SUN: Sale of Suncorp Bank – Presentation

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Sale of
Suncorp Bank
18 July 2022
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Key highlights
Sale of Suncorp Bank to ANZ for $4.9 billion, representing 1.3x P/NTA
Positive outcome for customers and staff
Significantvalue realised for Suncorp shareholders
Simplified group with a market leading general insurance business
Opportunity to enhance and accelerate the plan for Suncorp Bank under ANZ ownership
Reaffirming FY23 targets
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Sale of the
Australian Life
business
February 2019
Aligning everyone at Suncorp to core Insurance business
May 2019
Sale of Resilium
distribution business
August 2019
Renewed focus on
our core business
October 2019
Sale of Capital
S.M.A.R.T and
ACM Parts
July 2020
New operating
modeland
organisational
structure
February2021
Exited
underperforming
portfolios
March 2022
Sale of Australian
Wealth Business
July 2022
Sale of Suncorp
Bank
Announced
December2021
Sale of RACTI
joint venture
Aligned to deliver best products and services for customers
Bank was set up with end to end processes with a new team in place and strategy well under way
Reshaping and simplifying
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–PositionSuncorp Bank’s customers, people and purpose
for greater success over the medium to long term
–Focus on strategic initiatives within Suncorp’s insurance
businesses
–SimplifySuncorp as an organisation with a commitment to being
at the forefront of sustainability
–Maximisevalue for Suncorp shareholders with the offer
representing an attractive premium
–Alignmentof ambition with ANZ on the Bank’s future
potential
Strategic rationale
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–For a period of 3 years post completion:
–No net job losses in Queensland as a result of the acquisition
–No further reductions in branch numbers in Queensland
–Supporting ANZ’s existing renewable lending commitments to support Queensland
renewable projects and green Olympic Games infrastructure
–Supporting energy projects particularly those targeting bioenergy and hydrogen over the next
decade
–Access to product and technology initiatives currently being developed by ANZ
–Additional development, career progression and training opportunities for Suncorp Bank
employees
–Queensland will continue to be head office and key functions will continue to operate from
there
–Claims centre of excellence
Maintaining Suncorp
Bank’s strong Queensland
presence
Broader ANZ commitment
to the region
Benefits for Suncorp
Bank’s Queensland
customers and staff
Broader Suncorp
commitment to the region
A strengthening of Suncorp and ANZ commitment to Queensland
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Transaction
structure
–Sale of 100% of shares in SBGH Ltd, the holding company for Suncorp Bank (the Bank), to Australia and New
Zealand Banking Group Limited (ANZ)
Consideration
–100% cash consideration for the ordinary shares of the Bank
–$4.9 billion cash consideration, and a minimum brand licence fee of $50 million to be received over time
(representing $10 million per year)
–Price represents 1.3x P/NTA
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Conditions
Precedent
–As agreed in the Share Sale and Purchase Agreement (SPA),completion is subject to certain conditions
including ACCC approval, Financial Sector (Shareholdings) Act approval from the Treasurer and certain
amendments to the State Financial Institutions and Metway Merger Act 1996
Brand Licencing
Agreement
–Suncorp and ANZ have entered into a 5 year Brand Licencing Agreement for Suncorp Bank
–The term of the licencing agreement may be extended by an additional two years
Timeline to
completion
–Expected approximately 12 months to completion
–Targeting completion by second half of calendar year 2023
TSA–A transitional services agreement (TSA) will be entered into for a period of two to three years from completion
Stranded costs
–Stranded costs, net of TSA, will be approximately $40 million per year after tax from completion
–We are committed to removing stranded costs with a targeted timeframe of three years post completion
Note: (1) Based on last reported Net Tangible Assets of the Bank of $3.6 billion as at 31 December 2021. This NTA is subject to change once the completion balance sheet is finalised.
Transaction overview
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‒Upfront consideration of $4.9billion
‒A $50 million fee received over time
($10 million per year for the brand
licence)
‒Implied accounting gain on sale (post-
tax) of $0.3 billion
‒Estimated net proceeds (capital
generated) of $4.1 billion
‒Consistent with the approach taken in
previous divestments, the current
intention is to return the majority of
proceeds to shareholders
‒Excess capital expected to be
returned through combination of pro-
rata capital return, fully franked special
dividend and buybacks
Net Tangible Assets$3.6bn
Premium paid to NTA$1.3bn
Upfront consideration$4.9bn
Less: indicative separation costs, transaction costs, other
divestment related costs and provisions, and capital impacts
$0.5bn
Less: indicative capital gains tax$0.3bn
Estimated net proceeds (capital generated)$4.1bn
Indicative net transaction proceeds
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Note: (1) Based on last reported Net Tangible Assets of the Bank of $3.6 billion as at 31 December 2021. This NTA is subject to change once the completion balance sheet is finalised.
