Big carrot for investors

‘Respectful’ Suncorp pledges boost in dividends

SUNCORP has pledged to boost dividends this year in an attempt to salve investors fretting about a spending splurge at the insurancebanking giant.

The pledge to lift the ratio of profits paid out as dividends in 2018 came at yesterday’s annual general meeting.

Suncorp chairman Ziggy Switkowski also startlingly revealed he philosophically opposed the Federal Government’s Budget decision to slap a higher levy on Big Bank rivals.

“We really don’t want to be in a position where we are more competitive by there being lead put into the saddlebags of our competitors,” Dr Switkowski said.

He instead sought reforms to perceived unfair advantages, such as how Big Banks have to stock away less capital on home loans than regional lenders including Suncorp.

Hundreds of investors attended the AGM in Brisbane’s Sofitel hotel and the overall mood was positive, with all resolutions passed.

Suncorp used the meeting to list potential financial benefits from future plans and cost targets with projects. Some market watchers had earlier been sceptical about a lack of detail. One controversial plan is creating a “financial marketplace” – like the Apple of financial services.

But Suncorp’s share price dived in August upon revealing plans to speed up spending of almost $100 million on the marketplace idea, including developing a single app in which customers can access a range of services.

That spending includes $16 million on the app and $17 million for new branding.

One concern was these expenses will eat into dividends, which were worth 73c last year.

Suncorp typically pays between 60 per cent and 80 per cent of profits out as dividends. But its CEO Michael Cameron said the company this year would increase the ratio “to neutralise the impact of accelerating the strategy”.

The move did not bump the share price – Suncorp closed down 12¢ at $12.59, mimicking the overall market down.

Hunter Green analyst Charlie Green said Suncorp was “respecting its retail shareholders by committing to the dividend”.

The company also pledged to return operating expenses to $2.7 billion by 2019, which Mr Green described as a big commitment. It hoped to achieve benefits of $330 million by 2020.