The National Australia Bank Ltd (ASX: NAB) share price has been rising over the past month. But could a stronger Australia and New Zealand Banking Group Ltd (ASX: ANZ) derail its progress?
Over the past month, the NAB share price has risen by more than 12%. That's strong progress, considering the S&P/ASX 200 Index (ASX: XJO) has only gone up by 3.3% in the last month.
In recent times, investors have been impressed by the progress that NAB's relatively new leadership team, including CEO Ross McEwan, have made in turning the bank around.
For example, the NAB FY22 half-year result included cash earnings growth of 4.1% to $3.48 billion.
The CEO said that focused investment has been "key" to delivering strong momentum across the business.
But, banks are fighting each other for market share. There are the big four banks of NAB, ANZ, Westpac Banking Corp (ASX: WBC) and Commonwealth Bank of Australia (ASX: CBA). And there are other players like Macquarie Group Ltd (ASX: MQG), Bank of Queensland Limited (ASX: BOQ), and Bendigo and Adelaide Bank Ltd (ASX: BEN) that want to grow.
As such, an increase in market share for ANZ could mean a decrease in market share somewhere else. For starters, an acquisition of Suncorp's banking operations would simply merge the market share of ANZ and Suncorp. But after that, could ANZ use its bigger size to compete more strongly with NAB and others to grow its market share?
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ANZ kicks things up a notch
The ANZ CEO has said that the acquisition could mean it can "compete more effectively in Queensland".
The Australian Financial Review also reported that CEO Shayne Elliot said:
This is a big step forward, but I don't think moving from 13% to 15% market share somehow gives us some dominant position or some pricing power that we didn't have before.
It's a modest uplift, and we get to be a better competitor, with the really big players in the market who are people like CBA. Just as Suncorp probably feels dwarfed by ANZ, we feel dwarfed by CBA.
It's worth noting that ANZ will become the third largest in terms of mortgages and retail deposits if its Suncorp deal goes ahead, jumping ahead of NAB. It will also add $47 billion of home loans for ANZ.
But, even before this deal, ANZ reported that it's getting on a level playing field with the big four in loan processing times. Home buyers value being able to get faster loans through the system. In recent times, ANZ had seen longer processing times, a factor in its losing market share to other banks.
But in the trading update for the last quarter, released on the same day as the acquisition news, ANZ said:
Adding operational capacity and processing resilience in our Australian home loan business has helped deliver consistently faster turnaround times across all channels, and we are in line with major peers for our key customer segments. Lending volumes grew $2 billion (3% annualised) in the third quarter, with particularly strong growth in June. We remain on track to grow in line with the Australian major banks before the end of the financial year and are delivering growth with an eye to maintaining margin performance and credit quality.
A combination of a stronger national presence and better processing times could help ANZ capture more new loans, and slow down growth for NAB.
Foolish takeaway
The ANZ-Suncorp deal is not approved or done yet. There are many hurdles to pass, including the Australian Competition and Consumer Commission (ACCC) ruling on competitive impacts in the sector.
But, if ANZ is successful, it could be a little harder for NAB and others to grow their loan books as much as they have done in recent history.
