The ANZ’s move to pay $4.9 billion for Suncorp’s banking arm looks to be in trouble after the comments from the Australian Consumer and Competition Commission (ACCC) that it worries about future competition and can’t see many benefits from the deal.
In a statement on Tuesday, the ACCC said it was seeking more information from the industry and customers about the deal.
It said that second-tier banks such as Suncorp played an “essential role” in competing with the big four, and it would need to consider whether taking out a regional bank could remove a “competitive constraint” on the majors.
It is particularly concerned about the deal’s implications on agribusiness banking, small and medium enterprise banking, home loans and deposits.
While the Commission did not say whether it would end up approving or opposing the transaction, it said it was so far unconvinced by ANZ’s claims that the deal would provide public benefits to Queensland, or to prudential stability.
ANZ has argued the broader public would also benefit because the deal would make ANZ a stronger bank, which would allow it to serve customers more efficiently. However, the ACCC said it did not have the evidence to support this claim.
“The ACCC’s preliminary view is that the information currently before it is insufficient to substantiate the nature, likelihood and extent of the claimed public benefits, including ANZ’s estimates of future synergies that will be achieved and claims regarding public commitments to investment in Queensland or improvements in prudential stability arising from the Proposed Acquisition,” the statement said.
The ACCC also said it was not clear whether Suncorp would be a stronger insurer without its banking unit, and it was unclear how any such benefits would be passed on to insurance customers.
The regulator said it was calling for “further submissions from industry and consumers on how the proposed acquisition may impact competition”.
But Suncorp attempted to play down the ACCC’s concerns, saying they “part of the standard authorisation process” for deals needing clearance.
“Suncorp acknowledges the ACCC is required to undertake a thorough assessment of ANZ’s application and will continue to support this process by submitting a comprehensive response to the matters raised in the Statement of Preliminary Views.”
Suncorp shares were down 0.6% at $12.13 on Tuesday. That is still well above the $11.10 Suncorp shares traded at the Friday before the purchase was announced on Monday, July 18, 2022.
The ACCC said its review so far “has been focused on home loans and retail deposits, agribusiness banking and small and medium sized enterprise banking, as these are the areas where interested parties have raised the most issues”
“It is also considering how the proposed acquisition would affect competition in the banking sector more generally.
“We have today set out our initial views for further consideration,” ACCC Deputy Chair Mick Keogh said.
“We are seeking comment on issues including the extent to which it will impact lending rates, deposit rates, fees and charges, consumer choice, service levels, and innovation.”
“Our home loan price inquiry reports of 2018 and 2020 showed competition between the biggest four banks has been at best muted. Any acquisition of a potential rival by one of the major banks must be closely considered,” Mr Keogh said.
“Our statement of preliminary views outlines the key competition issues we’ve identified to date. Before we finalise our views, we welcome further submissions from stakeholders and consumers alike on the issues raised. After we consider submissions from consumers and interested parties, we will conclude our review and expect to announce our decision in mid- June.”
“We are also eager to hear from stakeholders about whether they think the acquisition will have any public benefits,” Mr Keogh said.
The ACCC said it can only “grant authorisation if it is satisfied in all the circumstances that either there is not a likely substantial lessening of competition, or that there are likely to be public benefits that outweigh any public detriments.
The ACCC’s final decision is currently scheduled for June 12 and submissions can be made to the ACCC until April 18.
From the ACCC’s statement there would seem to be a wide area of views to be canvassed which suggests the June deadline for a decision might be flexible.
In its statement, Suncorp said it “maintains the view that the sale of Suncorp Bank to ANZ is in the best interests of its customers, employees, shareholders, the state of Queensland and the nation, and will result in a stronger insurance and banking system in Australia.
“If the transaction is approved, Suncorp would become a dedicated insurer at a time when the value of insurance to the Trans-Tasman economy and the public has never been greater.”
Suncorp said it would also provide a substantive response to the submission made by Bendigo and Adelaide Bank. Bendigo and Adelaide have criticised the deal, with CEO Marnie Baker arguing that an “even bigger big four” could be harmful and questioning whether the $4.9 billion purchase “passes the sniff test”.
“As outlined at the Suncorp Group 2022 Annual General Meeting, Suncorp is of the view that a merger with a regional banking peer would not deliver the same benefits and is inferior to both a sale to ANZ and Suncorp Bank’s own organic plan.”
Suncorp said it remains fully committed to Suncorp Bank while the approval process continues.
ANZ said has admitted that it will have to close some branches acquired in the deal after a three-year grace period.
