Banking corporation Suncorp Group [ASX:SUN] reported growth in earnings, margins, and returns for the six months ending 31 December 2022, before the surge in home insurance caused by recent flooding in Auckland. Not to mention the heavy inflation and La Nina’s impact on the east coast last year.
Suncorp shares were up 1.5% this morning, worth $12.66 at time of writing, and has climbed 3.66% over the past year.
SUN’s shares are holding up there with the Big Four, despite a slight disadvantage against its wider sector average in the longer term:
Suncorp reveals positive first half despite macro strain
Today, the banking institution revealed a fair result for a time where widespread inflationary pressure has run rampant, and home insurance claims soared in the aftermath of La Nina’s chaotic impact across east coast Australia, blowing out the group’s natural hazard allowance by $99 million.
Ratios improved via strong top line growth and an increase in investment yields, but were not completely safe from increased natural hazards, reinsurance costs, and claims inflation.
Group net profit after tax was up 44.3% compared with 1H 2022, with the total of $560 million. Cash earnings also went up 62.9% to the total of $588 million.
Insurance Australia’s gross written premiums came to $4.8 billion — an increase of 9% — on inflationary impacts and increased natural hazard and reinsurance costs. Suncorp New Zealand’s gross written premiums totalled NZ$1.2 billion — up 12.2% — also due to price momentum.
Suncorp’s home lending went up $2.6 billion over the half (10.4% annualised), with a 2.03% net interest margin climbing 13 basis points.
Suncorp reported continued volatility in investment markets in the half, although these were offset by higher running yields across its $15 billion investment portfolio.
Net gain from yields and investment markets totalled $287 million, compared to $61 million the same time last year.
Operating expenses were curbed 3.1%, thanks to efficiency strategies as well as less project investments, which helped keep the bank on top of inflationary pressure.
Suncorp posted an interim fully franked ordinary dividend of 33 cents a share, a payout ratio of 71% of cash earnings.
Source: SUN
Suncorp hold FY23 targets
Suncorp’s New Zealand business posted an 8% rise in profits to NZ$91 million (AU$83 million) and confirmed the flooding in Auckland is likely to cost NZ$50 million.
Taking this into account, the bank said that its portfolio is yet to ‘reflect signs of distress’, and the operating environment will continue to remain challenging.
Suncorp said:
‘While some supply chain pressures have eased, global geopolitical events remain uncertain, and inflationary pressures persist. Central banks have raised interest rates aggressively in response to decades-high inflation and these policy settings are expected to remain in the near-term. Economic growth is projected to moderate.’
The sale of Suncorp to ANZ is still on track, now in the hands of regulatory and government approvals. Suncorp also reconfirmed its initial FY23 financial investment yield target of 10–12% remains in place.
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Regards,
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For Money Morning
