Judo Capital warns ACCC that ANZ takeover of Suncorp Bank may harm competitive landscape

Judo Capital has cautioned ANZ’s takeover of Suncorp Bank may be detrimental to small businesses and end customers, as it further reduces the number of domestic business lenders.

Challenger bank Judo Capital has cautioned ANZ’s takeover of Suncorp Bank may spur “substantial detriment” to small businesses and end customers, as it further reduces the number of business lenders in the domestic market.

In a submission to the competition regulator on the $4.9bn proposed acquisition of Suncorp’s bank, Judo chief Joseph Healy highlighted risks around any deal that may substantially lessen competition in the small and medium business banking and lending market.

He warned that it could “further compound and accelerate the industrialisation of specialised SME lending, making it more challenging for SMEs to access finance generally in this country (and particularly in Queensland)”.

The Australian Competition and Consumer Commission is assessing the proposed transaction and competitive dynamics in the banking sector, with a view to making a determination on the deal in June. Interested parties and stakeholders, including rival banks, have made submissions to the ACCC’s inquiry.

“We consider Suncorp Bank to be a vigorous and effective rival, particularly for Queensland SMEs and other customers,” Mr Healy said in the submission.

“We also note that there has been substantial consolidation in Australia’s banking system over recent months, caused by a number of very public exits from the banking sector; no doubt exacerbated by the very real and continued barriers to entry for new entrants.

“Major banks generally have access to cheaper wholesale funding than the smaller banks – lower funding costs further enable them to entrench their competitive advantages.”

The past three years have seen National Australia Bank buy Citigroup’s local retail operations and digital player 86 400. Bendigo and Adelaide Bank has acquired Up, Bank of Queensland snapped up ME and start-up bank Volt has returned funds to depositors.

Mr Healy also noted Judo was established to address a gap and limited competition in the small business banking market.

“We have long felt that SMEs were being left behind, or taken for granted, by the rest of the industry that has prioritised mortgage lending, industrialised its operating models and fundamentally diminished its relationship proposition in a market with no real competition,” he said.

Judo isn’t the only player to express concerns about ANZ’s takeover of Suncorp Bank. Brisbane-based Bank of Queensland’s submission to the ACCC is understood to highlight the transaction’s potential to notably reduce competition, given another regional bank will disappear.

The submission is also thought to outline competitive dynamics in the deposit market where some regional players have upped the stakes on the majors in parts of the market, predominantly to attract deposit funding.

Submissions to the ACCC’s review by Rabobank Australia and consulting firm BMAgBiz separately raised concerns about how the deal would impact the agribusiness banking and mortgage markets, particularly in Queensland.

Suncorp and ANZ have, however, argued that the banking market in Australia is highly competitive and the deal will provide the suitor more scale to compete against its three main rivals.

Mr Healy suggested the ACCC assess Suncorp bank’s net promoter customer score to determine how the deal may impact competition, in markets where it goes head-to-head for customers with ANZ.

He also said any reduction in services in Queensland could negatively impact Suncorp Bank’s customer scoring.

ANZ has committed to no net job losses at Suncorp Bank in Queensland for three years and to not close the target’s branches over the same period. It has not, though, made the same assurances for its own staff and branches in the state.

Judo’s submission said since the company had obtained its banking licence in April 2019, it had provided more than $6.8bn in funding into the small and medium business sector. It also said the company had about 127 frontline bankers, supported by a team of 48 analysts. Judo reports its interim profit results on Tuesday.