D-day looms for $4.9 billion ANZ-Suncorp deal

A final verdict is looming on ANZ Bank’s $4.9 billion battle to acquire control of Suncorp’s banking arm. The Australian Competition Tribunal is preparing to deliver its decision on the bank’s appeal.

ANZ first made a bid for Suncorp’s bank in July 2022, as part of a plan to expand in retail banking, but the Australian Competition and Consumer Commission rejected the deal last August, saying it would entrench a banking oligopoly.

The Australian Competition Tribunal will this week rule on ANZ’s bid to buy Suncorp’s bank.
The Australian Competition Tribunal will this week rule on ANZ’s bid to buy Suncorp’s bank.Credit: Oscar Colman

ANZ appealed to the tribunal last year, saying the transaction would help it take on industry giant Commonwealth Bank, and this Tuesday the tribunal will hand down its decision.

While ANZ could appeal against a further rejection on technical points of law, Tuesday’s decision is generally seen as the last word on whether the deal can go ahead.

If ANZ is allowed to buy the banking operations of Queensland-based Suncorp, it will be the biggest deal in Australian banking since Westpac bought St George in 2008.

The arguments on both sides, which were presented by barristers before Christmas, have focused on the extent of competition in the $2.1 trillion mortgage market, which is the biggest source of loans for Australian banks. The market is a crucial driver of profits.

If the takeover goes ahead, it is likely to be regarded as one of the most important moves from long-serving ANZ chief executive Shayne Elliott during his tenure. If the transaction is rejected, however, investors are expecting a return of capital from ANZ, which raised $3.5 billion in new equity in 2022 when it announced the takeover.

Jefferies analyst Matt Wilson said while some in the market were sceptical of large mergers or acquisitions, he believed the Suncorp deal made sense for ANZ, because it would make the bank a more effective competitor. Wilson said ANZ had effectively integrated New Zealand’s National Bank, which it bought in 2003, a deal that made it the largest bank in New Zealand.

ANZ has said it will take six years to achieve the full synergies from the Suncorp transaction, a longer timeframe than in many mergers.

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“When you don’t have to extract cost synergies quickly, there’s less risk in the acquisition because you’re not doing things that could upset the organisation or damage the franchise,“ Wilson said.

If ANZ is successful at the tribunal, it will also need final approval from the Queensland government and federal Treasurer Jim Chalmers.

Elliott, the longest-serving of the big four bank CEOs, told shareholders in December the deal was a key priority for this year, but that ANZ still had options to expand if it failed to get the green light.

“While the acquisition of Suncorp Bank would significantly increase the scale of our retail and commercial bank, helping us to compete even more effectively, if the transaction is blocked we remain confident in the execution of our Australian growth strategy,” Elliott said at the ANZ annual general meeting in December.

In making its case, ANZ has claimed the idea of a cozy banking oligopoly is outdated by pointing to the decline in banks’ net interest margins and the rise of competitors such as Macquarie.

The ACCC says second-tier banks are still important competitors against their larger rivals. When the ACCC rejected the deal last year, deputy chair Mick Keogh said: “We consider there is an increased likelihood of co-ordination between the four major banks in the supply of home loans should Suncorp Bank become part of ANZ.”

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