Snowball to tackle melting profits
Sydney Morning Herald
Wednesday August 26, 2009
THE incoming Suncorp-Metway chief executive Patrick Snowball will in effect be given a clean sheet to reshape the troubled financial services group after a second successive year of falling profits since its $7.9 billion company-transforming takeover of Promina.With the chairman, John Story, yesterday declaring its most recent financial year as "extremely disappointing" after a 40 per cent drop to $348 million, Mr Snowball will start work next week with the challenge of rebuilding both staff morale and earnings growth.Mr Story said that as a consequence of the poor result, boardroom pay had been frozen and short-term bonuses for senior executives axed.Investors also bore the brunt of a 62 per cent cut in the total dividend from $1.07 a share to 40c as the group moved to preserve its cash resources.Yesterday's result had been largely expected after a market update just over a fortnight ago, when the group flagged that lower contributions across its divisions would result in its net full year earnings falling from $556 million last year.A year before that the group had made profits of $1.06 billion immediately after acquiring Promina and its AAMI and Vero insurance brands.Suncorp was undone this year by a combination of weather-related insurance claims, huge bad debt charges and the fallout of the global financial crisis, which hammered its wealth management earnings.The group is now predominantly an insurer, but much of the focus has been on its banking division, which was almost sold last year after its cost of funding blew out. The bank has since been split into two: a core or "good" bank that initially took on $38 billion of housing, consumer and business loans that it wants to keep, and a non-core or "bad" bank.At the start of this year the "bad" bank housed nearly $17 billion of poorly performing borrowings, primarily property and development loans, now in run-off. Suncorp disclosed yesterday that it had since transferred another $1.5 billion of loans to its unwanted portfolio.In the meantime, the bank's contribution to second-half net earnings dropped to $20 million out of a total of $117 million for the full year. Suncorp's shares slipped 22c to $7.58.SUNCORP-METWAYProfit $348m -40%Revenue $14.1b +7.7%Dividend 40c -62%
© 2009 Sydney Morning Herald
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