ACCC Rejects ANZ’s Bid to Take Over Suncorp Bank: What Does This Mean for Australia’s Banking Sector?

ACCC Rejects Merger Authorization for ANZ‘s Acquisition of Suncorp Bank

The Decision

The Australian Competition and Consumer Commission (ACCC) has decided not to grant merger authorization for ANZ Banking Group’s (ASX:ANZ) proposed acquisition of Suncorp Group’s (ASX:SUN) banking arm. The ACCC, under its statutory test, must determine whether the proposed acquisition would substantially lessen competition or if the likely public benefits would outweigh the detriments. In this case, the ACCC found that the acquisition would indeed lessen competition, particularly in the supply of home loans nationally, small to medium enterprise banking in Queensland, and agribusiness banking in Queensland.

ACCC Deputy Chair Mick Keogh stated that the banking markets in question are critical for many homeowners, businesses, and farmers in Queensland. The acquisition by ANZ would further strengthen the oligopoly market structure dominated by the four major banks and limit the potential for second-tier banks to combine and create a greater competitive threat to the major banks.

Competition in the Home Loans Market

The ACCC expressed concern over the potential coordination between the major banks in the supply of home loans if Suncorp Bank were to be acquired by ANZ. This coordination would result in muted competition, to the detriment of customers. With more than a third of Australian households having a mortgage, the ACCC emphasized the importance of maintaining competition in this market.

The ACCC noted that the Australian home loans market is already at risk of coordination due to various factors such as banks’ ability to price signal, similarities between major banks in size and structure, stability of the existing market structure, and high barriers to entry. While there has been some recent evidence of increased competition in the form of cash-back offers, the ACCC expressed skepticism that this level of competition would continue. The potential acquisition of Suncorp Bank by ANZ would further increase ANZ‘s market share in home loans, making it closer in size to the Commonwealth Bank and Westpac. This increased symmetry between competitors could increase the likelihood of coordination and reduce aggressive competition.

Impact on Small and Medium Business Banking in Queensland

The ACCC also highlighted the concentration of small to medium enterprise banking services in Queensland, and expressed concerns about a likely substantial lessening of competition in this market if the acquisition were to proceed. Suncorp Bank is an important competitor for business customers in Queensland, offering a differentiated product with a strong focus on customer relationships and smaller businesses. The ACCC noted that ANZ‘s acquisition of Suncorp Bank would remove this differentiated offer and the competitive benefits it brings to Queensland businesses.

Implications for Agribusiness Banking in Queensland

The ACCC found that agribusiness banking in Queensland has a strong local focus, with banks developing a detailed understanding of farmers’ requirements and providing specialized services with local knowledge and industry expertise. Suncorp Bank is a vigorous competitor in many local areas of Queensland, directly competing with ANZ in several locations. The ACCC believes that removing Suncorp Bank’s independent presence in these areas would likely result in worse offerings being made to Queensland farmers.

Potential Alternative Acquisition

In assessing the likely future state of competition, the ACCC considered the possibility of Suncorp Bank combining with Bendigo and Adelaide Bank if the ANZ transaction did not proceed. While the ACCC did not definitively state that such a merger would occur, it considers it sufficiently likely to be considered as part of its assessment. The ACCC noted that Suncorp Group had extensively considered the option of a transaction with Bendigo and Adelaide Bank as an alternative to the proposed sale to ANZ.

Editorial and Advice

The ACCC‘s decision to reject the merger authorization reflects its commitment to maintaining competition in the Australian banking sector. By preventing the acquisition of Suncorp Bank by ANZ, the ACCC aims to prevent further entrenchment of the oligopoly market structure dominated by the four major banks. This decision is crucial in ensuring that customers, especially homeowners, businesses, and farmers, have access to a range of competitive offerings in terms of pricing, innovation, and quality of service.

The ACCC‘s concerns about coordination between the major banks in the home loans market are valid. If coordination were to occur, it would reduce the incentive for banks to compete aggressively on price and service, ultimately harming customers with mortgages. The potential merger between Suncorp Bank and Bendigo and Adelaide Bank offers an alternative scenario that could enhance competition in the banking sector, particularly against the major banks. Therefore, it is essential for regulators and stakeholders to closely monitor any potential developments in this area.

In conclusion, the ACCC‘s decision sends a strong message that competition must be protected and fostered in the banking sector. Maintaining a diverse and competitive landscape is vital for the well-being of customers and the overall health of the Australian economy. It is essential for regulators to continue scrutinizing potential mergers and acquisitions to ensure that they do not harm competition and the interests of consumers.