Home Business amount Australia’s ANZ to buy Suncorp’s banking arm for $3.3bn and boost mortgage business

Australia’s ANZ to buy Suncorp’s banking arm for $3.3bn and boost mortgage business

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An ANZ bank logo is pictured in Sydney, Australia April 23, 2018. REUTERS/Edgar Su

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  • ANZ to raise AUD 3.5 billion to fund the deal
  • ANZ pulls out of talks to buy MYOB Group
  • Suncorp intends to return majority net proceeds

July 18 (Reuters) – Australia and New Zealand Banking Group (ANZ.AX), Australia’s fourth-largest property lender, plans to buy the banking arm of insurer Suncorp Group Ltd (SUN.AX) for $4.9 billion Australian dollars ($3.33 billion), build its mortgage portfolio and extend its geographical coverage.

The agreed deal, subject to regulatory approval, shows how important mortgages remain to Australia’s banking sector, even as rising interest rates and cost of living pressures flip the country’s property market .

ANZ, which said on Monday it was aiming to raise A$3.5 billion by issuing new shares to pay for the deal, had missed out on most of the benefits of a COVID-19-induced housing boom that saw the Home values ​​jump by a quarter in the year to early 2022 due to application processing delays, analysts said.

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The takeover would increase ANZ’s mortgage portfolio by A$47 billion to A$307 billion, meaning it would overtake National Australia Bank Ltd (NAB.AX) in third place, according to publicly available data.

ANZ shares were not traded as the bank prepares its new share issue. The new shares were sold at A$18.90 each, a 12.7% discount from ANZ’s closing price of A$21.64 on Friday, according to its filings.

Shares of Suncorp, which is trying to offload an asset deemed non-essential, rose 5.7%, against a broader market gain of 0.6%. The company will return most of the sale proceeds to shareholders.

Analysts took a cautious stance on the deal given the complexity of previous Australian bank takeovers and economic uncertainty.

“(ANZ’s) acquisition appetite is troubling, given growing recession risks and ANZ’s poor operating performance to date,” Jefferies analyst Brian Johnson said in a client note. .

“ANZ’s main franchise is already struggling and adding more complexity during a time when MQG is driving up filing costs looks unruly,” he added, referring to Macquarie Group Ltd .

ANZ CEO Shayne Elliott said the deal would create a “simpler and stronger platform for growth” that “advances our strategic ambitions”.

“This acquisition is a historic step forward and the culmination of work that began seven years ago,” Elliott said on an analyst call, referring to informal talks between the lenders dating back to 2016.

In a May earnings update, the bank said it could try to boost profits outside of the mortgage business as rising interest rates intensified competition. ANZ last week announced it was in talks to buy accounting software maker MYOB from private equity giant KKR & Co (KKR.N), bolstering its business lending capability.

But earlier on Monday, ANZ said the MYOB deal was now cancelled, signaling to investors that the bank remains focused on mortgages after all. Read more

The deal would also amount to a geographic expansion of ANZ, which is headquartered in Melbourne, Queensland, where Suncorp is based and does most of its business. ANZ would retain Suncorp’s Queensland workforce and branding for at least a few years, among other commitments such as infrastructure funding for the 2032 Brisbane Olympics, the bank said.

The purchase price was 13.8 times the past earnings of Suncorp’s banking unit, ANZ said, below the price-earnings ratio of Suncorp’s overall business but within the range of major Australian banks. .

Suncorp President Christine McLoughlin said the agreed price “fairly values ​​the bank and reflects the hard work of our people and the progress made in achieving our strategic goals.”

($1 = 1.4734 Australian dollars)

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Reporting by Byron Kaye in Sydney and Sameer Manekar in Bengaluru, with additional reporting by Scott Murdoch; Editing by Daniel Wallis, Richard Chang and Kenneth Maxwell

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