Suncorp earnings to take $2.7bn hit

Suncorp Group has updated shareholders on the impact of the ongoing COVID-19 crisis on its financial performance over the 2020 financial year (FY20).

The group has revealed that it expects its cost to total approximately $2.7 billion, reflecting a rise in impairment charges from the COVID-19 crisis, the rolling back of offshore processes, and up to $70 million in staff remediation costs.

Credit impairment charges are set to total $133 million in FY20, representing approximately 23 bps of the bank’s gross loans and advances.  

But, according to Suncorp, its banking division remains “low risk”, with “sound capital, funding and liquidity”.

The bank claimed that approximately 80 per cent of its home loans have a loan-to-value ratio (LVR) of less than 80 per cent at origination, with the average dynamic LVR of the portfolio at approximately 57 per cent.

Reflecting on Suncorp’s overall operating position, group CEO Steve Johnston commented: “This is a difficult and uncertain time for the community, and our thoughts are with those feeling the emotional and financial impacts of COVID-19.

“Suncorp was quick to respond to this crisis, realigning our business around five clear priorities to guide our response: ensuring the health and safety of our people, supporting our customers, protecting our business, engaging our stakeholders and preparing for the post-COVID-19 environment.

“A key priority for us is to ensure our customers are protected and prioritising those most in need. We have launched several support packages and financial hardship options, and we have been working closely with industry bodies, government and regulators to ensure a coordinated response.”

Mortgage portfolio thins

However, Suncorp’s update also revealed that the bank’s mortgage portfolio contracted over the three months to 31 March 2020, down $278 million (0.7 per cent) to approximately $43.2 billion.

Suncorp attributed the contraction in its mortgage portfolio to “intense competition” for new lending.

The bank expects its mortgage portfolio to contract further in the fourth quarter of FY20, but claimed that it has “started to see benefits from process enhancements” following a “targeted approach in the broker channel and continued development of digital home lending origination”.

Offsetting the contraction in Suncorp’s mortgage portfolio was growth in the bank’s at-call deposits with net balances increasing $1.2 billion over the March quarter.  

Suncorp’s operational update followed the announcement of Lee Hatton’s resignation as banking and wealth CEO.

Bruce Rush, executive general manager, deposits and payments, has been appointed as acting CEO until a permanent appointment is made.

[Related: Suncorp Bank CEO steps down]