Each takeover of a smaller rival proposed by a big Australian bank has won clearance from competition authorities over the last 35 years. Every single one.
ANZ and Suncorp Group yesterday won hands down in their appeal to the Australian Competition Tribunal over the ACCC’s 2023 rejection of ANZ’s 2022 bid for Suncorp Bank.
Ever since the four major banks became the ‘Big Four’ in the early 1980s, a series of challengers and disruptors have fallen prey, most often when they have run into strife.
The list includes State Bank of Victoria, Trust Bank Tasmania, State Bank of NSW, Town & Country, Bank of Melbourne, St George Bank, Bankwest and most recently Citi Australia.
Even 86 400, the brightest of the neobanks, has been subsumed by NAB - and promptly lost in ubank.
In mid-2023 the ACCC, surprisingly, found its spine when it refused to authorise the merger of ANZ and Suncorp Bank.
With that ruling overturned, the challenge for ANZ now is to extract value from a A$4.9 billion takeover that adds a little, not a lot, to its market share – and even less grunt.
A key reason that ANZ and Suncorp prevailed is that the tribunal accepted Suncorp’s own submissions on its bank’s defects and disadvantages and overall lack of competitiveness.
“Suncorp has no particularly unique advantage that gives rise to a strong competitive position,” was one of only many candid comments by Suncorp’s barrister, Cameron Moore, on the second day of hearings.
“We’re hopeless,” was the guts of Moore’s astounding first afternoon on the floor, rubbishing his client’s business, MO, risk management, technology know-how and much else besides.
So, Suncorp made and won their case. They really are desperate.
Anyway, Moore’s themes echo through the ACT’s (aggravatingly brief) summary of reasons published yesterday. This is pending redactions from the full reasons sought by the parties.
On SME lending, the tribunal noted that “the Suncorp Bank offering is not materially differentiated from other regional and second-tier banks, in particular, Bank of Queensland”, while “barriers to expansion for banks already offering SME banking services in Queensland are relatively low”.
In agribusiness banking markets, the tribunal concluded it is “not satisfied that Suncorp Bank’s existing offering to agribusiness customers is likely to be more competitive in the No Sale counterfactual.
“The evidence before the tribunal suggests that Suncorp Bank will continue to provide the same, or potentially a reduced level of service, and has no plans to compete more aggressively or grow its agribusiness portfolio.”
More tellingly, the tribunal found against the ACCC (and Bendigo and Adelaide Bank) on the prospects for successful coordination by the major banks in the home loan market.
The tribunal said it was “satisfied that the home loans market is conducive to coordination, not least because of the combined 72 per cent share of banking system assets of the major banks”- then walked this back.
“The conditions for coordination, however, have recently reduced, and are likely to continue to reduce in the foreseeable future due to the material asymmetry in the market shares of the major banks, the emergence of Macquarie as a ‘maverick’ in the market, and the increasing use of brokers that has reduced consumer choice frictions, facilitating greater customer switching,” the tribunal panel wrote.
“Nevertheless, material barriers to entry and, in particular, expansion, remain. These include access to a competitively priced source of funds, and the substantial investment needed to establish the necessary technology systems and platforms to be able to offer a competitive product in the home loans market.”
Neither ANZ nor Suncorp yesterday provided any update on their planning and progress toward implementation plans.
Conclusion of this takeover is not likely until “mid 2024” Suncorp said, around two years after ANZ first reached terms with Suncorp.
It is subject to the amendment of the Queensland Financial Institutions and Metway Merger Act and final approval from the federal treasurer.