Australian Competition Regulator Blocked $4.9 Billion ANZ-Suncorp Deal

A man walks past an ANZ bank sign in Chinatown, Melbourne, on April 30, 2020. William West/AFP via Getty Images

The Australian competition regulator has knocked back ANZ Bank’s $4.9 billion (US$3.23 billion) proposal to acquire the banking division of Brisbane-based Suncorp Bank, one of its second-tier competitors.

In announcing the decision on Aug. 4, the Australian Competition and Consumer Commission (ACCC) said the proposed acquisition is likely to significantly lessen the competition in an already concentrated home loan market as well as the banking sector for small to medium enterprises and agribusiness in Queensland.

“These banking markets are critical for many homeowners and for Queensland businesses and farmers in particular,” ACCC Deputy Chair Mick Keogh said.

“Competition being lessened in these markets will lead to customers getting a worse deal.”

This means the loss of a better price, innovative services, and differentiated products with a strong focus on customer relationships.

Among the others, Mr. Keogh highlighted the major flow-on impacts of lessening competition to mortgage holders.

“More than a third of Australian households have a mortgage, with loans totaling around two trillion dollars, illustrating how critical it is that competition in this market is not substantially lessened,” he said.

Increased Likelihood of a Co-ordinated Home Loan Market

The acquisition of Suncorp Bank would add $47 billion of home loans to ANZ Bank, boosting its market share in the home loans sector above NAB, and closer to the Commonwealth Bank and Westpac.

The watchdog is concerned that this would increase the likelihood of co-ordination between the big four banks, with less incentive for ANZ to compete for customers by disrupting any coordination in the market.

“Co-ordinated market outcomes mean competition is muted at best, to the detriment of customers,” 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 would further entrench an oligopoly market structure that is concentrated, with the four major banks dominating.”

Another adverse impact cited by the ACCC is limiting the options for second-tier banks to combine to challenge the big four, based on its observation that “the major banks consider the second-tier banks to be a competitive threat.”

“The acquisition by ANZ would also remove the potential for a Bendigo and Adelaide Bank deal with Suncorp Bank,” Mr. Keogh said, referring to one of the options given by Suncorp should the acquisition by ANZ fail to go ahead.

“That potential combination would likely strengthen and diversify the competitive power of second-tier banks, reducing the likelihood of co-ordination.”

ANZ and Suncorp Set to Appeal

ANZ indicated it would appeal to the independent Australian Competition Tribunal, a move endorsed by Suncorp.

“We are naturally disappointed and disagree with the ACCC’s decision,” ANZ CEO Shayne Elliott said in a statement on Aug. 4, adding that the bank will seek an independent decision through the avenues of review available.

He insisted that the acquisition will improve competition and benefit Australian consumers, particularly in Queensland.

“All of the relevant markets are intensely competitive and will continue to be intensely competitive after the acquisition,” he said.

Suncorp chair Christine McLoughlin echoed the message, saying the company believed the deal wouldn’t hurt competition and there had been nothing to change its mind during the 12-month review.

“Together with ANZ, we will make our case to the tribunal, which is led by a justice of the Federal Court of  Australia,” she said.

“The tribunal will look at all of the evidence with fresh eyes before forming its own view.”

In 2020, the tribunal overturned the decision by the ACCC to oppose the merger of Vodafone Hutchison and TPG Telecom. But it backed the regulator this June regarding its decision to block a spectrum-sharing arrangement between TPG and Telstra.

The $4.9 Billion ANZ-Suncorp deal was announced in July 2022, described by ANZ as a “cornerstone investment for ANZ and a vote of confidence in the future of Queensland.”

In June, ANZ and Suncorp signed an implementation agreement respectively with the Queensland Government as part of the deal, both committing to further investments in the state should the deal goes ahead.

This includes the development of a major tech hub in Brisbane generating 700 jobs, a $19 million (US$12.5 million) investment in a new disaster response centre in Brisbane, and a commitment to hiring 120 people at a new regional hub in Townsville.

If the acquisition is completed, it would be the biggest transaction in Australian banking since Westpac’s 2008 takeover of St George during the global financial crisis.