Amidst the volatile environment in the banking sector with big banks getting a hit from the new tax levy and the recent ratings cut by credit ratings agency, Standard & Poors for about 23 Australian financial institutions (including Bendigo and Adelaide Bank and Bank of Queensland) at the back of housing market risks, Suncorp Bank (ASX: SUN) is reluctant to take a backseat in making a headline.
The bank has lifted third-quarter home loan lending by 2.8 per cent. In the latest quarterly update, the home lending portfolio has been reported to have grown modestly reflecting challenging market conditions. The Business lending growth was also flat while strong new business volumes were witnessed. However, repayments from successfully completed property developments and favourable conditions for agribusiness customers led to repayment of loans. On the other hand, the bank has less exposure to the higher risk lending segments of inner-city apartments and businesses affected by the resources industry slowdown. SUN has also been able to maintain a sound credit quality (with impairment losses of $7 million, or 5 basis points of gross loans and advances (annualised)). Further, the Bank’s Common Equity Tier 1 (CET 1) ratio continues to be strong at 9.19% and is above the target range of 8.5% to 9.0%. Interestingly, the bank has signalled for a modest portfolio growth in home lending and business lending while many competitors are adopting conservative strategies due to an impact from regulatory interventions, and thus, have indicated for a downturn.
Overall, Suncorp bank seems to benefit from the new $6.2 billion levy on Australia’s biggest banks, and also finds support from APRA’s limit on interest-only lending. Further, the group has been successful in mitigating the impact from the Cyclone Debbie on its operations given the fundamental strength. SUN also has completed the Capital Notes offer (the Offer), and raised about $375 million through the issue of 3,750,000 Capital Notes for $100 each. Initially, the offer size was about $300 million but was later raised to $375 million at the back of strong investor demand. For the half-year ended 31 December 2016, Suncorp Group reported an NPAT growth of 1.32 per cent to $537 million while group top line growth was 4.3 per cent over prior corresponding period (pcp). The interim dividend declared was 33 cents against 30 cents in pcp. SUN stock has surged over 5 per cent in last one month (as at May 19, 2017).
.png)
Bank Lending and Life-in-Force Annual Premium (Source: Company Reports)
Disclaimer
The advice given by Kalkine Pty Ltd and provided on this website is general information only and it does not take into account your investment objectives, financial situation or needs. You should therefore consider whether the advice is appropriate to your investment objectives, financial situation and needs before acting upon it. You should seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice. Not all investments are appropriate for all people. Kalkine.com.au and associated pages are published by Kalkine Pty Ltd ABN 34 154 808 312 (Australian Financial Services License Number 425376). The information on this website has been prepared from a wide variety of sources, which Kalkine Pty Ltd, to the best of its knowledge and belief, considers accurate. You should make your own enquiries about any investments and we strongly suggest you seek advice before acting upon any recommendation. Kalkine Pty Ltd has made every effort to ensure the reliability of information contained in its newsletters and websites. All information represents our views at the date of publication and may change without notice. To the extent permitted by law, Kalkine Pty Ltd excludes all liability for any loss or damage arising from the use of this website and any information published (including any indirect or consequential loss, any data loss or data corruption). If the law prohibits this exclusion, Kalkine Pty Ltd hereby limits its liability, to the extent permitted by law to the resupply of services. There may be a product disclosure statement or other offer document for the securities and financial products we write about in Kalkine Reports. You should obtain a copy of the product disclosure statement or offer document before making any decision about whether to acquire the security or product. The link to our Terms & Conditions has been provided please go through them and also have a read of the Financial Services Guide. On the date of publishing this report (mentioned on the website), employees and/or associates of Kalkine Pty Ltd currently hold positions in: BHP, BKY, KCN, PDN, and RIO. These stocks can change any time and readers of the reports should not consider these stocks as advice or recommendations.