Suncorp has called a halt to the implementation of its new core banking system and will write off $90 million of the carrying value of its IT investment. At the same time, the company has lost its head of its banking and wealth, after just three months in the job, and it faces a big remediation bill after making incorrect salary payments.
Suncorp reported yesterday that it has implemented the retail lending, personal loans and customer collections modules of its new core banking system but “paused” installation of the deposits, transactions and payments modules, “pending sufficient platform maturity”.
It has impaired the carrying value of the deposit and transaction modules, resulting in a A$90 million after-tax charge.
The company said: “We believe the significant risk associated with the deployment of this component in the current uncertain environment means it is increasingly unlikely that we will roll out the deposits, transactions and payments modules in the near term.”
ITnews reported that the Oracle system Suncorp is installing has had a long history of problems (the build has been going on for four years) and that the company was, in reality, “junking” it.
According to the report, Suncorp is faced with the “less than ideal” prospect of running its bank partly on Oracle and partly on its old Hogan system.
The company tried to make the best of the situation, saying its proven API architecture would enable it to deliver on its digital strategy at a lower cost and with lower risk than a full system replacement.
Suncorp banking and wealth chief executive Lee Hatton will leave at the end of month. She said in a statement that the demands of commuting from Sydney to Brisbane were not sustainable.
Bruce Rush, executive general manager deposits and payments, will act as banking and wealth CEO, while the company looks for a permanent replacement.
The banking division has included a $133 million management overlay within its collective provision to cover risk exposures in its lending book. The overlay is equivalent to 23 basis points of gross loans an expenses.
It has approved $4.05 billion of loan deferrals.
Home lending represents 81 per cent of the bank’s loan portfolio and about 80 per cent of home loans have loan-to-valuation ratios below 80 per cent. (The average dynamic LVR is 57 per cent).
Suncorp also revealed yesterday that it has been making incorrect payments – both underpayments and overpayments - to staff. It expects that remediation costs will be between $40 million and $70 million.
The pay and leave entitlements review, which started last November, is still in its early stages and has to date focused on the company’s insurance division.