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Suncorp's $1bn profit misses expectations

Morningstar with AAP  |  03 Aug 2017Text size  Decrease  Increase  |  

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BRISBANE - [AAP] Shares in Suncorp (ASX: SUN) have fallen by more than 6 per cent after the company's full-year net profit missed market expectations.

The lender and insurance giant's net profit rose 3.6 per cent to $1.075 billion in the 12 months to June 30, but that was down from Deutsche Bank's forecast of a 5 per cent lift.

Chief executive Michael Cameron said the result reflected top-line growth across the group and disciplined margin management.

He said the company's marketplace strategy, which is focused on improving products and customers' experience, had resulted in a lift in customer numbers.

As a result, he said, the group planned to invest an additional $100 million into delivering key elements of its marketplace strategy in the 2018 financial year.

"We now have a more resilient Suncorp and we have the confidence to invest now into the future," Mr Cameron told an analyst briefing on Thursday.

Suncorp also intends to increase its dividend payout ratio above the top end of its 60-80 per cent range to offset the impact on cash earnings of the additional investment.

Shares in Suncorp had dropped 6.12 per cent, or 90 cents, to $13.59 by 1140 AEST.

OptionsXpress market analyst Ben Le Brun said the shares had fallen mostly because the profit was about 4 per cent below market consensus.

"The company has also flagged higher investment going back into the business itself which might take capital management or capital management initiatives off the table and the market had high hopes for that," he said.

However, Morningstar banking analyst David Ellis said there were no major surprises in Suncorp's results, with the $1.15-billion cash profit--which strips out one-off and volatile items--in line with his forecast.

"The 7 per cent increase in the total fully franked dividend to 73 cents per share was modestly higher than our 72 cents per share forecast," he said in a note.

"The modest increase in the payout to 82 per cent surprised as it exceeded the 60-80 per cent target range, with management indicating the FY18 payout will also exceed the range."

Ellis also said the strong increase in customer numbers was a good outcome for Suncorp after two years of losses.

Suncorp's revenue rose 12.3 per cent to $17.39 billion as gains in the Australian insurance business helped offset lower margins in banking and a profit fall in its New Zealand business.

The Australian insurance business's profit jumped 30 per cent to $723 million on the back of strong revenue growth and lower claims costs.

SUNCORP PROFIT DISAPPOINTS INVESTORS:

* Net profit up 3.6pct to $1.075bn

* Revenue up 12.3pct to $17.39bn

* Final dividend up 2 cents to 40 cents, fully franked

 

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