Since the emergence of “Modern Portfolio Theory” and the “Capital Asset Pricing Model” in the late 1960s, institutional investors have taken a quantitatively driven approach to portfolio construction, looking to create portfolio diversification and obtain better risk-adjusted returns by balancing their asset-class exposures. This journey has seen several important advancements in thinking about how to optimally achieve desired results.
Funds that want to take the total portfolio approach first need to get the total portfolio view. To do that they not only need data – and lots of it – but a rock-solid understanding of exactly how they’re going to use it.
ANZ-Suncorp deal nixed by ACCC over anti-competition fears
ANZ’s long-held ambition to expand its banking footprint has been put on hold, with the Australian Competition and Consumer Commission (ACCC) blocking its $4.9 billion takeover plan for Suncorp Bank.
The ACCC on Friday refused to authorise the anticipated merger, saying it would further entrench a banking oligopoly and hurt competition, particularly in Queensland where Suncorp has a solid foothold in the consumer banking market.
The regulator said it’s required to withhold authorisation unless it believes the proposed acquisition would not substantially lessen competition or that public benefits arising from the deal would outweigh any detriments.
“We are not satisfied that the acquisition is not likely to substantially lessen competition in the supply of home loans nationally, small- to medium-enterprise banking in Queensland and agribusiness banking in Queensland,” ACCC deputy chair Mick Keogh (pictured) said in a statement announcing the regulator’s decision.
“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.”
ANZ’s share price was up about 1.5 per cent in morning trading Friday, while Suncorp shares were down nearly 1 per cent after the news.
Keogh noted that second-tier banks like Suncorp are important sources of competition for Australia’s four major banks – ANZ, Commonwealth Bank of Australia (CBA), National Australia Bank (NAB) and Westpac – while new entrants into banking face extremely high barriers. Importantly, the big four consider second-tier banks as a competitive threat, he added.
“The proposed acquisition of Suncorp Bank by ANZ would further entrench an oligopoly market structure that is concentrated, with the four major banks dominating,” Keogh said. “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.”
More, not less, competition needed
ANZ in June 2022 announced its plans to acquire the Suncorp banking operations from competitor Suncorp Group. The deal would bring $47 billion in home loans, $45 billion in deposits and $11 billion in commercial loans into ANZ’s existing lending portfolio, as well as increase the bank’s exposure to Queensland by 40 per cent.
The acquisition would also increase ANZ’s share of the home loans market, pushing the smallest of the big four in this sector above NAB and close to CBA and Westpac.
In denying authorisation, the ACCC said a likely reduction in competition in the supply of home loans was a key concern, citing an increased likelihood of coordination among the big four should ANZ absorb Suncorp Bank.
“The proposed acquisition increases the likelihood that the major banks adopt a ‘live and let live’ approach to each other, aimed at maintaining or protecting their existing market shares,” Keogh said. “This is instead of competing strongly on price, innovation and the quality of their service and products to win customers.”
Moreover, he said, denying the deal means ANZ will remain the smallest of the major banks, which would give it a stronger incentive to disrupt any market coordination. It also leaves the door open for a potential future deal between Suncorp and Bendigo and Adelaide Bank, which he said would “strengthen and diversify the competitive power of second-tier banks.”
The regulator also cited the proposed ANZ-Suncorp deal’s implications on small and medium business banking and agribusiness banking in Queensland as weighing against approving the merger.
“Suncorp Bank is an important competitor for business customers in Queensland,” Keogh said. “That differentiated offer, and the competitive benefits it brings for Queensland businesses, will not be available if ANZ acquires Suncorp Bank.”
In a statement following the ACCC’s announcement, ANZ CEO Shayne Elliott said the bank was “naturally disappointed” in the decision and would seek to challenge it. Under Australian competition law, a decision by the ACCC to deny an acquisition can be reviewed by the independent Australian Competition Tribunal.
“We believe the acquisition will improve competition, which will benefit Australian consumers, particularly in Queensland,” Elliott said. “All of the relevant markets are intensely competitive and will continue to be intensely competitive after the acquisition.”
Suncorp Group chair Christine McLoughlin said the banks would take the decision to the competition tribunal and remained hopeful it would ultimately win approval.
