ANZ says $4.9bn Suncorp Bank buy won’t dent competition, ACCC to rule in June

The company wants the ACCC to consider its $4.9bn acquisition proposal in light of an ‘intensely competitive’ market, even as it admits it may bring forward cost-cutting initiatives.

ANZ chief executive Shayne Elliott is making the case to the ACCC to proceed with a purchase of Suncorp’s bank. Picture: Arsineh Houspian.

ANZ wants the competition regulator to consider its $4.9bn acquisition of Suncorp’s bank in light of a national market that is “intensely competitive”, but has admitted it may bring forward cost-cutting initiatives.

The Australian Competition and Consumer Commission on Monday said it had received ANZ’s merger authorisation application and will seek submissions by January 18, ahead of making a determination on June 12.

ANZ agreed to buy Brisbane-headquartered Suncorp Bank in a transaction announced in July. The deal requires the ACCC’s green light to ensure it won’t substantially reduce competition across various markets, as well as approval from the federal and Queensland governments.

The ACCC said its chair Gina Cass-Gottlieb had disclosed a potential conflict of interest with the ANZ deal’s authorisation, as a “result of work performed prior” to being appointed to her current role. Ms Cass-Gottlieb had provided legal advice to Suncorp at Gilbert + Tobin.

The Melbourne-based bank argued in its application that the sector has “numerous competitors and new entrants” and that the combination of ANZ and Suncorp’s bank won’t “materially alter” the former’s market share or significantly increase concentration in any market.

ANZ committed to no net job losses at Suncorp Bank in Queensland and not closing the target’s branches in the state for three years.

In its ACCC application, the bank reiterated it expected after a three-to-four year separation period it would likely achieve $260m in annual cost savings, but said it may bring some initiatives forward. “ANZ does not expect to achieve material synergies during the separation period, in developing its integration plans, ANZ is exploring opportunities to realise some cost saving synergies earlier than the previously estimated four-six years post completion,” the bank said. “ANZ has not made any decisions about the numbers or roles of employees, or the numbers or locations of branches or contact centres that it will need to serve customers and run the bank following the separation period.”

The application highlights a shift away from branch banking and also says ANZ eventually expects cost savings by consolidating technology and products and “labour rationalisation”. The bank also flagged potential branch and contact centre cuts as duplicate branches were axed and digital channels saw greater take up.

ANZ said it is the smallest of the major banks and the acquisition would allow it to grow in Queensland where the bank has lighter representation. The heavily redacted application to the ACCC said the combination of ANZ and Suncorp Bank’s market share in home loans would be 15.41 per cent, which lags Commonwealth Bank at 25.8 per cent and Westpac at 21.54 per cent. ANZ said it would end up slightly ahead of National Australia Bank, which has share of 14.89 per cent. ANZ and Suncorp’s combined market shares were, however, redacted for a range of areas including commercial lending and agribusiness banking. ANZ went as far as saying its addition of commercial term-loan customers was roughly equal to attrition over the last four years.

ANZ noted new entrants such as Judo and incumbents like Macquarie Bank were winning market share without large branch networks, by taking advantage of digital developments and mortgage broker distribution.

ANZ submitted to the ACCC that public benefits from the proposed Suncorp Bank transaction would outweigh any detriments.

“Through our acquisition of Suncorp Bank we will increase our presence in one of Australia’s most important states and, we believe, improve competition,” ANZ chief executive Shayne Elliott said in a statement.

“Queensland is thriving and faces the prospect of strong opportunities to further grow and prosper. Since March 2020, Queensland has recorded better economic growth, better workforce participation and more interstate migration than any other state or territory in Australia.

“Queensland contributes 18 per cent to Australia’s GDP and ANZ is well placed to invest in the opportunities ahead … Last month the ANZ board visited Queensland and came away more convinced about the opportunity to support our customers and finance the growth ambitions of Queensland.”

The acquisition of Suncorp’s bank is subject to approval from the ACCC and Treasurer Jim Chalmers. It also requires the repeal or amendments to the State Financial Institutions and Metway Merger Act 1996, which currently requires Suncorp’s head office, alongside its key executives, be located in Queensland.

On Monday, Queensland Treasurer Cameron Dick said the state was engaging with both banks. “Any transaction must deliver for Queenslanders, particularly when it comes to skilled jobs and economic prosperity,” he told The Australian.

On the matter of Ms Cass-Gottlieb distancing herself from the merger deliberations, the ACCC said: “To manage this conflict, Ms Cass-Gottlieb will not participate in discussion of this authorisation or decision making for this authorisation.”

In a letter to interested parties, the ACCC said it wanted to assess how closely ANZ and Suncorp Bank competed and whether the financial institutions were “uniquely placed to provide significant future competition”. The regulator will also, among other things, gauge the extent to which other suppliers of banking products and services “will constrain the merged entity from raising prices or reducing the quality of its products and services”.

The takeover transaction will be followed closely by analysts and investors after a round of consolidation saw NAB buy digital player 86 400 and Citibank’s local retail operations, while Bank of Queensland acquired ME.

ANZ said completion of the Suncorp Bank acquisition was expected to occur in the second half of calendar 2023.

The deal sparked some criticism when it was announced in July with Jefferies analyst Brian Johnson labelling it a “value destructive transaction”.

ANZ’s application to the ACCC said the acquisition would not reduce competitive pressures, creating a bigger bank that was “better equipped to respond to them”.

“In contrast, if the proposed acquisition does not proceed, Suncorp Bank would continue to be held by Suncorp Group and operated in accordance with the approved business plan for Suncorp Bank … However, the extent of this support will be limited by Suncorp Group’s funding and capital position and the need to balance competing capital requirements in its bank and insurance businesses.”