Insurer: (1) FY09E margin guidance of 10-12% (UBSe 10.7%) (2) c10% FY08E margin guidance (UBSe 10%). Bank: (1) FY09E core earnings growth in ‘high single digits’ (UBSe 7.5%), BDD charges to rise (UBSe 30bps FY09E) (2) FY08E core profit up c12%, pre-tax contrib $594-599m ex one-offs (UBSe $594m ). WM: (1) FY09E UL profit flat (UBSe -20%), mkt conditions tough (2) FY08E ULP $130-135m (UBSe $130m). Div: confirmed 55cps in 2H (full UW), flat in FY09E. We have cut all divisions in all years. Insurance downgrades are 16-27%, driven by claims (lower releases), higher expenses and lower investment income. The bank's ½-8% downgrades mainly reflect an expected increase in BDD, but also lower non-interest income. In wealth management, we have adjusted down our margin and FUM forecasts, slicing 10-39% from earnings. Insurer: reserve releases are waning, profitability in the L-T book is uneconomic (3%pts of 09E margin is synergy-dependent). Bank: overweight exposure to commercial property and development a risk, despite collateral. WM: market volatility and depleted investor sentiment are stiff headwinds. Div: FY09E guidance = extreme 97% payout ratio, 2H08E dividend UW c3% dilutive. Our new $10.00 PT includes a 10% discount to our valuation to reflect ongoing risks. Sell rating (was Neutral), with M&A the main risk, in our view.
SUN Price at posting:
0.0¢ Sentiment: None Disclosure: Not Held
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