Indicative proceeds from transaction
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Net home lending growth ($m, %)
FY22
1
($m)
FY21
($m)
Change
(%)
Net interest income1,2451,2420.2
Other operating income339(92.3)
Operating expenses(736)(731)0.7
Profit before impairments512550(6.9)
Impairment release/(expense)1449(71.4)
Income tax(158)(180)(12.2)
Banking profit after tax368419(12.2)
CTI59.0%57.1%
NIM1.93%2.07%
0.08%
FY20
0.04%
0.05%
0.85%
0.06%
0.04%
0.04%
0.82%
FY21
0.05%
0.43%
0.02%
0.53%
FY22
0.03%
1.02%
0.96%
AgribusinessSMECommercialHome loans
90-day+ past due (% of total GLA)
–Lending growth supported by strong turnaround times and credit quality:
–Time to unconditional approval 9.1 days in 2H22 vs 17.4 days in
PCP
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–Origination LVR 66% in 2H22 vs 73% PCP; LVR >80% at 10% vs
19% PCP
–Arrears at multi-year lows
–NIMs down 7bps in 2H22 (competitive pressures, higher liquids, mix)
–Decline in other operating income impacted by mark-to-market
movements in economic hedges
–Collective provision balance stable at $180m half-on-half
–Reaffirm CTI target of ~50% by end FY23
–Suncorp remains committed to the Bank until completion
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FY22 figures are unaudited and will be confirmed at the FY22 results announcement
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Based on AFG data
-769
1,221
2,922
2H221H22
347
1H212H21
5.3%12.4%
1.5%
-3.3%
Annualised Growth
Bank Trading Update
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Insurance (Australia)
AAMI
National Brand
Suncorp and GIO
Regional Champions
Niche Brands
Specialty
Vero
Commercial
New Zealand
Australia and New Zealand have large and established general insurance markets, with ~A$46bn and ~A$7bn market sizes respectively
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With a strong competitive position and brand awareness in these markets, Suncorp Insurance is well positioned for continued success
Note: (1) APRA Quarterly General Insurance Performance Statistics, Dec 2021; Swiss Re
The Suncorp Insurance portfolio
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–Markets are well-regulated with established players
–Large and profitable markets in Australia and New Zealand, with $46b and $7b GWP respectively
–Growth rates are attractive across all General Insurance portfolios
–Leading customer and brand positioning (AAMI, Suncorp, Vero, Shannons, AA Insurance)
–Leading market share position, which provides scale advantages
–Leading core insurance capabilities, especially on digital, claims and pricing
–Strong corporate culture and a highly engaged workforce (top quartile vs our peers)
–Create a leaner, more efficient and effective business
–Shift to higher-growth lines of business (esp. Commercial) to drive growth and diversify portfolio
–Develop a more sustainable, resilient portfolio (prevention, resilient houses, government advocacy)
–Increase participation in partnerships across Mobility, Home and Commercial portfolios
–Higher return on tangible equity
–Strong organic capital generation
Attractive General
Insurance markets
Strong competitive
position
Compelling strategy
focused on value
delivery
Excellent outcomes
with strong underlying
performance
Suncorp Insurance is an attractive
investment opportunity for the future
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Cash return on equity above the through-the-cycle cost of equity
Underlying ITR of 10 –12% by FY23
Cost-to-income ratio of ~50% by FY23
Key divisional metrics
General insurance
Banking
Returns
Reaffirming FY23 targets
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Brand licencing period
~12 months ~2 years~5 years with potential for additional 2 years
–Continued delivery of the Bank’s strategic
priorities and objectives, ensuring
customers, people and purpose remain first
priority
–Separation program, including handover of
control of Suncorp Bank dedicated systems
–Satisfaction of Conditions Precedents to the
transaction
–Engagement with key stakeholders and
regulators
–Two year Transitional Services Agreement
(TSA) with ANZ has been entered into
–Objective is to ensure no disruption to
Suncorp Bank’s operations and continue to
offer customers high quality service
–A range of customary transitional services will
be provided to Suncorp Bank
–These support services include technology,
operations, and finance capabilities for a
period that allows ANZ to complete its
integration plans
–The Suncorp App will be transferred to
Suncorp Bank, with a focus on ensuring a
seamless experience for existing Suncorp
Banking customers
–A 5 year Brand Licencing Agreement (BLA)
with ANZ has been entered into for the
Suncorp Bank brand
–A Brand Licencing Committee will be
established to govern the implementation of
the BLA post completion
–Brand health will be monitored closely via a
set of agreed key performance indicators,
including reputation scores and NPS
measures
–The BLA may be extended by up to two
years
–By the end of the term of the licencing
agreement, there will be a re-brand
Pre-completion
Transitional period
Appendix:
Transitioning Suncorp Bank to ANZ
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This presentation contains general information which is current as at 18 July 2022. It is information given in summary form and does not purport
to be complete.
It is not a recommendation or advice in relation to the Group or any product or service offered by Suncorp or any of its subsidiaries. It is not
intended to be relied upon as advice to investors or potential investors, and does not take into account the investment objectives, financial
situation or needs of any particular investor. These factors should be considered, with or without professional advice, when deciding if an
investment is appropriate.
This presentation should be read in conjunction with all other information concerning Suncorp filed with the Australian Securities Exchange
(ASX).
The information in this presentation is for general information only. To the extent that the information is or is deemed to constitute forward-looking
statements, the information reflects Suncorp’s intent, belief or current expectations with respect to our business and operations, market
conditions, results of operations and financial condition, capital adequacy, specific provisions and risk management practices at the date of this
presentation. Such forward-looking statements are not guarantees of future performance and involve known and unknown risks and
uncertainties, many of which are beyond Suncorp’s control, which may cause actual results to differ materially from those expressed or implied.
There can be no assurance that actual outcomes will not differ materially from these forward-looking statements.
There are a number of other important factors which could cause actual results to differ materially from those set out in this presentation,
including the risks and uncertainties associated with the on-going impacts from COVID-19 and the Australian and global economic environment.
Suncorp undertakes no obligation to update any forward-looking statement to reflect events or circumstances after the date of this presentation
(subject to ASX disclosure requirements).
Important disclaimer
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