Suncorp posts 3Q mortgage contraction

Suncorp Bank has released its financial results for the third quarter of the 2019 financial year (3Q19), reporting a 0.7 per cent decrease in its mortgage portfolio, which dropped from $48 billion to $47.6 billion.

Suncorp’s portfolio increased by 0.8 per cent from $47.3 billion in the 12 months ending 31 March 2019, compared to a 7 per cent increase in the previous corresponding period.

According to Suncorp’s banking and wealth CEO David Carter, the bank was more selective in its approach to lending over the past quarter.  

“Over this time, we have maintained focus on asset quality, managing our margin and supporting the broker channel, including initiatives to improve operational efficiencies,” he said.

As at 31 March 2019, owner-occupied loans made up 42 per cent of the bank’s home lending portfolio, while investment loans totalled 28 per cent.

Further, 79 per cent of loans in Suncorp’s mortgage book were tied to principal and interest repayments, while interest-only loans made up 21 per cent of its portfolio.

Additionally, 79 per cent of home loans in Suncorp Bank’s portfolio were settled with a loan-to-value ratio (LVR) of less than 80 per cent, compared to 21 per cent of mortgages with an LVR of more than 80 per cent.

However, despite reducing its risk appetite, Suncorp reported that over the 12 months to 31 March 2019, the number of impaired assets managed by its retail bank spiked by 18.4 per cent, riding to $58 million.

Mr Carter said that the increase reflected the increased level of financial distress experienced by home loan customers in locations affected by natural disasters.

“Hardship applications relating to floods in Townsville, contributed to an increase in home loans in arrears,” he said.

“We know from experience with past flood events, that the increase in arrears is temporary, with most customers successfully recovering after approximately six months.

“Additionally, during the quarter, the bank has provided support to agribusiness customers materially impacted by significant weather events.”

Total lending breakdown

The bank’s consumer lending portfolio also contracted in 3Q19, dropping by 4.3 per cent in 3Q19 and 38.2 per cent in the year ending 31 March 2019, with the portfolio totalling $155 million at quarter’s end.

The quarterly portfolio contractions in Suncorp’s housing and consumer portfolios were partially offset by increases in its commercial (SME) and agribusiness books, which rose by 0.2 per cent and 0.4 per cent, respectively.  

Suncorp’s commercial portfolio totalled $6.6 billion as at 31 March 2019, while its agribusiness book totalled $4.3 billion.

The bank’s total lending portfolio fell by 0.5 per cent over the quarter to $58.8 billion.

Mr Carter expects lending volumes to improve over the coming quarter, particularly in its commercial portfolio, following the announcement of a $3 billion pledge to SME sector.   

He added: “We expect the ongoing investment in digital enhancements and payment capabilities that improve the banking experience for our customers to continue to deliver at-call deposits growth in the final quarter and beyond.”

[Related: Suncorp cuts mortgage rates by up to 70bops]