Suncorp Group Ltd., an Australian lender and insurer, sold A$1.6 billion ($1.5 billion) of mostly sour loans to Goldman Sachs Group Inc. at a discount and expects its non-core portfolio to incur a loss in the second half.
The loans were sold at 60 cents for every dollar and the company expects to reduce its non-core portfolio by a further A$700 million in the next two months to a total of A$500 million, it said in a statement. Suncorp expects the portfolio to lose as much A$490 million in the six months ending June 30.
Chief Executive Officer Patrick Snowball has focused on exiting commercial property and corporate loans, and leases that were worth A$18 billion in 2009 to reduce risk and steer Suncorp toward insurance and personal and small business lending. The Brisbane-based company had reduced the portfolio to A$3.4 billion by Dec. 31, freeing up A$420 million in capital.
“The loss was slightly higher-than expected, though investors will be comforted by the commitment to consider a higher dividend payout ratio,” said Morningstar Inc.’s Sydney-based analyst David Ellis.
The company said today it would consider a dividend above its target payout ratio of 60 to 80 percent of cash earnings for the year to June 30, 2013, and reiterated that capital considered surplus would be returned to shareholders.
Of the A$1.6 billion in loans sold, A$1.3 billion were impaired, Suncorp said.
“With the portfolio below A$3 billion, the group balance sheet in great shape, and a general improvement in funding and capital markets now was the time to act,” Snowball said in the statement.
Suncorp’s shares, which dropped as much as 3.3 percent, closed 1.8 percent lower at A$11.65, its lowest since April 10. The S&P/ASX 200 index closed 0.6 percent down.