The third-quarter update was largely in line with expectations. Credit Suisse suggests a dividend is still a possibility in the second half. Nevertheless, the valuation appeal is not enough and the broker retains a Neutral rating.
Suncorp has noted a reduction in claims frequency across the general insurance portfolio, notably in motor vehicles, but this is partially offset by landlord rental claims.
There was a -0.4% decline in bank lending in the March quarter and further contraction is expected in the June quarter.
Because of the uncertainty, the company has decided to convert up to $194m of convertible preference share into equity and boost its excess capital position. Credit Suisse raises the target to $9.65 from $9.15.
Sector: Insurance.
Target price is $9.65.Current Price is $8.91. Difference: $0.74 – (brackets indicate current price is over target). If SUN meets the Credit Suisse target it will return approximately 8% (excluding dividends, fees and charges – negative figures indicate an expected loss).
