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Analysis

Chalmers faces home test on ANZ-Suncorp

John Kehoe
John KehoeEconomics editor
Updated

Federal Treasurer Jim Chalmers faces a home ground test as the ultimate decision maker on ANZ’s proposed $4.9 billion takeover of Suncorp’s Brisbane-based bank.

Chalmers publicly played it straight on Monday following the deal’s official announcement, after receiving a private heads-up about the takeover from the two lenders earlier this month.

The delicate state-of-origin political dance was summed up by an experienced politics and business participant who noted that Suncorp “is as Queensland as rugby league”.

As a Brisbane Broncos and Queensland Maroons fan, Chalmers knows that Queenslanders regularly say they’re going to watch the footy at “Suncorp”, the abbreviated term used for the Suncorp-sponsored stadium.

Chalmers, who was wearing a maroon tie, said Suncorp was important to the Queensland economy.

But he signalled his adjudication under Financial Sector (Shareholdings) Act would be less about Queensland parochialism and more about the advice from the competition watchdog, banking regulator and state government.

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“I will be entirely, completely consistent with the process that’s set out,” he said in response to a question from The Australian Financial Review in Canberra.

Treasurer Jim Chalmers says he will take advice on the proposed ANZ takeover of Suncorp’s bank. Alex Ellinghausen

“There is some discretion for treasurers at the end of it, but it’s based on the conclusions of the competition watchdog and the other regulators as well.

“And so, I intend to take that advice seriously and, for that reason, not go into it any further.”

State Treasurer Cameron Dick was more parochial, arguing Suncorp was a “product of Queensland” and warning he would be “driving a hard bargain to ensure the new entity’s Queensland presence is preserved”.

Chalmers is no stranger to the prospect of an ANZ takeover of bancassurer Suncorp’s banking arm.

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When Chalmers was a senior adviser to then-federal treasurer Wayne Swan during the 2008 global financial crisis, ANZ almost acquired the beleaguered Suncorp bank and wealth management business for $3.4 billion.

Suncorp was extra vulnerable to a fire sale after paying a top-of-the-market $7. 9 billion for insurance giant Promina in 2007.

An emergency government guarantee on all bank retail deposits and wholesale debt from prime minister Kevin Rudd and Swan saved Suncorp as an independent financial institution.

ANZ missed out on the regional bank, and watched Westpac take over St George, and Commonwealth Bank snaffle up BankWest – both with the Australian Competition and Consumer Commission’s approval under Graeme Samuel.

Now, the ACCC’s view on the contemporary takeover will be crucial.

The struggling ANZ is the smallest of the big four banks, its 13 per cent share of the mortgage market is half the size of CBA’s, and it is underweight in Queensland.

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Suncorp has only a bit over 2 per cent of the national mortgage market, but is larger in Queensland.

Former ACCC boss Rod Sims was always sceptical of the big four banks buying small lenders, arguing it prevented new competition threatening the banking oligopoly, which controls 75 per cent of home loans.

ANZ will be hoping new ACCC chairwoman Gina Cass-Gottlieb takes a more legalistic view compared to Sims who, as an economist, gave greater weight than lawyers to the public policy merits of consolidation.

Her views are largely unknown and, like Chalmers, the ANZ-Suncorp deal is one of Cass-Gottlieb’s first big decisions.

She is not politically naive. Her uncle Moss Cass was environment minister in Gough Whitlam’s Labor government in the 1970s.

An ACCC spokeswoman said it would consider the competitive impacts on retail and business banking products and services, including transaction accounts, term deposits, home loans, personal loans, and small- to medium-sized business banking.

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“The ACCC recognises the important role that regional banks can play in competing with and challenging the major banks,” she said.

    The key legal competition test is whether the transaction has “the purpose, effect or likely effect of substantially lessening competition” in either the national or Queensland banking markets.

    Not only will the ACCC apply this test to the existing market, but it will also benchmark the ANZ-Suncorp bank deal against the potential alternative for Bendigo and Adelaide Bank to merge with Suncorp and create a “fifth pillar”.

    Sims last year approved the Bank of Queensland takeover of the struggling ME Bank, saying: “If the smaller ones can get together, that’s helpful.”

    But ANZ and Suncorp will argue this is theoretical and not realistic because Suncorp approached ANZ as the best complement for its bank and rebuffed recent approaches from regional rival Bendigo.

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    Chalmers will undoubtedly speak to his Labor ally, Queensland Treasurer Dick.

    For the deal to proceed, the state government must amend legislation, which requires Suncorp’s headquarters, chairman and senior management to be in Queensland, including treasury operations, information technology, marketing, credit control and human resources.

    The requirements are in state legislation from 1996 when Suncorp was formed by the merger of the former Queensland State Government Insurance Office and Metway Bank.

    About a decade later, Queensland treasurer and future premier Anna Bligh (now the head of the Australian Banking Association) reduced the proportion of Suncorp directors required to be based in Queensland.

    ANZ will initially run Suncorp’s banking operations as a separate entity, but eventually seek to subsume the business into a single, authorised deposit taking institution, like it did with National Bank in New Zealand.

    Hence, appointing at least one Queenslander to the Melbourne-dominated ANZ board may help clear political hurdles.

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    ANZ will lease the Suncorp brand for retail and business banking for five to seven years, before this right lapses for the exclusive use of Suncorp’s insurance business, which is not being sold.

    In contrast, CBA and Westpac have permanently retained their multi-brands of BankWest, St George, Bank of Melbourne and BankSA.

    ANZ has also committed not to close a Suncorp branch, and no net job losses for up to three years.

    Nevertheless, this failed to appease Finance Sector Union secretary Julia Angrisano, who warned it would lobby Chalmers to “reject the deal” because it would eventually “kill off” the Suncorp banking brand.

    “This is bad for jobs and bad for competition, and the FSU will be making submissions to Treasurer Jim Chalmers and the ACCC, calling on them to reject this deal,” she said.

    Union angst about jobs won’t go unnoticed in Labor circles.

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    The list of Canberra links is also intriguing.

    Former federal Labor finance minister Lindsay Tanner is a Suncorp director. Suncorp executive manager of external communications, Pip Freebairn, formerly worked for treasurer Swan.

    ANZ’s Canberra-based communications and public affairs executive Tony Warren formerly worked on navigating competition issues at Telstra and is a University of Queensland economics graduate.

    Moreover, Canberra-based ANZ director and former Department of Finance head Jane Halton was last month appointed by the Albanese government to review Australia’s COVID-19 vaccine and treatment deals.

    Attaining regulatory and political approval will be easier than in past decades when Suncorp was only just emerging from government ownership.

    Many Queenslanders would not realise Suncorp was once government-owned. But it is widely recognised as a Queensland lender and employer.

    Suncorp is a powerful brand in Queensland and its reputation was enhanced following the 2011 floods.

    Other insurers refused to pay out on flood insurance for certain types of flooding, such as rainfall damage, but Suncorp chose not to enforce its legal rights and paid out on virtually all forms of floods.

    Suncorp is part of the Queensland fabric. Handing it over to ANZ will not be comfortable for Chalmers, even if the retention of the standalone Suncorp insurance business may allow him to still watch the rugby league at “Suncorp”.

    John Kehoe is Economics editor at Parliament House, Canberra. He writes on economics, politics and business. John was Washington correspondent covering Donald Trump’s election. He joined the Financial Review in 2008 from Treasury. Connect with John on Twitter. Email John at jkehoe@afr.com

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