Suncorp Group Limited (SUN)
BUY

Soft FY22 Result

 8 Aug 2022
Sector: Financials

Need to know

  • Earnings 3% below with market estimates
  • FY22 dividend miss, 40cps vs 45cps expected
  • FY23E earnings guidance reiterated, insurance
    margin 10-12%

Investment implications

Small miss FY22 result, dividend light. FY22 NPAT $673m vs market at $690m. EPS 51cps vs 52cps market. DPS fully franked 40cps vs 45cps market.

Earnings guidance maintained for FY23E. SUN has reiterated insurance margin guidance for 10-12% in FY23E. This is already baked into market estimates for FY23E. SUN is anticipating “mid to high single” insurance premium growth in FY23E.

Cost base target $2.7bn. SUN reiterated its cost base target of $2.7bn for FY23E, although this could look optimistic given economy-wide inflation pressures and the current cost base of $2.8bn. The market is
perceiving this as slippage in the commitment Sale of SUN Bank to ANZ. No further update on the process with the ACCC. SUN remains committed to the capital return of proceeds, pending successful approval.

Capital and dividend. Core capital $248m vs $492m in Dec 21. Most of the reduction is due to a deferred tax asset and growth of the bank book. SUN believes these capital charges will reverse in future periods. Lowers DPS flexibility, particularly with the threat of another La Nina weather event over summer 2022/23.
Investment view. A soft share price reaction (-6%) to the Result, masks the earnings improvement story in FY23E and the potential for capital return in late FY23E.

Figure 1: SUN margin pathway into FY23E

Figure 1: SUN margin pathway into FY23E

This commentary reflects our initial view. For detailed reports for companies under Sandstone Insights coverage, see our latest research notes for our investment view and specific risks associated with investing in these companies.

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Stock overview

Stock overview

Share price

Share price

Company overview

Suncorp Group Limited is an Australia-based company that provides insurance, banking and wealth products and services through various brands in Australia and New Zealand.

Price performance

Share price

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