Billions at risk as Suncorp-ANZ deal denied over home loan competition fears

ANZ’s $4.9bn offer to take over Suncorp Bank has been blocked by the ACCC, in a move set to deprive Queensland of billions of dollars in the lead up to the 2032 Olympics.

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ANZ’s $4.9bn offer to take over Suncorp Bank has been rejected by regulators, depriving Queensland of billions of dollars in the lead up to the 2032 Olympics.

The Australian Competition and Consumer Commission said on Friday morning it was not satisfied the deal was in the public interest but both Suncorp and ANZ said they will appeal the decision. Queensland Treasurer Cameron Dick said the decision was both “disappointing” and “puzzling” given the watchdog had waved through similar deals in New South Wales and Western Australia

The Suncorp-ANZ deal is the biggest financial transaction in Queensland since Suncorp was created almost 30 years ago. Suncorp shares fell 3 per cent in early trading.

The deal would have pumped billions of dollars into the Queensland economy in the form of new lending and special dividends to mum and dad investors.

ANZ had vowed to make $10 billion of lending available to support Queensland businesses over the next few years, vital support to build employment and infrastructure as the Brisbane edges closer to the 2032 Olympic Games.

ACCC deputy chair Mick Keogh said the watchdog was not satisfied the acquisition was “not likely to substantially lessen competition” in the supply of home loans nationally, small to medium enterprise banking in Queensland and agribusiness banking in Queensland.

A pedestrian walks past a Suncorp Bank branch in Melbourne

“These banking markets are critical for many homeowners and for Queensland businesses and farmers in particular,” said Mr Keogh. “Competition being lessened in these markets will lead to customers getting a worse deal.”

Mr Keogh said second-tier banks such as Suncorp Bank are important competitors against the major banks. “The proposed acquisition of Suncorp Bank by ANZ would further entrench an oligopoly market structure that is concentrated, with the four major banks dominating,” he said. “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.”

More than a third of Australian households have a mortgage, with loans totalling around two trillion dollars, illustrating how critical it is that competition in this market is not substantially lessened, Mr Keogh said.

ANZ chief executive officer Shayne Elliott said the bank was “naturally disappointed” with the decision and foreshadowed an appeal.

“We believe the acquisition will improve competition, which will benefit Australian consumers, particularly in Queensland,” said Mr Elliott.

“All of the relevant markets are intensely competitive and will continue to be intensely competitive after the acquisition.

“Indeed, the acquisition will create a combined bank which is better equipped to respond to competitive pressures, and deliver significant public benefits, particularly in Queensland.”

Under Australian competition law, a decision by the ACCC to not grant authorisation can be reviewed by the independent Australian Competition Tribunal.

Queensland Treasurer Cameron Dick said he was puzzled why similar banking deals had been approved in other states by the ACCC but it has seen fit to reject one in Queensland. Westpac acquired St George in 2008 without opposition from the ACCC.

“While the ACCC seems favourably disposed towards a merger with Bendigo Bank, any such merger would need our government’s approval, and we have not agreed to any other proposal,” Mr Dick said. “As I made clear when I announced our government’s approval for the ANZ proposal, any other transaction would need to deliver a package of benefits of equal or greater benefit to secure our approval.”

ANZ boss Shayne Elliott with Suncorp CEO Steve Johnston.

Suncorp Group chairman Christine McLoughlin said the bank “was surprised and disappointed” with the ACCC determination to reject the ANZ takeover and would fully support ANZ’s appeal to the tribunal.

“When we embarked on this transaction, we were of the firm belief it was in the best interests of our customers, shareholders and employees and that it would provide a net benefit to the Australian economy,” Ms McLoughlin said.“Together with external economic and industry experts, we determined that this deal would not adversely impact the competitive dynamics in the markets in which we operate,” she said.

“There is nothing we’ve seen throughout the ACCC process that has caused us to change our view on these matters and we believe the tribunal will accept the merits of our case.”

Last month, the ACCC delayed its decision to Friday on whether to approve the takeover, blaming lengthy and last minute submissions.

Suncorp executives last week were believed to be preparing for the worst with the upper echelon of the group bracing themselves for a possible “D (Denial) Day”, sources said. The appeal to the tribunal is likely to take at least a year, sources said.

Ms McLoughlin said the ANZ acquisition would leave Suncorp free to expand as a pure insurance group. Ms McLoughlin last month said the deal would also ensures that Queensland remained the headquarters of one of the country’s major insurers.

“The benefits to Suncorp is that we will have less capital constraints and that will allow us to leapfrog in terms of growth opportunities,” Ms McLoughlin said.

She said Suncorp had already made a deal to return excess capital from the deal to shareholders. That could include $1bn distributed to more than 158,000 retail mum and dad shareholders holding in excess of 340 million shares and representing over 37 per cent of the issued shares. She declined to say how the funds would be returned to shareholders as that would have to be determined by the board. “ANZ is paying us cash and that gives us a lot more options than if we were being paid in script,” Ms McLoughlin said.

Suncorp said any sale of the bank would come at a time when insurance businesses in Australia faced significant challenges given volatility in global reinsurance markets and

increased insurance capital requirements.