Suncorp “still has incentives” to pursue a merger of its banking arm with Bendigo and Adelaide Bank in the event ANZ’s proposed acquisition of Suncorp Bank does not proceed, the ACCC has concluded. The ACCC yesterday published a heavily redacted full version of the reasons for its decision (announced on Friday) to deny authorisation for ANZ’s proposed A$4.9 billion takeover of the bank. The ACCC noted that over the course of several years Suncorp Group undertook various strategic reviews and received extensive external advice on ways to improve shareholder value and overcome a ‘conglomerate discount’. “Suncorp Group’s view that it was being valued below the combined sum of its insurance and banking businesses led it to form a view that a cash sale to a major bank would realise the largest financial benefits to its shareholders, which in turn led to it approaching ANZ.” However, this was not the only option considered in detail and Suncorp “also invested significant time and resources into considering the option of a regional merger, with specific reference to BEN. It also considered the option of retaining Suncorp Bank,” the ACCC said. The ACCC went on to analyse at length Suncorp Group’s incentives to merge Suncorp Bank with Bendigo. The ACCC said it “notes that submissions and evidence from ANZ and Suncorp Group show that there are strong benefits to Suncorp Group separating out its banking and insurance businesses. “It would also create additional value to Suncorp Group’s shareholders once the conglomerate structure has been removed.  The ACCC said its view was “that there remain strong incentives for Suncorp to divest Suncorp Bank.  “Suncorp Group’s internal documents indicate that the value of a merger with Bendigo was previously assessed as the second best alternative to the proposed acquisition by ANZ. “The ACCC considers that although Suncorp Group would need to carry out further assessment of any potential transaction, it still has incentives to merge Suncorp Bank with Bendigo if an offer came before it.” Prior to the announcement by ANZ of its offer for Suncorp Bank “Bendigo was seeking to engage with Suncorp Group and preparing to make an offer to merge with Suncorp Bank. “The ACCC understands that Bendigo has strong commercial incentives to enter into a merger with Suncorp Bank.” A merger between Bendigo and Suncorp Bank would effectively double its size. “Bendigo submits that the significant increase in scale resulting from a merger would enhance its competitiveness … enabling increased investment in technology, accelerating the delivery of Bendigo’s digital capabilities [as well as] providing a potential upgrade to Bendigo’s credit rating [and] attracting further deposit funding.” The competition regulator reached some stark, but gloomy, conclusions about the extent to which even flourishing second-tier banks – let alone any neobank challengers – are able to provide a check on the market power of Australia’s biggest banks. The ACCC said it considers that the retail banking sector “remains highly concentrated amongst the four major banks and that structural barriers across the sector remain high.  “It is clear that the major banks benefit from significant scale advantages which make it difficult for