Suncorp’s loan book contracts, bank earnings slide

Suncorp Group has published its full-year results for the 2020 financial year (FY20), posting a statutory net profit after tax (NPAT) of $913 million, up from $175 million in FY19.

This was despite a 33 per cent decline in the group’s cash earnings, with the NPAT result reflecting a $285 million after-tax profit from the sale of the group’s former Capital SMART and ACM Parts businesses, and the $89-million non-cash impairment charge relating to the core banking platform.

The cash earnings slide was partly driven by a 33.5 per cent decline in the banking and wealth division’s net profit after tax, from $364 million to $242 million.

The bank’s earnings result was impacted by a spike in collective provisions in response to the COVID-19 crisis and subdued lending growth.

Suncorp Bank’s collective provisions totalled $255 million as of 30 June, up from $111 million in June 2019.

The bank’s home lending portfolio contracted 2.8 per cent, down from $47.8 billion to $46.5 billion.

According to the group’s chief financial officer, Jeremy Robson, the contraction reflected “slow system growth, strong competition for new and existing business, and elevated, albeit recently improving, loan processing turnaround times”. 

This resulted in a 2.1 per cent contraction in the bank’s total lending portfolio, from $59.3 billion in FY19 to $58 billion.

Suncorp’s subdued lending performance was offset by deposit growth, up 2.7 per cent to $39.9 billion.

Mortgage deferral breakdown

Suncorp revealed that as of 31 July 2020, approximately 7,700 home loan accounts were under deferral arrangements, representing $2.4 billion in home loans or 5 per cent of the mortgage portfolio.

According to Suncorp, 50 per cent of deferral customers opted to resume full repayments following the bank’s three-month check-in, reducing the total from a peak of 13,200 customers, which equated to 8 per cent of the mortgage book.

Owner-occupiers represent approximately 68 per cent of mortgage deferrals, with 85 per cent of deferral customers paying principal and interest.

Most of the bank’s deferral customers are from Queensland (41 per cent), followed by NSW (34 per cent), Victoria (13 per cent), and the remaining states and territories (12 per cent).

Outlook

Looking ahead, Suncorp Group CEO Steve Johnston said that while the COVID-19 pandemic would have “long-lasting health and economic implications”, it would “present opportunities to accelerate the pace of organisational transformation”.

“The growing preference for digital and reliance on technology is shifting the way we work and the way we support customers,” he said.

“Our teams embraced more agile ways of working to fast-track digital solutions, including enhanced webchat capabilities, online claims functionality and virtual claims assessments.”

Mr Johnston concluded: “This period has fundamentally changed our perspective on what’s possible, and how quickly and efficiently we can adapt to deliver new customer experiences and drive greater efficiencies within the organisation.”

[Related: COVID crisis to spur market evolution]