Suncorp Group (ASX:SUN) releases 2Q22 results, shares fall

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  • In the March quarter, Suncorp Bank increased its home lending portfolio by AU$803 million, or 1.7%.
  • For the quarter, the total impairment charge was a net expense of AU$1 million.
  • The bank’s gross impaired assets fell from AU$12 million to AU$154 million.

The shares of Suncorp Group Limited (ASX:SUN) were spotted trading 0.44% lower at AU$11.26 per share today (9 May) at the time of writing this article. Approximately 643K shares of Suncorp were traded during morning trading hours on the ASX.

This might be because the insurance company Suncorp has shared its financial results for the second quarter of 2022 today.

Financial highlights

Suncorp Bank increased its home lending portfolio by AU$803 million, or 1.7%, in the March quarter (6.9% annualised, 7.5% annualised excluding discontinued line of credit products which are in run-down). The surge in house loan applications continues, with total applications up 21% from 2Q22. Consistent competitive offerings and quicker turnaround times drove the increase.

The positive net refinance rate, and ongoing delivery of the targeted work programme to improve client and broker experiences helped February and March 2022 growth exceed the system. The bank maintains a high-quality, conservatively positioned home lending portfolio, focusing on owner-occupiers and principal and interest payback periods and loans with a loan-to-value ratio (LVR) of less than 80%.

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Suncorp further informed that lending to businesses increased by AU$91 million, or 0.8%. An increase in frontline banker activity at the end of 2Q22 and into 3Q22 resulted in both existing customer drawdowns and new customer lending, resulting in AU$122 million in commercial lending growth.

Property acquisitions in a busy market, confidence in the sector due to heightened commodities prices, and drawdowns for tax planning ahead of the financial year-end aided modest agricultural growth of AU$28 million. The AU$59 million SME contraction was caused mainly by high payback levels that outpaced new business volumes.

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Suncorp continued to expand transaction account balances (19.3% annualised) and higher-margin retail term deposits (6.1%), but the savings portfolio shrank by 8.1% annualised.

For the quarter, the total impairment charge was a net expense of AU$1 million, or less than one basis point of gross loans and advances (GLA) annualised. This implies an unaltered collective provision for a medium-sized commercial customer and a little specific provision expense.

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Over the quarter, gross impaired assets fell from AU$12 million to AU$154 million (26 basis points of GLA). Total past due loans not impaired fell AU$18 million during the quarter to AU$347 million or 58 basis points of GLA.

At the end of April, there were 111 flood-affected home financing customers under hardship arrangements (62% QLD, 37% NSW and 1% ACT)

The Liquidity Coverage Ratio (LCR) and Net Stable Funding Ratio (NSFR) were 143% and 142%, respectively, as of 31 March 2022, reflecting Suncorp's continuing funding and liquidity strength. The bank's Committed Liquidity Facility (CLF) level is now AU$1.5 billion, with AU$500 million reductions due in May, September, and January 2023.

The bank's capital levels are healthy, with a Common Equity Tier 1 ratio of 9.32% (December 2021: 9.90%), which is above the intended operating range of 9-9.50%. The drop in the quarter was due to an increase in credit risk-weighted assets and the payment of an interim dividend in February 2022.

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