Australia’s competition regulator, the ACCC, has rejected ANZ’s proposal to acquire Suncorp Bank, saying the move would lessen competition.
In announcing its decision today, the Australian Consumer and Competition Commission said under the statutory test, it must not grant authorisation unless it is satisfied in all the circumstances that the proposed acquisition would not be likely to substantially lessen competition, or that the likely public benefits would outweigh the likely public detriments.
“We are not satisfied that the acquisition is not likely to substantially lessen competition in the supply of home loans nationally, small to medium enterprise banking in Queensland, and agribusiness banking in Queensland,” ACCC deputy chair Mick Keogh (pictured above) said.
“These banking markets are critical for many homeowners and for Queensland businesses and farmers in particular. Competition being lessened in these markets will lead to customers getting a worse deal.”
The ACCC’s decision is a blow to ANZ, which recently signed an implementation agreement with the Queensland government to establish a tech hub, including hiring 700 people, in the sunshine state. The major bank’s agreement was conditional on the successful $4.9 billion acquisition of Suncorp Bank.
Referring to this proposal, Keogh said ANZ claimed the hub would lead to increased lending to businesses in Queensland, including lending to support renewable energy targets and new energy projects.
“Based on a recent determination from the Australian Competition Tribunal, it may not be appropriate for us to take the claimed Queensland benefits into account. However, even when taken into account they are insufficient to offset the competitive harm.”
In a statement published on the ACCC website, McKeogh said second-tier banks such as Suncorp Bank were important competitors against the major banks, especially because barriers to new entry at scale into banking were very high.
“Evidence we obtained strongly indicates that the major banks consider the second-tier banks to be a competitive threat,” Keogh said.
“The proposed acquisition of Suncorp Bank by ANZ would further entrench an oligopoly market structure that is concentrated, with the four major banks dominating. It also limits the options for second-tier banks to combine and strengthen in a way that would create a greater competitive threat to the major banks.”
The ACCC today announced its determination and an executive summary of its reasons for denying ANZ’s acquisition proposal, with the full reasons to be released on Monday.
Increased likelihood of coordination in Australian home loans market
Commenting further on the ACCC’s reasons for denying the acquisition, Keogh said there was an increased likelihood of coordination between the four major banks in the supply of home loans should Suncorp Bank become part of ANZ.
“Coordinated market outcomes mean competition is muted at best, to the detriment of customers,” Keogh said.
“A substantial lessening of competition in home loans would have major flow-on impacts to Australians with a mortgage. More than a third of Australian households have a mortgage, with loans totalling around two trillion dollars, illustrating how critical it is that competition in this market is not substantially lessened
Keogh said the ACCC considers the Australian home loans market was already at risk of coordination between the major banks for a number of reasons, including banks’ ability to price signal, the similarities of the major banks in terms of size and structure, the stability of the existing market structure and high barriers to entry.
“While there is evidence of increased competition in the home loans market recently, including in the form of cash-back offers to consumers, we are not persuaded that this level of competition will continue,” he said.
The ACCC noted that the acquisition of Suncorp Bank would boost ANZ’s market share in home loans to be above NAB, and closer to CBA and Westpac.
“Increased symmetry between competitors can increase the likelihood of coordination, as there is less incentive to upset the status quo and try to win market share by aggressively competing for customers.”
Small and medium business banking in Queensland
The ACCC said SME banking services in Queensland was already concentrated and the acquisition would significantly increase ANZ’s market share.
“Suncorp Bank is an important competitor for business customers in Queensland,” Keogh said. “It offers a differentiated product with a strong focus on customer relationships and smaller businesses.”
Agribusiness banking in Queensland
Keogh said Suncorp Bank was a vigorous agribusiness banking competitor in many local areas of Queensland, and in particular competed strongly and directly against ANZ in a number of areas in regional Queensland.
“Agribusiness banking services in Queensland are already concentrated. Removing Suncorp Bank’s independent presence will likely lead to worse offerings being made to Queensland farmers,” he said.
As part of the decision-making process, the ACCC said sought the views of a range of interested parties including providers of banking and financial services, consumer organisations, and brokers and aggregators.
