Funding costs trim Suncorp banking profit

Suncorp Metway managing director John Mulcahy told the annual meeting yesterday it expected the credit crunch to trim between $10 million and $15 million from the "bottom line full-year result" of the group's banking business, though Suncorp did not explicitly revise prior earnings guidance.

The banking business earned $569 million out of the group's profit of $1.04 billion in the year to June 2007, and this group's outlook is now weighted towards insurance thanks to the takeover of Promina earlier this year.

Mulcahy said Suncorp's growth plans in retail banking - comprising new branches in Queensland and Western Australia and securing a greater share of broker-sourced home loan business - would require 270 new customer service positions over three years including 125 at the front line.

The banking and insurance group said it will "re-train, re-skill and redeploy" up to 250 people working in back office roles to the front office.

A restructure of Suncorp's capital base, including some form of return of capital, is also likely, though for taxation reasons not before March 2008.

The detail and scope of this return of capital Suncorp is yet to work out, and largely depends on the views of credit ratings agencies as much as the views of management on the capital needs of the business.

Meanwhile 41 per cent of shareholders voting at the AGM voted against the remuneration report, a symbolic gesture in a non-binding vote, and which reflects annoyance at the board's decision to waive hurdles for $3.8 million in share-based performance rewards for Mulcahy.