Heard the one about how less competition equals more competition?
That’s the doublethink coming from ANZ’s Shayne Elliott as he tries to explain why the competition regulator should wave through his acquisition of Suncorp’s banking arm.
One of the big four banks swallowing up a smaller regional competitor “actually increase competition and drive better outcomes for consumers”, he said yesterday. The acquisition would mean “we get to be a better competitor, with the really big players in the market who are people like CBA. Just as Suncorp probably feels dwarfed by ANZ, we feel dwarfed by CBA.”
What a load of garbage.
Elliott couldn’t even stay consistent with his line, denying that “moving from 13% to 15% market share somehow gives us some dominant position or some pricing power that we didn’t have before. It’s a modest uplift.”
So it’s both a modest uplift, barely worth noticing, and it will enable ANZ to better compete with the bigger of the big four.
As Karen Maley at The Australian Financial Review noted yesterday, “moving from 13% to 15% market share” simply puts ANZ back to where it was four years ago.
Maley has been one of two journalists casting a critical eye over the deal. Joe Aston, who has long had fun with Elliott’s misfortunes, is the other. They shame their AFR colleagues and most of the business media, which has been content to report rather than analyse the biggest, most anti-competitive deal in Australian finance in over a decade.
Similar to the way most political journalists are simply content to racecall politics rather than critically scrutinise policies and their impacts, it seems business journalists are happy just to racecall the deal. The competition implications are, like the approval of the treasurer, just one more hurdle up ahead.
In doing so, they are failing their readers — including investors who think they’re getting some insightful market information from the AFR. Investors are also bank customers and business owners, who will suffer as financial services competition is further reduced. And ANZ investors, in particular, must be wondering not just why the bank is playing silly buggers with its “if it’s Tuesday it must be MYOB” acquisition strategy, but whether Elliott and his struggling mortgage division won’t simply lose the acquired market share all over again.
After all, this is the mob that couldn’t turn basically free money from the RBA into mortgage lending growth in one of the biggest property booms of recent history. In 2020, the Reserve Bank started its Term Funding Facility (TFF) to help support lending by banks during the pandemic. A total of $188 billion was lent and the RBA says that ANZ was entitled to $20.09 billion of that and grabbed the lot. Yet still its home lending share went backwards significantly.
And that money has to be repaid, or refinanced, from next year onwards — plus an extra $4.13 billion that Suncorp took from the TFF.
And earlier this year the ANZ bought back $1.5 billion worth of its shares at $27.70 a share. The $3.5 billion raising announced yesterday will be done at… $18.90 a share. Only Aston pointed out this trashing of $8.80 a share.
The Finance Sector Union has already criticised the deal and with considerable justification — it knows that its members face the chop. The ANZ documentation for the deal released yesterday reveals “synergies” (aka cost cuts and job losses) will total ~$260 million a year pre-tax — or a full 35% of Suncorp’s reported cost base this year. Those “synergies” will be “phased in” over three years, starting in 2025-26.
So from then, ANZ will shut dozens of branches and sack hundreds of staff. It might be better that they do it all immediately, so sacked Suncorp workers can take advantage of the current tight labour market.
No such luck for ANZ investors. But perhaps Elliott can tell them that just as less competition really is more, a lower share price is actually higher.
