Suncorp banking deal faces ACCC, Queensland scrutiny

ANZ boss Shayne Elliott says he expects ‘a very fair hearing’ as the state flags it will drive ‘a hard bargain’ before agreeing to allow the Brisbane-based company to be sold.

ANZ and Suncorp have struck the most substantial deal in the banking sector since 2008, with Queensland’s largest listed company agreeing to sell its banking operations to the big four lender for $4.9bn.

But the proposed purchase of Suncorp Bank by ANZ faces immediate scrutiny from the competition watchdog and the Queensland government, which on Tuesday said it would be “driving a hard bargain” to ensure the company‘s presence in the state was “preserved”.

Investors and analysts have also questioned the timing of the deal, given an increasingly challenged economic outlook, with some warning ANZ may be overpaying for the bolt-on acquisition.

ANZ on Monday confirmed its intention to buy Suncorp’s banking operations for $4.9bn, raising $3.5bn to fund the acquisition after withdrawing from the widely criticised move to buy accounting business MYOB.

ANZ will also pay a further $50m to Suncorp over five years for the use of the Suncorp bank brand.

Hailing it a once-in-a-lifetime opportunity, ANZ chief executive Shayne Elliott said Suncorp Bank was a natural fit for ANZ.

“This acquisition is just adding scale to businesses we already have, we know and we love. What we love about this transaction is that every part of Suncorp Bank has a natural home at ANZ. We want all of it,” Mr Elliott said in a call with media.

“This is a good bank with a great franchise and a great product. It’s not about adding complexity, it’s really just about natural scale.”

The appeal of Queensland-based operations in particular was the growth potential, he said.

“Our business (in Queensland) is really focused primarily around institutional. We want to build scale to better compete and provide better opportunities for retail and small business customers for many, many years to come.”

ANZ, led by CEO Shayne Elliott, snaps up Suncorp’s banking operations for $4.9bn. Picture: Arsineh Houspian

The acquisition is subject to approval from the Treasurer, Jim Chalmers, and the Australian Competition and Consumer Commission. It also requires amendments to the State Financial Institutions and Metway Merger Act 1996, which currently requires that Suncorp’s head office, alongside its key executives, be located in Queensland.

Mr Elliott said he expected to get “a fair hearing” from regulators, as ANZ chairman Paul O’Sullivan spruiked the competition benefits from the deal.

“Combining with Suncorp gives us a chance to increase scale and our goal is to drive strong growth in Queensland by attracting additional investment, additional lending and additional finance.

“Overall it will result in much stronger competition and choice for Queensland consumers,” Mr O’Sullivan said.

In a bid to keep regulators on side, ANZ has committed to no Suncorp branch closures or net job losses in Queensland for at least three years.

The Queensland government, however, has already put ANZ on notice over its plans for the banking operations.

Queensland Treasurer Cameron Dick said Suncorp Bank was “a product of Queensland (and) wouldn’t exist without Queensland”.

“We will be driving a hard bargain to ensure the new entity’s Queensland presence is preserved. Queenslanders deserve nothing less,” Mr Dick said.

The competition watchdog, in its review of the deal, said it will consider the “likely impact and any public benefits resulting from the proposed transaction”, as well as the impact on a range of products including personal loans, home loans and small-to-medium business banking.

The acquisition comes as the nation battles an increasingly challenging economic outlook, not least in the housing market, with forecasts tipping house price falls in the range of 20 per cent in the coming years.

If the deal gets over the line, ANZ will acquire $47bn of home loans, $45bn in deposits and $11bn in commercial loans.

Mr Elliott revealed that investors he had spoken to on Monday had already questioned the timing of the transaction.

“Our perspective is it’s the right time because Suncorp Bank is in the best shape it’s ever been in (and) ANZ has got more capacity and capability. So the time is right,” he said.

“I understand the concerns ... but actually where we sit in our business today, and the broad reach of our customers today, we are very very well positioned to deal into those challenges.”

Jefferies banking analyst Brian Johnson highlighted the execution risk of the deal as the market deteriorates.

“If we go back to 2008, Westpac bought St. George, very expensively, at 1.8 times book value. Shortly thereafter, CBA bought Bankwest at 0.8 times book. So if you think we’re headed into a more challenging environment, then now is not the best time (to buy).

“The return is a long way away, and the dilution is now. You’d also have to wonder whether this management team (at ANZ) will be around when those synergies have to come through (in coming years).”

Suncorp CEO Steve Johnston. Picture: Jane Dempster/The Australian

Suncorp CEO Steve Johnston said the sale of its banking operations to ANZ was not only in the best interests of its customers, staff and shareholders, but also in the national interest.

“Suncorp and ANZ share a similar purpose, values and an ambition to create a brighter future for our customers and the communities that we operate in,” he told analysts in a call on Monday.

Offloading the banking business would allow Suncorp to focus on growing its insurance operations, while also providing an opportunity for ANZ to accelerate the growth plans for the Queensland-based bank under ANZ, he added.

Originally published as Suncorp banking deal faces ACCC, Queensland scrutiny