, and the ACCC 10 days to seek redactions of commercially sensitive information.
This comes as the tribunal heard, Bendigo could seek to appeal to the Federal court for review.
In a statement, Bendigo said it maintained its view that the proposed merger will hurt competition, “leaving customers and communities worse off.”
In the summary of reasons, justice Halley also said that while a merger with Bendigo was a possibility, it was “far from certain” and would face significant execution challenges. “In particular, realising postulated synergies within a sufficiently short time period to make a merger value accretive,” for Bendigo and Suncorp, he said.
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