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Mixed response to Suncorp earnings upgrade

Mixed response to Suncorp earnings upgrade

(31 January 2005 – Australia) Queensland’s Suncorp has upgraded its earnings guidance for the six months to December 2004, saying its banking division is expected to deliver a pre-tax profit of about 20 percent. Using preliminary, unaudited accounts, Suncorp said it expects to announce a post tax and goodwill net profit in the region of A$395 to 410 million for the first half.

Suncorp managing director John Mulcahy attributed the stronger than expected performance to a favourable operating environment, the strength of the Australian equities market, and internal improvements and initiatives within the company.

However, he warned that economic and competitive conditions had become tougher in the second half of the financial year.

"A further slowdown in lending growth, increased pressure on net interest margins and insurance premiums are expected to lead a slowdown in growth in the current half," Mulcahy said.

Analysts responded in different ways to Suncorp’s announcement. UBS took it as a sign that the environment for bank stocks was favourable and upgraded its rating from "neutral" to "buy".

Goldman Sachs JB Were kept its recommendation at "market perform".

Less positively, Credit Suisse First Boston said it was cautious about the growth challenges facing Suncorp over the next 18 months, and maintained its "underperform" rating.
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