The lender has committed to “improving broker servicing and fulfilment” as it seeks to improve the performance of the bank, which experienced a slow down in mortgage lending in FY19.
On Wednesday (7 July), Suncorp Group released its results for the 2018-19 financial year (ending 30 June 2019), in which it reported a whopping 83.5 per cent drop in its net profit after tax (NPAT) of just $175 million.
The drop in profit (down from $1.05 billion in FY18) was largely due to the non-cash loss on the sale of the Australian Life Insurance business.
However, cash earnings were up 1.5 per cent to $1.1 billion.
Suncorp mortgage book performance
Looking at the banking and wealth arm of the group, profit after tax was down 1.4 per cent to $364 million.
According to the bank, this was largely due to “challenging operating and economic conditions, combined with higher regulatory and compliance costs” following the banking royal commission.
The results show that total lending from Suncorp Bank rose by 1 per cent to $59.2 billion, which “principally reflect moderation in mortgage lending, with a highly competitive and slowing housing market, as well as Suncorp’s early adoption of increased serviceability and verification requirements”.
Indeed, the home lending portfolio grew by just 0.4 per cent over the year (to $47.8 billion), which it noted was impacted by “an increasingly competitive and slowing mortgage market”.
However, business lending portfolio grew 3.6 per cent over the year, driven by a 6.9 per cent increase in SME lending (totalling $6.8 billion) but partially offset by a reduction in agribusiness lending due to prevailing drought conditions and the northern Queensland floods.
However, looking forward, Suncorp said it was targeting “above system growth in all portfolios” – which will be driven by economic factors, such as the expected momentum in the mortgage market following the RBA cash rate cuts and changes to serviceability assessments, as well as an increasingly digitised and efficient offering.
In the financial results presentation and media briefing, acting CEO Steve Johnston said that the group’s “first priority is to ensure all [its] people and all [its] programs of work are aligned to improve the performance of [Suncorp’s] core businesses”.
In banking, this includes “a digital-first approach to products and functionality, fast-tracking [Suncorp’s] preparations to being open banking ready, ‘winning’ Queensland in direct, improving broker servicing and fulfilment, and maintaining a low-risk/high-quality credit book”.
Speaking to The Adviser about its broker strategy, Mr Johnston noted that brokers were “critical” for Suncorp’s business and had been “fantastic partners” for the group. Brokers wrote 68 per cent of the bank's mortgages, according to the financial results.
He continued: “When I talk about servicing brokers, one of the key requirements a broker has in dealing with an organisation like ours, particularly in the bank, is having a firm commitment around turnaround times for loan applications. [That includes] having us meet those requirements to the best of our ability so that, in their interaction with the customer, they can be confident that they are delivering to the customer’s expectation,” he said.
Mr Johnston elaborated: “For a business like ours, particularly in banking, we have variable flows of mortgages. We need to be better in making sure that we can bring down our processing times. Even though it is complex, at the moment, with changes to serviceability, we have to bring down those processing times and we have to be dependable and committed as we can be to delivering the commitments that we’ve made to the broker community.”
The acting CEO said it was equally important for the bank to be delivering on its commitments to insurance brokers, too.
He concluded: “That is a priority for us – to improve the way we service and make commitments to our very trusted and supportive partners in the broker community.”
Suncorp announces structural change
The group also announced that it would be reducing its focus on its marketplace strategy and roll out a new, “simplified structure” that will combine the responsibilities for group, customer and digital strategy; digital distribution; brand and marketing; and enterprise portfolio management office.
This will see intermediary distribution teams as well as Australian contact centres and stores aligned to Suncorp’s Banking & Wealth and Insurance operations.
It is hoped this will improve accountability and allow Suncorp to adapt “more quickly to changing community expectations and to execute [its] priorities faster”.
Mr Johnston said: “Part of that decision is to take the distribution businesses that have currently been sitting in the customer marketplace function – and by that I mean our contact centres, our intermediated distribution and our referrals – and move them back into insurance and banking and help us improve accountabilities, reduce duplication, and create more focus on delivering operational improvement.”
Given these changes, it was also announced that Pip Marlow – who joined Suncorp in March 2017 to lead its digital marketplace strategy – will leave the business at the end of August 2019.
The new customer and digital function will be led by Suncorp’s current chief program excellence officer, Lisa Harrison, who will become Suncorp’s chief customer and digital officer.
Mr Johnston commented: “Pip has made a significant contribution as part of the senior leadership team. She has been instrumental in creating a customer-centric culture, including the way we recognise and reward our customers. She has helped embed strong digital foundations, which has reshaped the way we support our customers.”
“I would like to thank Pip for her strong leadership in driving innovation and change, and I wish her every success in the future.”
Ms Marlow commented: “I’m proud of the team’s achievements in driving an innovation lens and improvements in customer experiences that we’ve introduced to Suncorp over nearly three years. This, together with our investment in digital, has helped us adapt to changing customer needs. Suncorp is a fantastic company. It’s been a privilege to have worked with so many inspiring people.”
Speaking of Ms Harrison’s new role, Mr Johnston continued: “Lisa’s appointment reflects the depth of talent at Suncorp. She brings deep marketing, digital and insurance domain experience to this new role.
“The new function will leverage the proven expertise of our technology data and labs team to take our customer and digital strategy to a new level, enabling us to embrace all of the opportunities that digitisation offers our customers and business.”
Annie Kane is the editor of The Adviser and Mortgage Business.
As well as writing about the Australian broking industry, the mortgage market, financial regulation, fintechs and the wider lending landscape – Annie is also the host of the Elite Broker and In Focus podcasts and The Adviser Live webcasts.
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