re: News: Suncorp sells Tyndall to Nikko Asse... Suncorp's good...

re: News: Suncorp sells Tyndall to Nikko Asse... Suncorp's good news on bad loans
Danny John
November 17, 2010


THE improving domestic economy has seen an acceleration in the run-off of the toxic loan book within Suncorp's "bad bank" with the group $2.3 billion ahead of where it had planned to be.

Having split its banking operations into a core "good" business and a non-core division almost two years ago, Suncorp has shed nearly $7 billion of its $18 billion of poor-performing debts. Latest figures provided to investors yesterday showed that of the $11 billion left in the portfolio, $3.7 billion remains tied in development finance and $4.5 billion in the troubled property investment markets.

But these represent significant improvements on the picture almost a year ago when the two sectors were responsible for $5.9 billion and $5.6 billion of loans respectively.

Suncorp was hit when the property and construction markets in its home state of Queensland and NSW went into rapid decline during the fallout from the global financial crisis. It has since opted to wind down the "bad" bank with the expectation that the run-off amount would be down to just $2 billion by June 2014. It has since reduced the total by another $1.5 billion over the past quarter that ended September 30, cutting the overall amount by $6.4 billion compared to an expected $4.1 billion.

It has still seen the level of impaired assets rise over the past quarter, largely as a result of Suncorp's exposure to problems encountered by the property group behind the DFO shopping centres. These impairments stand at $2.3 billion for the first three months of this year, with $92 million in actual losses.

Suncorp's "good" bank, which is concentrating on the home loan and small business markets, also experienced further credit problems with four existing and secured business loans becoming impaired. But its push back into the mortgage market is paying off with the bank having matched the sector for home-loan growth for the first time in two years.

The information was released as Suncorp announced the long-awaited sale of its Tyndall Investments fund management arm to Nikko Asset Management of Japan for $128 million of which Suncorp will get $80 million upfront. However, the group will book a loss this year of $30 million on the sale due to a write-down of $85 million of goodwill.