Suncorp bank sale 'reasonably good deal'

ANZ’s proposed $4.9 billion acquisition of Suncorp Bank is “a reasonably good deal for both parties” and it’s assumed regulatory clearances will be granted, Morningstar Analyst Nathan Zaia says in a research note.

“We have been sceptical competition regulators would allow a major bank to acquire Suncorp Bank, of the top ten largest home lenders in Australia,” he says.

“However, in our view, the acquisition does not materially alter the competitive landscape. There is abundant competition from other retail banks, member-owned banks, foreign banks and non-bank lenders.”

“While there are potential benefits to the bancassurance model, such as better customer insights versus stand-alone insurance peers, and better cross-selling opportunities, they have not delivered a material tangible improvement in earnings, returns on switching costs,” he says.

Fitch Ratings says the insurance and banking businesses are run separately with limited cross selling, and the successful sale of the bank will allow Suncorp to focus on its core insurance operations.

Fitch placed the long-term issuer default ratings of Suncorp Group Ltd and AAI Ltd on Rating Watch Negative (RWN) following the announcement of the bank sale.

“We expect to resolve the RWN once the sale is completed or it is announced that the sale will not proceed and once detailed information on [Suncorp Group’s] ultimate capital position is available,” it said.

The Australian Competition and Consumer Commission (ACCC) says it will begin a review of the proposed acquisition by ANZ as soon as it has received an application for merger authorisation.

“The ACCC’s review is expected to involve extensive consultation with market participants, interested parties and regulators and to carefully consider the likely competitive impact and any public benefits resulting from the proposed transaction on relevant banking markets and consumers,” it says.