The CEO of a leading challenger bank has praised the radical transformation of its lending portfolio after posting an 11 per cent jump in profit for the 2016 financial year.
Suncorp Bank yesterday announced a net profit after tax of $393 million, up 11 per cent on the 2015 financial year. The bank delivered total home lending growth of 5.9 per cent to $44.3 billion during the period — broadly in-line with system growth.
“The business lending portfolio returned to growth in the second half, reflecting our recent investment in distribution capability and reach,” Suncorp Group CEO Michael Cameron said.
“As you would expect we continue to focus on acquiring higher quality lending within our risk appetite,” he said.
“This is particularly the case in our approach to investment lending and property development where we have only minimal exposure to the inner city apartment market and mining or mining services lending.”
Over a seven-year period, Suncorp has significantly transformed its lending mix to focus on residential mortgages. For example, FY09 home loans accounted for 52 per cent of its total loan book. Today they contribute 81 per cent. SME lending has remained stable over the last seven years, contributing 10 per cent of the group’s credit exposures, while agribusiness has risen from 6 per cent in 2009 to 8 per cent today.
Corporate and property lending, which accounted for 30 per cent of Suncorp’s total lending portfolio seven years ago, is non-existent today.
Speaking at the release of the group’s profit results in Sydney yesterday, Suncorp’s Michael Cameron remarked: “Those of us who were in this room seven years ago would never have envisaged such a credit outcome.”
Suncorp’s lending portfolio in the 2009 financial year was valued at $54.4 billion. Today it is almost the same ($54.3 billion). However, the bank has managed to add $15 billion in mortgages over the period by dramatically shifting its credit strategy towards residential lending.
“While economic and credit cycles have played a part there can be no disputing the transformation of the bank and its current status as a low risk contributor to the group's platform and marketplace strategies,” Mr Cameron said.
The regional lender increased its net interest income for the 2016 financial year by 2.4 per cent with the net interest margin ending the year at 1.86 per cent, just slightly above the top end of its target range.
Mr Cameron credited the strong result in the context of cash rate reductions, increased competition and funding cost pressures.
Late on Wednesday, Suncorp revealed that it would pass on 10 basis points of the RBA's recent rate cut to variable mortgage holders, with small business borrowers to benefit from a 15 basis point reduction.
[Related: Suncorp unveils unified business model]