In a landmark decision with significant implications for the Australian financial landscape, the Australian Competition Tribunal has approved the $4.9 million merger between ANZ and Suncorp, despite the ACCC previously rejecting the deal.
This historic decision paves the way for the biggest banking merger in Australia since Westpac acquired St. George Bank in 2008.
The ACCC had initially expressed concerns that the merger would “substantially lessen competition” in the banking sector, particularly in Queensland, where both ANZ and Suncorp hold a strong presence.
However, ANZ has argued the acquisition would create a combined bank that is “better equipped to respond to competitive pressures to the benefit of Australian consumers” and deliver “significant public benefits, particularly in Queensland”.
Ultimately, the tribunal agreed with the latter.
The major argument against the merger was that the proposed acquisition would make it easier for the big four banks to coordinate and lessen competition.
With the four majors controlling 72% of banking system assets, the tribunal said it was satisfied that the merger would be “conducive to coordination”.
However, the Tribunal said the conditions of coordination have recently reduced and are likely to continue to reduce for the foreseeable future due to the “material asymmetry” in the market shares of the major banks and the emergence of Macquarie as a market “maverick”.
The Tribunal also reasoned that the increasing use of brokers that has reduced consumer choice frictions and facilitated greater customer switching contributed to creating competition.
“In addition to other reasons, significant changes to the home loan market, decreased use of technology, and consumer behaviour have reduced the risk of coordination.
The Tribunal therefore concluded that the proposed acquisition would not be likely to have the effect of substantially competition in the home loans market.”
The decision comes as welcome news for Suncorp, which has been trying to unload its regional banking business to focus on its under-pressure insurance arm.
While other mergers were possible, such as one with Bendigo and Adelaide Bank heavily discussed throughout the tribunal hearing, the process would have needed to start again and was potentially more complex due to technology integration concerns.
The tribunal pointed to this issue stating that the Bendigo-Suncorp merger was “far from certain” and would face “significant execution challenges”>
Another deal would have also likely need to include some of ANZ’s proposed investments in the Queensland market such as a moratorium on branch and ATM closures and a technology hub in Brisbane – which are now set to take effect.
But more broadly and perhaps more importantly, the tribunal’s decision could justify other banking mergers in the future, with the ACCC left to lick its wounds after a blow to its authority.
