D-Day for ANZ’s Suncorp deal as tribunal challenge begins

It’s make or break time for ANZ’s plan to buy Suncorp Bank, with the Australian Competition Tribunal meeting this week to decide the fate of the $4.9bn dollar deal.

It’s make or break time for ANZ’s plan to buy Suncorp Bank, with the $4.9bn deal set to go before the Australian Competition Tribunal from Monday in a nine-day fight which will either see the deal knocked back or Australia’s biggest bank purchase since St George go ahead.

The tribunal will hear arguments about why it should overturn the Australian Competition and Consumer Commission’s decision earlier this year to kybosh the deal.

The takeover appeal will be heard by three tribunal members: deputy president and Federal Court justice John Halley, former ACCC commissioner Jill Walker and Keypath chair and Domain director Diana Eilert.

Both sides are expected to front the Federal Court building in Sydney on Monday, flanked by teams of lawyers and silks with the case set to resemble a courtroom battle but with several key differences.

In an unusual legal move, the Queensland government has been allowed to intervene in support of the merger, which it argues will pump up to $35bn into the state’s economy through additional lending capacity.

The state government’s decision to throw its political weight behind the deal could be crucial, with the ACCC decision seen as being imposed by southern-based regulators not attuned to the needs of a regionally diverse state.

The Queensland government will argue that crucial evidence about the public benefits of the deal were not sought or presented to the ACCC before it made its ­decision.

“The commission did not seek information, documents or evidence about the … public benefits,” the government says in a submission lodged with the tribunal.

In addition, “the state of Queensland did not provide such information, documents or evidence directly to the commission”, it says.

The ACCC is fighting the tie-up, saying it is not satisfied the deal is in the public interest and “not likely to substantially lessen competition” in the national home loan market, small to medium enterprise banking in Queensland and agribusiness banking in Queensland.

The competition regulator rejected ANZ’s takeover of Suncorp Bank in August, arguing it would prefer the Melbourne-based lender attempt to grow its market share organically rather than leapfrogging rivals through the bolt-on acquisition.

ANZ holds 13.02 per cent of the home loan market in Australia and Suncorp is considerably smaller with 2.39 per cent. Suncorp Bank has almost 1.2 million customers.

Queensland already has a number of regional banks including Heritage, Auswide, Bank of Queensland and Great Southern Bank. The ACCC has warned that allowing ANZ to buy Suncorp Bank risked entrenching an “oligopoly market structure”, with the banks positioned to co-ordinate rather than genuinely compete.

However, ANZ is expected to argue that Judo Bank and Rabo­bank are key challengers in agribusiness and SME lending. ANZ has also been active in the mortgage market, with cash-back offers backed by low pricing leading the lender to rapidly grow its home lending book.

At its full-year results in November ANZ revealed its mortgage lending margins had fallen 10 basis points to 1.65 per cent.

ANZ’s efforts have unsettled its rival lenders, who have spent recent months warning of some operators writing unwise loans below the cost of capital. The current lending landscape will feature in arguments put to tribunal, in an update from earlier data presented to the ACCC.

The tribunal will review the evidence put to the ACCC and will hear submissions from all sides. The panel members will also question all parties before making a decision, which will require applying the same competition test that the ACCC used.

The fight is expected to be as hotly contested as the earlier ACCC fight, with several parties preparing to be ejected from hearings as banks reveal highly confidential information to the tribunal.

ANZ is understood to be preparing to tackle an alternative to its purchase of Suncorp Bank: Bendigo and Adelaide Bank has argued it is a better suitor for the Queensland lender. Bendigo has been given leave to intervene after Suncorp snubbed its offer to buy the bank, arguing a combination of the two could create a strong challenger to the big four incumbents.

The decision to offload the bank to ANZ was part of Suncorp’s long-term strategy to free itself to expand as a pure insurance group, because its banking business is too small to compete against the big four.

Suncorp’s banking operation is considered a financial drag on the growth prospects of the group. There had been expectations that ANZ would supply the additional capital required to fund the bank if the takeover had been given the green light this year.

ANZ chief executive Shayne Elliott said earlier this year the acquisition of Suncorp would create a bank “better equipped to respond to competitive pressures”.

Suncorp Group chief executive Steve Johnston has told staff that the company “remains fully committed to supporting the bank as this process continues”.

“We have clear plans in place for both the bank and our insurance businesses and we must continue to focus on delivering to those,” he told staff earlier this year. “While the delays are frustrating. our businesses must keep moving forward.”

A deal would be a win for local investors with more than $4bn expected to be distributed to Suncorp shareholders, including about $1bn to more than 158,000 retail shareholders holding in excess of 340 million shares.

The tribunal’s decision is expected in February.