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Suncorp’s profits fall as loan book thickens

by Reporter5 minute read
Suncorp’s profits fall as loan book thickens

Suncorp Bank has recorded a profit loss in the first half of the 2018 financial year, down by 16 per cent from the previous year, despite growth in its overall loan book.

The lender has recorded a net profit after tax of $452 million in its half-year report for the 2018 financial year (HYFY18), down by 16 per cent from $537 million in HYFY17.

However, Suncorp’s overall retail lending portfolio grew by 8.7 per cent in the same period, to $47.2 billion, up from $44.3 billion in the six months leading to December 2016.

The bank’s business lending portfolio also grew from $9.8 billion in HY17 to $10.5 billion in HY18.

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However, operating expenses were markedly up, contributing significantly to the overall drop in profit.

“The bank delivered well above system growth compared to a flat performance this time last year,” Suncorp CEO and managing director Michael Cameron said.

“Origination processes were simplified, there was a big and successful focus on retention and the brand has been re-positioned. Home lending and business lending both benefited.

“While the bank is now achieving good growth, we will continue to protect margins by actively managing the cost base and maintaining a risk-averse approach.”

The CEO added that Suncorp’s lending growth was managed alongside regulatory requirements imposed by the Australian Prudential Regulation Authority (APRA).

“The bank continues to maintain disciplined lending practices and new business credit quality was strong over the period,” Mr Cameron noted.

“Asset growth remained within APRA’s macro-prudential caps and we have low exposure to higher risk segments, such as inner-city apartment markets.”

The half-year report also shows that above-system growth in the home lending portfolio was underpinned by “improvements in customer experience including reduced loan processing times and simplified origination processes, an increased focus on customer retention and capacity within macro-prudential limit settings”.

It suggested that “competitive price offerings and enhanced broker partnerships also contributed to asset growth and geographic diversification, with momentum expected to continue into the second half to deliver growth above system in the 2018 financial year”.

However, the report revealed that net banking fee income and commission reduced due to “a reclassification of Treasury Foreign Exchange fees to other revenue and an increase in broker commissions aligned to the growth in lending”.

Mr Cameron also noted the bank’s efforts to move towards advanced accreditation and work with APRA to ensure the lender’s compliance practices are up to date.

“We continue to make good use of our new modelling capabilities and risk systems which have been invested in as a result of our progress towards advanced accreditation,” the CEO said.

Mr Cameron concluded: “While the pathway to advanced status has been more protracted than we had originally anticipated, we continue to work constructively with the regulator to clarify the next steps in this process and the associated Basel III and ‘unquestionably strong’ capital requirements.”

[Related: Suncorp reshuffles business development team]

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