SUN to let go of non-core ops
(11 May 2009 – Australia) Suncorp has, after a six month strategy review, decided to reclassify four business banking segments as non-core operations and run-off those areas of the business.
During its review, Suncorp determined the various parts of its banking operations that were core to a sustainable business as an eAf rated Australian bank.
The bank also outlined the segments of the market that were no longer considered appropriate to participate in, which the bank will be running]off as non]core portfolios.
The non]core portfolio essentially comprises four of Suncorpfs business banking segments. These are $6.3 billion in development finance, $3.4 billion in corporate banking, $5.1 billion in property investment and equipment finance of $2.0 billion.
The value of the non-core book is $16.8 billion, while the remaining core book of the bank has been valued at $38.2 billion, cutting the overall value by nearly one third.
Suncorp banking group executive David Foster said that these strategic changes will ensure that Suncorp bank has a viable core with a less volatile profitability dynamic into the future.
Foster said that it is important to stress that this is not a egood bankf/fbad bankf distinction. The decision on the components of core and non]core has been made purely on strategic decisions around funding, industry dynamics and deposit gathering capacity.
In the respective portfolios there are some small segments within the ecoref book that have some impaired assets. Equally, within the non]core portfolio there are some components that, from a credit quality perspective, are pristine, Foster added.
The non-core assets were capital-intensive businesses that were 90 percent funded from wholesale financing markets, to which Suncorp aimed to reduce exposure, he said.
By geography, almost a half of the non-core book is located in Queensland and around a third in New South Wales.
The changes project the bank towards its desired goal towards the upper end of a target of 60 percent to 70 percent retail funding to core loans. This level gives the bank reduced dependence on debt markets, with a core portfolio with substantially reducing earnings volatility enabling it to operate with a sustainable funding profile.
The bank also outlined the segments of the market that were no longer considered appropriate to participate in, which the bank will be running]off as non]core portfolios.
The non]core portfolio essentially comprises four of Suncorpfs business banking segments. These are $6.3 billion in development finance, $3.4 billion in corporate banking, $5.1 billion in property investment and equipment finance of $2.0 billion.
The value of the non-core book is $16.8 billion, while the remaining core book of the bank has been valued at $38.2 billion, cutting the overall value by nearly one third.
Suncorp banking group executive David Foster said that these strategic changes will ensure that Suncorp bank has a viable core with a less volatile profitability dynamic into the future.
Foster said that it is important to stress that this is not a egood bankf/fbad bankf distinction. The decision on the components of core and non]core has been made purely on strategic decisions around funding, industry dynamics and deposit gathering capacity.
In the respective portfolios there are some small segments within the ecoref book that have some impaired assets. Equally, within the non]core portfolio there are some components that, from a credit quality perspective, are pristine, Foster added.
The non-core assets were capital-intensive businesses that were 90 percent funded from wholesale financing markets, to which Suncorp aimed to reduce exposure, he said.
By geography, almost a half of the non-core book is located in Queensland and around a third in New South Wales.
The changes project the bank towards its desired goal towards the upper end of a target of 60 percent to 70 percent retail funding to core loans. This level gives the bank reduced dependence on debt markets, with a core portfolio with substantially reducing earnings volatility enabling it to operate with a sustainable funding profile.
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