Strong result for Suncorp, despite margin sqeeze

Suncorp’s wealth management business contributed significantly to the group’s $821 million profit for 2005 on the back of strong investment earnings, although the result included a $16.7 million one-off gain from the sale of management rights and a loss generated by the squeeze on margins caused by choice of fund.

Wealth management’s $91 million contribution for 2005 was 37.5 per cent higher than in 2004, or 12.1 per cent higher excluding the one-off gain.

Managing director and chief executive officer John Mulcahy said the company had adjusted its pricing in anticipation of rising competition in the superannuation space, which was affecting margins.

In the face of increasing competition, he said the company expected to grow funds under administration faster than the industry average through customer retention and sales.

“An important source of sales growth will be our ability to increasingly penetrate the group’s large banking and insurance customer bases for wealth management solutions,” he said in a letter to shareholders.

At the company’s annual results briefing, Mulcahy said the company had been successfully piloting a relationship management program providing combined insurance, business banking and wealth services to clients.

He said the company planned to expand its branch network organically throughout the country, but added it had no aggressive expansion plans and no specific acquisition targets in mind.

The company’s banking division performed well, supplying a $458 million profit for the year, up 23.5 per cent, as a result of strong lending and deposit growth, higher net interest margins and historically low bad debts.

General insurance also delivered a strong result with pre-tax profits of $651 million despite losses due to storms in Queensland of $190 million, 1.9 times higher than average for the last five years excluding the 1999 Sydney storms.