Suncorp banking/wealth management sale begins

Suncorp-Metway’s ratings have been placed on ‘CreditWatch’ by Standard & Poor’s (S&P) amid uncertainty about the outcome of the sale of the group’s banking and wealth management operations.

S&P said it has placed Suncorp-Metway and its core operating companies on ‘CreditWatch’ with “developing implications” amid uncertainty about the future corporate structure of the group.

The ‘CreditWatch’ placement relates to Suncorp’s A+/A-1 ratings, and also applies to Suncorp’s insurance operations, the research house said.

Suncorp said it has received “several approaches” by parties interested in acquiring its banking and wealth management operations. S&P said that on a normalised basis, the group’s banking and wealth management operations account for more than 40 per cent of its earnings.

While the research house highlighted the bank’s “good” market position in Queensland and “sound” asset quality and earnings profiles, it did note that Suncorp has a shorter-term funding profile than many of its peers.

‘CreditWatch Developing’ indicates the ratings assigned could be upgraded, downgraded or affirmed depending on the outcome of the divestment negotiations.

Whether or not Suncorp divests its banking and wealth management operations to an entity with a better or worse credit rating will impact on the credit profile on the business.

“In a divestment scenario, the rating on the group’s remaining activities, namely its substantial general and life insurance operations, would be determined by the resulting corporate structure (whether independently listed or acquired), and the business and financial profiles,” the S&P statement said.

S&P credit analyst Mark Legge said the current credit market situation adversely affects banks with shorter term liability profiles and those more exposed to offshore funding markets.

“Nevertheless, any refinancing pressure is expected to be short term, and we are comforted by the strongly supportive Australian banking regulatory system, including the ability of banks to access the Reserve Bank of Australia's window for securities eligible for repurchase,” Legge said.