Suncorp Mulls Banking Arm Spin-Off
(28 June 2022 – Australia) Not for the first time, Suncorp Group is running the ruler over the sale or float of its banking division to refocus on insurance.
Revealed by The Australian Financial Review’s Street Talk, the move would align Suncorp with rival Bank majors. Suncorp’s board and executive committee (ExCo) have long deliberated on different approaches to splicing the group’s banking and insurance divisions in a shift away from the traditional “D” model.
Suncorp’s banking operations generate A$400 million a year in cash profit, secure two percent of Australia’s commercial banking market and hold a mortgage lending heavy loan book worth A$59.5 billion as of Q1 2022. Headquartered in Queensland, most customers reside there and NSW. Spinning off or selling the bank would be a big move by Suncorp, which opened its first branch as Queensland Agricultural Bank in 1902 and has grown into a $13.7 billion, ASX50 listed company.
“If you look at the present time with global bond rates rising given inflationary fears, which raises the real risk of a recession, the earnings outlook for banks is unclear, particularly the smaller regional players which don’t seem to have operating scale” commented Jefferies Analyst Brian Johnston.
“To the extent they don’t own their cost of capital, they are trading below net book value. It’s hard to think Suncorp’s bank would be any different to Bank of Queensland and Bendigo and Adelaide Bank” Johnston added.
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