Suncorp has continued to explain its place in the banking market and why it should become part of ANZ, laying out its arguments during an appeal to the Australian Competition Tribunal over the ACCC’s rejection of ANZ’s $4.9 billion acquisition of Suncorp Bank.
Suncorp’s barrister, Cameron Moore, painted a picture of his client as a “very small participant in the banking sector” – one that accounts for 1.7% of system assets.
This characterisation directly counters the ACCC’s concerns outlined in its rejection in August that the merger would “substantially lessen competition”.
The main argument presented on the third day of the hearing was that ACCC made Suncorp Bank out to be “disproportionately important”.
Moore summarised the three points of contention with the ACCC’s position:
1. To make Suncorp a “supposed linchpin of an allegedly pro-competitive merger” with Bendigo Bank – which is waiting to submit its own offer for the bank.
2. To engage in a “Suncorp-centric view of competition that is static” by trying to look at what Suncorp does today and then “just assume or suggest” that will be removed without looking at a future with, and future without analysis.
3. That Suncorp Bank is an integral part of Queensland’s product market through its agribusiness and part of the geographic market, through its lending SME and home loan channels.
To this last point, Moore directly disputed the ACCC's claim that Suncorp Bank plays a “central or important" role in the banking sector, arguing that this perception is “not consistent with reality”.
Moore launched a critique of the ACCC's expert report authored by Mary Stark in June.
The report argued that a Bendigo-Suncorp merger would create a “stronger competitor” due to increased scale and resources for investing in technology. Essentially, the report concluded that the Bendigo deal would enhance competition compared to an ANZ acquisition or no sale at all.
Moore took issue with the report's reasoning and particularly with the ACCC's claim that losing Suncorp Bank as a potential acquisition target for other second-tier banks would “further entrench the existing market structure”.
He argued that this rationale suggested the ACCC wanted to preserve Suncorp Bank to be used for future acquisitions to form a “slightly larger bank” not based on its current competitive impact.
Furthermore, Moore argued that the ACCC's submission claiming detriments beyond specific market impacts constituted a “legal error” and should be disregarded. He emphasised that competition assessments must be limited to identified markets.
“It’s a somewhat unsatisfactory state of affairs we say the matter has been left in that way by the competition regulator,” Moore said.
However, a real-world example of Suncorp Bank being worse off with Bendigo Bank is that it would lose its credit rating, Moore argued.
Suncorp, as it currently stands, has an A+ credit rating because of its relation to its insurance arm – three notches above Bendigo’s BBB+.
“A key benefit of a bank merger would ordinarily be said to be that the transaction and the scale it would bring to funding costs. That’s not the case here,” Moore said.
“Putting them together does not assist either.”
After that, the session was closed for the rest of the day due to confidential material.
This followed day two where ANZ’s barrister Ruth Higgins pointed out that there were other second-tier banks waiting in the wings besides Bendigo.
Higgins said, “there is no reason that gap could not be filled by BOQ or Judo. Those entities have stated they intend to grow in SME and provide these services.”
Higgins said that Bendigo itself already services Queensland and disagreed with the ACCC’s assessment of what a geographic market means.
“We say the relevant market is a national banking market," Higgins said. “Products are provided nationally. “Pricing usually is national, can be modified on a case-by-case basis. The ACCC asserts that agribusiness knowledge is local. We submit that is a fundamental mistake.”
This was followed by some statements from Moore that further diminished Suncorp’s banking business across a variety of metrics, including:
Legacy systems and costs: “Some of Suncorp’s competitors have significant cost advantages, because of Suncorp’s legacy branch network and legacy platforms.”
Losing market share: “Until recently Suncorp was losing a significant amount of its market share.”
Lack of competitive edge: “Suncorp has no particularly unique advantage that gives rise to a strong competitive position.”
“… What one cannot say is that it has some competitive leading edge that allows it to out-compete, in Queensland or anywhere else.”
Limited business banking products: “They need a full range of business banking products, and Suncorp cannot offer a full range. And nor can they satisfy businesses of a certain size.”
“[ANZ] is not buying Suncorp to dismantle it. Certainly, the intent is to keep the brand operating for some time, to preserve the benefits of the business in ANZ.”
The action continues tomorrow until its conclusion on December 15.
