ACCC Rejects ANZ’s Bid to Takeover Suncorp Bank

The ACCC Rejects ANZ Banking Group’s Acquisition of Suncorp Bank

Introduction

In a major decision with significant implications for Australia’s banking industry, the Australian Competition and Consumer Commission (ACCC) has announced its decision not to grant merger authorisation for ANZ Banking Group’s proposed acquisition of Suncorp Bank’s banking arm. The ACCC‘s decision is based on the statutory test, which requires the regulator to determine whether the acquisition would substantially lessen competition or if the likely public benefits would outweigh the likely public detriments. In this case, the ACCC has concluded that the acquisition would indeed lessen competition in critical markets such as home loans, small to medium enterprise banking, and agribusiness banking.

Competition Concerns

According to the ACCC Deputy Chair Mick Keogh, the acquisition would further consolidate an already concentrated banking market dominated by the four major banks, namely ANZ, Commonwealth Bank, Westpac, and NAB. The ACCC believes that allowing ANZ to acquire Suncorp Bank would entrench an oligopoly market structure, limiting the options for second-tier banks to strengthen and create a greater competitive threat against the major banks. The loss of Suncorp Bank as a competitor would have negative implications for homeowners and Queensland businesses and farmers, resulting in customers getting a worse deal.

Impact on Home Loans Market

The ACCC found that the acquisition would likely lead to a substantial lessening of competition in the supply of home loans nationally. They pointed out that increased market concentration would increase the likelihood of coordination between the major banks, leading to muted competition and reduced benefits for customers. The ACCC also highlighted that the Australian home loans market is already at risk of coordination due to various factors, including banks’ ability to price signal, the similarities between major banks in terms of size and structure, and the high barriers to entry. The removal of Suncorp Bank as a competitor would further exacerbate this coordination risk.

Impact on Small and Medium Business Banking

The ACCC‘s assessment revealed that small to medium enterprise banking services in Queensland are already concentrated, and the acquisition would significantly increase ANZ‘s market share. Suncorp Bank, with its differentiated product and strong focus on customer relationships and smaller businesses, is an important competitor for business customers in Queensland. The ACCC believes that the acquisition would eliminate Suncorp Bank’s differentiated offer, resulting in worse offerings for Queensland businesses.

Impact on Agribusiness Banking

The ACCC‘s findings indicate that agribusiness banking services in Queensland are also concentrated, with Suncorp Bank being a vigorous competitor in many local areas. Removing Suncorp Bank’s independent presence would likely lead to worse offerings being made to Queensland farmers. The ACCC is not satisfied that there would not be a substantial lessening of competition in agribusiness banking in Queensland if the acquisition proceeds.

The Potential of Suncorp Bank Combining with Bendigo and Adelaide Bank

As part of its assessment, the ACCC considered the potential scenario of Suncorp Bank combining with Bendigo and Adelaide Bank if the ANZ acquisition does not proceed. While the ACCC does not definitively state that such a merger will occur, they believe there is a realistic prospect of such a transaction. The ACCC‘s consideration of this scenario further highlights the potential competitive benefits that could be lost if the ANZ acquisition goes ahead.

Public Benefits

ANZ and Suncorp Group have put forth various claimed benefits of the proposed acquisition, including cost savings for ANZ, the ability for Suncorp Group to focus on its insurance business, and potential prudential benefits. However, the ACCC has determined that these benefits do not outweigh the likely detriments, particularly the competitive harm that would result from the acquisition. The claimed benefits to Queensland’s economy, such as establishing a tech hub and increased lending to businesses, are insufficient to offset the potential negative impacts on competition in the banking sector.

Conclusion and Recommendation

The ACCC‘s decision not to grant merger authorisation for ANZ‘s acquisition of Suncorp Bank is a significant development in Australia’s banking industry. It underscores the importance of maintaining competition in critical banking markets and preventing further consolidation among the major banks. The ACCC‘s findings highlight the potential for coordinated market outcomes and reduced benefits for customers, particularly in the home loans market. It also emphasizes the importance of strong competition to drive innovation, lower prices, and improve the quality of service and products.

Given the ACCC‘s determination, it is recommended that ANZ explore alternative strategies for growth and competitiveness in the banking sector. The rejection of the acquisition provides an opportunity for other second-tier banks, such as Suncorp Bank and Bendigo and Adelaide Bank, to strengthen and combine their competitive power to challenge the dominance of the major banks. It also serves as a reminder for regulators to remain vigilant in promoting and maintaining healthy competition in the banking industry for the benefit of Australian households and businesses.