BOQ, Bendigo Bank reportedly in merger talks

Market sources say talks are happening, and experts say a merger makes sense

BOQ, Bendigo Bank reportedly in merger talks

Bank of Queensland is reportedly in initial talks regarding a $10 billion-plus merger with Bendigo and Adelaide Bank, just months after the exit of BOQ chief executive George Frazis.

Frazis left the bank in November as its board made changes to the lender’s strategic priorities, The Australian reported. It has been suggested that BOQ’s board has decided not to progress with a CEO search until it can determine whether a merger with Bendigo Bank is possible.

However, BOQ sources told The Australian that a CEO search was ongoing and denied that talks with Bendigo Bank are taking place.

Despite that denial, multiple market sources told the publication that merger talks have been happening, and experts say a merger deal makes sense.

Competitive pressures

The pressure for BOQ and Bendigo to join forces in a highly competitive mortgage market has been ratcheted up recently, especially with ANZ agreeing to buy BOQ’s Queensland rival, Suncorp Bank, for $4.9 billion.

BOQ’s market value is $4.54 billion, and Bendigo’s is $5.7 billion, according to The Australian.

Bendigo and Adelaide Bank had lobbied to buy Suncorp before the ANZ deal was inked. BOQ, meanwhile, snapped up ME Bank for $1.3 billion last year.

Read next: Consumer advocates slam ANZ-Suncorp deal

In December, some market watchers opined that Frazis’ sudden departure from BOQ cleared the way for a merger with Bendigo and Adelaide Bank, as Frazis wouldn’t be the right cultural fit for the merged entity, The Australian reported.

Both banks need to gain scale to stay competitive in the market.

At the time of Frazis’ exit, BOQ chairman Patrick Allaway praised the departing CEO for overseeing a return to growth at the bank and overseeing the acquisition of ME Bank.

Some analysts, however, said that BOQ overpaid for ME Bank. The $1.3 billion deal was 1.05 times ME’s book value and 11.9 times its annual underlying cash earnings, The Australian reported.

Merger challenge

One possible challenge to a merger is Bendigo and Adelaide Bank’s community structure, The Australian reported. The bank shares profits with Australian communities, while BOQ has franchise branches.

BOQ has 163 branches and more than 900,000 business and retail customers, according to The Australian. Bendigo Bank has 220 community-owned branches and 400 Elders outlets, with more than 1.9 million retail customers.

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