Bank Australia and Qudos Bank Sign MoU to Explore Merger of Customer-Owned Lenders

Bank Australia and Qudos Bank announced on 1 February 2024 that they had signed a memorandum of understanding to explore a potential merger, a combination that the two customer-owned institutions said could produce one of Australia's largest mutual banks and meaningfully strengthen their collective capacity to invest in services, technology, and competitive pricing against the major listed lenders that dominate the domestic retail banking market.

Both banks operate on a customer-owned, or mutual, model in which depositors rather than external shareholders hold beneficial interests in the institution. Both boards have described the cultural alignment as a significant factor in the decision to explore a combination.

COMBINED SCALE AND DUE DILIGENCE

A merged Bank Australia-Qudos entity would, according to the announcement, be positioned among the largest customer-owned banks in the country.

The MoU signed on 1 February 2024 initiates a period of structured due diligence during which both banks' leadership teams and advisers will examine the financial, operational, and cultural dimensions of the proposed combination.

PROCESS AND REGULATORY STEPS AHEAD

The execution of a memorandum of understanding is an early-stage instrument that does not commit either party to completing a transaction.

Any completed merger would require approval from the Australian Prudential Regulation Authority, which oversees authorised deposit-taking institutions including mutual banks. APRA's review focuses on prudential matters such as capital adequacy and governance, while competition issues fall within the remit of the Australian Competition and Consumer Commission. Any merger would also require the approval of both banks' members.