Suncorp Group’s board has called in investment bankers to help mull the divestment of its banking unit – a potential move that would leave the $17.8 billion financial services company as a pure-play insurer and create a separate bank estimated to be worth about $4 billion.
The Brisbane-based bancassurance giant is understood to be working with a team of UBS bankers, led by country head Matthew Grounds, to deliberate the banking unit spin-off, which is backed by Suncorp boss Michael Cameron, while his board remains cautious.
The offloading of Suncorp’s banking operations is expected to help the ASX-listed company, owner of brands including AAMI, APIA, and Just Car Insurance, bridge the significant value gap between itself and general insurance rival Insurance Australia Group (IAG), which is worth about five points on a price-to-earnings basis, Street Talk reported.
So far, UBS’s role remains informal, with no formal signed mandate letter or anything else that could prompt disclosure by Suncorp. It’s also understood that the work is preliminary and purely hypothetical.
The radical makeover would also leave Suncorp as one of the country's biggest general insurers, with $8.3 billion gross written premiums and about $550 million in profit this financial year, on Macquarie's numbers, Street Talk reported.