ANZ has kicked off its marketing campaign to win support for its potentially competition-limiting acquisition of Suncorp Bank with an obviously well-briefed pro-deal commentary in some sections of the business media.
The $4.9 billion acquisition needs the approval of the competition regulator, the ACCC and the ANZ, in the wake of the release of its submission to the commission arguing in favour of the deal, is pushing hard to win over sceptical analysts and politicians, especially in Queensland.
A big negative is the admission that the deal will eventually see the closure of a number of branches and heavy job losses over time (say by 2026). With a state election in Queensland in October, 2024, that could be a potential negative that is too hard for the politicians to accept.
For all the arguments being made in favour of the deal – such as scale, a small (estimated 1.9%) boost in the ANZ’s share of the national mortgage market) and a better deal for Suncorp Bank customers, the growing concern about the impact of high interest rates in the wake of the Reserve Bank’s attempts to control inflation with a series of big rate rises, will pressure the supposed value of the deal to both the ANZ and Suncorp.
Some analysts have asked what the ANZ is doing spending $4.9 billion on buying a small national market share when it could be using that money to get aggressive in the stuttering home loan market and lead more.
If it buys Suncorp Bank, ANZ reckons it will pick up around $47 billion in new mortgages, $45 billion in deposits, and $11 billion in commercial loans.
At September 30, ANZ’s Pillar 3 capital data shows total assets of 1.085 trillion and residential mortgages around $414 billion, up from $410 billion at march, 2021.
That slow growth highlights why the ANZ is trying this deal – it has lost significant market share in the very competitive residential mortgage business since the pandemic started in 2020, while rivals led by the Commonwealth and NAB (as well as the non-bank lenders led by Macquarie) have made stronger gains and stolen the ANZ’s business.
ANZ claims it has fixed its problems (which revolved around slow approval processes which saw borrowers move elsewhere for faster approvals) but the pitch for the Suncorp Bank purchase tells us that it is looking for a faster way to rebuild its growth – by acquisition which will also have the benefit of obscuring the weak management that allowed the ANZ lose market share to its rivals.
The big banks didn’t do as well in 2022 in stockmarket terms as they did in 2021 when they stormed home in the final quarter of that year to boost solid returns.
The Commonwealth’s market value ended up 0.37% at December 30, while Westpac was up 7.9% – albeit from a lower base as investors gradually return to the share register after the money laundering and other scandals damaged its reputation and management and board members was replaced.
NAB shares were up 1.8% but ANZ shares lost 14.9% in value over 2022, a significantly adverse judgement by investors and one that the Suncorp Bank buy story is clearly designed to try and repair.
In an interview with Fairfax Media on Monday, Bendigo Bank CEO Melanie Baker came out against the ANZ purchase.
“From a market share and a competition perspective, I’m just querying whether it passes the sniff test,” she told Fairfax papers.
Bendigo tried to buy Suncorp Bank last year but was rebuffed by the Suncorp board in 2022.
Baker, a 33-year finance executive told Fairfax that during her time in the industry there had been “quite a bit of consolidation”, noting Bendigo itself was a product more than 80 businesses coming together.
However, she told Fairfax that mergers between smaller banks could benefit innovation and competition by allowing smaller “agile” rivals to better focus on customers’ needs. She claimed these benefits did not come about from allowing the big four to buy their rivals.
“You won’t actually get that if you consolidate everything into the larger end. You’re not going to get that agility, you’re not going to get that immediacy in reacting to customers’ needs and expectations and that lifting of innovation,” Baker said.
And then there’s the track record of all banks and other financiers exposed in the Hayne Royal Commission. ANZ was nowhere near as bad as the Commonwealth, Westpac, NAB or AMP, but the bigger banks generally were shown to be arrogant so far as their customers, past and current were concerned.
The ANZ though seems to have escaped the money laundering activities that saw the CBA, Westpac and NAB caught out by financial intelligence regulator AUSTRAC.
That should be a positive.
ANZ shares rose 0.2% yesterday to $23.72.
