Suncorp home loan book grew $4.6bn in FY23

Suncorp Bank revealed its financial year results for the period ending June 2023, reporting home lending increased by 9.1 per cent ($4.6 billion) taking its home loan book to $54.8 billion.

This marked a substantial rebound from the 0.9 per cent decline in home lending during FY21 and continued the steady momentum of 9 per cent growth in FY22.

Despite experiencing lower home lending activity during the latter half of the financial year, Suncorp Bank remained resolute in maintaining a balanced approach between growth and margin outcomes.

Chief executive officer Steve Johnston expressed satisfaction with the bank’s consistent growth in home lending, attributing it to “improved broker and customer experiences”.

Indeed, brokers wrote 80 per cent of the bank’s new flows.

The results revealed ongoing investment in the broker channel through “simplified processes, improved productivity, and a clear focus on lower-risk new business”.

Notably, the third-party channel has now contributed to 74 per cent of the bank’s total lending portfolio, compared to 70 per cent from the previous financial year.

Despite a strong broker presence in Queensland (42 per cent), Suncorp Bank highlighted its growing broker presence in other states, particularly NSW (30 per cent), Victoria (15 per cent), and Western Australia (8 per cent).

“These outcomes are particularly pleasing given the challenging backdrop over the FY23 plan period, including the global pandemic, social and economic disruption and market volatility, supply chain inflationary challenges, and unprecedented natural hazard events,” Mr Johnston said.

Suncorp Bank also reported its steps towards removing cashback offers and increasing back-book retention hurdles, to improve its overall lending portfolio quality.

Owner-occupier lending lifted by 69 per cent throughout the year and accounted for 72 per cent of the bank’s total lending portfolio.

However, the surge in interest rates over the past year caused fixed-rate originations to plummet to a mere 3 per cent of new loans, down significantly from the previous year’s 36 per cent, which constituted 20 per cent of the bank’s total home loans.

Given half the outstanding fixed-rate loans are rolling off this year across Australia, Suncorp noted it “continues to proactively contact customers prior to and post maturity to provide support to manage the increase in monthly repayments”.

New loans with an LVR above 80 per cent represented only 7 per cent of originated loans amid tight serviceability constraints and lending requirements.

The business lending sector also witnessed positive developments, with total business lending increasing by 5.9 per cent to reach $12.4 billion.

While the SME portfolio experienced a slight contraction due to operational changes and a competitive recruitment market, the agribusiness sector demonstrated resilience by growing 5.2 per cent to reach $4.5 billion.

Overall, Suncorp Bank saw its margins increase by 27.7 per cent, marking $470 million.

Despite the increasing debt amid rising interest rates, mortgage arrears past 90 days remained flat compared to the past financial year at 0.42 per cent of loans, down from 0.43 per cent in FY22 and 0.83 per cent in FY21.

ANZ-Suncorp merger hurdles cited

Following the Australian Competition and Consumer Commission (ACCC) decision to not grant merger authorisation for ANZ Banking Group (ANZ) to acquire Suncorp Group’s banking arm, Mr Johnston reiterated the bank “remains fully committed to supporting Suncorp Bank while the process continues”.

“We are obviously disappointed with the ACCC’s decision to deny authorisation,” Mr Johnston said.

He added that the bank “maintains the view that the proposed sale is in the best interests of our customers, shareholders, and employees and that it will deliver public benefits for Queensland and the nation.”

“In our view, the deal can achieve these objectives without adversely affecting the competitive dynamics in the markets in which we operate.

“While we have only had a couple of days to review the ACCC determination, we’ve seen nothing that has changed our view on these matters or our level of confidence that the deal will ultimately be approved.”

Subject to all the regulatory and government approvals being received, completion is now expected by the middle of the 2024 calendar year.

Jeremy Robson, chief financial officer, added there will be some additional costs, based on the delay in the process.

“We now expect the separation and other costs to increase from the previously estimated $500 million to between $575 million and $600 million.

“This reflects the delayed process and improved clarity on the program requirements.”

But he added there had been no change to the expected net proceeds from the sale of the bank.

Digital investment

Suncorp reiterated its investment in digital banking, AI, and the broker channel as consumers seek fast processes and instant results.

The bank’s initiatives included a nationwide rollout of digital connectivity and the launch of an instant pricing tool on its broker portal, enhancing brokers’ capabilities in pricing requests for new loans, announced earlier this year.

Suncorp previously said all brokers accredited with the bank can use the tool to complete “best discretionary price for applicable new lending”, then upload the pricing approvals to their applications prior to submitting in ApplyOnline.

[Related: Suncorp launches pricing tool for brokers]