Talk grows of major bank acquisition deal
All the latest news and gossip from Brisbane's business movers and shakers... this is City Beat:
Is Bank of Queensland well advanced with plans to acquire rival ME Bank in a deal that could easily top $1 billion?
That's the word from City Beat spies, one of whom reports he overhead a BoQ top gun in a Bondi café last week discussing the fact that they are close to making an announcement.
Predictably, a BoQ spin doctor declined to weigh in on the matter Thursday. "We don't comment on rumour or market speculation,'' she said. Her counterpart at ME was equally tight-lipped.
But banking analysts said the tie up could make sense for BoQ, headed by George Frazis (illustrated), and potentially other joint venture partners involved in a buyout of ME, formerly known as Members Equity Bank.
Chatter about a possible deal emerged this week, with some suggestions that a consortium of buyers, including private equity players, are looking to do a deal worth $1.1bn to $1.5bn.
Launched in 1994, ME is owned by 26 super funds, including SunSuper, AustralianSuper and HESTA, and writes loans and mortgages for industry super members.
With more than 540,000 customers, it oversees assets worth almost $30bn and makes a virtue-signalling point of not investing in fossil fuels, coal assets, gas power, LNG plants, tobacco or the arms trade.
Even with fierce competition from bigger banks, ME generated a 20 per cent spike in net profit to $80.8 million in the last financial year. That was despite absorbing $42m in bad debts.
But the bank also sparked outrage among some of it clients last year in a stumble that forced bank top guns to face a Parliamentary inquiry in May and later saw the departure of longtime boss Jamie McPhee.
The anger bubbled up after ME tinkered with a redraw facility impacting mortgage principal repayments and somehow failed to alert customers ahead of time.
At the same time it's understood that some of the super funds are keen to sell, at least in part because ME has never paid a dividend.
Meanwhile, BoQ has its own troubles, as net profit plunged 61 per cent to $115m in the year to August 31. It's also lumbered with a woeful IT system and has seen the departure of plenty of troops in its finance team as management become more entrenched in NSW.
Despite these headaches, market watchers say a deal could benefit both camps.
"I wouldn't be surprised if it happened. Banks like to get bigger and building up scale is important to them,'' one analyst told us.
Another finance industry player in Brisbane agreed with that sentiment but was more circumspect.
"Bank of Queensland's got the firepower to do it but it probably needs to attend to its own housekeeping before trying to buy or bolt on anything new,'' he said.
"BoQ has got a mountain of IT and platform issues to attend to. It has to tidy its own backyard before it would logically think about an acquisition.
"But it's certainly do-able and they would probably get support for it. The additional scale will be helpful to BoQ as it embraces new technology. They would also be buying at the bottom of the cycle so it could be a very prescient purchase.''
Originally published as Talk grows of BoQ acquisition deal