ANZ-Suncorp Bank’s $4.9bn merger on a knife edge

The fate of ANZ’s takeover of Suncorp Bank is now in the hands of the powerful Australian Competition Tribunal, which is set to hand down its decision early next year.

The fate of ANZ’s $4.9bn takeover of Suncorp Bank is now in the hands of the powerful Australian Competition Tribunal, which is set to hand down its decision on whether to green-light the deal on February 20.

The tribunal, comprising deputy president and Federal Court justice John Halley, former ACCC commissioner Jill Walker and Keypath chair and Domain director Diana Eilert, heard closing arguments on Friday from parties involved in the battle after a two-week hearing.

The arguments centred on different interpretations of national competition law and whether it should uphold or overturn the Australian Competition & Consumer Commission’s decision earlier this year to kybosh the deal.

Counsel for Suncorp Cameron Moore SC told the tribunal Queensland-based Suncorp was too small to pose any threat to the market power of the big banks. Suncorp made up less than 2 per cent of national banking assets and had numerous larger competitors. The ACCC, meanwhile, says the deal would entrench the market power of the big four banks and give consumers a worse deal, especially in home lending.

The ACCC is pushing a regional bank tie-up between Bendigo Bank and Suncorp, arguing this would provide a competitive counterpoint to the market-dominating big banks. 

But Mr Moore said the tie-up with Bendigo would actually give Suncorp less financial power to compete because it would not be part of the wider financial group. Bendigo says its approaches to Suncorp have been rebuffed.

“There was a suggestion that a merger between Bendigo and Suncorp would mean the major banks would have more to worry about than about these individual banks at the moment,” Mr Moore said. “We would say that is not self-evident because in the case of Suncorp the major banks would know it had suffered a significant funding dis-synergy and that its cost of funding was now much higher than it used to be when it was part of the Suncorp group.”

Garry Rich SC, counsel for the ACCC, said the deal would make Commonwealth, ANZ, NAB and Westpac, which had dominated home lending for decades, even more powerful.

“Fundamentally, banking is a scale game,” Mr Rich told the ­tribunal. “Increased scale leads to lower costs, debt and ­equity ­funding.

“All else being equal, those lower funding costs enable the four major banks to increase their market share, or at least maintain their existing shares in the face of any challenge from other competitors because their marginal costs are lower.”

Mr Rich said that without the transaction, the four major banks collectively had a market share of 74.5 per cent in home lending. “ANZ’s market share is almost three times that of Macquarie and more than 4.6 per times that of Bendigo Bank,” Mr Rich said. He said that with the proposed transaction, the major banks collectively would control about 76.8 per cent of the market and catapult ANZ to third place.

Counsel for ANZ Ruth Higgins said the ANZ-Suncorp tie-up would not hurt competition in key rural markets in Queensland, given many rivals were now operating effectively without branches, lowering the barriers to entry. Ms Higgins said ANZ and Suncorp were not each other’s closest competitors in Queensland and in some areas had complementary operations.

Ms Higgins said the growth of digital banking, decreased use of cash transactions and the rise of brokers had effectively increased competition in agribusiness and business banking, which may have traditionally relied on a network of physical branches.

The tribunal also will take into account written submissions from the Queensland government that the deal should be approved on “public interest” grounds.