By Danny John
INCOMING Suncorp-Metway chief executive Patrick Snowball will effectively be given a clean sheet to reshape the troubled financial services group after a second successive year of falling profits since its $7.9 billion takeover of Promina.
Chairman John Story yesterday declared its most recent financial year as ''extremely disappointing'' after a 40 per cent net profit drop to $348 million. Mr Snowball will start work next week, with the challenge of rebuilding both staff morale and earnings growth.
Mr Story said that, as a consequence of the poor result, boardroom pay had been frozen and short-term bonuses for senior executives axed in recognition that Suncorp had let down its shareholders.
Investors bore a 62 per cent cut in the total dividend to 40¢ a share, from $1.07 last time, as the group moved to preserve cash.
Yesterday's result had been largely expected after a market update just over a fortnight ago when the group said that lower contributions from its banking, insurance and wealth management divisions would hit net full-year earnings.
The group made $556 million in 2008. A year before that, it made a profit of $1.06 billion immediately after acquiring Promina and its AAMI and Vero insurance brands.
Suncorp was undone this year by a combination of large weather-related insurance claims, huge bad debt charges and the fallout of the global financial crisis, which hurt its wealth management earnings.
Although Suncorp is now predominantly an insurer - whose trading earnings slid by a third to $304 million - much of the focus has lately been on its banking division, which it almost sold last year after its cost of funding blew out.
The bank has since been split into two: a core, or ''good'', bank, which took on $38 billion of housing, consumer and business loans that it wants to keep; and a non-core, or ''bad'', bank.
At the start of this year, the ''bad'' bank housed nearly $17 billion of poorly performing borrowings, primarily property and development loans, now in run-off.
Suncorp disclosed yesterday that it has since transferred another $1.5 billion of loans to its unwanted portfolio after a final review of its exposures.
In the meantime, the bank's contribution to second-half net earnings dropped to just $20 million - out of a total of $117 million for the full year - after impairment losses of $355 million wiped out most of its latest pre-tax profit.
But acting chief executive Chris Skilton said the bank was now focusing on much lower-risk business and was covering 70 per cent of its funding through deposits.
Mr Story also insisted that the division remained a core part of Suncorp's business despite speculation the new CEO may recommend it be sold to free up capital to develop the insurance operation.
Suncorp shares slipped 22¢ to $7.58.