Tag: Suncorp

Suncorp completes Guardian Advice remediation program

ASIC says Suncorp Life and Superannuation Limited (Suncorp) has recently completed a remediation program, which impacted over 4,000 clients of Suncorp-owned GuardianFP Limited (Guardian Advice).

Suncorp paid $1,431,167 in compensation to Guardian Advice clients who had received poor advice.

Suncorp undertook the remediation program after ASIC imposed additional licence conditions on the Australian financial services (AFS) license of Guardian Advice because a surveillance uncovered deficiencies in the life insurance advice provided by Guardian Advice to retail clients (15-003MR).

ASIC was concerned that Guardian Advice had failed to comply with its general obligations as an AFS licensee, including monitoring and supervising its representatives and ensuring they were adequately trained or competent. A number of clients suffered harm a result of these failures.

When Suncorp announced that it would exit the financial planning business carried on by Guardian Advice in November 2015, ASIC obtained a commitment from Suncorp that it would complete the remediation program provided for in the additional licence conditions and  fund the compensation of Guardian Advice clients (15-353MR).

Additionally, Suncorp undertook to compensate clients who may have been at risk of having received poor advice from ‘high-risk’ advisers, who were identified using a range of risk metrics applied to all advisers in the Guardian Advice network. Affected clients were also compensated under this remediation program.

Suncorp’s remediation program was overseen by independent experts.

Suncorp reveals partnership deal on Nine’s The Block

All power to the property spruikers, judging by this from Suncorp today:

The Block has become an ‘institution’ in Australia after more than 15 years of inspiring millions of homeowners.

In a Block first, this year Suncorp’s Store Manager, Amber Nijenhuis will make a regular appearance during the show, helping contestants keep their project finances on track throughout the series.

“Keeping your costs on track can be a difficult task with unexpected costs around each corner and the temptation of spending more here and there. I’m excited to help contestants tackle their renovation costs,” Ms Nijenhuis said.

Suncorp’s EGM Brand and Marketing, Mim Haysom, said the Group was thrilled to partner with Channel Nine and The Block for a second year.

“The Block celebrates the potential of the Great Australian Dream,” Ms Haysom said.

“Through our partnership with The Block, we can highlight how putting considered savings goals and budgets in place and sticking to them can help everyday Aussies reach their goals sooner.”

Suncorp will also back a competition giving viewers a chance to win up to $25,000 and partner with award-winning interior designer Shaynna Blaze on a Budget Better series for online platforms.

Suncorp CEO Steps Down

Suncorp today announced that CEO and Managing Director Michael Cameron will be leaving the company after almost four years in the role and seven years as a Board member.

Mr Cameron has led a significant digital transformation of Suncorp, an enterprise wide focus on the customer and navigated the business through a period of unprecedented regulatory change.

Chairman Christine McLoughlin said that while Mr Cameron had made a considerable contribution, now was the right time for change. This will provide the opportunity for the Company to enhance its performance in a highly competitive and challenging external environment as Suncorp seeks to strengthen its core businesses by focusing on its customers, products and brands.

“On behalf of the Board I would like to thank Michael for his leadership in accelerating our digital capability and in driving a customer-first culture,” she said.

To ensure a smooth transition, Mr Cameron will remain employed in an advisory capacity until 9 August 2019 following the release of Suncorp’s full year results.

Mr Cameron said it had been a great privilege to lead Suncorp and he was proud of what had been achieved.

“Suncorp now has the digital foundations in place to enable it to be nimble and to seize opportunities. I believe the business has great potential and will continue to enjoy success,” Mr Cameron said.

In the interim, the Board has appointed Group CFO Steve Johnston as Acting CEO.

Ms McLoughlin said Mr Johnston is an extremely experienced executive and has a deep understanding of Suncorp’s core insurance and banking businesses. He is best placed to lead Suncorp and build on the Group’s multi-channel capability.

“Steve is highly regarded by his peers and has successfully served in various leadership roles in his 13 years at Suncorp. He has played an integral role in the transformation of Suncorp,” Ms McLoughlin said. 

Mr Johnston said he was honoured to take on the role of Acting CEO and lead this highly respected business.

“I recognise the importance of this role, especially during this challenging time for the financial services industry. I am truly passionate about what we do and confident in our future,” he said.

The Board has a robust approach to internal succession planning and Ms McLoughlin confirmed it is in a strong position to supplement this with a search to identify external domestic and international candidates who will also be considered in the selection process. The Board hopes to be in a position to announce the new CEO in the latter part of the year.

Jeremy Robson will step into the Acting Group CFO role while the Board completes the succession process. Mr Robson has been with the Group for six years, most recently as Deputy CFO.

