ANZ Group Holdings Ltd. will become the third-biggest player in Australia's A$2.2 trillion home loan market once it completes the purchase of Suncorp Group Ltd.'s banking arm.
The Australian Competition Tribunal overturned the Australian Competition and Consumer Commission's decision to block ANZ's acquisition of Suncorp Bank on Feb. 20, clearing a major hurdle. The tribunal ruled that the deal's small increase in ANZ's market share would not significantly impact competition in the home loan market.
ANZ ranked fourth in the home loan market with a 13.5% share as of Dec. 31, 2023, just behind National Australia Bank Ltd.'s 14.6%, according to data from the Australian Prudential Regulation Authority. Once the Suncorp Bank deal closes, the combined entity would account for A$343.63 billion in home loans, or a 15.9% market share, on a pro forma basis. This would place it behind Commonwealth Bank of Australia with 25.3% and Westpac Banking Corp. with 21.4%.
The deal would bring the combined entity's share in total assets and deposits closer to the third-ranked National Australia Bank, the data shows.
Competition, more deals
The ANZ-Suncorp deal is not likely to drastically change competition in the home loan market, analysts said.
"I don't think it is necessarily a good thing for competition as I don't think ANZ now becomes a much stronger competitor that offers borrowers something different," Nathan Zaia, an equity analyst at Morningstar, told Market Intelligence via email. "In reality, I don't think it will change competition. There are plenty of options for borrowers."
ANZ agreed in July 2022 to acquire Suncorp Bank for A$4.9 billion amid increasing competition in the home loan market. Prior to striking the deal, the bank had been seeking to bolster its home loans business after its share in the space slipped to 13.9% as of Aug. 31, 2021, aggressively moving to regain market share, offering cashbacks to customers and growing its mortgage book at the cost of margins.
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The deal's approval was not surprising, said Martin North, principal at Digital Financial Analytics. The convergence of the two banks should, in theory, increase competition. "ANZ needs to grow its mortgage book," North said.
The approval of the ANZ-Suncorp deal may open the door for more bank deals, Citi analyst Brendan Sproules said.
"The tribunal found that there are efficiency benefits, which will benefit the public, from the ANZ-SUN merger," Sproules said in a Feb. 20 note. "This finding, combined with its conclusions in the competitive landscape of the mortgage market, clearly opens the door for further mergers of the smaller banks, possibly with other large players."
Completion of the deal remains subject to legislative amendments by the Queensland Parliament and approval by Australia's Federal Treasurer. Suncorp Group said in a Feb. 26 statement it expects the deal to close around mid-2024.
