The latest news and gossip from Brisbane’s business people … this is City Beat:
Are the Bank of Queensland well advanced in their plans to take over rival ME Bank in a deal that could easily top $ 1 billion?
That’s the word of City Beat spies, one of whom reports holding a BoQ-top gun over himself in a Bondi cafe last week and talking about they’re about to make an announcement.
Predictably, a BoQ spin doctor declined to look into the matter on Thursday. « We don’t comment on rumors or market speculation, » she said. Her counterpart at ME was just as nervous.
However, bank analysts said the collaboration could make sense for BoQ, led by George Frazis (illustrated) and potentially other joint venture partners involved in a buyout of ME, formerly known as Members Equity Bank .
There was talk this week about a possible deal, with some suggestions that a consortium of buyers, including private equity players, would seek a deal worth $ 1.1-1.5 billion.
Founded in 1994, ME is owned by 26 super funds, including SunSuper, AustralianSuper and HESTA, and writes loans and mortgages for super members of the industry.
With more than 540,000 customers, the company oversees nearly $ 30 billion in assets and is a signal not to invest in fossil fuels, coal, gas power, LNG plants, tobacco, or the arms trade.
Despite stiff competition from larger banks, ME achieved a 20 percent increase in net income to $ 80.8 million in the last fiscal year. That was despite taking on $ 42 million in bad debt.
But the bank also sparked outrage from some of its clients last year when it stumbled, which forced the bank’s top guns into a parliamentary investigation in May and later saw the departure of longtime boss Jamie McPhee.
The anger rose after ME tinkered with a redraw feature that was affecting mortgage repayment and somehow failed to alert customers in time.
At the same time, it is believed that some of the super funds are happy to sell, at least in part because ME never paid a dividend.
Meanwhile, BoQ has its own problems as net income fell 61 percent to $ 115 million as of August 31. In addition, BoQ is facing a sad IT system and with increasing management has dropped a lot of troops in its finance team rooted in NSW.
« I wouldn’t be surprised if it happened. Banks like to get bigger and building economies of scale is important to them, » one analyst told us.
« The Bank of Queensland has the firepower to do this, but it will likely have to run its own housekeeping before trying to buy or screw anything new, » he said.
« BoQ has to deal with a variety of IT and platform problems. It has to clean up its own garden before it can logically consider an acquisition.
« But it is definitely doable and they would likely get support for it. The extra scaling will be helpful for BoQ as it encompasses new technology. They would buy at the end of the cycle too, so it is a very cautious buy could. » »
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