ANZ has announced it has agreed to acquire Suncorp Bank for $4.9 billion in a deal the bank said would accelerate the growth of its retail and commercial businesses.
The acquisition will include $47 billion of home loans, $45 billion in deposits and $11 billion in commercial loans but exclude Suncorp’s insurance operations in Australia and New Zealand.
ANZ CEO Shayne Elliott said that Suncorp Bank was a “natural fit” with the bank due to its culture, risk appetite and customer focus.
“The acquisition of Suncorp Bank will be a cornerstone investment for ANZ and a vote of confidence in the future of Queensland,” he said.
“With much of the work to simplify and strengthen the bank completed, and our digital transformation well-progressed, we are now in a position to invest in and reshape our Australian business. This will result in a stronger, more balanced bank for customers and shareholders.”
In a separate statement, ANZ also announced it had withdrawn from earlier discussions with Kohlberg Kravis Roberts & Co. (KKR) about a potential acquisition of MYOB.
To help finance the acquisition of Suncorp Bank, ANZ confirmed it would seek to raise $3.5 billion through an entitlement offer that will be conducted at $18.90 per share, representing a discount of 12.7 per cent on its last trading price.
Suncorp Bank will continue to be led by its current CEO, Clive van Horen, with ANZ licensing the Suncorp Bank brand for five to seven years for a fee of $10 million per year.
ANZ committed to maintaining Suncorp’s branch footprint in Queensland for at least three years and pledged there would not be any net job losses in the state over the same period.
“This is a growth strategy for ANZ and we will continue to invest in Suncorp Bank and in Queensland for the benefit of all stakeholders,” said Mr Elliott.
“Importantly, the same great staff that serve customers today will serve customers tomorrow as members of the Suncorp Bank team and we are committed to building on the great service customers have already been experiencing.”
Suncorp said that the sale was expected to yield net proceeds of $4.1 billion, representing $3.21 per share, the majority of which is planned to be returned to shareholders.
“This proposal has been assessed through the lens of creating value for shareholders and, just as importantly, to ensure there is alignment of purpose and values, and positive outcomes for our people and customers,” said Suncorp chairman Christine McLoughlin.
“We believe the agreed price fairly values the bank and reflects the hard work of our people and progress made on delivering our strategic objectives.”
ANZ issues trading update
On Monday, ANZ also released a trading update for the third quarter of its financial year ending 30 June.
The bank said that strong lending and margin momentum was evident across all of its major businesses with revenue up by 5 per cent, while home loan lending volumes were reported to be up by $2.0 billion or 3 per cent.
“We remain on track to grow in line with the Australian major banks before the end of the financial year and are delivering growth with an eye to maintaining margin performance and credit quality,” ANZ said.
ANZ’s net interest margin increased by 3 basis points during the quarter, driven by rising rates but partially offset by “intense price competition” in home lending portfolios.
The bank also stated that ‘run-the-bank’ costs were expected to be broadly flat in the second half despite inflationary pressures.
“This was a pleasing quarter where all our businesses performed, particularly our home loan business in Australia,” commented Mr Elliott.
“While rising inflation and interest rates are starting to impact customers, household and business balance sheets remain strong and with a collective provision balance of $3.8 billion, we are well-placed to continue to support economic growth into the future.”
Jon Bragg is a journalist for Momentum Media's Investor Daily, nestegg and ifa. He enjoys writing about a wide variety of financial topics and issues and exploring the many implications they have on all aspects of life.