Suncorp isn’t alone in suffering massive impairment costs, but the sudden departure of a key executive and massive underpayment of workers could complicate matters for the banking and insurance giant.
Suncorp is set to take a $133 million hit off the back of greater provisioning for credit losses stemming from COVID-19, with FY20 group costs to be “slightly above” $2.7 billion. Despite that, the company has maintained its “robust capital position” and will make a decision on its final dividend through year-end processes.
“Suncorp was quick to respond to this crisis, realigning our business around five clear priorities to guide our response: ensuring the health and safety of our people, supporting our customers, protecting our business, engaging our stakeholders and preparing for the post-COVID-19 environment,” CEO Steve Johnston said. “A key priority for us is to ensure our customers are protected and prioritising those most in need.”
Claims have declined in Suncorp’s consumer motor insurance portfolio as a result of mobility restrictions, but Suncorp expects that some claims have been delayed as a result of customers experiencing financial stress and social distancing. Suncorp expects that there will be an increase in loss of rental income claims.
Suncorp also revealed that it had inadvertently underpaid workers due to errors in its rostering and pay systems, with the cost of remediation expected to be in the range of $40 million to $70 million.
“As a Suncorp employee of longstanding I am incredibly disappointed that we have let our people down – there is no excuse and we need to get this right,” Mr Johnston said. “I want to offer my sincere apologies to those who may have been affected.”
Suncorp has already self-reported to the Fair Work Ombudsman and has contracted Deloitte to help it resolve the matter.
Suncorp also announced the surprise resignation of banking and wealth CEO Lee Hatton, who will be leaving the organisation at the end of May to take a position at a Sydney-based fintech. Ms Hatton joined Suncorp in February.
Bruce Rush, executive general manager for deposits and payments, will serve as acting CEO until a permanent replacement is found.
“Lee is a highly capable executive and I am disappointed to see her depart after a short time with the group,” Mr Johnston said. “I respect her desire to spend more time closer to home and I wish her well. The bank has an experienced and capable executive team and I’m very confident that Bruce will provide strong leadership and direction while we seek a permanent appointment.”