‘Project Galileo’: Inside ANZ’s $4.9 billion play for Suncorp’s bank

At about 5.30am on Monday morning, ANZ Bank chief executive Shayne Elliott and his chairman Paul O’Sullivan gave the final green light to a deal Elliott said had been seven years in the making.

In Brisbane, following a frantic weekend of board meetings and final preparations, the two men signed off on ANZ’s biggest acquisition in almost two decades: the $4.9 billion purchase of Suncorp’s banking arm.

Under Elliott, CEO since 2016, the bank has been focused on cutting costs and offloading non-core businesses, and he says the deal is a sign it is now shifting towards growth.

In truth, however, Suncorp’s bank has been on ANZ’s radar as a possible target for much longer than seven years: ANZ also came close to buying the Queensland bank during the 2008 global financial crisis.

If Monday’s deal is approved by regulators, it will be the biggest transaction in Australian banking since Westpac swallowed St George during the global financial crisis; it will make ANZ the third-biggest mortgage lender in the country; and it will be one of Elliott’s biggest strategic moves.

However, it is likely to face significant regulatory scrutiny, and it’s also emerged that another suitor for Suncorp’s bank – fellow regional Bendigo and Adelaide Bank – missed out on the chance to join forces with Suncorp. Private equity group KKR, which had been in talks about the $4 billion sale of MYOB to ANZ, has now also been told that ANZ is withdrawing from discussions, after considering the purchase only last week.

There has long been market speculation over whether Suncorp – which makes about two thirds of its profits through insurance brands such as AAMI and GIO -would sell off its bank.

In April this year, ANZ was given the chance to dust off its files on the Queensland lender, after it was told Suncorp was considering its options for the bank. While Suncorp CEO Steve Johnson had previously argued the case for keeping the financial conglomerate as one, on Monday he said it regularly also assessed the potential for offloading the bank and focusing solely on insurance.

“What we’re seeing is the significantly increased cost of running these two businesses in terms of regulatory costs, compliance costs, systems investments,” Johnson said on Monday. “We didn’t want to get into a position where we had to move capital to parts of the business that left others, who could use that capital, wanting.”