Suncorp’s approach to managing Suncorp Bank for the year or more until its sale to ANZ is completed will be based on its current strategy, with a business-as-usual approach to policies and procedures, the company said in a presentation yesterday.
Suncorp announced the sale of Suncorp Bank to ANZ for a cash consideration of around A$4.9 billion, based on a premium to net tangible assets of 1.3 times.
It expects the net proceeds to be around $4.1 billion after transaction and separation costs, provisions and capital impacts of $500 million and capital gains tax of around $300 million.
Completion of the transaction is expected in the second half of next year, which means that Suncorp will continue to run the bank for a full financial year before the handover takes place.
In an investor briefing yesterday, Suncorp chief executive Steve Johnston said the bank would continue to pursue key strategies, such as reducing its cost-to-income ratio to 50 per cent by the end of 2022/23.
Suncorp Bank’s CTI was 59 per cent in the year to June – up from 57 in 2020/21. Johnston said he is confident the bank will meet the target.
Johnston said provisioning for impairment, which could affect the bank’s NTA and the price ANZ pays, will be done using current settings. The collective provision balance at the end of June was unchanged from the December half at $180 million – a level that Johnston described as “conservative”.
Suncorp released unaudited 2021/22 results for the bank yesterday. Net interest income rose 0.2 per cent year-on-year to $1.2 billion and other operating income fell 92.3 per cent to $3 million, while operating expenses rose 0.7 per cent to $736 million.
The bank’s net interest margin fell from 2.07 per cent in 2020/21 to 1.93 per cent in the year to June. Profit after tax was down 12.2 per cent to $368 million.
According to APRA data, Suncorp Bank has a $46.2 billion mortgage book, which grew by 8.8 per cent over the 12 months to May, compared with system growth of 8 per cent.
Like ANZ, Suncorp Bank went through a period of slow growth in mortgage origination, with its book shrinking in 2019 and 2020, but over the past year has successfully addressed the issue.
Key to this was that the time to unconditional approval was 9.1 days in the six months to June, compared with 17.4 days in the previous corresponding period. That is a very important metric for a bank that originates around 75 per cent of its home loans through brokers.
The acquisition will increase the size of ANZ’s mortgage book by 17 per cent.
Following completion of the sale, Suncorp and ANZ will work together under a transitional services agreement for two years.
ANZ plans to maintain separate branding, although the bank will be fully integrated. It has licensed the Suncorp Bank brand for five years at a cost of $50 million and has a right to extend that for up to two years.
Asked why Suncorp was selling the bank now, when much of the work