While the external operating environment remains challenging, Suncorp confirms its FY19 cash earnings are in line with market expectations. As noted at the interim result the external operating environment including natural hazards above allowance, investment market performance and unforeseen regulatory costs will impact the Group’s FY19 reported result and outlook.

Suncorp will deliver its full year 2019 result on 7 August 2019.

Suncorp Also Feels The Heat

Suncorp released their APS 330 report for the quarter ended September 2018.  Like the majors, funding pressure and slow loan growth are impacting the results.  There was a rise in 90-day plus past due. They expect the moderation of home lending growth to continue. Sustained pressure from price competition and elevated funding costs is expected to result in a FY19 net interest margin at the low end of the 1.80% to 1.90% target range.

During the September quarter, total lending growth was $265 million or 0.5%. The home lending portfolio grew $361 million, up 0.8% over the quarter, within a competitive and slowing mortgage market. The home lending portfolio remains comfortably within macroprudential limit settings as Suncorp continues to be selective in its target markets. The business lending portfolio contracted $90m or 0.8% over the quarter, with moderate growth in the commercial and small business portfolios offset by a reduction in agribusiness lending following customers repayment of debt.

The transition to AASB 9 Financial Instruments (AASB 9) increased the collective provision in the balance sheet by $20 million on 1 July 2018. Following the adoption of AASB 9, provisions are expected to be more variable from period to period reflecting the increased sensitivity of the modelling to changes in economic conditions and the risk profile of Suncorp’s lending portfolio; and the movement of exposures across credit stages.

A net positive movement in impairment losses was driven by a small number of one-off customer recoveries and an improvement in the risk profile of the lending portfolio, as assessed under AASB 9.

Gross impaired assets of $140 million remained broadly stable over the quarter. Past due retail loans grew by 5.2% to $510 million over the quarter, primarily driven by an increase in customer tenure in late stage arrears. Suncorp’s approach to management of arrears is continually reviewed to improve outcomes for all stakeholders.

Wholesale funding costs continue to be impacted by the elevated Bank Bill Swap Rate (BBSW). During the quarter, Suncorp continued to support its sustainable and diversified funding base by issuing a five-year $750m covered bond. Suncorp also achieved a strong increase in at-call deposits, growing 4.7 times system over the quarter. The Net Stable Funding Ratio (NSFR) was 111% as at 30 September 2018.  The LCR was 128%.

Following payment of the 2018 financial year final dividend to Suncorp Group, Banking’s Common Equity Tier 1 (CET1) ratio of 8.9% reflects a sound capital position towards the upper end of the target operating range of 8.5% to 9.0%.

The moderation of home lending growth is expected to continue, driven by a slowing market and impacts associated with regulatory reforms. Balances of vanilla housing loans dropped by 1.7% compared with the previous quarter, but this was offset by a rise in securitised housing loans and covered bonds, up 16.3%. They grew more in Queensland  than outside the state.

They said they will target above system growth in both home lending and business lending for the financial year, provided that pricing and lending criteria remain within the portfolio tolerance settings, noting the impact that ongoing drought conditions may have on the agribusiness portfolio.

Suncorp will continue to maintain a conservative risk appetite, with no material changes in any segment. While impairments could be impacted by economic factors and ongoing drought conditions, they are expected to remain below the bottom end of the through-the-cycle operating range of 10 to 20 basis points of gross loans and advances.

Suncorp continues to target above system growth in at-call customer deposits, leveraging the investments made in enhanced digital and payment capabilities. Sustained pressure from price competition and elevated funding costs is expected to result in a FY19 net interest margin at the low end of the 1.80% to 1.90% target range.

They say the expected impacts of the Basel III reforms and APRA’s roll-out of unquestionably strong benchmarks cannot be confirmed until APRA releases the draft standards, which is assumed to be in early 2019.

Rates Up, Lending Down

Today’s video post discusses the implications of the latest official lending data and announced rate rises.

More Lenders Hike Mortgage Rates

Now Westpac has broken the dam, others are following, as expected.  More will follow, especially late on a Friday afternoon…

Both regional banks, Suncorp and Adelaide Banks said that “challenging” market conditions have forced them to hike rates on variable rate mortgages across both owner-occupied and investor  mortgage products by as much as 40 basis points.

Suncorp says rates on all variable rate home and small business loans will rise by 17 basis points and 10 basis points respectively, from September 14.

Adelaide Bank says rates for eight products across its range of principal and interest and interest-only owner-occupied and investor products will apply from  September 7. Specifically, principal and interest-owner occupied and investment variable loans will be increasing by 12 basis points, interest-only owner occupied and residential investment loans will rise by 35 basis points and 40 basis and interest-only investment loans settled before January 1 will be increased by 12 basis points.

