Investors may be wondering whether Commonwealth Bank of Australia (ASX: CBA) shares could benefit from the news that ANZ Group Holdings Ltd (ASX: ANZ) has been blocked from buying the banking division of Suncorp Group Ltd (ASX: SUN).
The Australian Competition and Consumer Commission (ACCC) denied ANZ's proposed acquisition on competition grounds.
Suncorp is one of the larger challenger banks in Australia. As such, the ACCC argues its removal from the loan market would reduce competition in the sector.
The ACCC noted this also meant that Suncorp Bank would not be able to merge with Bendigo and Adelaide Bank Ltd (ASX: BEN), suggesting that would "likely strengthen and diversify the competitive power and second-tier banks".
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Why did the CBA share price decline on Friday?
Interestingly, CBA shares fell 0.58% on Friday amid this news.
The ACCC suggested that if the deal went ahead, it would increase the likelihood of the major ASX bank shares adopting a 'live and let live' approach to each other to maintain or protect their existing market share.
The regulator would prefer that the banks competed strongly on "price, innovation and the quality of their service and products to win customers".
We'd need to ask each CBA share seller the reasons why they sold at a lower price on Friday. But if I had to draw a link to the blocked deal, I'd suggest that competition staying stronger is not good news for CBA shares because of the implications for future margins and market share if Suncorp were out of the picture.
ACCC deputy chair Mick Keogh noted that evidence the ACCC collected "strongly indicates that the major banks consider the second-tier banks to be a competitive threat". It also said that an approved deal would "further entrench an oligopoly market structure that is concentrated".
I'll also note that the ACCC pointed out that if ANZ did not acquire Suncorp, it would give ANZ "a stronger incentive to disrupt any coordination in the market".
Based on the regulator's stance, it appears the decision to block the move was not the best outcome for CBA shares and profitability.
Are there any positives?
At a stretch, we could say that ANZ staying smaller means it won't have as much financial strength to compete with CBA, particularly in Queensland and in the mortgage market.
Also, Suncorp may not be that focused on growing its mortgage book, which could bode well for CBA if it means less-focused competition, though the ACCC seems to suggest that Suncorp's banking operations are a good merger candidate with Bendigo Bank.
In my opinion, the biggest factors for CBA's profit (and CBA shares) will be how competitive the whole sector is from here (not just ANZ), what happens with interest rates and how borrower arrears perform.
