The ANZ Group Holdings Ltd (ASX: ANZ) share price is under the spotlight after the ACCC blocked the deal with the Suncorp Group Ltd (ASX: SUN) banking division.
ACCC says to ANZ: No deal
ANZ had wanted to grow its market position in Australia by acquiring Suncorp Bank, but the ACCC has denied authorisation.
The ACCC isn’t meant to grant authorisation unless it’s satisfied “in all the circumstances” that the proposed acquisition would “not be likely to lessen competition, or that the likely public benefits would outweigh the likely public detriments.”
Sadly for ANZ, the ACCC wasn’t satisfied that it wouldn’t substantially lessen competition in the areas of supplying homes nationally, small to medium enterprise banking in Queensland, and agribusiness banking in Queensland.
Explanation of the denial
ACCC Deputy Chair Mick Keogh said:
These banking markets are critical for many homeowners and for Queensland businesses and farmers in-particular. Competition being lessened in these markets will lead to customers getting a worse deal.
Second-tier banks such as Suncorp Bank are important competitors against the major banks, especially because barriers to entry at scale into banking are very high. Evidence we obtained strongly indicates that the major banks consider the second-tier banks to be a competitive threat.
The proposed acquisition of Suncorp Bank by ANZ would further entrench an oligopoly market structure that is concentrated, with the four major banks dominating. It also limits the options for second-tier banks to combine and strengthen in a way that would create a greater competitive threat to the major banks.
The ACCC also noted that bank CEOs have been saying that they are stepping back from aggressive promotions, which it wouldn’t “expect to see banks publicly flagging plans to reduce the competitiveness of their offerings.”
Final thoughts on the ANZ deal
ANZ indicated to investors that it’s going to appeal against the decision through the Australian Competition Tribunal, The possible deal is also subject to additional conditions including approval from the Federal Treasurer and Queensland legislative amendments.
I don’t think ANZ needs to do this acquisition to do well, it needs to focus on its own operations, offer customers a more compelling service and gain market share.
The banking sector and the ANZ share price isn’t attractive to me, I’d rather invest in ASX dividend shares in less competitive sectors.
