Australia’s comfortable banking system will undergo the biggest change in many years with the announcement that Bank of Queensland (ASX: BOQ) is buying Me Bank for $ 1.325 billion

This deal will effectively double the size of BOQ’s retail bank and leave it knocking on the doors of the Big Four, after overtaking Bendigo and Adelaide Bank (ASX: BEN)

The deal to buy ME Bank from its owners of industry super funds will be entirely cash and BoQ is expected to raise $ 1.325 billion through a subscribed fundraiser

BoQ Chairman Patrick Allaway said the deal was ‘transformative’ and would see the bank become the leading ‘customer-centric’ alternative to the Big Four – Commonwealth Bank (ASX: CBA) , Westpac (ASX: WBC), National Australia Bank (ASX: NAB) and ANZ Bank (ASX: ANZ)

He said the two banks were “very complementary” and “would bring together two organizations sharing a common goal and values ​​that generate greater value for customers, employees and shareholders”

The deal is seen as a practical solution for the 26 industry super funds that founded ME Bank in the 1990s, with a price tag of 105 times the book value of ME and 119 times the underlying earnings of ME considered reasonable

Having a stock market listing and a more unified shareholder base could also be a big advantage

ME started providing banking services to industry fund members, but has always struggled to grow almost as fast as its masters, who now have a virtual lock on the big side of the pension industry

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While ME presents itself as an alternative to traditional banks, its main source of income is home loans, which are sold through mortgage brokers.

ME Bank came under heavy criticism last year after making controversial changes to clients’ redesigned and cleared accounts without properly informing them

ME Chairman James Evans said increasing the size of the bank would benefit customers and staff and help the combined bank compete better with rivals

“Today’s decision represents a permanent change for the better in the Australian banking landscape. This agreement brings together two culturally aligned organizations to form what will be an enhanced and influential banking alternative for clients,” said M Evans

He said the banks were a “natural fit” and the combination would have total assets of $ 88 billion and total deposits of $ 56 billion

The acquisition will also increase the geographic diversification of BoQ, with ME having a bias in the Melbourne market, as the two banks work towards a common technology platform

BoQ CEO George Frazis says synergy benefits are expected to reach $ 70-80 million within three years, while return on equity increases in year one

BoQ also raised its cash profit forecast by 8-10% in the first half of the year, largely due to growing mortgage market share and improving profit margins

Managing director George Frazis said the deal would double the bank’s business footprint and increase retail revenues from 36% to 50%

“The increase in the number of customers means that BoQ Group can now offer a real banking alternative to around 145 million people,” he said

ME Chairman James Evans said the deal would keep ME Bank competitive and allow it to benefit on a larger scale

“This will give ME Bank access to additional capital, financing and expertise to support and invest in the delivery of improved products and services for ME Bank customers”

The deal is expected to be finalized by August and is already well on its way to regulatory approval

BoQ’s actions have been suspended since last week when the financing package for the acquisition was put together

ME Bank

World news – UA – Big four banks warned after Bank of Queensland bought ME Bank for $ 1.3 billion