The decision by Australia’s competition regulator to block the takeover of Suncorp by ANZ gives some clear signals for the future of Australian banking.
It is not a huge surprise to see the deal blocked, given that it would make the 'big four' an even bigger four.
There had been a school of thought that this deal might get over the line because ANZ is the smallest of the four, behind Commonwealth Bank of Australia, NAB and Westpac. The deal would only have catapulted the bank to third place in terms of total mortgage market share, which is, and will for ever be, the key determinant of banking strength in Australia.
And ANZ will appeal to the Australian Competition Tribunal, so the deal is not yet dead. But it is very clear where the Australian Competition and Consumer Commission wants the industry to go.
The ACCC said on Friday that a merger would “further entrench an oligopoly market structure that is concentrated, with the four major banks dominating.”
No surprise there. But what is more interesting is another comment further down in the ACCC’s determination, credited directly to ACCC deputy chair Mick Keogh.
“The acquisition by ANZ would also remove the potential for a Bendigo and Adelaide Bank deal with Suncorp Bank,” Keogh said. “That potential combination would likely strengthen and diversify the competitive power of second-tier banks, reducing the likelihood of coordination.”
Well, that is interesting.
It is one thing to block a deal. It is another to identify by name a deal the ACCC would rather see happen.
Suncorp is an insurance group with a bank attached, and it has wanted to get shot of the bank for some time. To that end, conversations have indeed been held with Bendigo, but Suncorp has publicly said that it does not consider a merger with another second-tier bank to be realistic.
It is clearly the job of a regulator to police competition, and the ACCC gives a clear articulation of its rationale for blocking the ANZ deal. It says a merger would increase the dominance of the big four banks in the supply of home loans, dimming competition to the detriment of customers.
Curious look
Since more than one third of Australian households have a mortgage, and that total book amounts to $2 trillion, the ACCC considers it critical that competition in the market is not diminished.
“The proposed acquisition increases the likelihood that the major banks adopt a ‘live and let live’ approach to each other, aimed at maintaining or protecting their existing market shares,” Keogh said in his determination.
He went on to argue that keeping ANZ as the smallest player would “give it a stronger incentive to disrupt any coordination in the market”.
But is it the job of a competition regulator to spell out which deals it does wish to see?
One can understand the ACCC’s rationale. Second-tier banks in Australia are massively outgunned, and mergers among them would give them greater competitive heft. But positioning itself as some sort of gamemaster, orchestrating outcomes, is a curious look.
For its part, ANZ could be forgiven for looking askance at the ACCC’s decision not to oppose NAB’s purchase of Citigroup’s consumer business last year. Presumably the regulator was less concerned about the exit of a foreign name from the consumer landscape than a more iconic and locally important Queensland bank.
Next step: the tribunal. But if that appeal fails, one wonders if Suncorp and Bendigo will find themselves with little choice but to look at an arranged marriage, witnessed by a proud competition regulator.
