ANZ to challenge ACCC knockback of $4.9b Suncorp deal

ANZ Bank will challenge the competition watchdog’s rejection of its $4.9 billion planned purchase of Suncorp’s banking division, after the regulator said the deal would further entrench the country’s banking oligopoly.

In a blow to ANZ’s growth ambitions and Suncorp’s hopes to becoming a pure-play insurer, the Australian Competition and Consumer Commission (ACCC) on Friday vetoed what would have been the biggest transaction in Australian banking since Westpac’s 2008 takeover of St George.

The competition watchdog said second-tier banks were important competitors against the major banks.Credit: Arsineh Houspian, Paul Harris

In a sign the watchdog would also oppose other big banks from buying regional lenders, the ACCC said if ANZ was allowed to buy Suncorp’s bank, there was a higher risk of “coordination” in the $2.1 trillion mortgage market.

ACCC deputy chair Mick Keogh said the competition watchdog weighed up whether there would be any substantial lessening in competition in banking, and whether that could be offset by public benefits from the merger.

“We are not satisfied that the acquisition is 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,” he said.

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

ANZ chief executive Shayne Elliott said the bank was “naturally disappointed” with the decision and noted it could be reviewed by the independent Australian Competition Tribunal. The tribunal’s final ruling is expected in early to mid-2024.

“We are closely reviewing the determination and will seek an independent decision through the avenues of review available to us,” he said.

Shares in ANZ were up 0.9 per cent to $25.49 a share at the close despite the setback, as some analysts said the bank could return capital to shareholders if its appeal failed. Shares in Suncorp dropped in early trade but ended 0.1 per cent higher to $14.06.

Morningstar equity analyst Nathan Zaia said the ACCC’s decision was surprising, arguing the deal would not have materially changed the competitive landscape.

Zaia pointed to the presence of other second-tier banks, non-bank lenders and foreign banks, which he said would likely fill any hole left by Suncorp, and noted the major banks’ performance over the years.

“Sometimes banks get a bad rap but looking at their performance over many years, they’ve all performed so differently, so they are competing,” he said.

Zaia said the decision drew a line in the sand for major banks hoping to pick up smaller competitors. “The ACCC don’t want all the smaller banks being mopped up,” he said.

In making its case for the deal, ANZ, the country’s fourth-largest bank, had argued it needed more size to be a better competitor with bigger rivals such as Commonwealth Bank. It also maintained competition in Australia’s home loan market was fierce, as reflected by dwindling returns and the rise of Macquarie Group in home loans.

“We are not satisfied that the acquisition is not likely to substantially lessen competition in the supply of home loans nationally”: ACCC deputy chairman Mick Keogh.

However, smaller banks and consumer groups opposed the deal and in April, the watchdog said it was unconvinced the deal would deliver the public benefit claims put forward by the banking giant, calling for more information on the deal.

The big four banks control about 75 per cent of the mortgage market, and regulators have long suspected they don’t compete sharply enough because of their ability to price signal, similarities of the major banks in terms of size and structure, the stability of the existing market structure and high barriers to entry.

On Friday, Keogh said there was an increased likelihood of co-ordination between the four major banks in the home loan market if Suncorp were to become part of ANZ.

“The proposed acquisition increases the likelihood that the major banks adopt a ‘live and let live’ approach to each other, aimed at maintaining or protecting their existing market shares,” he said

The ACCC also said the merger would have limited the options for second-tier banks to combine and strengthen in a way that would create a greater competitive threat to the major banks.

Suncorp chairman Christine McLoughlin said the group was surprised and disappointed with the ACCC’s decision and would support ANZ in making its case to the tribunal.

“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.”

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