Suncorp Bank continues to lose share in the mortgage market, despite its considerable efforts over the past couple of years to turn that situation around. And its latest financial report shows that falling home loan share is not the bank’s only problem.
The bank is also struggling to deliver an ambitious cost reduction program.
Things have improved in its mortgage business but it is still lagging. According to APRA data, Suncorp’s mortgage book grew 4.5 per cent over the 12 months to December, compared with system growth of 7.2 per cent.
It got closer to system in the December half when its mortgage book grew by 3.5 per cent, compared with system growth of 3.8 per cent (the bank’s figure for the half was growth of 2.7 per cent). And in the December quarter its book grew 1.9 per cent, compared with system growth of 2 per cent.
Suncorp’s banking and wealth division made a cash profit of A$200 million in the six months to December – an increase of 5.3 per cent over the previous corresponding period but 12.7 per cent down on the June half result.
After benefiting from an impairment release of $57 million in the June half last year, the bank made a release of just $16 million in the latest half.
The division contributed more than 50 per cent of Suncorp’s total earnings, as insurance earnings were hit by lower investment returns and higher natural hazard costs.
Net interest income of $621 million was up 0.5 per cent on the previous corresponding period but down 0.5 per cent half-on-half.
Operating expenses of $366 million were down 1.1 per cent on the previous corresponding period but up 0.8 per cent half-on-half.
The cost to income ratio was 57.6 per cent – up from 56.5 per cent in the previous corresponding period. The bank has a goal of reaching a CTI of 50 per cent by 2022/23 but right now the ratio is going in the wrong direction.
The net interest margin rose from 2.04 per cent in the December half 2020 to 2.09 per cent in the June half last year but fell to 1.97 per cent in the latest half. Competitive loan pricing and mortgage refinancing were the main contributors to the fall.
Credit quality was positive. Loans past due by 90 days or more fell to 62 basis points of gross loans and acceptances – down from 90 bps in the previous corresponding period and the best result in a decade.
Another positive was the growth in customer deposits – up 7.8 per cent on the previous corresponding period, with a high proportion going into lower cost at-call accounts. Customer deposits of $44.7 billion make up 78.4 per cent of loan funding.
Suncorp chief executive Steve Johnston said he was confident the bank would continue to recover in home lending. The bank has upgraded its systems, which was reflected in a reduction in application turnaround times from 16 to 14 days during the half.
Home loan settlements were up 70 per cent on the previous corresponding period.
The bank