Suncorp Bank’s first quarter update showed a 2.4 per cent rise in mortgage lending - after a stagnant 2017 - and negligible bad debts.
The latest jump was partly linked to the Group’s new Marketplace strategy which aims to simplify processes, improve capabilities and retain more customers.
"Providing simple, innovative and relevant product offerings, complemented by fast and consistent service is making it easier for new and existing customers to connect with banking solutions that meet their needs,” said banking and wealth head, David Carter.
However, according to UBS analyst James Coghill, while the rise was this was attributed to "accelerated investment in Marketplace", he suspects the more dominant driver would have been a range of more competitive price offerings rolled out in the fourth quarter and flagged with the 2017 profit result.
The Group announced in August that it would spend $100 million on the Marketplace strategy in 2018.
Investor lending growth of 7.6 per cent on the year ago same quarter was also highlighted in the update - which is well under APRA's 10 per cent cap.
Meet full year targets
In the quarterly result, Suncorp said its interest-only lending was at 29 per cent which is also slightly under the regulatory cap for interest-only lending.
“While Suncorp Bank appears comfortably on track to meet our full year 2018 loan growth forecast of 4.2 per cent, we remain somewhat cautious on net interest margin pressure given intensifying competition to reprice principle-and-interest mortgages,"noted Coghill.
“Although no commentary was provided on net interest margins, we understand soft guidance for "top-end" of the 175 to 185 basis points net interest target range target range is still valid.”
The analyst’s net interest margin estimate currently stands at 184 basis points for the 2018 full year.
Impairment charges were just $5 million, or 4 basis points of gross loans in the 2018 first quarter.
Bad debts down
Suncorp Bank had already flagged bad debt losses below its through cycle at between 10 basis points and 20 basis points for 2018.
Coghill thinks bad debts will move back within that range over the course of 2019.
The lender's common equity tier one ratio stands at 8.77 per cent which is within its range of 8.5 per cent to 9 per cent.
“Overall, the Bank appears to be performing as we expected and the absence of any commentary on Life or general insurance suggests no significant new developments elsewhere,” said Coghill.
“Our Suncorp thesis is predicated on stability in Bank earnings for between 12 to 18 months with a premium rate-driven recovery in general insurance providing some upside risk beyond an expense-laden 2018.”
The analyst Is predicting that the bank will earn $403 million for the full year - up from $400 million in 2017.
The outlook for regional bank’s looks muddier after Bendigo and Adelaide Bank chief executive Mike Hirst recently warned shareholders to expect flat balance sheet growth, citing greater competition.