ANZ is buying Suncorp - what does it mean for customers?

One of Australia's biggest banks could be about to get even larger following the announcement of a proposed deal that would see ANZ purchase Suncorp Group's banking arm for $4.9 billion.

Unveiled on Monday, the acquisition would not only see ANZ significantly expand its existing customer base via an additional 1.2 million Suncorp customers, it would include Suncorp Bank's home ($47 billion) and commercial ($11 billion) loan books, plus $45 billion worth of 'high quality' deposits.

Importantly, says ANZ chief executive Shane Elliott, the move would also prove a good "geographical fit" for the bank which is seeking to expand its footprint in Queensland.

"ANZ is committed to making a meaningful contribution to the economic and social prosperity of Queensland and this announcement will see ANZ increase its presence, and we believe improve competition, in one of Australia's most important regions.

"While we have an outstanding team already supporting our customers, we recognise in order to provide better services and improve competition for all Queenslanders we need to build on our existing retail banking presence."

Suncorp Group's insurance business, which includes brands such as AAMI, Apia, GIO, Shannons and Vero, is not part of the deal though. Instead, it will become the group's major focus moving forward.

"As a dedicated insurance business we will be singularly focused on meeting the needs of our customers and communities at a time when the value of insurance has never been greater," says Suncorp Group chief executive, Steve Johnston.

How will the sale impact Suncorp Bank customers?

The answer appears to be 'not very much' - at least, not in the short term.

First of all, Suncorp Bank is set to continue to be run as a separate bank under its own licence for at least three years following the completion of the deal in order to "minimise disruption" and support its "ongoing growth", according to a statement from Suncorp. It will also keep its name for at least five years.

If Suncorp Bank was to move under ANZ's authorised deposit-taking institution (ADI) licence, it would mean that any account holders with separate ANZ and Suncorp accounts totaling more than $250,000 would no longer be fully covered under the Financial Claims Scheme though.

ANZ has also committed to maintaining the existing number of Suncorp ATMs and branches in Queensland for at least three years, and it says that there will be no net job losses over that period either.

The long-term ramifications of the sale are, of course, harder to predict. Dr Paul Mazzola, a lecturer in banking and finance at the University of Wollongong, believes that there will likely be both pros and cons for customers down the line.

"Customers will be given access to a broader range of financial products because ANZ's basket of products is a lot larger than Suncorp's, so that's a positive for customers. They could also, potentially, get the benefit of better pricing on some products given that they can ride on the back of ANZ's larger balance sheet," he says.

"On the negatives, it doesn't take a genius to work out that at the end of that three-year period in which ANZ has committed not to reduce branches or jobs, the bank will look at whatever cost reductions it can achieve from there.

"Banks have been very good at cost cutting and, in fact, if you look at the way they've increased their profits over the last couple of decades, it's mostly through cost-cutting because for two decades net interest margins have been consistently decreasing year on year."

Will competition suffer if the deal goes through?

While ANZ's proposed move for Suncorp Bank may be the most recent and one of the largest in Australian banking history, it's by no means the only one. In 2008 the Commonwealth Bank purchased Bankwest for $2.1 billion, and just last year the Bank of Queensland acquired ME Bank for $1.3 billion.

The question that these deals prompt though is whether they're ultimately good or bad for competition in the sector and for banking customers in general.

ANZ has stated that its purchase of Suncorp would help improve competition, especially for Queenslanders, but that's not a position shared by fellow institutions.

"The takeover of Suncorp by ANZ will simply increase the power of the major banks in Australia. That's not great news for banking consumers," says Peter Lock, chief executive of Toowoomba-based mutual Heritage Bank.

"It's even worse that we're losing a Queensland-based bank, and the different perspective that brings. Having all the major banks based in Sydney and Melbourne means that there is a metropolitan perspective that dominates, when it's not really representative of the rest of the country."

For Dr Mazzola, the acquisition will "undoubtedly lessen" competition because it will remove "one of the top ten banks out of the system". However, he explains, the threshold for competitiveness will ultimately be decided by the Australian Competition and Consumer Commission (ACCC) when the regulator examines the deal in the coming months.

"The measure is not whether it's going to reduce competition, the measure adopted by the ACCC is whether it will substantially lessen competition. The inference there is that it can lessen competition, but not substantially lessen competition, and I can see the arguments for and against the proposal on the basis of that."

A green light will also be required from Federal Treasurer, Jim Chalmers, before the sale can go through, and the Queensland state government will need to amend the Financial Institutions and Metway Merger Act (1996).

If it is approved, ANZ and Suncorp estimate that the deal will likely be fully completed in the second half of 2023.

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