Well, we know that Suncorp won’t be in banking for much longer. Why else would it hire a British insurance executive for the vacant CEO’s role
The last bloke, John Mulchay, was a banker (from the Commonwealth) of sorts and he couldn’t make it work, or the much larger insurance side.
Now the board has gone for someone with clear insurance skills and zero banking experience, which tells us something about the problems at the group and the way the future is seen by the board.
Suncorp’s new boy is Patrick Snowball (whose surname will produce all the usual cliches about having a Snowball’s chance in turning round the pondering Suncorp).
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But given that Suncorp is now the country’s second biggest insurer (with AAMI, Suncorp, GIO and a couple of other brands) and a very small regional bank, without much in the wait of growth options, filling the CEO’s role with someone with an insurance CV, sounded more logical.
Now Suncorp has to find a way of hiving off its banking business. The ANZ was poised to buy it last October after Suncorp trembled in the wash-up of the Lehman Brothers collapse. But the Federal Government’s three-year deposit guarantee saved the day and Suncorp stepped away from the deal.
But with Westpac and the Commonwealth having snapped up rivals and gained market share, the ANZ could argue that buying Metway would make it better placed to compete with the CBA and Westpac: that old Australian story of less competition being better for business and all concerned (Trust us, we’re .ankers).
Mr Snowball previously ran the UK insurance operations of Aviva, which last week sold its Australian business to the NAB.
Mr Snowball left Aviva just two years ago after he lost out in the succession race to take over from the top job at the group. Aviva was formerly known as Norwich Union. He then joined another smaller insurance company, Towergate Partnership. He starts at Suncorp in September.
Suncorp could look to sell off Metway, but it has a bad bank with $16 billion of dud loans and $38 billion of good loans that are still paying their way at last report.
That $16 billion is a a millstone that will weigh down the bank’s performance and ability to perform for years to come. It also makes a sale very problematic, unless some way can be found to completely separate the loans. But they would have to be supported by capital, something Suncorp has a minimum of at the moment.
Any buyer would want to discount the price they paid for the bad loans, or leave them with Suncorp, which would defeat the purpose of selling the banking side.
So Snowball’s first decision (besides deciding on which side of the Brisbane River he will live) is to find a hard-headed banking executive with the skills of a receiver/liquidator to oversee the banking side and bad bank. Those attributes will be needed.