Lets be clear about what is happening here. Funding costs are indeed rising, as we show from the latest BBSW.

In addition some of the smaller lenders are lifting some deposit rates to try and source funding.

But the real story is the they are also running deep discounted rates to attract new borrowers, (especially low risk, low LVR loans) and are funding these by repricing the back book. This is partly a story of mortgage prisoners, and partly a desperate quest for any mortgage book growth they are capture. Without it, bank profits are cactus.

Once again customer loyalty is being penalised, not rewarded.  Those who can shop around may save, but those who cannot (thanks to tighter lending standards, or time, or both) will be forced to pay more.

Suncorp Full Year Profit Falls

Suncorp has announced a net profit after tax (NPAT) of $1,059 million, a 34 per cent uplift on the first half of 2018.

However, this is 1.5% lower than the FY17 result, which they say was driven by the accelerated investment in the strategy. Actually, given the complexity of the market, and their business, I think they are doing rather well!

The Board has declared a final ordinary dividend of 40 cents per share and a special dividend of 8 cents per share. This brings the total dividend for 2017-18 to 81 cents per share, fully franked. Total dividend to investors in FY18 is up 11 per cent on the prior year.

Suncorp said the result was driven by stronger second half performance, reflecting the early benefits of the strategy.  The Business Improvement Program exceeded target by $30m. Digitisation of the business continues apace.

Key numbers

Insurance (Australia) delivered NPAT of $739 million. Motor and Home portfolios have performed strongly with GWP growth of 4.7 per cent, and claims performance at better than industry levels.

Banking & Wealth delivered NPAT of $389 million, with above system growth in lending (1.2x system or 6.2%)  and deposits (up 4.7%). A strong profit increase in Wealth was driven by improved investment income and reduced project costs.

New Zealand achieved NPAT of A$135 million, reflecting premium growth, unit growth, good claims management and expense control.

The Group NIM was 1.84 in FY18, but fell in the second half, from 1.86 to 1.82, reflecting the funding costs mix.  They suggest BBSW rates will “moderate”.

Overall provisions fell.

But past due on the home loans portfolio rose, consistent with other lenders.

Sale of Australian Life insurance business

Following the completion of a strategic review, Suncorp has entered into a non-binding Heads of Agreement with TAL Dai-ichi Life Australia to sell the Australian Life insurance business.

As part of the proposed transaction, Suncorp will enter into a 20-year strategic alliance agreement with TAL to provide life insurance products through Suncorp’s direct channels, including its digital channels, contact centres and store network. Completion of the transaction is expected to occur by the end of 2018, subject to regulatory approvals and conditions.

Capital

What Suncorp said

Suncorp CEO & Managing Director Michael Cameron said that the strong performance in the second half is driving momentum for FY19.

“Six months ago, we committed to a stronger second half, as the benefits of our strategy begin to flow through, and I’m pleased to report a 34 per cent uplift on NPAT on the first half. This result is a direct outcome of the repositioning programs we have implemented over the past two years. We are now beginning to see momentum, to deliver a further uplift in shareholder returns in FY19,” he said.

Suncorp March 18 Update

Suncorp gave a quarterly update under Australian Prudential Standard 330.

Total lending grew 0.9%, or 5.4% year to date, slower than the first half.  Total lending assets grew $546 million to $58.3 billion over the quarter. Mortgage growth was 0.8% in the quarter, or $361 million. Investor and interest only loan mix declined.

They also reported some growth in the business portfolio.

Impairment losses for the quarter were 2 million or 1 basis point on gross loans (annualised), well below their 10-20 range through the cycle.

However, the % of loans past due rose.

NSFR was 112% and the CET1 ratio was 8.80.

They executed $4.2 billion in term wholesale issuance over the financial year to date, including both domestic and offshore, with an average weighted term of 3.3 years.

Subsequent to the March quarter they announced a $1.25 billion Residential Mortgage-backed Security transaction, which increased CET1 by around 13 basis points.

 

Suncorp Hikes Interest Rates

From Australian Broker

Non-major bank Suncorp has announced it will hike interest rates on all variable rate home and small business loans, starting 28 March.

Variable Owner Occupier Principal and Interest rates will rise by 0.05% p.a., Variable Investor Principal and Interest rates will increase by 0.08% p.a., and Variable Interest Only rates increase go up by 0.12 p.a.

Suncorp’s Variable Small Business rates will increase by 0.15% p.a. and Access Equity (Line of Credit) rates will increase by 0.25% p.a.

The bank’s CEO David Carter said the decision to increase rates was based on increasing costs of funding, as well as meeting the costs associated with regulatory change. The outlook for US interest rates factored in the decision as well. “As a result, we have seen the key base cost of funding, being the three-month Bank Bill Swap Rate (BBSW), rise approximately 0.20%. This increase results in higher interest costs to our wholesale funding, as well as our retail funding portfolio, such as term deposits,” he said in a statement.

