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Home loan competition concerns stymie ANZ-Suncorp merger

by Annie Kane13 minute read

The competition watchdog has decided not to grant merger authorisation for ANZ to acquire Suncorp Bank due to home loan and SME lending competition concerns.

The Australian Competition and Consumer Commission (ACCC) has denied authorisation to ANZ Banking Group (ANZ) to acquire Suncorp Group’s banking arm.

The competition watchdog flagged that the Australian home loans market is 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.

It suggested a merger of ANZ and Suncorp would impact competition in the mortgage market as well as SME and agribusiness banking.

ACCC deputy chair Mick Keogh stated: “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.


“These banking markets are critical for many home owners and for Queensland businesses and farmers in particular. Competition being lessened in these markets will lead to customers getting a worse deal.”

The ACCC said that non-major banks, such as Suncorp Bank, are important competitors against the major banks, especially because barriers to new entry at scale into banking are very high.

“Evidence we obtained strongly indicates that the major banks consider the second-tier banks to be a competitive threat,” Mr 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.

“We are not satisfied that the acquisition is not likely to substantially lessen competition in the supply of home loans to Australian consumers.”

The impact on mortgagors

“We consider there is 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,” the ACCC deputy chair continued.

“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 $2 trillion, illustrating how critical it is that competition in this market is not substantially lessened.

“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. This is instead of competing strongly on price, innovation and the quality of their service and products to win customers.

“While there is evidence of increased competition in the home loans market recently, including in the form of cashback offers to consumers, we are not persuaded that this level of competition will continue.

“We note recent commentary by bank chief executives that they are stepping back from aggressive promotions. If this market was truly competitive, we would not expect to see banks publicly flagging plans to reduce the competitiveness of their offerings.”

The ACCC suggested the acquisition of Suncorp Bank would boost ANZ’s market share in home loans to be above NAB and closer to the Commonwealth Bank (CBA) and Westpac.

As at June 2023, ANZ’s owner-occupied book was $186.5 billion and its investor loan book was $93.6 billion. It was the smallest of the big four banks.

Suncorp, meanwhile, had $36.6 billion in owner-occupied loans and $14.7 billion in investor loans at the end of June 2023. A combined entity would therefore have more than $223 billion in owner-occupied mortgages and $108 billion of investor loans.

CBA’s owner-occupied book was $366 billion while its investor book was $180 billion; Westpac had $293 billion in owner-occupied mortgages and $155.9 billion in investor loans; while NAB has $201 billion in owner-occupied loans and $108.8 billion in investor loans.

“If ANZ doesn’t acquire Suncorp Bank it will remain the smallest of the major banks, giving it a stronger incentive to disrupt any coordination in the market,” Mr Keogh said.

Other concerns raised by the ACCC include:

  • A reduction in SME banking competition in Queensland (due to the removal of Suncorp Bank’s offerings from the market in Queensland)
  • A reduced offering for farmers in Queensland (as a result of removing Suncorp’s “independent presence” and relationship management model in agribusiness banking)

ACCC seems to pave the way for Bendigo and Adelaide Bank merger

The ACCC also noted that Bendigo and Adelaide Bank had previously been interested acquiring Suncorp Bank and suggested that such a merger would likely create a larger second-tier bank that would be better placed to grow its market share through increased competition and trigger a stronger competitive response from the major banks.

“After undertaking this intensive assessment, the ACCC considers that there is a realistic prospect of a Suncorp Bank transaction with Bendigo and Adelaide Bank. We know Suncorp has extensively considered the option of a transaction with Bendigo and Adelaide in particular,” Mr Keogh said.

“While we are not saying such a merger between Suncorp Bank and Bendigo and Adelaide Bank will definitely occur if the ANZ deal does not proceed, we consider it is sufficiently likely that it is necessary to consider this scenario as part of the ACCC’s assessment.”

Additionally, the ACCC said it considers that a merged Bendigo/Suncorp Bank entity may also be a more effective competitor than either bank is separately.

Noting the decision, the heads of ANZ and Suncorp said they were surprised and disappointed and would be asking the Australian Competition Tribunal to review the decision.

[Related: ANZ-Suncorp merger decision extended again]

mick keogh accc ta fearo


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