BOQ Acquires ME Bank to Become Sixth Largest in Australia

Bank of Queensland (BOQ) has signed a $1.325 billion deal to acquire ME bank on Feb 22, paving its way to challenge the big four dominance. (Reuters/Edgar Su)

Bank of Queensland (BOQ) has signed an all-cash deal to acquire Members Equity Bank (ME) for about $1.3 billion (US$1.03 billion).

Announced on Feb. 22, the deal will see the BOQ emerge as a nation’s sixth-largest bank, giving it the scale it needs to challenge the big four—NAB, CommBank, ANZ, and Westpac.

The acquisition was fully funded through underwritten equity raising and is expected to be complete by the end of the 2021 financial year.

BOQ chairman Patrick Allaway described the deal as “transformational” and “strategically aligned,” saying it was a major step in the bank’s plan to be “the leading customer-centric alternative” to the big players.

“With the addition of the ME Bank business, BOQ now has a material scale and a compelling growth platform to support this ambition,” he said in a statement.

ME is an industry super fund-owned mortgage lender launched in the 1990s, with a current loan book value sitting around $25 billion. As a result, BOQ will double its retail bank size, bringing its retail and business ratio close to a 50-50 split. It will also lift its ranking among the national financial institutions to the sixth position, just below Macquarie Bank.

BOQ Managing Director and CEO George Frazis said the deal is set to deliver “sustainable and profitable growth” to the merged entity.

“Combined, the group, will have pro forma total assets over $88 billion, with total deposits of more than $56 billion,” he said.

The bank also expects the integration to generate benefits between $70 million to $80 million within three years and boost return on equity in the first year.

The two banks confirmed business remains as usual for customers and employees. Under the deal, the ME brand, employee, operations, and Melbourne-based presence will be retained. The merger will not affect or change its existing customers’ accounts, nor their relationship with ME bank.

“We are pleased that under the proposal, the ME Bank brand and operations will be maintained,” ME Bank’s chairman James Evans said. “ME customers will be able to enjoy the same simple and straightforward products and services we know they expect from ME Bank, along with the additional benefits of being part of a bigger bank.”

ACCC Welcomes the Merger

Rod Sims, chair of ACCC, has welcomed the merger and sees it as a potential way to disrupt the status quo of the “big four” Australian banks.

“Our assessment is those four players only see themselves in the market; they don’t take much notice of the smaller players when thinking about pricing or other decisions,” he told the Sydney Morning Herald.

Sims also believes that the acquisition means both institutions now stand a better chance of penetrating the big four banks’ market dominance.

“If this can help them with a wider product offering, a wider geographic offering, a bit more economies of scale, if this could help them challenge the big four, that’s helping,” he said.