Australia’s ANZ to acquire insurer Suncorp’s banking unit for $3.3bn

Australian lender ANZ has agreed to a A$4.9bn (US$3.3bn) deal to acquire insurer Suncorp’s banking arm in a bid to boost the size of its mortgage book as the country’s housing market cools.

ANZ is one of Australia’s “Big Four” banks along with Commonwealth Bank, Westpac and National Australia Bank, but it has fallen behind some of its rivals over the past decade as they capitalised on the country’s housing boom.

The Suncorp deal is the largest in Australia’s banking sector since 2008, when Westpac bought St George and Commonwealth bought Bankwest in a period of consolidation for the sector. The deal will expand the lender’s footprint in the high-growth Queensland market.

ANZ’s acquisition of Suncorp could herald further deals with smaller regional lenders including Bendigo Bank, Adelaide Bank and the Bank of Queensland, said analysts. NAB completed a A$1.2bn takeover of Citigroup’s consumer business in Australia last month.

Shayne Elliott, chief executive of ANZ, said: “The acquisition of Suncorp Bank will be a cornerstone investment for ANZ and a vote of confidence in the future of Queensland.”

ANZ, which will absorb A$47bn of mortgages as part of the takeover, has made a series of commitments to Queensland as part of an agreement that includes A$15bn of investment linked to renewable energy and the 2032 Olympic Games in Brisbane. ANZ will raise A$3.5bn via a discounted share placing to fund the deal.

The Melbourne-based bank also said it would not close any Suncorp branches in Queensland for three years after the completion of the deal and would maintain the brand in the state for at least five years.

The deal is expected to come under close scrutiny from regulators including the Australian Consumer and Competition Commission. The commission has warned that it would take a hard line on banking consolidation in response to the power of the four main banks in Australia’s residential market. It also needs the approval of Jim Chalmers, the country’s treasurer.

The sale of Suncorp’s banking arm ends pressure on the company to restructure after investors called for it to split in a bid to improve profitability.

Steve Johnston, chief executive of Suncorp, said that the sale comes at a time when “the value of insurance has never been greater”.

He added that “more frequent and severe natural hazard events” — such as recent flooding in Australia — had increased costs and created affordability challenges for customers and the industry.

ANZ said last week that it had held talks over a A$4bn takeover of accountancy software developer MYOB, which is owned by private equity firm KKR, but the bank stepped back from the deal after agreeing the takeover of Suncorp.