Suncorp Bank chief executive Clive van Horen is confident the bank will achieve its target of lowering its cost-to-income ratio to 50 per cent by the end of the 2022/23 financial year, despite the fact its CTI rose in the year to June.
Suncorp Group released its 2021/22 financial report yesterday, with results for the bank that included a fall in income, a 14 basis point fall in net interest margin, higher expenses and a 12.2 per cent fall in after-tax earnings.
Last month, Suncorp announced the sale of Suncorp Bank to ANZ for around A$4.9 billion. Completion of the transaction is expected in the second half of next year and Suncorp has committed to continuing with its current strategic priorities until the sale is completed.
These include cutting its CTI ratio, regaining home loan market share after a period of poor performance, improving customer service and digitising the bank.
The home lending business performed well. The housing loan portfolio increased by 9 per cent to A$50.2 billion over the year and by 12.4 per cent annualised in the June half. System growth over the year to June was 7.8 per cent.
The bank said it improved its home lending processes and technology, with investment in “automation and digitisation initiatives which improved efficiency in the origination process.” One result was a five-day reduction in application turnaround times to an average of 11 working days in 2021/22.
The total lending book, including SME, commercial and agribusiness lending, grew by 7.8 per cent to $62.1 billion.
Suncorp chief financial officer Jeremy Robson said the bank grew home loan share without any compromise in credit quality. The proportion of new business with loan-to-valuation ratios below 80 per cent rose from 79 per cent in 2020/21 to 87 per cent in the year to June, and the proportion of new business covered by lenders mortgage insurance fell from 19 per cent to 13 per cent.
In retail lending, the value of impaired assets fell 14.9 per cent to $40 million. The bank reduced its collective provision by $15 million to $180 million, reflecting the improvement in the risk profile of the book.
While home loan share grew, low rates impacted income, which fell 4.2 per cent to $1.2 billion.
Investment spending and increased personnel cost to support lending growth led to a 0.7 per cent increase in expenses. The cost-to-income ratio rose from 57.1 per cent in 2020/21 to 59 per cent in the year to June.
The net interest margin fell from 2.07 per cent to 1.93 per cent. Profit after tax fell 12.2 per cent year-on-year to $368 million.
Van Horen said lending growth and rising rates, combined with cost reductions, would help the bank achieve its CTI target.
Meanwhile, the bank is working with ANZ on the approval process for the sale. An ANZ spokesman said an application to the ACCC was a few weeks away.