Bank Australia’s Qudos merger solidifies its competitive position

Its Qudos and Australian Unity Bank mergers are not expected to disrupt core activities.

Bank Australia (BAL) has solidified its competitive position and is expected to maintain a ‘strong’ capital position following its merger with Qudos Bank.

BAL and Qudos Bank completed their merger on 1 July 2025. Qudos Bank transferred all its assets and liabilities to BAL, which will operate both the Bank Australia and Qudos Bank brands.

Separately, BAL is scheduled to acquire Australian Unity Bank’s assets and liabilities in fiscal 2026.

Taking these two acquisitions into account, BAL is expected to see its risk-adjusted capital (RAC) ratio decline to 16.2% to 16.7% through fiscal year 2026 and 2027, according to estimates from S&P Global Ratings.

“It reflects our view that the consolidated entity will not experience any disruptions to core activities and will maintain underlying loan growth slightly above average for the Australian banking system,” the ratings agency said.

The RAC ratio is the ratio used to gauge a bank’s ability to withstand an economic downturn or risk, according to Investopedia.

Integration risks
However, BAL does face integration risks with Qudos as it works to consolidate systems whilst managing the drag on profitability from merger related costs, said S&P.

BAL is expected to remain a price taker in the Australian lending and deposit market.

“This makes it susceptible to competitive pressure from Australia's larger regional and major banks. Following the merger, BAL will have a market share of about 0.4% of Australia's residential lending market,” the ratings agency said.

Overall, however, the merger is unlikely to materially affect underlying risk in BAL’s consolidated lending and funding portfolios, S&P said.

“We forecast BAL's credit losses will remain low at about 0.05% of customer loans, lower than the systemwide average. We expect the mutual bank to remain very well capitalized with a RAC ratio between 16.2% and 16.7% through fiscals 2026 and 2027,” it said.