Suncorp Group Limited (ASX: SUN) is an Australian and New Zealand company that specialises in providing financial service to consumers (banking, insurance and superannuation). Suncorp has a market capitalisation of A$15 billion.
What are the key features of Suncrop’s FY21 results?
Suncorp reported net profit after tax (NPAT) increased by 13.1% to A$1,033 million compared with FY20. Cash earnings increased by 42.1% to A$1,064 million compared with FY20. Suncorp will pay a final dividend of 40 cents per share and a special dividend of 8 cents per share (fully franked) to investors. Suncorp also announced an on-market buyback up to A$250 million.
This result was largely driven by Suncrop’s Insurance (Australia) business, which reported NPAT increased by 42.4% to A$547 million. Higher growth, investment returns and reserve releases contributed to this result. Suncorp’s Banking and Wealth business reported NPAT increased by 69% to A$417 million. Improved net interest margins and a net impairment release contributed to this result. Finally, Suncorp New Zealand NPAT decreased by 17% to A$215 million. Higher natural hazard costs, lower investment income and normalisation of working claims contributed to this result.
What is the outlook for Suncorp?
The outlook for Suncorp is uncertain. The short-term operating environment has improved since the peak of COVID-19. However, continued flare ups and lockdowns may negatively impact the company’s following results. The company’s management noted their FY23 plan aims to deliver sustainable returns on equity above the through-the cycle-cost of equity. This aimed is to be achieved through 12 strategic initiatives, where the benefits should be released in HY22. Management is maintaining its commitment to a 60%-80% dividend payout ratio.
What is the market reaction to Suncorp FY21?
The market reaction to Suncorp’s FY21 profit result is positive. Suncorp’s share price is up around 8% and is currently trading at A$12.64. This positive reaction is due to Suncrop’s NPAT beating market expectations, special dividend and on-market buy-back. Suncorp has a forward P/E ratio in the high-teens and has an annual dividend yield of around 3% (fully franked).
This article has been prepared by the Australian Stock Report Pty Ltd (AFSL: 301 682. ABN: 94 106 863 978)
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