Suncorp has confirmed it is reviewing “strategic alternatives” for its banking operations after the Australian Financial Review’s ‘Street Talk’ column reported the company is attempting to ‘spin off’ or sell its banking activities to focus on its more profitable insurance business.
According to the AFR, Suncorp has around two per cent of Australia’s commercial banking market, generating about $400 million of profit per year.
Suncorp remained tight-lipped, saying only: “As previously advised, Suncorp, from time to time, reviews its strategic alternatives in relation to all of its businesses and is currently doing so in respect of its banking operations.”
According to the AFR, Suncorp has enlisted investment bank Barrenjoey Capital Partners to find a buyer and determine the banking arm’s worth as a separately listed company on the ASX.
However, Brian Johnston, an analyst with financial services firm Jefferies, told the AFR that selling the bank may be easier than separately listing it because of the recent selling of bank shares, reducing buyer demand.
“If you look at the present time with global bond rates rising given inflationary fears, which raises the real risk of a recession, the earnings outlook for banks is unclear, particularly the smaller regional players which don’t seem to have operating scale.”
The AFR said Suncorp’s review follows several demergers among Australia’s top-100 companies as boards attempt to improve shareholder value by narrowing business focus and operate more efficiently.