What will the ANZ and Suncorp deal mean for customers?

Australia's fourth largest bank, ANZ, has been given the green light by the Australian Competition Tribunal (ACT) to go ahead with its proposed acquisition of Suncorp Bank.

The decision, which was announced last week, comes six months after the Australian Competition and Consumer Commission (ACCC) blocked the deal on the grounds that it could lessen competition in the mortgage market, as well as the agribusiness and small business banking sectors in Queensland.

However, the Tribunal ultimately differed from the ACCC's perspective, ruling that the acquisition was unlikely to substantially lessen competition in any of the sectors.

"Suncorp Bank is a high-quality business with a strong team and excellent customer base, and we look forward to bringing them access to the best of ANZ, including our platforms and technology," says ANZ chief executive, Shayne Elliott.

"We strongly believe that the acquisition presents significant opportunities for ANZ, Suncorp Bank and our customers, as well as major public benefits including for Queensland."

Before it's completed, the deal will still need approval from the Federal Treasurer, Jim Chalmers, and the Queensland Parliament though.

Rival left unconvinced by competition claims

With $52 billion worth of owner-occupier and investment loans on its books, Suncorp is Australia's ninth largest mortgage lender behind the big four, Macquarie Bank, Bendigo Bank, Bank of Queensland and ING, according to the latest APRA household lending figures.

However, the 2.5% share of the $2.15 trillion mortgage market that Suncorp currently commands was not deemed to be significantly meaningful from a competition perspective.

In its determination the Tribunal noted that Suncorp Bank wasn't a particularly strong competitor in the home loans sector and that the proposed sale to ANZ wouldn't make a material difference to the potential risk of coordination by the major banks (which have a combined market share above 70%).

The Tribunal also determined that the acquisition was not likely to substantially decrease competition in Queensland's small business banking and agribusiness markets.

Responding to the Tribunal's decision, ACCC chair Gina Cass-Gottlieb noted that the regulator would reflect on the outcome but continue to monitor competition in the sector.

"Banking markets are critical for many homeowners, businesses and farmers. The ACCC will continue to apply scrutiny to these markets across the breadth of our functions including merger assessments and enforcement investigations."

Bendigo Bank, which was analysed by the ACCC as a potential alternative suitor for Suncorp's banking business in the original decision to deny ANZ's proposed deal, was franker about the potential impact the deal could have on both competition and customers.

"The Bank maintains the view that the proposed merger will lead to a lessening of competition, leaving customers and communities worse off," it said in a statement released after the Tribunal's determination.

What will the change for ANZ and Suncorp customers?

ANZ has already confirmed that it has licenced the Suncorp Bank brand for five to seven years and that Suncorp will continue to operate under its existing authorised deposit-taking institution licence, initially.

That means that, for now, any customers holding separate deposit accounts with both ANZ and Suncorp will still be protected under the Financial Claims Scheme which guarantees up to $250,000 per person, per institution.

ANZ has also promised to maintain the total number of Suncorp Bank branches operating in Queensland for at least three years after the deal has been completed. Though whether there will be any cuts to the number of ANZ-branded branches in the state will need to be seen.

What about the various products and rates on offer at each bank though?

Peter Marshall, banking expert at financial comparison website Mozo, says that he wouldn't be surprised to see Suncorp's mortgage offers start to edge closer to ANZ's own offerings in years to come.

"Looking at the products that ANZ currently offers versus the products that Suncorp offers, it's a fairly similar range of options, but the Suncorp rates are quite a bit cheaper at the moment.

"Now, ANZ will be looking to make a return on the investment they've made. So I would assume that over time - and it might take a few years - Suncorp's rates will be drawn closer to ANZ's rates, although they will probably maintain some distance.

"We can look at the Commonwealth Bank and Bankwest which was a fairly similar situation. Bankwest previously had some very competitive rates, but over a number of years that competitiveness has drained away. And I expect that we're going to see the same thing here."

While it's likely to be a slow process if it does occur, Marshall says that existing customers should pay close attention to their interest rates to ensure that they're not getting behind.

"I think that people who are with Suncorp really need to keep an eye on what happens to their mortgage over the next few years.

"They may find that when the RBA is cutting rates - as they're expected to do sometime later this year - some of those cuts may not be as large as they are for ANZ customers."

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