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Australia’s competition regulator has blocked the country’s biggest banking merger since the 2008 financial crisis after ruling that ANZ’s A$4.9bn ($3.2bn) takeover of smaller rival Suncorp would “further entrench an oligopoly” in the sector.
The Australian Competition and Consumer Commission on Friday said the combination of the country’s fourth- and eighth-largest mortgage providers would reduce competition by strengthening the position of the so-called big four banks and their ability to co-ordinate on the supply of home loans.
The ACCC said the deal, announced in July last year, would also lessen competition in the business market and the agriculture lending sector in the state of Queensland, where Suncorp is based. Suncorp and ANZ plan to appeal against the decision to the Australian Competition Tribunal.
Christine McLoughlin, Suncorp chair, said the sale to ANZ remained in the best interest of customers, shareholders, employees and the Australian economy. “The tribunal will look at all of the evidence with fresh eyes before forming its own view,” she said.
Shayne Elliott, ANZ chief executive, said: “The acquisition will create a combined bank which is better equipped to respond to competitive pressures, and deliver significant public benefits, particularly in Queensland.”
The decision to block had been anticipated, given the deal would remove a challenger from a market where four banks — Commonwealth, NAB, Westpac and ANZ — control about three-quarters of the mortgage market.
It also halts a run of deals in the global banking sector in which local players have acquired smaller rivals or the regional arms of larger financial institutions. NAB acquired Citigroup’s Australian consumer business for A$1.2bn last year, which the ACCC did not oppose.
The ACCC said the Suncorp deal would have strengthened the hand of ANZ, the smaller of the big four, so stopping the deal would provide the bank with a “stronger incentive to disrupt any co-ordination in the market”.
The regulator also highlighted that the acquisition would prevent consolidation among smaller “second-tier” banks in Australia, including a potential merger of Suncorp with close rival Bendigo and Adelaide Bank. “That powerful combination would likely strengthen and diversify the competitive power of second-tier banks,” said Mick Keogh, deputy chair of the ACCC.
Suncorp, which is part of a broader insurance group, has held talks with Bendigo in the past but said earlier this year that a merger with another second-tier bank was not a realistic prospect.
The decision by the regulator to state that it has a preferred option for banking consolidation partners was interpreted by analysts as creating a pathway to a broader market structure in the future.
Brendan Sproules, an analyst with Citi, said in a research note: “While the ACCC notes that such a transaction may not occur, they appear to not want to rule it out.”
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