At the time of writing, NAB shares are trading up 0.69% at $30.74 apiece.
NAB is one of the largest banks alongside Australia and New Zealand Banking Group Ltd (ASX: ANZ), Commonwealth Bank of Australia (ASX: CBA), and Westpac Banking Corp (ASX: WBC). Both ANZ and Westpac are in the red today, while CBA is 0.58% higher.
NAB seems interested in making bolt-on acquisitions to increase the size of its consumer division. It recently bought the Australian consumer division of Citigroup. The purchase price is the net assets of the business, plus a premium of $250 million. At the time of the announcement, the required equity was approximately $1.2 billion.
NAB’s interest in Suncorp Bank
According to reporting by the Australian Financial Review, if Suncorp decides to put up its banking division for sale then NAB would be interested in trying to buy it.
The newspaper reported that NAB’s leadership has “informally” told Suncorp’s management about the interest.
The approach was reportedly so that Suncorp’s board would know there was a large potential bidder that would be serious if a sale process were to proceed.
It’s possible that a potentially enlarged NAB is a reason that investors are sending the NAB share price higher.
How much would this add to the big four bank?
In its quarterly update for the three months to 31 March 2022, Suncorp reported that its total housing loans were $48 billion (up 1.7% over the quarter). It also had $11.3 billion of business loans, up 0.8% for the quarter.
The Suncorp Bank impairment expense was $1 million for the quarter. Suncorp Bank CEO Clive van Horen said its lending portfolio continued to be “high-quality and conservatively positioned”.
It was also noted that turnaround times were “consistently competitive” over that quarter, reflecting “continued delivery of a targeted program of work to improve customer and broker experiences”.
Wouldn’t other banks be interested?
It’s possible that banks other than just NAB would be interested in acquiring the Suncorp Bank business.
The AFR suggested that each of the big four ASX banks of NAB, CBA, Westpac, and ANZ would be interested. However, for varying reasons, NAB may be the best-placed candidate.
The newspaper noted that CBA may be too large to buy the business due to competition reasons. Therefore, CBA could attract the attention of the Australian Competition and Consumer Commission (ACCC). Westpac’s “painful” restructuring could mean it isn’t in a position to make an acquisition. The AFR said that ANZ is “in the doldrums”.
However, the newspaper did point out that Macquarie Group Ltd (ASX: MQG) could be a bit of a wildcard – the Macquarie banking division is looking to grow its mortgage book.
What would happen to Suncorp?
For starters, the company would have a few billion dollars to decide to return to shareholders and/or invest into its remaining business.
The company would then still have its insurance operations with multiple brands including AAMI, Bingle, Apia, Terri Scheer, Vero, and Asteron Life.
NAB share price snapshot
The NAB share price is up almost 7% this year to date and 16% over the past 12 months. However, it is down 6.5% over the past month and 5% over the past week.