The competition regulator, the ACCC, has rejected ANZ's proposed $4.9 billion takeover of Suncorp's banking arm – a decision that has been widely expected by investors since being announced in 2022.
Not too many investors saw a chance for ANZ to succeed in its deal, despite both banks pulling out all stops with support from the Queensland government – even though ANZ confirmed there would be significant job losses and branch closures in the coming years if the deal was done.
The proposal didn't get much support from consumer, small business, or rural groups who warned of less, not more competition in the coming years if the takeover was allowed.
The ACCC has pointed to growing opposition to the deal in submissions from various groups – with one strong opponent being the regional rival, Bendigo and Adelaide Bank, which Suncorp looked at as a possible merger partner for its bank.
But in the end, the Commission couldn't see any way to support the deal.
"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," ACCC Deputy Chair Mick Keogh said in a statement issued before ASX trading started on Friday.
"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."
"Second-tier banks such as Suncorp Bank are important competitors against the major banks, especially because barriers to new entry at scale into banking are very high. Evidence we obtained strongly indicates that the major banks consider the second-tier banks to be a competitive threat," Mr. Keogh said.
"The proposed acquisition of Suncorp Bank by ANZ would further entrench an oligopoly market structure that is concentrated, with the four major banks dominating. It also limits the options for second-tier banks to combine and strengthen in a way that would create a greater competitive threat to the major banks."
"After taking into account all of the claimed benefits, we are not satisfied they are enough to outweigh the likely significant detriments to competition in banking markets that have the potential to impact many Australian households and businesses."
The ACCC released its decision and a summary of its reasons and said the full decision would be released on Monday following confidentiality checks with relevant parties.
The ACCC looked at the impact on home lending, small businesses, and agribusinesses (especially in Queensland) and found competition problems in all areas.
It was especially strong on the negative impact of the deal on home lending, warning it could have reduced competition, despite claims to the contrary from ANZ.
"We consider there is an increased likelihood of coordination between the four major banks in the supply of home loans should Suncorp Bank become part of ANZ.
"Coordinated outcomes mean competition is muted at best, to the detriment of customers."
"A substantial lessening of competition in home loans would have major flow-on impacts to Australians with a mortgage. More than a third of Australian households have a mortgage, with loans totalling around two trillion dollars, illustrating how critical it is that competition in this market is not substantially lessened," Mr. Keogh said.
"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. This is instead of competing strongly on price, innovation, and the quality of their service and products to win customers."
"The ACCC considers the Australian home loans market is already at risk of coordination between the major banks for several reasons, including banks' ability to price signal, the similarities of the major banks in terms of size and structure, the stability of the existing market structure, and high barriers to entry.
"While there is evidence of increased competition in the home loans market recently, including in the form of cash-back offers to consumers, we are not persuaded that this level of competition will continue," Mr. Keogh said.
"We note recent commentary by bank executives that they are stepping back from aggressive promotions. If the market was truly competitive, we would not expect to see banks publicly flagging plans to reduce the competitiveness of their offerings.
The proposed acquisition increases the likelihood that the major banks adopted a 'live and let live' approach to each other, aimed at maintaining or protecting their existing market shares. This is instead of competing strongly on price, innovation, and the quality of their service and products to win customers."