According to Suncorp, the “vast majority” of its customers will continue to pay rates well below the headline, due to the products’ various features and benefits.

“It remains our priority to offer a range of competitive products and services to all of our customers. The higher interest costs will benefit our deposit customers, with Suncorp offering attractive rates across term deposit and at call portfolios, including our new Growth Saver product that rewards regular savers with a 2.60% bonus interest rate,” Carter said.

Suncorp HY18 Profit Down 15%

Suncorp released their Hy18 results today. Reported net profit before tax was $452 million, down 15.8% on pcp.  They explain this fall in terms of the impact of the damaging Victorian hailstorm that occurred just prior to the balance date, as well as the significant investment in their two major programs.

The management are doing the right things to get the business onto a stronger revenue and profit generating position, but still have risks relating to the future share of home lending, and ongoing natural hazards. Their digital strategy is beginning to pay dividends, but there is more to do. APRA’s recent announcements on capital ratios means the advanced capital approach will likely be less beneficial.

The result included the Business Improvement Program investment of $50 million, Marketplace spend of $36 million, with Natural Hazards $65 million unfavourable to allowance, driven primarily by the Victorian hail storm. Natural hazards were $395 million overall.

The Group’s top line growth was 2.5% driven by strong momentum in both Consumer General Insurance and Banking: Australian Home and Motor Insurance Gross Written Premium (GWP) up 3.9%; Bank lending growth 8.7%, well above system; Australian Life Insurance underlying profit after tax increased to $39 million, up 56% and New Zealand General Insurance achieved GWP growth of 7.6%

Total operating expenses increased 3.3 per cent, excluding the Business Improvement Program, and 5.7 per cent when including the net investment in the program.

Their $2.7 billion Business Improvement Program will reset the cost base and they foresee stronger growth ahead (presumably large insurance claims permitting!). The net benefits this year will be $10 million but that grows quickly to an expected $195 million next year, and $329 million in FY20.

Digital interactions are up 19% since this time last year. This has contributed to a 10% reduction in complaints.

In FY19, they are committing to a $2.7 billion cost base despite expected volume growth, and inflation.

The interim dividend was 33 cents, reflecting a payout ratio of 90%.

Looking across the divisions:

Insurance (Australia) – NPAT of $264 million was down 28.5 per cent as solid growth in net earned premiums was offset by higher natural hazard costs and the impact of investment in the Business Improvement Program.
GWP growth for Home and Motor Insurance was 3.9 per cent, driven by unit growth and price increases, while GWP growth in Commercial lines was 1.5 per cent for HY18. CTP premium growth was impacted by scheme reform in NSW and Queensland.

Net incurred claims costs were up 14.7 per cent, reflecting higher natural hazard costs.

Investment income on the insurance funds was $120 million. The headline result was supported by mark-to-market gains from narrowing credit spreads and the outperformance of inflation-linked bonds. This was offset by mark-to-market losses from an increase in risk-free rates. The underlying portfolio yield was $106 million, or 2.3% annualised, which is slightly below our expectation of around 80 basis points above the risk-free rate.

Australian Life Insurance underlying profit after tax was $39 million, up 56 per cent for the half, reflecting benefits of repricing and the ongoing focus of the optimisation program.

Banking & Wealth– delivered an NPAT of $197 million for the half, down 5.3 per cent on HY17, with good top line growth, offset by investment in the Business Improvement Program. Lending growth of 8.7 per cent reflected strong consumer and commercial lending momentum within Suncorp’s risk appetite.

Net interest margin (NIM) of 1.86 per cent remained strong supported by asset repricing and efficient funding.

Business credit quality was strong over the period. Impairment losses of $13 million, representing 4 basis points, remain well below the long‐run range

New Zealand – achieved a profit after tax of NZ$67 million (A$61 million) for the half year, an improvement of 81 per cent over the prior corresponding period. GWP growth was 7.6 per cent (in NZ dollar terms), with good performance across all channels (on a like for like basis, excluding the impact of the sale of Autosure in FY17, GWP increased 10.4%). Strong new business and retention rates delivered in‐force premium growth of 5 per cent (in NZ dollar terms).

After payment of the dividend, the franking account balance will be $158 million. The Group is well capitalised with $381 million in CET1 capital held above its operating targets.

Suncorp remains committed to returning excess capital to shareholders.

With regards to advanced capital management (IRB) they said:

While the pathway to advanced status has been more protracted than we had originally anticipated, we continue to work constructively with the Regulator to clarify the next steps in this process and the associated Basel 3 and ‘unquestionably strong’ capital requirements.