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SUNCORP (ASX:SUN) has sold its non-core banking portfolio for $1.6 billion at a weighted realisation of 60 cents in the dollar to the Goldman Sachs Group, the bank announced today.
The so-called “bad” corporate and property assets were separated from Suncorp’s core banking business in the wake of the global financial crisis.
They were initially worth $18 billion, but had reduced to $2.8 billion by May 31 through an orderly runoff strategy.
Chairman Ziggy Switkowski says the resolution of the non-core portfolio marked a significant milestone in the group’s transformation.
He also flagged a special dividend for the second half above the payout range of 60-80 per cent and says any surplus capital will go to shareholders.
“Resolving the non-core portfolio over the past four years has been a difficult and challenging experience for the board, Suncorp management and, of course, our shareholders,” says Switkowski.
“The reducing scale of the non-core portfolio and the strength of the Suncorp Group have allowed us to act decisively at this time to remove the non-core portfolio risk.”
The group expects a further organic run-off of non-core assets and individual loan sales of $500 million in June and $200 million in July. It has a residual portfolio of 130 loans worth $500 million, which will be managed as part of the overall bank’s lending portfolio.
The majority are expected to be settled over the 2014 financial year.
The non-core portfolio is also expected to incur an after-tax loss of between $470 and $490 million in the second half of the financial year.
CEO Patrick Snowball says it was the right time to sell, with the portfolio below $3 billion.
“This is a significant turning point and the non-core portfolio will no longer divert attention from the real progress being made across our business.”
The bank’s core operations in the low risk segments of retail, agribusiness and commercial SME continue to perform strongly.
Suncorp shares were down 1.81 per cent to $11.645 in early trading this morning.
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