Suncorp to withdraw from personal lending

While releasing its results for the first half of the financial year 2021 (1H21), Suncorp Bank announced that it will not only withdraw its personal loan products, it will also permanently cease underwriting new travel insurance policies under all brands, and exit Vero from Australian consumer and construction policies via Australian intermediated partners, including brokers. 

Suncorp currently offers both secured and unsecured personal loans starting from $5,000 on terms up to seven years.

The bank’s personal lending portfolio currently represents less than half a percent of its total retail lending book.

A spokesperson for the bank told Mortgage Business that Suncorp will discontinue offering personal loans as a standalone product from 16 February 2021, while Home Package Plus or My Home Package customers can continue to apply for personal loans as part of their package up until 16 April 2021.

They added that existing Suncorp personal loan customers will not be impacted and can continue to transact on their loan as they do today.

“Suncorp has made the decision to discontinue offering new personal loans in order to focus on other product improvements, additions and innovations, particularly in its home loan portfolio,” they told Mortgage Business.

Steve Johnston, group CEO, commented that the move forms part of the group’s journey to simplify and improve the group’s core business, which has been a working project since 2019.

“We have put in place a new operating model and structure, one that is better aligned to the areas of greatest opportunity. We have improved accountability, removed duplication and added new talent to our senior team.

“[But] further simplification was also required. Following the sale of the Life and Capital SMART businesses, we have continued to review our portfolio. This has led to us to taking the tough decisions to exit intermediated Vero Australian consumer and construction policies, the underwritten travel portfolio, and we will now no longer offer personal loans in our bank,” Mr Johnston said.

Suncorp to improve broker experience

As well as removing products, the group has also announced a number of key areas of focus moving forward.

This includes growing its home lending presence by focusing on “speed, transparency and the consistency of its origination processes to improve customer and broker experience”.

“There is also a focus on improving the bank’s digital front end and improved use of data and auto-decisioning,” the group outlined in its investor presentation.

“The bank has continued to invest in its home lending processes and continues a targeted program of work to simplify and speed up its origination process and improve customer experiences.”

Mr Johnston added: “In the bank, we have already taken steps to create greater end-to-end accountability under Clive [van Horen] and his team. The bank’s program includes further improvements in the home loan origination process, simplification of the product portfolio, further optimising our distribution footprint and accelerating our digital and everyday banking capabilities.

“We are also looking to drive targeted growth in business banking.”

According to the bank’s results, home lending contracted 1.6 per cent over the half to $45.7 billion; however, applications lodged with the bank were up over 30 per cent on the prior comparative period (pcp).

The bank revealed that, in December 2020, it received its highest volume of new applications in over 18 months.

Nearly three-quarters of the bank’s lending over the half was to owner-occupiers (and largely principal and interest loans), with 46 per cent of all its mortgagors based in Queensland. 

The bank suggested that its loan processing turnaround times had remained “steady” despite the significant increase in new applications during the half. 

However, it noted that the growth was offset by elevated customer repayments, external refinances and property sales, resulting in an 11 per cent increase in portfolio outflows. 

As at 31 December 2020, there were 2,645 bank customer loan accounts under temporary loan repayment deferral arrangements across the home, consumer, commercial and agribusiness portfolios, representing $0.64 billion in lending. This was done from the previous half when 14,408 accounts were on deferred arrangements, representing just under $5 billion in lending.

Business lending also grew in 1H21, rising 0.7 per cent over the half, with growth in commercial lending partially offset by a contraction in agribusiness.

Notably, the results show that the proportion of home lending settlements initiated via the digital channel in the half almost doubled to 13.9 per cent (compared with 7.1 per cent in December 2019). 

For the half, the banking and wealth arm delivered $190 million in profit after tax, up 11.1 per cent on pcp. This was driven by strong net interest margin.

Across the whole Suncorp Group, net profit after tax came in at $490 million, down 23.7 per cent on the pcp (which included the $293 million gain on sale of Capital SMART and ACM Parts businesses in October 2019).  

Group cash earnings were $509 million, up 39.5 per cent on the prior corresponding period (pcp), driven by higher earnings across all businesses.

There was a fully franked interim dividend of 26 cents per share, reflecting a payout ratio of 65 per cent of cash earnings.   

Mr Johnston commented: “Over the past year, we have refocused our strategy, continued to implement the ongoing regulatory program of work, improved our customer service, reinvigorated our brands, further digitised our business and become more efficient. 

“I am proud of how the group has delivered on these commitments and been true to our purpose in a challenging year.  

“We are seeing improved momentum in our Australian and New Zealand insurance businesses as evidenced by strong top-line growth, while our bank is also delivering improved performance.” 

He continued: “Suncorp enters the second half of FY21 in good shape, with momentum starting to build across our businesses and our balance sheet remaining very strong.

“The group’s three-year plan addresses customers’ growing preference for digital and evolves how we work and serve our customers as technology changes.    

“Most importantly, we are focused on delivering for our people, our customers, our communities and our shareholders.”

[Related: Suncorp overhauls serviceability policy]