Financial services provider, Suncorp Group Limited (ASX: SUN) is expecting it's home and business lending growth to improve in 2019 June quarter. Further, the company is going to leverage its investment in enhanced digital and payment capabilities to improve customer experiences in the coming quarter.
The company ended the March quarter with a total lending portfolio of $58.9 billion, slightly higher (+1%) than the previous corresponding period (pcp). In the March quarter, the company commercial portfolio increased by 0.2% to $6.7bn and continues to be well diversified and weighted towards lending facilities less than $5 million. Alongside, the company’s agribusiness portfolio also grew by 0.4% to $4.4 billion despite facing significant weather events in some areas during the March quarter. Although the company witnessed growth in its commercial and agribusiness portfolio, the growth in the business lending portfolios was offset by a $314 million contraction in home lending, amid increased price-driven competition and a continued credit market slowdown.
In a quarterly update provided under Australian Prudential Standard 330, the company informed that during the March quarter, the company was focused on its asset quality, managing its margin and supporting the broker channel, including initiatives to improve operational efficiencies.
During the March quarter, Banking focused on strengthening broker partnerships, supporting first home buyers and implementing initiatives to improve operational efficiencies and it continues to remain selective in its target markets, maintaining a high-quality lending portfolio.
The company reported a net positive impairment recovery of $2 million over the March quarter which was primarily underpinned by improvements in the commercial lending portfolio’s risk profile, following favourable migration across the credit stages as assessed under AASB 9.
After the payment of the 2019 financial year interim dividend to Suncorp Group, the company reported a Banking’s Common Equity Tier 1 (CET1) ratio of 9.10%, reflecting a robust capital position, above the target operating range of 8.5% to 9.0%.
While proving the outlook, the company informed that it is going to maintain a prudent risk appetite, with no material changes anticipated in any segment. The company’s impairment losses are expected to remain below the bottom end of the through-the-cycle operating range of 10 to 20 basis points of gross loans and advances in FY19.
The company is expecting the home lending market to be impacted by the continued tightening of serviceability and lending standards across the industry, as well as reducing demand and declining confidence in the property sector. Further, it expects its agribusiness portfolio to benefit from an improvement in agricultural conditions following recent widespread rainfall.
At the time of writing, i.e., on 8 May 2019 AEST 3:35 PM, the stock of the company was trading at a price of A$13.480, down 0.955% during the day’s trade with the market capitalisation of ~A$17.67 Bn. The stock has 52 weeks high of $15.785 and 52 weeks low of $12.050 with an average volume of ~3,277,913.
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