BOQ-ME Bank deal to create sixth largest bank

Last month, Bank of Queensland (BOQ) announced that it would be buying ME Bank from Industry Super Holdings for $1.3 billion. 

According to new analysis by Roy Morgan, if approved, the transaction would represent the largest merger of two local banks for more than a decade, with 1 million customers between them.

The deal would make the expanded BOQ Group the sixth largest bank in Australia in terms of total customers, according to Roy Morgan, behind only the big four and Bendigo Bank. 

The transaction could also broaden BOQ’s reach across the country. While both banks have a significant footprint in NSW, BOQ’s strength is in Queensland and Western Australia, while more than a third of ME Bank’s customers are from its home base of Victoria. 

The deal would see BOQ broaden its geographic risk, as its $44-billion book is Queensland-dominant, while ME Bank’s $27-billion book is Victoria-dominant.

Roy Morgan’s data has shown that more than 80 per cent of BOQ’s customers are based in Queensland, NSW or Western Australia, including nearly half in Queensland – while almost 80 per cent of ME Bank’s customers are in Victoria, NSW or Queensland, including over a third in Victoria.

BOQ’s customers are also older than ME Bank’s, with around 21.5 per cent aged 65 and over, compared with only 13.9 per cent for ME Bank. 

In contrast, ME Bank’s customers are only of a slightly younger profile, with around 60 per cent aged from 35-64, compared with 50 per cent of BOQ’s customers.

Small-business owners were significantly over-represented among BOQ’s base, while professionals, managers and semi-professionals were the most over-represented among ME Bank customers.

Reflecting on home loans (ME Bank’s largest source of revenue), nearly half of ME bank’s customers are paying off their home loan compared with more than a quarter who own their home. 

In contrast, a lightly larger share of BOQ’s customers own their home (36 per cent) than those who are paying off their home (35 per cent).

Michele Levine, chief executive of Roy Morgan, said the “challenge and opportunity” for the merger lie in the differences of the banks’ customers. 

“Over many years and across many industries, Roy Morgan has recorded higher levels of customer satisfaction for smaller players,” Ms Levine said. 

“It seems easier to satisfy the needs of customers who have chosen a smaller, niche brand than to satisfy the needs of a large, often heterogeneous customer base. 

“History shows unsuccessful mergers that see an exodus of customers are those that failed to recognize the unique reasons customers chose their brand in the first place and stayed with it.”

The age profiles contribute to the key differences between the two customer sets, she added, commenting they also have contrasting values and attitudes, aligning with different ends of Roy Morgan’s “value segments”.

What the BOQ-ME Bank transaction entails

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

The ME Bank brand, people, operations and Melbourne-based presence will be retained, “reflecting BOQ’s multibrand strategy and the commitment of both banks to retain their common customer-centric ethos and values”, BOQ said last month.  

The transaction is expected to be finalised by the end of this financial year (and, at latest, by August).

ME Bank said the deal would not affect or change existing customers’ accounts or arrangements, nor their relationship with ME Bank. 

[Related: Two non-majors to merge]