Rabobank and consultancy concerned over the effect on agribusiness banking

Former Commonwealth Bank staffer Jeff Morris exposed his employer’s poor practices. Picture: Flavio Brancaleone

Agribusiness is emerging as a key area of focus as the competition regulator ramps up an in-depth assessment of ANZ’s acquisition of Suncorp Bank.

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

The Australian Competition and Consumer Commission’s deadline for submissions was January 18 and it now embarks on detailed analysis to assess whether the $4.9bn transaction has the potential to substantially lessen competition.

“In theory, a stronger merged bank should be in a better position to provide the continuation of banking products and services to the food and agribusiness market in Queensland,” said Peter Knoblanche, Rabobank’s local chief executive.

“Historically, this is not always apparent especially where the expected synergies of the merger adversely impact the level of service being delivered to the customers.

“Importantly, there will be one less stand-alone competitor in the marketplace, should the merger proceed.”

Mr Knoblanche said the merger of ANZ and Suncorp’s bank would result in a combined food and agribusiness debt market share of about 14 per cent, maintaining ANZ as the fourth largest player. He highlighted potential competition issues stemming from the deal in the mortgage market.

“Although the home loan market is not a core focus for Rabobank Australia Limited, given that the concentration of ANZ and Suncorp branches in Queensland is predominantly located in the larger coastal cities/towns, the merger could remove a local competitor from the home loan market which will potentially impact the level of competition and service within the market,” Mr Knoblanche added.

ANZ has committed to no net job losses at Suncorp Bank in Queensland for three years and to not closing 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.

BMAgBiz’s submission to the ACCC noted the firm’s services included procuring finance for agribusinesses, and interacting with lenders in the industry on an almost daily basis.

The submission outlined that Queensland’s agribusiness lending market was dominated by the big four banks, Rabobank and Suncorp.

“The large corporate-style borrowers are predominantly serviced by the four major banks and Rabobank, but in the sub-$50m space Suncorp competes very effectively with all the main lenders,” it said.

“Losing another option would result in a significant reduction in the already limited options. This would most likely lead to a less competitive environment for borrowers.”

Industry data showed bank lending to Australian agribusiness climbed by almost a third to $104.7bn in the 12 months ended September 30, providing the sector much needed growth as home lending volumes slowed.

The ACCC will no doubt dissect the dynamics in Queensland’s agribusiness banking industry and consult further to nail down whether ANZ’s takeover of Suncorp bank will hinder competitive dynamics in a meaningful way.

Some players are throwing their support behind the deal. Risk and insurance firm Aon noted the transaction would enable Suncorp to focus squarely on its insurance business.

Banking analyst Brian Johnson at his office in Sydney.

“Aon supports the divestiture because we believe this strategic focus will drive needed innovation in the insurance industry to address unmet client needs,” its submission said.

“As Aon has previously informed the ACCC in connection with its proposed merger with Willis Towers Watson, the insurance industry is facing significant challenge.”

Debate on the transaction is firing up, with consumer advocates this month labelling the ANZ-Suncorp Bank tie-up a “disaster for effective competition”. Well-respected banking analyst Brian Johnson also expects the deal to markedly lower competition across loans and banking products.

ANZ and Suncorp have argued the acquisition will see the combined bank have enough scale to compete more fiercely in the industry, given Melbourne-based ANZ’s relative size versus the other majors.

ANZ’s authorisation request to the ACCC argued the banking market was “intensely competitive”. The ACCC — which will delve into the details, market pricing and dynamics — has signalled it will make a determination on the transaction in June.

Gold whistle

The importance of whistleblowers in the financial services industry over the past decade cannot be understated.

A fraud involving the office of National Australia Bank’s CEO was brought to light due to an anonymous whistleblower and the Hayne royal commission was a result of rampant poor conduct, some of which was reported by whistleblowers.

Former Commonwealth Bank staffer Jeff Morris worked tirelessly exposing shoddy practices within his employer’s financial planning division, and then took the corporate regulator to task for not acting on detailed information.

Morris makes the point that CBA’s board could have saved itself a lot of trouble, had it acted on information he offered them about the planning unit.

“I had actually written to the CBA board way back in 2013 and offered to give them the real story, because they were not getting the real story,” he told this column.

As a result of NAB’s whistleblower, the former chief of staff to the bank’s CEOs Rosemary Rogers and event company principal Helen Rosamond are serving time in jail.

Financial services companies need a speak-up culture that encourages whistleblowers to come forward within a safe framework that doesn’t jeopardise their employment.

AMP’s D-Day

AMP has essentially a little over four weeks to meet all the conditions for the sale of its local infrastructure and real estate unit to Dexus, or move to a fallback plan and revised transaction structure.

The price AMP will receive for its local Collimate unit will be sliced by $25m to $225m on Friday, given the delays, and an earn out of about $26m is forfeited.

February 28 is the date parties are now working toward, otherwise either has the right to terminate the agreement. Holding up the deal is approval from Chinese regulators on the transfer of the wealth group’s stake in China Life AMP Asset Management to outside the sale’s perimeter.

Dexus structured the transaction to take into account such risks and delays, which was a smart move.