Why ANZ should walk away from Suncorp

As a shareholder of ANZ, we would like the ANZ Board to walk away from buying Suncorp Bank. Our reasons are simply the price offered is too high and the market dynamics have changed. 

We've seen this movie before with Westpac overpaying for St George, watching the subsequent underperformance of Westpac over the past decade. 

We implore the ANZ Board to buy ANZ stock back with the surplus capital rather than burden ANZ with an overpriced acquisition.  

In July 2022, ANZ offered to pay $4.9bn for Suncorp Bank representing 1.3x P/NTA. Using ANZ's preferred valuation measure of P/NTA, we see that since then bank and non-bank financial multiples have fallen Bendigo Bank (BEN) trading at 1x P/NTA and Bank of Queensland (BOQ) at 0.65x P/NTA. 

So if ANZ overpays by at least 30%, the synergies become even more important in a retail banking market that has become increasingly competitive and commoditised especially in mortgages. 

ANZ's competitors will be thrilled that ANZ is distracted trying to move Suncorp Bank customers to the new ANZ plus deposit platform to achieve its $260m pre-tax synergy benefits. 

The easier option would be to close branches, but ANZ promised no job cuts or branch closures in Queensland for three years post-acquisition. 

Since June 2022, when Macquarie offered a high interest transaction account, the retail deposit market has become increasingly competitive with the TFF roll-off and lower savings rates compounding the problem. We now also question if the $260m in earmarked synergies (35% of Suncorp's cost base) are still achievable.  

In the last few years, ANZ lost nearly 2% market share in mortgages due to poor servicing and tighter risk policies and via the Suncorp bank acquisition is looking to buy back that share.

ANZ's recent H1 result in retail banking showed the strategy of "creating a simpler better-balanced bank to compete in the digital age" was starting to turn the business around, with revenue up 11% and cash NPAT up 9%. 

Let's hope either the Board comes to its senses and either pays less or chooses to pursue growth organically with a focus on returns and buybacks of its stock. 

Otherwise, we may have to rely on the ACCC knocking it back on competition grounds. If that happens, please ANZ, don't even consider going to court!