ANZ granted unconditional merger authorisation to buy Suncorp Bank

On Tuesday morning (20 February), the decision was handed down in the Federal Court of Australia in Sydney and determined that the merger would not lessen – or be likely to lessen – competition in the national mortgage lending and SME finance or agri lending in Queensland (one of the core arguments for the original decision).

The ACCC was also not satisfied that the proposed acquisition would be likely to result in benefits to the public that would outweigh detriments to the public.

However, the tribunal determination outlined that the current players are not of sufficient size to materially reduce competition in the marketplace.

For example, it said that Suncorp Bank “is not a particularly strong competitor in the home loans market” and its agribusiness is “not particularly unique, or unable to [be] replicated by other competitors” and the tribunal argued that ANZ would remain constrained by other competitors, in particular, NAB and Rabobank.

In the reasons for the determination, the three members of the tribunal (Justice Halley, Dr J Walker and Ms D Eilert) also noted the competitive effect that brokers provide the lending market in improving access and distribution.

They wrote that while the home loans market is “conducive to coordination” – partly because of the combined 72 per cent share of banking system assets of the major banks – this risk has recently reduced and is 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 is satisfied that the forecast integration and productive efficiencies from the Proposed Acquisition constitute real and tangible benefits to the public, represent a saving of real resources and are likely to be sustained,” the decision summary read.

“The Tribunal is satisfied that the Proposed Acquisition represents a net public benefit because any detriments arising from any reduction in competition are unlikely to be sufficiently certain and significant to outweigh the more certain integration and productive efficiencies forecast to arise from the Proposed Acquisition.

“Given these findings, the Tribunal has concluded that the determination of the ACCC declining to grant authorisation of the Proposed Acquisition under s 88(1) of the CCA is to be set aside and, in its place, a determination is to be made pursuant to s 88(1) and s 102(1) of the CCA granting to ANZ unconditional merger authorisation for the Proposed Acquisition.”

Completion of the acquisition remains subject to legislative amendments by the Queensland Parliament and approval by the federal Treasurer. If received, completion is expected around mid-2024.

Treasurer Jim Chalmers said that once he receives Treasury advice and the relevant approval under the Financial Sector (Shareholdings) Act 1998 (FSSA) for ANZ's application to proceed, he would "carefully and methodically consider whether the proposed acquisition is in the national interest under the FSSA and then announce a decision in due course".

‘A significant milestone’

ANZ has welcomed the decision, with chief executive Shayne Elliott stating: “This is a significant milestone and an important step forward in the process, however we still have further conditions to meet. We remain committed to completing the acquisition as soon as possible once all sale conditions are met.

“Suncorp Bank is a high-quality business with a strong team and excellent customer base, and we look forward to bringing them access to the best of ANZ, including our platforms and technology. We strongly believe that the acquisition presents significant opportunities for ANZ, Suncorp Bank and our customers, as well as major public benefits including for Queensland.”

Suncorp Group chairman Christine McLoughlin added that Suncorp would continue to work constructively with the Queensland government and federal Treasury to secure the remaining approvals.

Ms McLoughlin said the tribunal decision reflected the importance of strong, sustainable insurance and banking systems equipped to meet the changing needs of customers, communities and the broader economy.

“It’s also a big win for Queensland with both Suncorp and ANZ announcing significant jobs and investment packages as part of the bank sale process,” Ms McLoughlin said.

“Suncorp’s package, worth around $25 million, will not only bring continued investment and jobs in the state of Queensland, but through further investment in our end-to-end disaster management capability and natural hazard resilience initiatives, will bring benefits to customers and communities right across Australia and New Zealand.

“Importantly, our bank customers will have access to a wider range of products and services, and our people a broader range of banking career opportunities under ANZ, which has committed to maintaining and growing Suncorp Bank’s strong Queensland presence.”

Ms McLoughlin said the board “remained committed” to returning to shareholders any capital that is in excess to the needs of the business once the merger has been completed.

Suncorp Group CEO Steve Johnston said the sale of the bank would result in Suncorp becoming a dedicated trans-Tasman insurance company – particularly noting that the need for a “continued investment in a vibrant private insurance sector had never been greater”.

“Our ability to meet the rapidly evolving needs of insurance customers and address increasingly complex challenges such as climate change and affordability will be significantly strengthened through dedicated investment as a pure play insurance company,” he said, adding that the group remained fully committed to Suncorp Bank while the process continued.

Background to the decision

The tribunal’s decision followed a nine-day hearing that commenced on 4 December, delving into the ramifications of the merger and scrutinising the Australian Competition and Consumer Commission’s (ACCC) earlier decision to refuse the acquisition.

During the hearings, counsel Ruth Higgins SC, representing ANZ, argued vehemently against the ACCC’s rejection of the merger, labelling it a “fatal mistake”. Ms Higgins contended that the ACCC’s decision was erroneous as it failed to adequately consider the evolving competitive landscape within the banking sector, particularly in light of technological advancements and regulatory changes.

Furthermore, ANZ’s submission emphasised that the merger would not substantially alter competitive dynamics and would lead to public benefits, including improved performance in Suncorp’s insurance sector and potential cost savings.

At the heart of the dispute lies the ACCC’s concerns over potential harm to competition, particularly in home loans, small- to medium-sized enterprise (SME) banking, and agribusiness banking in Queensland.

Mick Keogh, the ACCC’s deputy chair, had previously expressed apprehensions regarding the creation of an oligopoly dominated by the four major banks and the subsequent limitations on competition.

In August 2023, the ACCC formally rejected the merger proposal, citing fears of reduced competition in critical banking markets. The decision stemmed from concerns that the acquisition would exacerbate the dominance of the major banks, stifling competition and ultimately leading to unfavourable outcomes for consumers.

At the time, the ACCC suggested the acquisition of Suncorp Bank would boost ANZ’s market share in home loans to be above NAB and closer to the Commonwealth Bank and Westpac.

As at June 2023, ANZ’s owner-occupied book was $186.5 billion and its investor loan book was $93.6 billion. It was the smallest of the big four banks. Suncorp, meanwhile, had $36.6 billion in owner-occupied loans and $14.7 billion in investor loans at the end of June 2023.

ANZ, however, has remained steadfast in its pursuit of the merger, asserting that it would continue to be the smallest among the major banks even post-acquisition and would not diminish incentives to compete vigorously for customers.

Both the Suncorp and ANZ CEOs have frequently shown optimism about the merger’s potential to benefit consumers and foster growth.

[Related: Home loan competition concerns stymie ANZ-Suncorp merger]