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Bank of Queensland has confirmed it will fully acquire industry fund-owned ME Bank in an attempt to scale up its retail banking offering and diversify into new regions of the country.
In a statement lodged to the Australian Stock Exchange on Monday, the regional bank announced it would take full ownership of ME Bank through a landmark deal worth $1.325bn.
The majority of the acquisition will be supported by a $1.3bn capital raising initiated by the Sunshine State-based bank.
BOQ noted the deal would double the size of its retail bank and create a more competitive alternative banking product to the big four major players.
ME Bank was first established in 1994 by 26 superannuation funds. It has never paid a dividend to shareholders and has approximately $86bn in total assets and $56bn in deposits.
BOQ chief executive George Frazis said it was a “defining acquisition” and fitted in with the bank’s ongoing overhaul to upgrade its banking technology.
“Critically, ME Bank delivers material scale, broadly doubles our retail bank, and provides geographic diversification,” Mr Frazis said.
“The ME Bank brand is also a great fit with the BOQ and Virgin Money brands, creating customer-centric alternatives in Australia.”
BOQ expects the takeover to deliver benefits between $70m and $80m over a three-year period.
It is anticipated to produce low double-digit growth in the company’s cash earnings per share over the first year following the acquisition.
BOQ’s capital raising is expected to issue new shares at $7.35 each, which is a 12.6 per cent discount on its last traded price on Thursday a week ago.
Shares in the banking group were placed into a trading halt ahead of the announcement.
“Today’s announcement is another major step in our strategy to be the leading customer-centric alternative to the big banks,” BOQ chair Patrick Allaway said.
“With the addition of the ME Bank business, BOQ now has material scale and a compelling growth platform to support this ambition.”
ME Bank in 2020 was embroiled in a public scandal after it automatically lowered withdrawal limits on redraw accounts for more than 20,000 home loan customers.
A House economics hearing last year was told that customers on average had their redraw accounts lowered by $17,500. ME Bank apologised for the failings that were linked to its archaic banking software.
Mr Frazis said the merged banking group would “accelerate” the benefits of a single digital banking platform.
“BOQ’s digital transformation is well under way, and the acquisition of ME Bank is expected to accelerate the pathway to a scaled common cloud based digital retail bank technology platform,” he said.
“We believe that the benefits of a single platform are significant but are largely underpinned by the ability to leverage global capability with evergreen upgrades via cloud software.”
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