The Suncorp Group board has shown its confidence in the continuation of the post-COVID recovery by increasing its dividend payout ratio, declaring a special dividend and launching a share buyback. And the banking and wealth division made a release from its collective provision.
Speaking at an investor briefing following the release of the group’s 2020/21 financial report, Suncorp chief executive Steve Johnston said: “While there is still risk associated with the external operating environment, the outlook for the business and the economy is more positive and we have reviewed our balance sheet position through this lens.
“We entered COVID with a strong balance sheet, giving us confidence and flexibility throughout the early stages of the pandemic. Unlike many of our competitors, we have not had to raise discounted equity and we have been able to maintain our dividend within our target payout ratio range.”
Suncorp reported group net profit of A$1.03 billion for the 12 months to June – an increase of 13.1 per cent over the previous corresponding period.
On a cash basis, after adjusting for profit on a sale in 2019/20 and acquisition amortisation, cash profit was up 42 per cent to $1.06 billion. Return on equity (on a cash basis) was 13.2 per cent.
The board declared a final dividend of 40 cents a share, taking the total dividend for the year to 66 cents a share. The payout ratio was 79.3 per cent – at the top of the group’s target range. In 2019/20 Suncorp paid a total dividend of 36 cents a share and the payout ratio was 60.7 per cent.
The special dividend of 8 cents a share will be fully franked. The buyback will be worth $250 million and be completed over six months.
The banking and wealth division has released $60 million from its collective provision ($49 million net), leaving a year-end balance of $195 million.
Suncorp chief financial officer Jeremy Robson said the remaining provision “continues to incorporate a prudent set of assumptions reflecting the uncertainty around ongoing lockdowns, as well as the vaccine rollout”.
The banking and wealth division made a net profit of $419 million, compared with $248 million in 2019/20.
Net interest income rose 4.3 per cent to $1.2 billion and the net interest margin rose 13 basis points to 2.07 per cent.
Robson said the improvement in the NIM was due to two factors: the low funding cost provided by the Reserve Bank through its term funding facility; and a shift in the balance of deposits from term deposits to at-call.
After falling in 2019/20 and the first half of 2020/21, lending grew 40 bps in the June half. Home lending grew 80 bps, offset by a fall in business lending.
Johnson said the return to growth was the result of improved processes, notably faster loan approval times. He said the faster turnaround times could be sustained.
Arrears were down over the year but picked up in the second half. At 30 June, 90.9 per cent of the total of 14,400 home loan repayment deferrals were performing or had exited the